Although the company’s top-line growth benefitted from recent acquisitions, revenue, on a like-for-like basis, still managed to grow at an impressive rate of 21% on strong domestic volume growth, with all product categories making a positive contribution.

Rising costs

On a less optimistic note, the company saw input costs rising during the period. Cranswick is not alone in facing higher raw material costs, as other food manufacturers have also reported sharply rising costs in recent months. What’s more, like most other food producers, it has managed to pass on some of the rising costs to consumers in the form of higher prices, which partially mitigated the impact on margins.

And despite these cost headwinds, Cranswick continues to invest across its asset base to add capacity and capability. The company today reported further progress made at its new, purpose-built continental products factory in Bury, Greater Manchester. Elsewhere, it has continued to invest in its pork processing facilities both at Preston near Hull and at the recently acquired Ballymena site in Northern Ireland, which will increase pig processing capacity and drive further operating efficiencies.

Not cheap

At first glance, the stock doesn’t seem cheap, trading on a price-to-earnings (P/E) ratio of 23.5. That said, I can see why investors may be prepared to pay a premium for its shares.

It has an impressive growth track record, with a compound annual growth rate in adjusted earnings per share of 10.4% over the past five years. And looking ahead, City analysts expect the company to deliver bottom-line growth of 12% this year and 7% next year. The stock only yields 1.6%, but that is from a payout which is covered 2.7 times by earnings.

Structural decline

Another stock worth a closer look is specialist distributor Connect Group (LSE: CNCT). The company, formerly known as Smiths News, has just delivered its trading update covering the 45 weeks to 15 July.

Total group revenue fell 1.3% in the period, due to a continued decline in newspaper and magazine sales, which offset revenue growth elsewhere in the group. The company’s shrinking top-line reflects its struggle to grow, but this was to be anticipated given the structural decline in print media. Moreover, the fall in revenues was in line with management’s expectations.

Elsewhere, it was a different story. Total parcel freight revenues rose 4%, while its Pass My Parcel’s volume run rate continued to increase. Thanks to core growth, new client partnerships and the development of additional services, the volume of parcels handled in June 2017 averaged 23,400 per week, which represents an increase of 149% on the same period last year.

Looking forward, City analysts expect underlying earnings to fall by 13% this year, before bouncing back by 5% in 2018. This gives Connect a forward P/E of 6.2 (falling to 5.6 by 2018), which means it’s deeply under-valued. Additionally, the stock boasts a bumper yield of 9%.

The post Why Cranswick plc could be a top pick for savvy growth hunters appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Although Kraft Heinz swiftly announced that it was abandoning its attempt to buy Unilever (LSE: ULVR), a number of analysts expect Kraft Heinz would look to make a renewed bid for Unilever’s food and refreshments business. That’s because the US food group has big plans to shake up the low-growth foods industry and has the firepower to undertake such a deal, thanks to backing from Warren Buffett’s Berkshire Hathaway and Lemann’s 3G Capital.

But even if Kraft Heinz doesn’t return with another offer, I don’t expect things to return to normal for Unilever. I expect the failed bid to serve as a wake-up call for its management — and it seems that management acknowledges this too, as it released this statement on Wednesday: “Unilever is conducting a comprehensive review of options available to accelerate delivery of value for the benefit of our shareholders. The events of the last week have highlighted the need to capture more quickly the value we see in Unilever.”

Accelerate cost cuts

First and foremost, management will face pressure to boost margins. That’s because its near 15% operating margins lag well behind the 25%-30% margins generated by peers such as Reckitt Benckiser, Colgate-Palmolive and Kraft Heinz. It could look to accelerate its cost savings programme in a bid to match its rival manufacturers’ profitability, but a more aggressive approach may be adopted.

Paul Polman, chief executive, is well known for his long-term value-creation model, following his decision to scrap quarterly reporting at the company. But he may decide this is the time to focus more on short-term value, by adopting a strategy called zero-based budgeting, which 3G Capital’s austere empire-building relies upon.

Dividends/buybacks

Had Kraft been successful in buying Unilever at around 4,000p a share, this would have raised the combined company’s net debt to around 5-6 times its EBITDA. As a standalone company, Unilever has net debt of only €12.6bn, which shows that it has the potential to leverage up to unlock value.

Analysts from Credit Suisse believe that should it increase its leverage to a still modest level of three times EBITDA, that it has the potential to buy back €20bn worth of its shares, or pay a special dividend of around €7 a share, which equates to a yield of around 17%. With interest rates still hovering near record lows, a buyback could be significantly accretive to earnings per share, while special dividends would likely only be slightly dilutive.

