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Produce Share Discussion Threads
Showing 251 to 274 of 275 messages
|Agreed its the margin thats important to us on the 80 percent that are not our own grown, these are not really brought on the open market though we are contracted with the farmers and do a lot of the harvest/process/transport/bagging etc , the nature of the agreements with the farmers is not 100pct clear so its difficult to predict what the margin will do in this environment, high prices should be good for everyone but some guidance from the company would be welcome. Also this new agreement with tesco seems to fix the margin all the way down the chain so it may be that some chunk of the business does not benefit from a higher price.|
|I've noticed the price of spuds has gone up recently now I know why|
|Prices are running 100 pounds a ton higher than this time last year for many varieties of spuds, just on the 100k tons they grow themselves that would equate to a 10m gbp windfall, or 20 pct of market cap, now clearly tesco will take their ounce of flesh and there will be a reason why the higher prices dont feed through but these shares must get some benefit from the boost in prices|
|This is looking excellent, after the glut of 2014 which carried forward to 2015 we are now in a very tight market for 2016/2017 prices are running 50 pct higher than last year and 100 pct higher than the year before, plus we have squeezed out a lot of operational efficiencies in the time being, even on the glutted market numbers we are trading on a low multiple, I think we are in a great position going forwards and will see a major re rating over the next 12 months|
|Trying to deploy here some of the cash from netd sale on Friday, but have to order.|
|Looks like the last block of shares has changed hands.|
|Got my time machine fixed. ;-)|
|Good timing yet again BAMBOO2....|
|What I mean is the whole sector is seeing prices rise including the price of spuds so depends on what prices we pay etc.|
|Well unless we now grow something other than potatoes or daffodils I am not sure how a lettuce shortage will help !
will people buy potatoes instead of lettuce?
One thing for sure though a couple of years down the line I think with Brexit we will be trying to grow everything ourselves as it will be whole lot cheaper than importing through EU red tape . Any businesses out there that are listed that do have greenhouses to grow veg etc?|
|Lol hope so, shortage of lettuce etc pushes prices up, hopefully we are still on the right side of that.|
|Bought a few here, have today as a turn day. Hope I got the direction right. :-)|
|No worries. This is a growth stock.|
greg the grinch
|Lol. As long as there's no blight.|
|Like watching potatoes grow?|
greg the grinch
|Yes slowly does it with this one.|
|creeping up quietly|
|Excellent article thanks jon123.|
|stole this from another board
By Edmond Jackson | Tue, 3rd January 2017 - 10:20
Stockwatch: Buy this share on the dips Last December's £633 million takeover of Fyffes by Japan's Sumitomo Corporation was frustrating in that I had drawn attention to it some years before, arguing that fruit and bananas in particular were a long-term growth market, even if Fyffes' stock performance was quite irregular and off-radar for most investors.
I then let it drop off the map, like most, but value was eventually affirmed by Sumitomo. So I wonder the extent of parallel with AIM-listed Produce Investments (PIL), a British potatoes and daffodils supplier, considering how the Jerry Zucker Revocable Trust (named after a late Israeli-American entrepreneur) held 11.8% in Fyffes, and last 7 December raised its stake in Produce Investments from 6.5 million shares to 6.9 million or 25.7% of the equity.
Such extent of ownership of a £47 million company means this trust is locked in, taking a long-term view until a trade buyer makes a move. Either that or the fund manager has special confidence in Produce Investments, currently priced around 175p at the high end of a two-year range of 120p to 190p, albeit down on the 300-320p range the stock reached in 2013 and 2014.
The volatility is explained mainly by variable cropping and a squeeze on supermarket pricing, but management says it has restructured to cope.
I should also clarify, hedge fund Toscafund did reduce its stake from over 10% to 4.1% last October to November, but at the same time asset manager Ruffer went to over 5%. So Toscafund takes a more sceptical view or believes in a better switch.
Double-digit profit surge
Produce Investments is "vertically-integrated", from growing seeds to processing and supplying major retailers and wholesalers. Key brands include England's largest fresh potato packer Greenvale, potato grower the Jersey Royal Company, anti-sprouting storage group Restrain and Cornish daffodil hand-pickers Rowe Farming.
The group hasn't updated on trading since September, when results for the year to 25 June 2016 showed a 4% rise in revenue to £185.1 million and a 14% improvement in operating profit to £9.2 million, helped by more stable retail market conditions. Pre-tax profit dropped 41% to £3.3 million, however, due to the closure of a packaging site in Kent costing £4.6 million and metal contamination causing a product recall.
The matter has been fully resolved and management has now created a supply chain model "more closely aligned" to current market conditions, which can also offset any fluctuations - the closure of a Kent packing facility has removed surplus capacity, for example.
