Finsbury Food Share Discussion Threads

[battlebus2] 28/9/2012 07:30

Diverse income trust has been adding now above 3%.

[spaceparallax] 27/9/2012 17:56

Looks as if the mkt might finally be waking up to the compelling FIF case.

[battlebus2] 27/9/2012 17:30

I've added today to what was a small first investment.

[woodcutter] 27/9/2012 17:23

I believe we are witnessing the begining of a full breakout with momentum up toward 40p too. Once the share price rise gets in flow then the traders will come in and drive it forward. The only question then will be at what point will it rest, we'll be able to see that as the trade volumes drop off and the late comers find themselves buying at the next top before we see a step back in the share price

Not easy to predict where the next share price rest will be, it was around 40p for sometime in 2008 so i guess that's the most likely. i'd buy more but i'm pretty much fully invested at the moment in nine stocks with all of my stocks bar one doing well so i'm not inclined to sell any of them, added to which i'm already overweight in fif, and a couple of others compared to the rest of my portfolio so it's time to sit back and enjoy hopefully.

Woody

[aleman] 27/9/2012 16:44

Interesting buying late this afternoon. Cenkos' buy note is already out. I wonder if that is PG's updated note doing the rounds. Nice to see the gap up to 40p trying to fill again, anyway.

[topvest] 25/9/2012 13:46

I'm not sure it was ever quite on the brink, but it was over leveraged for a listed company. I agree that it would be nice to know where they are heading.

[this_is_me] 25/9/2012 09:37

Things are going well at present; turnover and profit are rising and debt is falling. If this steady progress continues for a few years management will have done well.

[jpjp100] 25/9/2012 09:26

Anyone that paid 85p for FIF shares is surely happier now with them at 34p, under the current management team, than they were when the shares were 11p under the old management team.

Yes, the company has a chequered history, yes it operates in a tough market, yes it may even have been a vehicle to feather the nests of its majority owners in previous times

But even the most hardened cynic must acknowledge that the business under Duffy and Boyd et al. is doing pretty well all things considered.

[jpjp100] 25/9/2012 09:15

I agree that its not a significant problem topvest, just saying that I would have preferred to see cash increase in line with top line sales

Its clearly been a tough year and FIF has come out of it well as a result of its hard work and, maybe, a little bit of luck here and there.

What's next? is the question that will become increasingly important now. If the balance sheet continues to improve then what can FIF do to go from a £200m t/o business to something towards a £300m t/o business in the coming years....

I would say that the management has now proved it has rescued the company from the brink, it needs to deliver sustainable future profitable growth now.

[topvest] 24/9/2012 19:45

It's due to growth in sales and capex so that's not a problem.

[jpjp100] 24/9/2012 18:28

I expect the board would be happy to see current assets > current liabilities

the only minus for me on reading the results is in the cashflow statement

cash generated from operating activites is slightly down vs last year and net cash (after interest and tax) from operating activities is over £1m down

As a result the business had £800k less cash at the year end than the prior year

Not the end of the world, but I'd be happier if that had gone up in line with top line growth

[topvest] 24/9/2012 12:45

Debtors and property more than cover the debt, so they are getting more conservative on the gearing front. Just need a positive trigger to re-rate the shares.

[aleman] 24/9/2012 11:58

Anybody familiar with the 5 freehold sites? THey look to be on the books now at about £10.6m. I'm guessing this is a bit on the conservative side. Can anyone comment? Memory Lane in Cardiff is 8 acres on its own. Lightbody looks like it could be similar. We could be looking at 20-25 acres.

Edit - Cleared industrial land is worth about £600k per acre in Cardiff and £400k in glasgow so its probably not so far out.

[aleman] 24/9/2012 11:02

Offer paid has gone up from 34.65p to 34.8p to 35.0p since the open. A tick up would be nice to go in the market reports at the end of the day.

LOL - it's ticked down.


topvest - at double the price, a £5m deal would be a 13% dilution, perhaps 15% with placing discount. Would you rather have 15% dilution or just wait a year for the £5m free cashflow to pay for it? I reckon the company could handle another £10m debt by this time next year,i.e £40m instead of my £30m forecast, bearing in mind that the acquired earnings would push EBITDA up to more like £14-15m, from my £13.2m forecast, so debt/EBITDA would still be around the current 2.7 . No share issues for me!