M&A

An alternative to returning cash to shareholders could be to bulk up Unilever’s personal care business. Sales of personal care products are growing much faster than they are for foods, while margins are holding up better.

It’s clear that management is already expanding into the market with recent acquisitions, such as the Dollar Shave Club and Dermalogica, albeit it is doing so at a much slower pace. Some have speculated that a tie-up with US consumer company Colgate-Palmolive could be much more transformative.

Bottom Line

Exactly what Polman and his team will do remains to be seen, but if there’s one thing I’m sure will happen, it’s that Unilever will announce big changes in the coming months.

The post What to expect from Unilever plc after Kraft Heinz Co’s abandoned bid appeared first on The Twelfth Magpie.

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Well, the share price initially shot up on 23 March, gaining 71% on the day to 53.75p, after the company revealed it had “received an unsolicited, non-binding and highly conditional approach” from McCormick & Company on 12 February. It wasn’t a formal offer, but an indicative price of 52p per share had initially been suggested. That was quickly rejected by the board of Premier Foods, but was followed on 14 March by an updated approach with an indicative price of 60p.

The board again rejected it, saying that it “significantly undervalues Premier’s growth prospects and represents an insufficient premium to Premier’s enterprise value“. With the shares trading at a tiny P/E of under five prior to the approach, and with a 60p offer lifting it only as high as 7.2 based on expectations for the year to March 2016, I can certainly understand Premier’s underwhelmed reaction. However, it did say that should a further revised offer be made, it would give it “…careful consideration and evaluate its merits“.

All over

That offer was made a week later, at 65p per share, which the Premier board said “continues to undervalue Premier and its prospects“, but told us it was prepared to get together with McCormick for a bit of a chin-wag to see if a recommendable offer could be forthcoming.

But that’s all history now, as McCormick has pulled out and won’t be making an offer, triggering today’s share price collapse. The shares, however, are still 35% above the initial pre-offer price, so what does this all say about Premier Foods as an investment?

It looks to me as though McCormick really was trying to do a bit of bottom-fishing and get hold of Premier Foods on the cheap. The shares had been in a rut for years, with EPS plunging from 27.51p in 2010 to just 7.16p in 2015. But it looks as if the turnaround is happening as Premier’s restructuring starts to take effect, with a 16% EPS recovery indicated for the year just ended and single-digit rises pencilled-in for the next two years.

Recovery

The problems at Premier, the maker of many household brands including Bisto, Mr Kipling and Sharwoods, came about by over-enthusiastic expansion that led to burgeoning debt. At the interim stage in October, net debt stood at £585.3m (though it was expected to “reduce significantly” in the second half). The firm’s problematic pension deficit adds weight to its woes too, but that was down by £32.8m to £211.8m after the first half.

While debt levels remain so high (the interim figure was well above the company’s market cap of around £350m at the current share price) there’s still some sizeable risk for Premier and I can see an erratic share price in the near future. But with fundamentals starting to look good, and with McCormick having seen a bargain price at 65p per share, I’m cautiously optimistic for the future of Premier Foods.

The post This Is Why Premier Foods Plc Crashed By 30% Today appeared first on The Twelfth Magpie.

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GW Pharmaceuticals (LSE: GWP) shares shot up 70% in March, to end the month at 421p. The company specializes in developing “novel therapeutics from its proprietary cannabinoid product platform“, and got some good news from a phase 3 trial of its Epidiolex (cannabidiol) treatment for Dravet syndrome on 14 March.

Dravet syndrome is a rare and severe form of epilepsy that affects children, and as yet there are no FDA-approved treatments — and so a breakthrough there could be nicely profitable. The trial results found that the drug reduces seizures, with “high statistical significance” when compared to a placebo control. As a result, the share price more than doubled on the day, though it’s fallen back a bit since.

Epidiolex notwithstanding, the shares are down 40% since their peak in June 2015, and the company still looks to be some years away from turning a profit. There was $324m in cash on the books at 31 December, although GW did make an operational loss of $86.6m in its last full year. The next step for Epidiolex is a regulatory submission, but though the drug does seem promising, this still looks like a risky investment to me.

Partnership

A takeover approach is one event that can make a share price jump, and we heard on 23 March that Premier Foods (LSE: PFD) had kicked out an offer by McCormick & Company saying it “significantly undervalues Premier’s growth prospects and represents an insufficient premium to Premier’s enterprise value“. The announcement was accompanied by news of a cooperation agreement with Nissin Foods, the inventor of instant  noodles.

