Cranswick Plc - First Quarter Trading Update and Acquisition
First quarter trading statement and acquisition of leading Mediterranean food products business
Cranswick, a leading UK food producer, today provides an update on trading for the three months to 30 June 2019 and announces the acquisition of Katsouris Brothers Limited (Katsouris Brothers), a leading Mediterranean food products business.
Trading in the first quarter of the financial year has been encouraging.
Revenue in the three months to 30 June 2019 was 1.5 per cent ahead of strong comparatives in the same period last year.
Far East export revenues were strongly ahead of the corresponding period last year, reflecting increased demand from China following the widespread outbreak of African Swine Fever in the region.
The UK pig price increased by 10 per cent during the period although the average price across the quarter to June 2019 was still below that in the equivalent period a year earlier.
The Group continues to invest at record levels across its asset base to increase capacity, add new capability and drive further operating efficiencies, whilst maintaining industry leading standards at all its facilities.
Investment in the new £75 million poultry primary processing facility at Eye in Suffolk, which will more than double existing capacity, is progressing to plan. Commissioning is expected to take place towards the end of the financial year and is being fast-tracked to support the anchor customer for the new site (Wm Morrison Supermarkets plc). This world class operation is the first new primary poultry plant to be constructed in the UK for almost 30 years and will, when fully commissioned, be the most technologically advanced and efficient facility in the UK industry incorporating the highest animal welfare standards.
As expected, net debt increased during the period in response to the Group's substantial ongoing capital investment programme. The Group is in a robust financial position with committed, unsecured facilities of £160 million which provide comfortable headroom.
Acquisition of leading Mediterranean food products business
The Group announces today that it has acquired the whole of the issued share capital of Katsouris Brothers Limited.
Katsouris Brothers is a leading processor and multi-channel supplier of Continental and Mediterranean food products. The business operates from two facilities in Wembley, North London and employs a total workforce of approximately 250. Costas and Louis Constantinou, Managing Director and Commercial Director respectively, who have a wealth of experience in this attractive and fast-growing sector, will remain with the business. We welcome Costas, Louis and their team to Cranswick and look forward to working with them to develop the business further.
For the year ended 30 June 2019 (unaudited), revenue for Katsouris Brothers was £68 million and adjusted EBITDA was £6 million. Gross assets at 30 June 2019 were £30 million. The transaction is expected to be modestly earnings enhancing in the current financial year.
The net cash consideration of £43.5 million was funded from Cranswick's existing debt facilities. Further deferred contingent consideration of up to £7.0 million in cash may become payable dependent on the future performance of the business in the 14 month period to 30 September 2020.
Adam Couch, CEO of Cranswick, commented:
"We have made a positive start to the year and our capital investment programme, which is building a platform for future growth, remains firmly on track. We continue to make pleasing progress on the new Eye poultry facility and our new continental products facility in Bury is now performing strongly and in line with the original business case.
"I am delighted to announce the acquisition of Katsouris Brothers, a leading supplier of Continental and Mediterranean food products. This acquisition strengthens our existing continental products business and broadens our offering in a number of fast-growing, plant based, non-meat product categories.
"The family behind Katsouris Brothers has created long lasting and sustained relationships with suppliers and the business has a strong customer base. We look forward to building on this and continuing to invest in the facilities and the team, over the years ahead."
The outlook for the underlying business in the current financial year remains in line with management's expectations with the enlarged Group expected to benefit from the acquisition of Katsouris Brothers, as detailed above.
With experienced management at all levels of the Group, a strong range of products, a well-invested asset base and a robust financial position, the Board is confident in the continued long-term success and development of the business.
The Company's next scheduled comment on trading will be the interim results announcement for the six months ending 30 September 2019, on 26 November 2019.