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Blackfriar: Cranswick cashes in to cover the costs of its pork meal
CRANSWICK'S insatiable appetite for growth isn't dampened by a small thing such as the recession.
A fortnight ago the East Yorkshire meat company, which started life as a farmers' co-operative producing pig feed, bought Bowes of Norfolk's pig processing arm for 17.2m.
It was the latest in a long string of acquisitions that have helped the company to grow sales to more than 700m and employ more than 5,500.
But while it may be hungry for growth, the premium pork company isn't getting fat in the process.
This week, Cranswick recouped the cash by selling its pet business for 17m to management.
It's just this kind of eye for a timely deal which Blackfriar admires.
Cranswick didn't want to have to rely too heavily on costly bank finance; instead, it divested of the last of its non-core business in a deal which made perfect sense.
But the sale and the acquisition clearly wasn't swapping like for like. Blackfriar believes Bowes will be another fine string to its bow, and allow growth within supermarkets.
Cranswick isn't stopping there – acquisitions are in its blood.
As Brewin Dolphin analysts pointed out: "Cranswick's cash flow and banking facilities leave the group well placed to take part in any further sector consolidation."
Blackfriar believes it won't be too long before Cranswick has devoured another target.
Blackfriar has heard more than enough about rewards for failure over the past few months. But what about rewards for mediocrity?
Struggling Leeds design and engineering consultancy White Young Green recently said its new directors are in line for share windfalls if they succeed in upping its share price.
New chief executive Paul Hamer and new finance director David Wilton will receive 500,000 and 400,000 shares respectively if they hit a three-year performance target. The incentives hinge on WYG's share price being at least 60p in April 2012. From the 6.5p low its shares hit in March, that's a tough ask.
But why 60p, and why just share price?
Blackfriar thinks there are more exacting standards to measure a company's success by.
The share price is what it is. In a bull market it's a director's best friend, and when things are going badly, it's the devil on his shoulder. Some try to ignore it, others trumpet it.
It's certainly a simple measure, and one Blackfriar understands was picked after consultation with investors. Rivals Atkins and WSP both reward directors with shares based on the companies' earnings per share (EPS). WYG itself used this measure until recently, but since it started reporting losses, EPS doesn't give directors much incentive to work their magic.
Even so, Blackfriar believes incentives should be based on a measure which actually tells you if the company is succeeding rather than the arbitrary nature of the company's share price.
What about a measure which pits WYG's performance against that of its sector peers? Or some measure of profitability?
"To have it on one metric is strange," as one analyst put it. "It could be on a whole host of things."
WYG has been devastated by its exposure to the crashing UK and Ireland property markets, and has a 91.5m debt millstone around its neck.
Mr Hamer and Mr Wilton were drafted in to sort out problems which were not of their making.
They have their work cut out in renegotiating debt and returning it to profitability.
Blackfriar wishes them well in this. If they succeed, they deserve to be rewarded.
But how about remuneration based on how successful they are, rather than the vagaries of the company's share price?
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