The McCormick offer, revised from an earlier 52p bid, valued Premier shares at 60p, and on the day we saw a 70% share price rise. Since then, McCormick has upped its offer to 65p per share, and the shares ended the month trading at 57p for an 88% rise during March. The Premier board still believes that’s too cheap, but it’s going to have talks and hopes for an even better offer to emerge, and if that comes off then there’d be a profit to be made.

Even after the month’s rise, Premier shares are still valued on a P/E multiple of under seven based on 2016 forecasts, so it looks like there’s room for negotiation.

Rising oil

Results on 17 March gave oil explorer and producer EnQuest (LSE: ENQ) a 31% share price boost, and since then the price has kept on going for a 71% rise over the month. We’ve now seen a 118% gain since 20 January’s low point, buoyed by the price of oil which seems to be steadying at around $40 per barrel.

EnQuest reported a 31% rise in production for the year to December 2015 to 36,567 barrels of oil equivalent per day, which was above the upper end of the company’s guidance. The price of extracting the stuff dropped dramatically, due to continuing savings in operating costs, from $42.10 per barrel in 2014 to just $27.70 per barrel.

Net debt rose to $1.55bn at year-end, but the firm reckons it’s “well within its net debt to EBITDA covenant of five times“. EnQuest isn’t expected to get back to profit this year and next, so it’s tricky to value — but I reckon there could be more to come.

The post 3 Shares You Should Have Bought In March: GW Pharmaceuticals (+70%), Premier Foods (+88%), EnQuest (+71%) appeared first on The Twelfth Magpie.

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If you’d bought Hargreaves Lansdown (LSE: HL) 12 months ago, for example, you’d be sitting on a 47% gain today at 1,361p. And if you’d managed to buy-in at the low of October 2014, you’d be up 61%. Dividends would have yielded less than 2%, but overall a cracking performance. So why would you sell?

Well, Hargreaves Lansdown is a very well managed investment company and its fundamental performance has been impressive, but I just don’t see how the shares deserve such a very high P/E rating of more than 35. After three great years of EPS growth to 2013, it then slowed to 9% in 2014, reversed to a 4% fall in 2015, and there’s a return to growth of 18% on the cards for the current year.

But a P/E of 35 is around two-and-a-half times the long-term FTSE average, and a share with a total EPS growth of 23% over three years does not, in my mind, deserve such a rating. Better than average, sure, but not that high. The price has actually dipped since the end of December, and I can see a leaner year ahead for Hargreaves Lansdown shareholders.

Overpriced telecoms?

Vodafone (LSE: VOD) is a big mystery to me. With its shares priced at 222.5p, we’re looking at a P/E based on March 2016 forecasts of 46! And I just don’t see what Vodafone is doing that commands such a lofty valuation. Vodafone has a number of telephone operations in various parts of the world, and it’s investing in the next generation of networks along with the rest of the world’s telecoms companies. But when I look at Vodafone I just see lots of assets and no joined-up company or joined-up strategy.

But maybe that’s what people find attractive. Are they expecting future merger or takeover attempts to get control of those assets?

It must be that, because I can’t see it being the mooted 11.5p dividend, yielding 5.3%. Not with earnings expected to come in at only 4.9p per share.

What price cheap clothes?

Associated British Foods (LSE: ABF) is perhaps not the kind of name you’d associated with a doubling in share price in three years and a P/E of 30, but that’s the forward valuation its 3,047p shares command right now. The company offers nice safe business and geographic diversity, but its star is its Primark subsidiary that has been providing some very good growth in recent years.

Yet since early December we’ve actually seen the share price lose 16%. So is the over-enthusiasm waning? I think it needs to, because I just don’t see the justification for such a high rating.

EPS fell by 2% in the year to September 2015 after a 6% rise the previous year, and there’s a further 2% drop on the cards for this year. That’s overall earnings growth of only 2.3% in three years. And with the dividend set to yield only 1%, a P/E of 30 boggles my mind.

The post Time To Sell Vodafone Group plc, Hargreaves Lansdown PLC And Associated British Foods plc? appeared first on The Twelfth Magpie.

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I quite like the look of Tate & Lyle (LSE: TATE). The maker of sweeteners and other food products has been through a tough spell and has seen its share price lose 25% over the past two years, falling to 590p. We’ve had profit warnings, but we’ve seen concerted turnaround efforts which are starting to look good.