When the chairman of 10 years retired last October, he said: "The business model is more resilient, more diverse and well placed to handle any pressures that it might encounter."
This coincides with supermarkets introducing fresh food price increases as competition eases from the discounters - as if Aldi and Lidl have borrowed from German government subsidies to expand, long enough.
A forward price/earnings (PE) multiple of around 7 times is in line with the stock's annual average historic PE of recent years, although the rating should improve if management de-risks the business with more consistent results. The prospective dividend yield is nothing special at 4.5%, but forecast earnings cover this an ample three times. Yields in the region of 5% or more tend to be covered below two times, so this is yet another sign the stock is being priced cautiously in case of setbacks.
The table also shows a strong cash flow profile, some years in excess of earnings, which bolsters security of the dividend. Capital expenditure is obviously grabbing a share of this and management is on the outlook for further acquisitions, despite a lowly cash position last June. But the overall profile hints more at upside rather than downside, further supported by a strong net tangible assets per share value and operating margin improvement from 3.9% to 6.3% in the last financial year.
So, while Produce Investments isn't exactly an exciting new business and supermarket suppliers are usually a turn-off for investors, key financial metrics hint at a positive risk/reward profile at around 175p.
Flexibility for M&A
My chief concern is that management want to diversify into more food service providers and possibly venture into other markets through acquisitions; but the cash/debt position doesn't imply much flexibility.
At the last balance sheet date of 25 June 2016, cash had run down from £2.8 million to £0.7 million; admittedly after repaying £7.0 million of longer-term debt during the year. Short-term debt rose from £16.5 million to £18.9 million. This leaves net gearing of 35.4% with intangibles representing 31.5% of net assets and net interest charges clipping 11.9% of interim operating profit in the last financial year.
Fair enough, but the board needs to better clarify its funding facilities in annual results like this, especially when it entertains acquisitions as a key plank of development strategy. As things stand it will benefit from a fresh long-term debt facility. Even the 2016 annual report doesn't clarify the group's funding flexibility under present arrangements.
This is a side-step, but I recall Warren Buffett once disclosing how he'd taken out a low-cost debt facility in an annual report, because its terms were attractive and he wanted to demonstrate flexibility for acquisitions even though nothing attractive was in sight.
Weather chief risk
Management says it has upgraded its IT systems partly to cut the risk of failure - migrating to an external cloud-based provider from in-house servers - and doesn't envisage any major impact from Brexit in the short term, although immigrants represent a significant portion of the workforce - a risk if tougher controls ensue.
Weather is the chief factor management can't control, however, and any investor would need to be convinced that climate change won't mean freak weather upsets at key times for the business. But, as the 25.7% shareholder appears to believe, any drop in share price is an opportunity to accumulate for the long-term prize.
For more information, visit the website.
Produce Investments - financial summary Consensus estimates
year ended 25 June
2012 2013 2014 2015 2016 2017 2018
Turnover (£ million) 154 206 192 178 185
IFRS3 pre-tax profit (£m) 6 7.6 8.6 7.3 3.5
Normalised pre-tax profit (£m) 5.6 7.7 10.2 6.1 10.8 8.6 9.3
Operating margin (%) 4.4 3.7 5.8 3.9 6.3
IFRS3 earnings/share (p) 23.1 26.9 31.7 19.8 11.6
Normalised earnings/share (p) 20.4 27.3 38.1 15.6 36.7 24.3 26.4
Earnings per share growth (%) -0.2 33.7 39.7 -59.1 135 -33.8 8.8
Price/earnings multiple (x) 4.8 7.2 6.6
Annual average historic P/E (x) 7.5 7.4 7.9 7.2 6.8
Cash flow/share (p) 37 15.6 42.4 34.4 32.6
Capex/share (p) 12.5 12.5 29 13.6 14.3
Dividend per share (p) 5.5 3.6 5.9 6.9 7.2 7.6 8.3
Yield (%) 4.1 4.4 4.7
Covered by earnings (x) 4 7.8 7 2.3 5.2 3.2 3.2
Net tangible assets per share (p) 71.5 72.7 117 128 129
Source: Company REFS
PIL 167.25p -7.75 (-4.42%)|
|Suspect the MMs have been playing games.|
|Yep, ticking back up again...|
|Obviously they are not a FFY as it is a different business but I think they can do a similar thing here.
Now for the 'sitting and waiting'.|
greg the grinch
|Yes mine too, long term hold for me so not at all concerned.|
|I reckon there is a long term seller out there (Tosca?), if you look at the chart they wait for 175p-ish and then sell into that rise.
I knew this when I bought in. My thoughts are that the sells will be absorbed over the next few weeks/months so expect a 'wiggle' and then up we go.
I reckon buyers of this share are also investors and not the quick money brigade so hopefully not too much profit taking.
My only red share.... :)|
greg the grinch