Finsbury Food Share Discussion Threads

[topvest] 16/11/2011 20:41

I think that getting back on the dividend list will help the share price no end, along with clearing all deferred consideration. After that they will need to grow the dividend back to 3/4p and get the share price up.

They should only do acquisitions that are equity funded in my opinion, unless small in size, but that will not be feasible until the share price is a £1 or so as it would be dilutive.

The share price is showing signs of a positive re-rating which is good and so I am positive on prospects here, but I'm not really keen on acquisitions - they are not really needed!

[aleman] 16/11/2011 19:15

Debt reduction and deferred payments amounted to over £5m last year. With a similar fall of £5m this year, the saved interest will go some way towards a 1p dividend, but the profit is actually forecast to rise so they could probably pay a 1p dividend and pay debt and deferred payments down by even more than last year, giving a year-end target of maybe £26m net debt, down from a peak of £43.7 net debt in 2008. That's a debt reduction in 4 years of £18m at the same time as deferred payments and a small acquisition added about £5m to the load, so absorbing about £6m cashflow each year in total. This all occurred through a recession and with commodities spikes so there is plainly plenty of scope for paying a substantial dividend of 6p or more, costing about half the expected freed cashflow at £3.2m, perhaps £4m fully diluted in a few years, were debt stabilised at current evidently manageable levels under £30m - but that does not meet their stated goal of expansion by acquisition which will require further debt reductions in advance. Given we're already well into the year and commodities have eased, I'll be surprised if we don't get a dividend of some sort, as a return to dividends has been hinted at twice by the board and they could manage much more than the forecast 1p if they chose to eschew further acquisitions.

The question seems to be, to pay 1p dividend (cost £0.5m) and save (as further debt and deferred payment reduction) £5.5m per year towards acquisitions or pay 4p per year dividend and only save £4m per year towards acquisitions. The share price looks daft when you look at it this way - it should be near £1 (less a small discount for margin exposure to commodities and supermarkets) - but the market is waking up.

[boffster] 16/11/2011 18:49

Markt. Annual report P39 shows financial income and expenditure. Net finance expense just over £2m last year.

Regarding the debt, I think £7m headroom is enough to pay out a dividend of £1m, while still keeping a 'rainy day' fund without needing to go cap in hand to the banks. Bear in mind the healthy cash flow is allowing the debt to be pared down quite quickly.

Looking forward to the update & AGM next week

[markt] 16/11/2011 17:32

Aleman...thanks for your notes...

"They would be able to afford a substantial dividend once deferred payments are finished, which will be soon".
Personally I would doubt it....headroom on bank debt was 7M in last accounts I think.....and as % of the bank debt or relative to operating costs it is not so big imo .....I think they would/will prefer to increase that headroom before paying much dividend....but just my guess...
(bank debt, 32.7M and deferred consideration = 4.3M (1.2M is interest free) total = 37M. 5.6% effective interest rate on bank debt. Note 7, "interest on defined benefit pension scheme obligations" "1.13M"...25% of the finance expense of 4M)....
it does say interest....but I can't see how it can be interest since deficit it only about 1M, interest cost for that would be around 60k, not 1M)

(approx. 6M options will reduce EPS in this fin. year imo...since dilutive and after year end)

Perhaps the word 'interest' regards the pension plan is not meant to mean interest in this case.

Do you think they will want to get current assetts to be positive before paying much dividend or not needed ?
(accounts make a mention that it is negative)

[aleman] 16/11/2011 16:38

markt - the defined benefits pension closed to new entrants. I can see no significant costs for it in the cashflow statement and the interest for 2010 and 2011 look like they might be the guaranteed rises in benefits due to inflation and not a charge arising to the company, given that the assets increased faster than liabilities.

The ability to service debt is usually monitored through interest cover. Operating cashflow to net finance cost is over 5 (and could reach 6 on the current year forecast), which means they should already be comfortable to pay a dividend. However, what is holding them back is the deferred payments which they also have to meet from spare cash. They would be able to afford a substantial dividend once deferred payments are finished, which will be soon. So, debt levels are already sustainable. Further reductions in debt will just give them leeway for more acquisitions in the future, if they are so minded.

[aleman] 16/11/2011 16:17

Yes. For a number of factors, I'm reluctantly not going. My voting card has been posted, marked as previously described. I like to go to the occasional AGM (rarely missing local ones but London is a fair trek) so maybe next year. Sound them out on the prospects of a dividend this year, please, if you are feeling amenable.

[markt] 16/11/2011 15:54

...but on ADVFN only 1 trade...a buy of 10k shares at 27.5p....2.7k pounds ! Nothing....but highest price paid for a long time
...'if' 1 or 2 similar sales then 'could' perhaps re-trace its steps...time will tell

(21p in Aug to 27p now....largish % rise...)

[spaceparallax] 16/11/2011 15:11

sp on the move again

[markt] 16/11/2011 15:07

the recent moving up in the share price triggered me to go and look again at the accounts...

One thing I couldn't understand was the high interest cost relating to pension...approx. 1M pnds interest....but the pension fund deficit is close to zero, only 1M short and fund has value of around 20M, ie, nothing....
and interest on 1M shortfall would be a small amount, not 1M
(...or maybe I am making a silly mistake in reading the accounts)


Anyone understand this 1M pension interest cost ?

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Any views on how many years until debt could be paid off ?
And how many years until debt is small enough that it would allow a full dividend to be paid ?

I expect that some of you big holders have already looked at these things...

