THE INVESTMENT COLUMN: Cranswick looks tasty at this level

IT IS pretty difficult to make a decent living as a food supplier, what with the mighty supermarkets flexing their muscles to drive down prices. To do so, a food group needs posh products for which people will pay up, and it needs to keep a very, very close eye on costs across the business. Cranswick fits the bill, as its trading update yesterday amply demonstrated.

Based in Driffield, East Yorkshire, the group sells fresh pork, gourmet sausages, delicatessen cooked meats, and earlier this month it paid pounds 80.6m in cash to buy Perkins Chilled Foods, processor of cooked meats - which is integrating well, it said. The group also includes sandwich-making, animal feed and pet food businesses.

The management has just about completed its massive capital expenditure programme, building four new factories at a cost of pounds 20m and closing five existing sites. The expectation is that proceeds from property sales will cover the one-off costs of the restructuring.

When we last wrote on Cranswick last May, high raw materials prices, particularly the cost of wheat, were hurting the animal feed business, but this is back in the black thanks to more normal prices and the self- help effects of mill closures. We advised readers to hold off until the interim results in November, then reassess. Those results did indeed prove a turning point for the shares, which have leapt 50 per cent since then. Yesterday, down 5.5p at 561p, they were trading at almost 12 times its broker's earnings forecast for the current year. That is a sector-average valuation for a company with an above-average track record and growth prospects. Buy.