Finsbury Food Share Discussion Threads

[markt] 02/12/2011 17:59

"by pricing at or below cost, just to get the business rather than have factories sat idle / closed"

it was something I put in my initial list of risk factors

diluted EPS has gone 6.9p, 7.0p, 7.1p....over last 3 years.....despite a 20M increase in turnover, savings due to redundancies, savings due to capex on machinery etc, benefits from any acquisitions,

recent share price looks to be due to the large % increase in reported EPS and perhaps in part to the reduction in the debt imo...but the diluted adjusted EPS only increased by 0.1p.

a fair price for FIF shares against this scenario ?
good question
....depends on various things...such as overall profit margin and November RNS stated "operating margins are lower year on year"
for the future reported turnover, EPS and debt for 2012 and 2014....we will have to wait to see !

[spaceparallax] 02/12/2011 13:25

think we might be due a small tick-up soon.

[boffster] 02/12/2011 12:11

I do love a good conspiracy theory

[spaceparallax] 02/12/2011 11:23

Why does someone buy 9999 shares rather than 10K? A signal perhaps?

[jpjp100] 01/12/2011 21:22

markt

the logic goes like this: there will be demand for cakes / bread. Yes, maybe less demand, but its not going to vanish totally. So, as long as FIF is run better than most of its competitors, they should be the ones that lose out first if there is a downturn.

You can safely put the "monopoly commission" out of your mind as far as the UK cake industry is concerned

Whilst price is by far and away the factor that is shouted about most in decision making amongst retailers, it isn't the only thing. As long as pricing is done with making a profit in mind, I believe FIF is at least as well placed as any competitor to win and retain business.

Suicide pricing can happen when a company (with lots of staff and big fixed costs) can't find a way to profitably compete and tries to win business by pricing at or below cost, just to get the business rather than have factories sat idle / closed

In industries with over capacity (like bread and cakes), this is something that can happen. Its fine to do it on a little bit of business to prove a point, but it can get out of hand and do a lot of damage to the market that is very hard (for everyone) to recover from.

We have to hope that FIF is outsmarting the competition with better service, shorter lead times, better innovation, better product range, better quality etc. etc. to protect itself from such shenanigans.

The evidence so far suggests that it is.

Boffster, don't feel obliged to read / post on this thread - its not compulsory!

[boffster] 01/12/2011 14:32

yawn.

Maybe all food producers are going to go bust and we'll all starve to death.

Hopefully some before others.

Why not drop this silly thread, you are welcome to post negativity on my thread. As long as it is to the point, and not repetitive or ridiculous

[markt] 01/12/2011 13:55

jpjp
"however bad things get for the cakes / specialty bread business, have in mind that all FIF has to do is to run its business better than most of its competitors"

Why is that ?
margin has been falling , a lot, over last few years....and sales in cake sector could suffer from economy....(GDP is down and unemployment is up but increase is not a big % wrt of population....and public sector layoffs of 700k announced)
....all FIF has to do is .....I don't follow your logic...
---

...and maybe (for sure ?) the monopoly commission would not allow FIF to make any other big acquisition in the cake sector since it is already no. 1 or no.2 and the M.C. must protect the market to ensure competition.

---

contend with competitor(s)...
difficult sector....since seems like a Dutch auction to sell your products...
and if you have big fixed costs with factories and over 2k staff...and your competitor has the same....

then both appear to me to be forced to obtain sales...at any price since must have turnover to keep the staff paid and pay factory costs...

("suicide pricing")

....how pricing and competition works in done in the sector in detail....I don't know...

[jpjp100] 30/11/2011 21:02

do not underestimate how tough the market is for FIF, its hard going in their markets - we see that by the thin margins achieved by all participants.

boffster is probably right that the right approach is to under promise and over deliver rather than the other way round

the UK economy isn't going to help in a big way anytime soon.

there is a balance to be struck with the divi & debt repayment imo. Resuming divi payments (it can't be a one off, it should only be resumed when there is confidence that the divi can be at least maintained and ideally increased each year from then on) sends a clear message of confidence and would do wonders for the share price, a 1p divi would probably do more than another 500k off the debt imo

I firmly believe that FIF is being run better than its competitors right now. Given the overcapacity in the market, there could be consolidation / elimination of a player to remove some excess capacity at any time. It is important that FIF is in a position to benefit from (or even lead) that process. That can only be achieved by convincing enough players that FIF is a better prospect than most of the other suppliers in the market: debt down, positive shareholder funds, growing sales, respectable profits, good service levels, good customer relations, dividend, stable management.... etc.

With a bit of a following wind, FIF can get there and hasn't really put a foot wrong in the last year or so imo

[aleman] 30/11/2011 13:06

I'd like to see the brokers have a stab at next year's results and dividend. I suppose it is hard to forecast with recovery in margins hard to call and the desire of the company to retain firepower for more acquisitions but we're already half way through this year. Panmure Gordon have yet to update fter the update so it might yet come. Anybody got access to notes from either broker? They might have numbers out for 2013 and 2014 that aren't on aggregator sites.

