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A surge in retail sales during the pandemic has driven a double-digit rise in annual sales at meat producer Cranswick, while it posted higher margins despite increased COVID costs.

Total revenue for the year to 27 March jumped 13.9% to £1.9bn as it made up for a sharp reduction in food service sales with an increase in sales to retail customers.

Adjusting for acquisitions made during the previous year, but included for the full year this time, revenue on a like-for-like basis was 12.1% higher with volume growth across all its product categories.

Cranswick said bobust retail demand comfortably offset lower food service channel revenues, and the benefit of lower pig prices being passed on to customers, particularly in the final quarter of the year.

Export revenues were modestly ahead of the prior year with continued growth in Far East and EU trade offsetting lower sales to other non-EU markets.

Like-for-like Fresh Pork revenue increased by just 0.1% as strong retail and export volumes was offset by lower wholesale volumes as more product was diverted into the group’s internal supply chain.

Convenience, which comprises cooked meats and continental products, saw like for like growth of 14.1%, excluding the impact of the Katsouris Brothers acquisition in July 2019.

Gourmet Products revenue increased 11.5 per cent with strong retail growth offsetting lower food service demand.

Poultry revenue increased by 38.5 per cent in the year reflecting a full year contribution from the new Eye poultry facility.

Adjusted group operating profit increased by 26.1% to £132.5m, with adjusted group operating margin 68 basis points higher at 7% reflecting a stronger product mix, improved operating efficiencies, a full year contribution from the Eye poultry facility and strong capacity utilisation across the business throughout the year.

The uplift in operating profit was net of £18.6m of COVID-19 related costs which included £9.8m of bonuses paid to staff.

Cranswick said the start if its bew financial year has been “particularly positive” and the outlook for the group is very “encouraging”.

The business has a strong balance sheet and comfortable financial headroom to support plans for growth that include further broadening of the range of products, increasing capacity and maintaining the asset base as the most modern and efficient in the sector.

As part of this, it announced work is underway on a new £25m breaded poultry facility in Hull which will be operational in 2023.

CEO Adam Couch commented: “We have delivered strong growth and made further strategic progress in a year of unparalleled challenge and complexity. We have supported our customers by delivering excellent service levels to ensure full availability of our products both in store and through the fast growing online channel.

“Our outstanding performance would not have been possible without the incredible support of our colleagues across the business and I thank them for their continued commitment and dedication.

“The safety and wellbeing of our colleagues remains our priority. Our thoughts are with the families of those colleagues we lost during the year and with all colleagues and their loved ones affected by COVID-19, who we continue to support in these most difficult times.

“We have made further progress in driving through our groupwide ‘Second Nature’ sustainability strategy during the year. In November, our Milton Keynes site became the first Cranswick facility to be awarded carbon neutral certification. Since then eight more Cranswick sites have achieved the same status as we continue to forge ahead with our climate change agenda.

“We have made a very positive start to the new financial year and, whilst there is still a degree of uncertainty about how the future will unfold, I am confident that the strengths of our business, which include its diverse and long-standing customer base, breadth and quality of products and channels, robust financial position and industry leading infrastructure will support the further development of Cranswick in the current financial year and over the longer term.”

Meanwhile, Chairman Martin Davey has indicated his intention to retire from his role and will step down from the Board, at Cranswick’s AGM on 26 July 2021.

When he steps down Davey will have served as a director for 36 years and as chairman since 2004. He will remain with the Company in an advisory capacity until May 2022.

The board has decided to appoint current non-executive director, Tim Smith, as Davey’s successor with effect from the conclusion of the Company’s AGM. Smith will also be appointed chair of the company’s nomination committee.

Couch said: “Much of what Cranswick is today in terms of its culture and ethos reflects Martin’s character and personality. On a personal note, he has been an inspiration, mentor, wise counsel and friend to me in equal measure and, on behalf of all at Cranswick, I would like to thank Martin for his invaluable contribution to the Group over the last 36 years. I wish him, his wife Linda and their family all the very best for the future.”

Cranswick shares are up 5.1% to 3,904p so far this morning.

Morning update

Britvic has reported “encouraging trading” in the early stages of the ending of lockdown after posting a 6.3% revenue decline in the first half of its financial year.

The continuing impact of trading restrictions and social distancing measures adversely impacted the group’s financial performance in the first half of the year to 31 March.

Underlying revenue declined 6.3% (and by 11.7% at actual exchange rates) on a constant currency basis to £617.1m due to the closure of the on-trade and loss of on-the-go volumes.

GB volumes declined 6.1% driven by the impact of restrictions on the hospitality channel, and lower mobility levels reducing on-the-go consumption of smaller pack formats. Albeit, in the at-home channel it delivered over 11% revenue growth and continued to gain market share, with demand remaining strong for larger value packs.

Brazil saw revenue increased 15.2%, driven by strong performance across the portfolio. However, the rest of the world saw revenues decline 25.6% amid weaker sales and the impact of the sales of assets and exit of private label juice business in France.

Britvic said it continued to take decisive action to reduce costs across the business and optimise revenue growth management, both of which have helped to mitigate some of the profit and cash impacts.

Underlying adjusted EBIT declined 15.4% and profit after tax decreased 14.7% to £33.2m.

However, Britvic said it was entering the second half of its financial year “with confidence and optimism”.

