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Finsbury's AGM statement confirms that trading has remained resilient in FY21E, with the group expecting to deliver improved revenue and profitability this year. As such, with visibility improving, we are reinstating forecasts (FY21E Adj EBITDA of £26.0m). We also update our rating to Buy (from Under Review), which is driven by the group's low valuation (c7.7x FY21E P/E), planned reinstatement of the dividend (3.8% yield), and the increasing levels of FCF available to shareholders (11% FCF yield) now that the group has reached the end of a period of heavy investment.
Companies: Finsbury Food Group plc
Nichols has issued a 9m trading update to the end of Sept and a full year outlook. Following on from H1, it is pleasing to see further positive momentum across the dominant activities of UK Vimto Packaged and International (c70% FY19 sales), whilst the cash position remains very healthy. Unsurprisingly OoH has remained significantly challenged (Q3 sales -45%), but we welcome the positive actions signalled this morning to align costs to a period of softer revenue whilst its main end market of hospitality navigates a pre/post Covid-19 landscape. Full year PBT guidance is for £11-13m - down c60% y/y, reflecting high operational gearing at OoH from a >£25m loss of sales. With FY21 a year of partial profit recovery, FY22 is of greater relevance from a valuation perspective and whilst guidance remains suspended, we see a pathway to get to 80-85% of our previous FY20 PBT of £29m. This would imply EPS of c53p, set against a 10 year P/E average of 20.4x. Overall, we feel OoH uncertainty is priced in and should not overshadow the ongoing resilience of core activities, as well as the fundamentals around longevity/growth prospects of the Vimto brand, geographical diversity and a strong c£44m of net-cash to capitalise on future opportunities.
Companies: Nichols plc
Cake Box’s interim results reconfirmed the company’s resilience in the face of extremely adverse circumstances for UK High Street retailers. Cake Box reported only single digit declines in sales revenue and profits in the period as the business benefited from its flexibility, financial strength, and an ongoing customer commitment to celebration. In our view, celebration’s resilience as a category, product innovation, increased outlets, and a commitment to “steady, sensible and sustainable” growth, augur well for further revenue expansion. Yet the group’s valuation remains attractive.
Companies: Cake Box Holdings Plc
Despite Covid-19 materially impacting the Foodservice business, Finsbury traded profitably throughout Q4, and was able to report FY20A Adj EBITDA (pre-IFRS 16) only c4% lower YoY at £24.4m, whilst strong free cash flow (c19% historic FCF yield) reduced net leverage by 0.3x YoY to 1.1x (net debt lower by £9.1m YoY). Demand has been recovering MoM since April, with group revenues now approaching their prior year levels. Notwithstanding the steady improvement seen, due to continued uncertainty caused by Covid- 19, including the potential effects of a second wave of infections, we are not reinstating forecasts at this stage, and maintain our Under Review recommendation.
Both of Carr’s Group’s divisions have continued to operate throughout the coronavirus lockdowns as they serve key markets. While adjusted PBT was 17% lower year-on-year during FY20 because of an unseasonably mild winter in the UK and delays in engineering contracts, a pick-up in US cattle prices at the year-end helped deliver a full-year result ahead of our estimates, which were revised down in March.
Companies: Carr's Group PLC
MPE has reported interim results for the period ending June 2020. The operational performance is strong (CPO-equivalent production up +31%) but gross margins are lagging our expectations. Despite upgrading our CPO price expectation +8%, we are trimming our FY expectations by c10%. Our price target – which is not driven off volatile short-term earnings – remains at 1,000p/share.
Companies: M.P. Evans Group PLC
Dekel Agri-Vision has announced the completion of the acquisition of an addition 14.2% interest in the large-scale cashew nut processing project, currently under construction in Tiebissou, Côte d'Ivoire. (The company's intention to acquire this additional interest was first announced on 3 November 2020). Following completion, Dekel Agri-Vision now owns a 52% controlling interest in the project, which is on track for first production in Q2, 2021. We have consolidated revenues and earnings from the cashew business into our group financials and reflected the increased 52% profit contribution from the cashew project. As a result, we have increased our target price, based on our DCF valuation to 8.1p from 7.6p, reflecting a market cap of £36.7m, up from £32.2m, and compared to a current market cap of £10.2m. We reiterate our Buy recommendation.
Companies: Dekel Agri-Vision Plc
We have completed another periodic refresh of our value screen, first established in our inaugural quant/screening note of 26 May 2015. As usual the screen selected the 25 stocks exhibiting the most extreme value characteristics (based on 2016 consensus P/E and latest price to tangible book ratio) from our universe, and we have chosen 10 stocks to focus on. Since inception last year the screen has outperformed the main small-cap and micro-cap indices (by about 8pp and 3pp respectively) and has proved to be pleasingly defensive.
Companies: ABBY AUG BILN CARR CGS GOAL BOOT LVD RAV VTU
Zambeef has announced the disposal of Sinazongwe Farm for US$10m gross (US$9.25m net). While the sale process has taken quite some time, at US$3,900/ha for the 2,500ha farm we see this as a good price, particularly as the impact on the income statement is small. The cash raised will be used to pay back debt and represents 2.5p/share. Our earnings forecasts are not materially affected but the cash is a welcome injection to the balance sheet.
Companies: Zambeef Products PLC
Cake Box, which announced strong interim results today, benefits from a unique value for money fresh Devon cream egg-free cake product offering, unusually visible growth and high returns on capital associated with its franchise model. The company should continue to add value as a brand manager, food manufacturer, and franchise retailer, with excellent execution.
Cake Box’s FY2020 trading statement released today confirmed that, ahead of the impact of the COVID-19 measures, the company was enjoying brisk growth – both in terms of overall and like-for-like sales revenue. Moreover, in the current period of uncertainty the company’s finances are underpinned by its strong balance sheet and franchised business model.Cake Box’s FY2020 trading statement released today confirmed that, ahead of the impact of the COVID-19 measures, the company was enjoying brisk growth – both in terms of overall and like-for-like sales revenue. Moreover, in the current period of uncertainty the company’s finances are underpinned by its strong balance sheet and franchised business model.
Cake Box’s preliminary FY2020 results, released today, reconfirmed strong sales growth in FY2020 with scope for an expanded distribution footprint to deliver further sales revenue expansion in FY2021. While the Covid19 lockdown clearly disrupted franchisees’ in-store sales, Cake Box appears well placed to spring back both quickly and with a positive growth trajectory.
Zambeef has reported FY2020 interim results for the six-month period ending 31 March 2020. In what is a tough macro environment in Zambia, we believe that the company has delivered a strong performance, with underlying growth in revenue of +27% y-o-y (+9% in US$) and +31% y-o-y underlying growth in gross profit (+12% in US$). While customers are gravitating to lower-margin products, Stock Feed and Cropping have countered with a very good performance. We had largely anticipated these dynamics, so we are not changing our forecasts at this stage, but the weakness of the Kwacha needs to be monitored.
Premier Foods’ FY20 results demonstrate the substantial progress the company has made over the past few years. The UK business has now grown for 11 consecutive quarters and Q121 is set to be very strong. In the UK the brands grew ahead of their categories and the innovation rate has hit a new high. A new landmark pensions agreement was signed in April, which could potentially significantly reduce the future funding requirements for Premier Foods. The recent triennial actuarial valuation delivers further credence to the pensions deal.
Companies: Premier Foods plc
Cake Box has started FY2021 positively with strong same store sales growth, new store openings and an excellent online performance. The company is not only able to repay its furlough monies, but also reward shareholders with a special dividend. Cake Box released a trading statement as such this morning.