At the interim stage reported in November, Tate & Lyle announced an 18% rise in adjusted pre-tax profit and maintained its first half dividend at 8.2p per share. Chief executive Javed Ahmed said that, with the firm’s plans progressing well, “...we remain on track to deliver the guidance for the full year we set out in May, and for future growth“.

There is a further drop in reported EPS forecast this year, but the City expects to see growth starting to return next year. And those dividends are set to start creeping upwards again, with a yield of 4.6% this year perking up slightly to 4.7% next. Those are not massive dividends, but if we really are at the turnaround point that I think, you could be locking in some very nice future dividend rises.

Engineering bargain?

BBA Aviation (LSE: BBA) has suffered from the engineering and aerospace fallout, and its shares are down 33% in 2015 so far, at 173p. Is it a dead duck or an oversold bargain? Very much the latter, I’d say. It’s not like anything has gone dramatically wrong with the firm; there’s just a modest 4% fall in EPS forecast for this year, which was reinforced by a 3% drop in group revenue reported in BBA’s latest trading update on 9 December. And then forecasts suggest a 14% rebound in 2016, dropping the stock’s P/E as low as 11.

But what about that dividend? Its expected to deliver a 4.5% yield this year, rising to 4.7% next — and in 2016 it should be almost twice covered by forecast earnings.

Chief executive Simon Pryce spoke of “strong momentum into 2016” and “significant growth investments made in recent years“, and he seems to me to be someone who’s reasonably conservative in his statements.

Big Oil!

Then there’s Royal Dutch Shell (LSE: RDSB), which forecasts suggest could be offering a dividend yield of 7.7% this year and next — and that yield has been boosted by a 34% share price fall in 2015, to 1,480p. But Shell’s dividend is by no means a no-brainer. The obvious first problem is that it would not be covered for forecast earnings for this year. There’s a 40% drop in EPS expected, and it could be even worse than that as the oil price has continued to slide and has fallen below $40 a barrel.

But on the upside, Shell has plenty of cash available to pay uncovered dividends for a couple of years if it wants to — many are expecting a dividend cut, but I’d put the chances of getting the cash at better than 50/50.

And if you buy today, you’d be getting the shares at a price not seen since 2009. It’s a calculated risk, but I reckon there’s a decent chance it will come good.

The post Are Dividends From Royal Dutch Shell Plc, Tate & Lyle PLC And BBA Aviation plc Unmissable? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended BBA Aviation. The Motley Fool UK has recommended Royal Dutch Shell. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

That’s been accompanied by modest but steady growth in earnings, so that even after the rise the shares are still on a modest forward P/E of only 15 — which isn’t bad for a forecast dividend yield of 4.4%.

But can the growth keep on going? Well, Imperial released full-year results today, reporting a 7% rise in underlying volumes for its higher-margin Growth brands, and net revenue up 12% — Growth and Specialist brands now account for 57% of the company’s net revenue. With a developing world becoming increasingly affluent, there are plenty more aspiring customers out there to be upsold to.

Still cheap

Broadcaster ITV (LSE: ITV) has also been on a roll, with its shares almost quadrupling in value in just four years, to 256p. There’s a serious profit performance behind that too, with EPS up by almost a quarter last year following on from a similar rise the year before — and the City’s analysts are predicting at least two more years of double-digit growth that would take the P/E to only 14.5 in 2016. Dividends are yielding a fairly modest 2.5% or so, but they’re rising way faster than inflation each year.

First-half results this year support the optimism, bringing in a 25% rise in adjusted pre-tax profit and allowing the firm to lift its interim dividend by 36%. Chief executive Adam Crozier told us that “All parts of the business performed well“, so things look good — and I don’t see any clouds on the horizon.

Overstretched

Over at Associated British Foods (LSE: ABF), we’ve just had full-year results that included a 6% drop in adjusted pre-tax profits, with chief executive George Weston speaking of “the challenges of food commodity deflation and big movements in exchange rates“. But the dividend was lifted 3% to 35p, although that does only provide a 1% yield on today’s share price of 3,418p.

That share price is a result of a 150% climb in the past three years, but it has resulted in a trailing P/E of 30, rising to nearer 34 based on 2016 forecasts. How can such a high rating be justified?

It’s mostly down to Primark (which is nothing to do with the firm’s food business), but though I think Primark is a good business, I can’t see it being good enough to support such a high valuation in the long term — by comparison, NEXT is on a forward P/E of only 18, and offers dividend yields of 5%.

I reckon the rises at Imperial Tobacco and ITV stand a very good chanced of continuing on up, but ABF’s must surely be running out of steam, mustn’t it?

