Canterbury Foods

Shares in meat and pastry products manufacturer Canterbury Foods fell 8.3% to 27.5p after a mediocre trading statement. Chairman Christian Williams admitted that although the first quarter was encouraging, trading in the second quarter was challenging due to rising interest rates, very high red meat prices and reduced market demand. However, he did reiterate the company was able to control its costs and the interim results should 'approximately' be in line with expectations. A small loss is expected, relating to redundancies at its Yate and Hull sites and the costs of a recent placing, which reeled in £6.2m. With high raw material prices, Canterbury needed the cash to enable it to successfully restructure its operation and develop its sausage and pastry sales. It estimates the efficiencies implemented and opportunities maximised will result in net cost savings of £2.3m per annum and sales growth of up to £11m by 2007. But the rationalisation programme will incur exceptional costs in the second half. Broker Shore predicts a pre-tax loss of £400,000 for 2004, moving into a small profit of £600,000 in 2005. 2005's EPS of 1.7p makes for a prospective p/e of 16.1. Not particularly cheap, but the stock could repay those prepared to take a patient long term view.

Sector: Food Producers

Companies: Canterbury Foods Group

Market cap: £10.2m

PE Forecast: n/a

Share price: 27.5p