[boffster] 30/11/2011 12:34

Aleman, I just wish Mr.Duffy had been a bit more positive at the AGM. Then again he was all doom & gloom when I spoke to him a few months ago, and then we get sales up 17%. I think he's a man who prefers to under promise and over deliver, I can respect that. A lot better than being the other way around.

[aleman] 30/11/2011 12:31

sp - the company should generate around 22p of operating cashflow this year and maybe 10p of free cashflow (higher if margins recover although that is speculative) to go towards debt . A 1p dividend won't make much difference to how fast they pay it off! It will cost only £0.5m so they will still probably pay £5m off debt and deferred acquisition payments, and they've already reached debt levels and interest cover at which NFDS and Greencore were recently taken over on double figure P/Es! It just highlights how cheap these are, as FIF should command a takeout price of £1 or more where an acquisitor would get £5-6m free cashflow and rising for just over £50m. That's a lot better than another food company would get for cash in the bank.

[spaceparallax] 30/11/2011 12:09

I'd be happy to waive a divi for the moment, preferring instead to see the share price rerating as a result of the continuing debt erosion.

[topvest] 30/11/2011 12:05

Yes, a 1p dividend for next year is what I expect. It's affordable and by that time the deferred considerations will be pretty much a thing of the past.

[boffster] 30/11/2011 11:22

I would certainly welcome a dividend. If I was being cynical, I might suggest that the directors would want to exercise their options before recommending one!

[aleman] 30/11/2011 11:11

Cenkos have updated their forecast. Both brokers are now forecasting a 1p dividend for this year. It's odd that they've left turnover at £197m when it was up £10m after only 4 months. If they're going to pay a dividend, shouldn't we be on our way to a normal rating by the time it's paid?


Cenkos Securities BUY 28 Nov 2011
2011 5.80 7.10 - 189.60
2012 6.40 7.70 1.00 197.20

Panmure Gordon BUY 28 Sep 2011
2011 5.84 7.07 - 190.00
2012 6.30 7.71 1.00 195.00

[jpjp100] 30/11/2011 08:00

maybe this should go on the other thread as its not a negative really

however bad things get for the cakes / specialty bread business, have in mind that all FIF has to do is to run its business better than most of its competitors

a potential negative I can see FIF might have to contend with is if a competitor does something stupid to (re)gain market share: a cut throat licence deal with a brand, an overly generous and overly long promotion, suicide pricing... that type of thing would do a lot of damage in the market and would take a long time to recover from

[boffster] 29/11/2011 23:01

Cobblers.

The company's product range has already proven itself in these testing times. Things would have to be pretty tough before people are forced to eat gruel. Its more expensive items (for instance, holidays, overpriced restaurants) which get cut first.

Cakes are an inexpensive treat for an increasingly fat population

[markt] 29/11/2011 18:20

...chancellor announces 700k more job losses in public sector over next few years
and pay rises below inflation....

and economy weaker than predicted in March....and 2012 outlook for GDP reduced..

etc etc

-ve impact on cake sales over time imo

[markt] 28/11/2011 16:16

jpjp100
in reply.

...I occasionally send allegations to the FSA if I see anything at companies that I think break the rules.....(but seems quite widespread, see the penalties and notices from FSA and Plus websites to see many companies getting cautioned or fined...many more get privately cautioned imo....the FSA does not want to damage any company's reputation or trade if it can avoid it)

the regulation in the UK is very lax or loose imo....since the Govt. wants the City to be active and busy....and generating work and taxes....the Govt. thinks that if regulation was tightened up that many companies would just register on exchanges outside of the UK

only if people communicate any complaints to the system is there the chance that the system may improve.....noting that in the UK there have been a never ending series of financial sector frauds....from small to big
(pensions miselling, split inv. trusts, mortgage misselling, City Slickers....)

The legal cases recently about News of the World and press eavedropping/spying on people is an example that the UK does not provide correct regulation. The press sector has its own regulator...it does not work. The stock exchange is much the same imo.

[markt] 28/11/2011 15:37

I move/copy some posts from other thread....to collect posts under this title

====
"well done to FIF for the large increase in turnover...

...but what about telling shareholders and the market a bit more...some real info...like effect on profit

margin is down....by how much ?!!"

[markt] 28/11/2011 15:15

...sad to see that people continue to complain if anyone dares mention any negative aspects regards FIF shares.

The shares went to 15p from 85-100p.
The market seemed to think there were -ve aspects.
...but Boffster et al seem to think that no one must mention them !!...strange imo. A forum should discuss -ve and +ve aspects imo....not just the +ve.

Freedom of speech.

And a bit sad imo that people moan so much if there are any opinions or ideas posted that are different than their own.

But it is human of course for FIF shareholders (ie. most posters) to want to only see +ve posts.....in part they want to create a positive atmosphere for FIF and to encourage new share buyers and help increase the share price....so they make money.

[jpjp100] 28/11/2011 10:28

its not obligatory to read it....

[boffster] 28/11/2011 10:12

No, we must listen share price I've sold all my shares. ;-)

Please go on Markt. I want to benefit from your wisdom.

[spaceparallax] 28/11/2011 09:26

Markt,

This is a very sad thread that you've started - showing your true colours