The post Can The Surges At Imperial Tobacco Group PLC, ITV plc And Associated British Foods plc Keep On Going? appeared first on The Twelfth Magpie.

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We should know more next Wednesday, 7 October, when rival and market leader Tesco (LSE: TSCO) is due to bring us its first-half results. The Sainsbury news already seems to have had a knock-on effect on Tesco, with a 7% rise on the same day taking the price to 183p, although it’s dropped back a few pennies since then — Tesco shares are now up around 1.7% in 12 months.

For the quarter to 30 May, Tesco reported a slowing of its like-for-like sales decline, to a drop of just 1.3%, with like-for-like volumes actually up 1.4% and price deflation accounting for the income fall. Current forecasts suggest Tesco’s earnings slide is coming to an end, with a 6% fall this year followed by a 20% recovery next. Is it finally time to pick Tesco’s bottom? It just might be.

Tasty calories

The recovery at high-street baker Greggs (LSE: GRG) has been going impressively well, with a 43% rise in EPS reported for the year ended January 2015 after a couple of years of falling earnings. That’s led to an 81% share price gain over the past 12 months, up to 1,080p, but the resurgence has gone off the boil a little of late and the price has been pretty much flat since the end of April.

Will the company’s next trading update, due on Tuesday, 6 October, provide fresh impetus for the upwards march? A continuation of a first-half performance that saw a 6.4% rise in sales with diluted EPS up 50% would be nice, and full-year forecasts suggest another 20% will be added to earnings this year. But with forward P/E multiples of around 20 and dividends set to yield less than 3%, I think the good news is already in the share price.

Bums on seats

The meteoric share price rise at easyJet (LSE: EZJ) might have slowed to only 27% in the past 12 months, but investors sitting on a five-bagger to 1,780p in just four years should be feeling pretty pleased with themselves.

It’s all about getting those aeroplane seats filled, of course, and next Tuesday we’ll be seeing September’s traffic statistics. August saw the budget airline enjoying a load factor of 94.4%, which was a new record for the firm, thanks to strong summer trading — and though easyJet’s operations had been subject to some disruption, that performance was apparently more than enough to offset it.

The shares are on a forward P/E of 13, dropping to 12 based on 2016 forecasts, with dividend yields expected to top 3%. If you’re happy with the risks of investing in airlines, that still looks reasonable value to me.

The post 3 Shares For The Week Ahead: Tesco PLC, Greggs plc And easyJet plc appeared first on The Twelfth Magpie.

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Fyffes is best known for its bananas, though the Dublin-headquartered firm imports a number of different tropical fruits, including pineapples and melons. A growing Western appetite for such exotics has brought in handsome profits for Fyffes shareholders over the past five years, but is there more to come or are you treading on slippery skins if you buy now?

Growing profits

Between 2010 and 2014, pre-tax profit at Fyffes more than quadrupled to €39m, although earnings per share gained a more modest (but still respectable) 37% over the same period.

Looking at dividend yields, you could be forgiven for not being impressed, as they’ve dropped from a peak of 4.4% in 2011 to just 2.2% in 2014, and forecasts suggest only 1.6% this year. But that’s all down to the soaring share price, and hides a dividend that has actually been rising a long way ahead of inflation — the full-year payout for 2014 was lifted by 10% on of the previous year, and the annual payment is always very well covered by earnings.

Fyffes released interim figures in August and they looked impressive indeed, with chairman David McCann speaking of “a continuation of the strong growth in earnings achieved in recent years, with a 12.2% increase in Adjusted EPS in the first half…“, and the interim dividend was lifted 12.2%.

Upbeat guidance

The company, unusually for an AIM-listed one, also gave us some full-year guidance, suggesting adjusted EBITDA of between €55m and €61m, with full-year adjusted EPS expected to come in at 12.2 cents to 13.9 cents per share — though admittedly these adjusted figures are hard to compare with reported reality.

Is Fyffes one to buy now? Well, there are only three analysts’ recommendations out there right now, including the company’s own broker, all on Strong Buy ratings. And it really depends on your take on the continuation of the growth story.

Further growth to come?

Forecasts suggest a 16% boost to EPS this year followed by a smaller 2% in 2016, but it’s the years beyond that that really count. If Fyffes genuinely can keep the past five years’ growth going, then a forward P/E multiple of around 11.5 for this year and dropping a little for 2016 could still indicate decent value, even if that predicted 1.6% dividend yield might not look too impressive.

The post Should You Grab Fyffes PLC ORD’s Bananas? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.