(I would assume that no need to pay off all debt before happy to pay full dividend...and that co. would be happy to tick along with some debt...but I guess that they would also want to get current assetts to be positive and have some +ve excess)

[boffster] 16/11/2011 13:55

Markt, thanks for the sentiment. Aleman, are you definitely a no-go for the AGM?

[markt] 15/11/2011 18:52

......hope it goes well for any of you that are big holders....you took the risk and have waited and waited....

[spaceparallax] 15/11/2011 14:05

Looking quite promising

[aleman] 15/11/2011 12:05

I topped up slightly at the end of last week but don't expect to have any more spare cash for a while. The chart suggests a jump in the price to trade around 30-33p for a bit before moving up to 40p (where the p/e is all of 5). I'll be surprised if I can get any more around the current price.

This one is starting to look like a defensive safe haven in a stumbling period for growth stocks.

[boffster] 15/11/2011 11:51

A modest buy over the offer has pushed the bid price up.

[markt] 14/11/2011 13:49

Back to FIF....
....buy/sell today is 25.5-27p according to ADVFN......hovering around resistance.....but seems little interest in selling at the moment....so maybe this week it may break resistance and move to a new range.....

[markt] 11/11/2011 18:17

Background info....

options issued at Premier Foods.....shortest time till exercise....3 years from grant date..
(compare with I think 2 months for 1/3rd of options issued in the summer at FIF)

"The Options will normally be exercisable between the third anniversary of the Grant Date and the day before the fifth anniversary of the Grant Date subject to continued employment, retention of the linked Investment Shares in the Company and the achievement of a share price based performance target".

...I'm hoping that someone can ask at the AGM about the reasoning for the short time till exercise of 1/3rd of the recent FIF options

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Background info
If anyone is interested in info relating to 2 of the board members..non-execs..and controller of the votes of large investor in FIF..(ie. LFI)..and their investing performance over the last 20 years....you'll find all the info over on the LFI msg brd....
includes compounding etc..since 1990 !
(29p average price 1990-1994...and 28p now 20 years later (excluding 1 apartment)
Must be the worst performing investing fund for 1990-2011 period imo !...with 7.5% yearly increase it would be worth 132p ! now, not 28p)
-----
Conclusion. LFI performance over last 20 years under the control of David Marshall (and with a son as director of subsidiary for at last 10 years) has been a disaster !
(the LFI subsidiary is the co. secretary I believe for FIF...and I think also does the FIF accounts). (I try to get changes made at LFI...but no interest so far from other shareholders, all asleep imo !)

[spaceparallax] 11/11/2011 16:30

fingers crossed

[boffster] 11/11/2011 16:29

You were saying SP?

[spaceparallax] 11/11/2011 16:17

If only we could burst through that 26p level

[aleman] 11/11/2011 14:21

I'd like to ask them about the dividend prospects, the forecast of one and comments in the last 2 results.

[markt] 11/11/2011 14:16

(although M.Lightbody could have different desires that the PIs.....
perhaps he could want money quickly ...to move abroad to start a sailing school or invest in company X in other sector or.....
we don't know
so...he could agree to options with short timescales...in the hope to drive co. perf. in short term....so he can sell out around 50p ...we don't know...

imo ...PIs have to vote for or against options packages based on their own opinions/desires...)

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If anyone is collecting questions for the AGM ....perhaps you can consider to ask these

1) Why was/is there such a short time between the issuing of recent options and the first time for being able to exercise, 2 or 3 months separation when 2 years min. would be normal.

2) Does the FIF board think it is correct to have the chairman of LFI on the FIF board to represent the interests of all LFI shareholders and the value of the money invested (2M pounds)....but that the payment for this LFI representative (Mr Marshall) is NOT paid back to LFI but is paid directly to an un-named overseas company ? (one assumes linked to Mr Marshall, tax ?, national insurance ?)

(LFI running costs eat up assetts since not had enough income to pay the running costs....so, the more income LFI can get, such as from FIF, MWB (CRE for Mr Marshall for WSE investment) et al....then it should help contribute to paying the LFI running costs, and reduce the eating up of assetts to pay dividends)

3) What is the name of overseas company that receives Mr Marshall's money ?
(money paid out by FIF, so FIF shareholders have a right to know, I am a FIF shareholder...and LFI)
4) Which country ?

5) Accounts always report that the changing price of raw materials is not priced into contracts.
Can the board please explain why it is not possible to do this ?

(in other industries it is normal to price into contracts important variables which will change costs over medium/long term; eg. in engineering sector; price changes by change in price for 40000kg of aluminium, price changes by the reported labour rate index for 37000 hours of labour of aluminium welders.....)
(if price of wheat/gas/eggs/sugar goes up it appears that FIF profits could be nailed (and hence share price)....surely the sales contracts can be written to protect against this...and/or futures contracts for wheat used...)

(with small margins...the amount of risk being taken on board looks high imo)

[aleman] 11/11/2011 11:58

I partially agree. He potentially loses out from dilution although could potentially benefit fron the board gaining more control at the expense of other shareholders while still having a big enough vote to block the rest of the board himself.

[boffster] 11/11/2011 11:42

Aleman, the only comfort I take from this is that Martin Lightbody is the largest shareholder but is not a beneficiary of these options (being a non-exec).

[aleman] 11/11/2011 11:07

An acquisition that big should not have the share issue preapproved! Shareholders should get their say.Historically, most acquisitions destroy shareholder value (although often result in pay rises for directors). It's lack of attention democratic rights like these that contributes the mess western capitalism is getting itself into.