Finsbury Food (FIF) has slashed net debt by 27 per cent and, since the end of its first-half reporting period, sold its Free From bread business for £21m. Coupled with a share placing in November that raised £4m, this gives it the capital strength to make badly-needed investments in its cake business and reintroduce a dividend.
Finance director Stephen Boyd says cake has historically seen little investment because of the company's debt profile. Now, he says Finsbury is in a position to change that, and it is hoped this might translate into lower costs and stronger growth as factories and processes are made more efficient.
That's important because, following the sale of the Free From business, cake generated nearly six times as much revenue as bread in 2012, but first-half underlying operating margins are much weaker - 2.2 per cent compared with 5.5 per cent.
Already in the first half of the year the underlying operating profit has risen 17 per cent to £4m, driven by the bread and Free From division, where revenue grew 7 per cent to £27.4m. In the UK cake division too, revenue inched up by 2 per cent to £67.8m. A 17 per cent decline in sales at Finsbury's part-owned subsidiary, Lightbody Europe, caused overall cake sales to fall slightly, but operating profit still rose 33 per cent to £1.7m
Following the sale of the Free From business, Cenkos expects a drop in 2013 pre-tax profits to £5.8m, giving EPS of 6.3p rising to £6m and 6.1p in 2014 (2012: £6.5m/7.8p).
| FINSBURY FOOD GROUP (FIF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 53p | MARKET VALUE: | £33.9m | |
| TOUCH: | 52-54p | 12-MONTH HIGH: | 55p | LOW: 21p |
| DIVIDEND YIELD: | 0.5% | PE RATIO: | 6 | |
| NET ASSET VALUE: | 84p* | NET DEBT: | 50% | |
| Half-year to 29 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 102 | 2.22 | 2.10 | nil |
| 2012 | 103 | 2.95 | 3.60 | 0.25 |
| % change | +1 | +33 | +71 | - |
Ex-div: 3 Apr Payment: 26 Apr *Includes intangible items of £62m, or 97p per share | ||||