It said it has seen “encouraging” trading in the first weeks of the second half as lockdown measures begin to ease in the UK

It will ramp up investment in the second half to capitalise on near-term market opportunities and drive long-term growth

Going forwards, it anticipates positive mix impact as at-Home growth moderates, socialising increases and on-the-go consumption regains momentum.

CEO Simon Litherland commented: “In challenging circumstances, we have delivered a robust first half performance, demonstrating the resilience and agility of our business. We have continued to win in the channels open to us and have gained share in our key growth markets of GB and Brazil. Our cash management has been particularly strong, and I am pleased to reinstate our interim dividend.

“We have also made good progress on our strategic opportunities, such as simplifying our Irish business, entering the mainstream energy category in GB and Ireland by relaunching Rockstar with PepsiCo, and acquiring Plenish, a leading natural premium brand in the fast growing plant based drinks category.

“In the second half we plan to rebuild investment behind our brands to ensure we emerge strongly and are best positioned for the recovery as it evolves. As lockdown restrictions have started to ease in some of our markets, early trading has been encouraging. Although some uncertainty does remain, I am confident that our strategy and focus on People, Planet and Performance will ensure we deliver growth for all our stakeholders, both in the short and long term.”

Elsewhere, Imperial Brands has posted a 3.5% rise in first half net revenues, driven by an uptick in tobacco sales during the pandemic period.

In the six months to the 31 March organic net revenue was up 3.5% to £3.6bn, while reported revenues were up 6.1% to £15.6bn.

COVID-19 related changes to consumer buying patterns has continued to be a net benefit to revenue, with traditional tobacco in growth of 3.2% while next generation products were up 16%.

Tobacco price mix was up 6.5% reflecting gross pricing growth of 5.3% and favourable product mix of 1.2% driven by a strong performance in US mass market cigars.

Organic tobacco volumes down 3.3% with consumer demand partially offset by weaker duty free volumes and a reduction in US inventories following strong wholesaler purchases in March 2020

Imperial said it had begun to stabilise long-term aggregate market share performance in its five priority markets, with gains in US, UK, and Spain partially offset by declines in Germany and Australia

Organic adjusted group operating profit was up 8.1% driven by a reduction in NGP losses and higher distribution profits.

Reported operating profit of £1.6bn was higher by £712m, driven primarily by profit on disposal of the Premium Cigar Division (£281m) and a reduction in amortisation and impairment of acquired intangibles (£225m)

NGP losses reduced by 62.5% to £83m as it continues to optimise investment and as the prior year write-downs (£95m) were not repeated to the same extent

Full year guidance remains unchanged with low-mid single digit organic adjusted operating profit growth at constant currency.

In the second half it anticipates some of the benefit it has seen in duty paid to unwind as it laps a stronger comparator period and volume trends start to normalise.

Despite these factors, and increased investment behind its new strategy, it expects second half tobacco profitability to grow modestly against the same period last year. In NGP, a disciplined investment approach will support market trials in heated tobacco and vapour, with second half investment at a similar level to the first half.

CEO Stefan Bomhard commented: “We have made a good start in implementing our new strategy to transform Imperial and remain on track to meet full year expectations.

“In tobacco, we have put in place a clear market prioritisation to increase focus on our best opportunities for sustainable profit delivery. We have begun to stabilise the aggregate market share performance across our top five priority markets reflecting the changes we have made to tighten performance management and the good underlying momentum established over the past year. This is an encouraging start and one that I look forward to building on over time as we begin to step up investment in new strategic initiatives.

“Our NGP performance has improved, albeit against a weak comparator period. We have focused investment more tightly behind our NGP market strongholds and are on track to activate market trials in vapour and heated tobacco later this year. Our aim is to create a successful NGP business that meets consumer needs and, over time, can make a meaningful contribution to harm reduction.

“All of this has been achieved against the background of the ongoing global pandemic and I would like to thank employees throughout the business for their hard work and willingness to embrace change.”

On the markets this morning, the FTSE 100 has gained 0.5% to 7,068.4pts.

Early risers include Britvic, up 4% to 955.3p, Glanbia, up 2.5% to €14.35 and Imperial Brands, up 2.3% to 1,626p.

Fallers include McColl’s, down 2.5% to 37.7p, Nichols, down 1.7% to 1,471.8p and Virgin Wines, down 1.5% to 235p.

Yesterday in the City

The FTSE 100 started the week slipping back 0.2% to 7,032.8pts.

Food to go and travel retail stocks suffered on fears that the Indian variant of COVID would slow down the UK’s reopening.

SSP Group fell 4.7% to 307.6p, WH Smith was down 4.4% to 1,649.5p, Greggs fell 1.7% to 2,455p and Compass Group was down 1.6% to 1,515p.

Other fallers included Domino’s Pizza Group, down 2.7% to 376.2p, THG, down 2.3% to 604p, Hotel Chocolat, down 2.3% to 380p and PayPoint, down 1.7% to 573p.

The day’s risers included McColl’s, up 3.5% to 38.7p, Total Produce, up 2.6% to 195p, Coca-Cola Europacific Partners, up 2.6% to 50.80, Sainsbury’s, up 2.1% to 264.5p, Finsbury Food Group, up 1.7% to 84p and Glanbia, up 1.7% to €14.00.

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