[aleman] 24/9/2012 10:52

topvest - debt/EBITDA has fallen from 4.6 to 2.7 in 2.5 years. Bloody amazing really!

[aleman] 24/9/2012 10:47

On further digestion I think these are very good results. A few things ate into cashflows this year which should be better next year. I can see EBITDA beating £13m (from £12.4m - £12.9m without options charges) with only very modest growth, lower option charge and less interest. Working capital knocked about £750k off operating cashflow this year but should be lower next time. Net cash from operating activities should be more like £8.5m from this year's £7.0m. Take off a higher £3.5m capex and the final £1.2m deferreds leaves £3.8m for debt and dividends, a 1p dividend (£1.1m) leaves debt down £2.7m. Debt and deferreds together fall £3.9m to £30.0m. Debt/ EBITDA would be £30.0m/perhaps £13.2m = 2.27. EV/EBITDA should go over 5 at this level so I'll go for 5.5 as a target(c.20% peer discount) x £13.2 = £72.6m enterprize value. Knock off £30.0m debt and that gives a market cap of £42.6m or 76p before further options dilution. Even without increasing the current EV/EBITDA rating of 4.29 for another year of progress (c. 35-40% discount to peers), you get a market cap of £26.6m or 47p per share. The current market cap is £19.1m. Add in the expected £30.0m debt and EV is £49.1m which gives a EV/EBITDA of £49.1/13.2 = 3.72. Given a 5th year of steady modest improvement this year, and debt already down to fairly normal levels for food companies, a 40% discount to peers' 2013 estimated ratings looks excessive.

As I said last night, earnings show the trend pretty well here for now. 7.8p with maybe 8.5p to come. Find me another company with such steady earnings and cashflow growth and steady debt reduction in recent years that is on a forward p/e of 4 or less. 34p is too cheap. I'll be looking for a 50%+ rise over the next year, even on only modest growth.

[topvest] 24/9/2012 10:41

See debt to EBITDA ratio has come down from 3.7 to 2.7 in 5 years. CEO comment is interesting: "The Board is resolved to pay down debt, build a balance sheet that is significantly less leveraged and create long-term value."

Would be interesting to know what their target is!

[spaceparallax] 24/9/2012 10:20

Great results, continued growth and debt reduction - a virtuous cycle.

[topvest] 24/9/2012 10:08

They presumably talk the market down, given the supermarkets no doubt read their results announcement. It wouldn't be very good to talk about margin improvement and then try and get price rises.

You have to give them credit for managing the debt down. I'm not sure what they see as optimal financial gearing. Does anyone know? I suspect £25-30m. Share price still very low given circa. 8p EPS. There is the potential for this to get re-rated this year which would result in a doubling of the share price. That would enable them to place some shares to do a deal rather than the debt funded approach of the go-go years. Not opposed to an acquisition if it's part or all debt funded, with no earn-out!

[jpjp100] 24/9/2012 09:47

I like it!

£200m t/o breakthrough with profit, margin and debt all seemingly under decent control

an interesting time ahead

balancing the repayment of debt with the need to invest / acquire to deliver further growth, but not taking the eye of the ball regarding business as usual

[woodcutter] 24/9/2012 09:21

I think pretty good results really, eps beat forecast. A bit dissapointed that the debt hadn't come down a bit more but as Aleman noted i was a litle optimistic on that point. Interesting that they continue to invest in line with depreciation and the cash flow continues to be very good. The investing activities up a couple of £m on last year so with some further belt tightening and hopefully no further acquisitions we could see debt falling again next year maybe at a faster rate.

The share price has held up so far, next few days/weeks will be interesting to watch.

Woody

[aleman] 24/9/2012 08:49

I didn't see a mention of an acquisition this time. That's my guess from the lack of dividend and the determination to severely talk the market down despite very good results.

[topvest] 24/9/2012 08:43

Good results in a difficult market. Rather disappointing to get no mention of dividend intentions which is very poor and evasive, in my view. The last thing we need is more acquisitions, unless they are an absolute bargain! That's probably why the share price is so low. 5 years of debt reduction and the management team are talking about acquisitions before dividends. Not impressed!