Q2 figures reflected strong foodservices impact, but with encouraging recovery at the end of the quarter. No major change expected in our opinion/target price.
Companies: Kerry Group Plc
The Q1 figures do not really reflect the impact of the crisis, or even the good improvements at the beginning of the year. The group decided to withdraw its FY20 guidance, expecting a strong negative impact in Q2, while we also see some troubles in H2. Our estimates are likely to go down, while we still believe that Kerry remains a quality defensive stock in our coverage, and even more so during the crisis.
FY19 results confirmed the predictability and toughness of Kerry’s business model. The same scenario continued: Taste & Nutrition remained solid, pushed up by healthy life style and acquisitions, while the Consumer Foods division is still challenging. We believe FY20 will stay the same way.
The 9m results proved, once again, the predictability and the toughness of Kerry’s business model. We see the same scenario as other previous quarters: Taste & Nutrition continues to be solid, pushed up by innovations and acquisitions, while the Consumer Foods division is still challenging. “Very important to the overall strategy”, to quote management, M&A is still on the table.
Kerry reported H1 results slightly beating analysts’ expectations. The Taste and Nutrition division continued to be the main growth driver, while the Consumer Foods division was more challenging. Innovation and M&A are still on the table, if they correspond with the new consumer trends. We will positively revise our expectations.
Good Q1 figures, still pushed up by the innovative Taste & Nutrition division. No major change in our expectations expected. Our Add recommendation should be maintained.
Good performance for FY18, pushed by the Taste & Nutrition division, on which we see significant growth potential. We judged the business as solid, despite the non-trading charges putting a shadow on the reported figures (acquisitions and Brexit impact).
The company scored quite a decent quarter given the strong comparables from last year. Sterling’s headwinds and Brexit woes clearly weighed on the reported figures limiting the excitement.
Despite stronger than we expected FX headwinds, the underlying business growth is solid and the company is not losing its momentum. Our Add recommendation is maintained.
Q1 update: Volumes were up by +3.7%, with pricing up +0.9%. On a reported basis, revenue was flat +0.1% (FX: -8.4% translation, net acquisitions: +4%).
By segment, T&N recorded +4.3% in volumes whereas Consumer Foods were up +1.6%.
T&N volumes by region: Americas +2.9%, Europe +3.9%, APMEA +9.7%.
The group’s margin was flat: +20bp for T&N and -60bp for Consumer Foods (impacted by sterling, as expected).
FY guidance is maintained.
Great performance in Q4 despite strong comparator from last year, driven by Asia Pacific and EMENA (exceeded expectations).
We judge the underlying business as solid although the FX puts a shadow on the reported figures.
Guidance suggests another good year of sustained underlying performance, however, the FX headwinds should result in somewhat weaker/flattish reported EPS for 2018.
9M update: Volumes were up +4.2% (Q3: c.5%), with pricing +2%. On reported figures, sales were up +4.5% (FX: -2.2%, net acquisitions: +0.5%).
By division, Taste & Nutrition grew by c.5.4% in volumes in Q3, whereas Consumer Foods reported a c.1.4% increase in volumes.
The 9M trading margin is maintained yoy (20bp for Taste & Nutrition, -70bp for Consumer Foods, both in line with our estimates).
Due to currency headwinds (-4%), the group expects to achieve growth in adjusted earnings per share of 4-6% on a reported basis.
At its Capital Markets Day, Kerry Group outlined its five-year business plan for FY18-22. The major points include:
• a target of 3-5% annual volume growth on a group-wide basis, with Taste & Nutrition targeting 4-6% growth and Consumer Foods targeting 2-3% growth;
• a target of a 30bp improvement in the group trading profit margin per annum on average across the five-year cycle; with Taste & Nutrition targeting to grow by 40bp per annum and Consumer Foods targeting to grow by 20bp per annum;
• Return On Average Capital Employed (ROACE) is expected to achieve at least 12% per annum;
• FCF target of €3bn by FY22, with a cash conversion target of more than 80;%
• a target of double-digit dividend growth.
H1 update: Volumes are up +3.8% (Q2: 3.8%) with Taste & Nutrition up +4.2% and Consumer Foods up +2.3%. Pricing stood at +1.8%.
T&N volumes by region: Americas +3.6%, EMEA +2.3%, Asia Pacific +10.3% (Americas were a little bit weaker in Q2, EMENA improved whereas Asia Pacific maintained its momentum).
The reported revenue was up +4.8% (FX:-1.4%). The trading margin was flat at 10.6% with T&N +20bp, CF -70bp.
The interim dividend is up 11.9% to 18.8 cent.
Due to currency headwinds (estimated to be 2-4%) the group expects to achieve growth in adjusted earnings per share of 3% to 7% on a reported basis (5-9% previously) to a range of 333.1 to 346 cents per share (2016: 323.4 cents).
Q1 update: volumes were up by +3.8% with pricing up +1.3%. On a reported basis, revenue was up +4.5% (FX: -1%, net acquisitions: +0.4%).
By segment T&N recorded +4.1% in volumes whereas Consumer Foods were up +2.1%.
T&N volumes by region: Americas +3.8%, EMEA +1.9%, Asia Pacific +10.4%.
The group margin was flat: +20 bps for T&N and -70 bps for Consumer Foods (impacted by pound sterling as expected).
FY guidance is maintained.
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Initiating with a Buy rating – We initiate our coverage on Dekel Agri-Vision with a BUY rating and a target price of 7.6p, equating to a market capitalisation of £32.2m. We believe Dekel Agri-Vision's agri-commodity diversification strategy, complementing its existing palm oil processing operations with a new cashew nut processing project (in which the company currently has a 43.8% interest, and an option to acquire a further 17%), provides a solid platform to enhance margins and drive step changes in profitability in the coming years.
Companies: Dekel Agri-Vision Plc
A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
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.
Companies: Finsbury Food Group Plc
We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.
Companies: BCA CLIN CLG CBP DNLM EAH STU FCRM FUTR GTLY INS GLE NICL SDL SPR TRI
A brief year-end trading update with not a huge amount of details. The main point is that post the July 2019 profit warning, the PBT performance through a combination of mix and cost savings has come in towards top-end of market expectations, implying c18% y/y decline. So a c3% beat vs our £36.5m. Revenue decline at -9% however was worse than our -7%. This reflects ongoing challenges with the Rubicon and Rockstar barns and lower Irn-Bru volume due to price realignment. Net, the company had a better H2 than H1 and from our understanding, exits Q4 with good momentum. Looking ahead to 2020, the comps are easier and the company is expected to get back into growth mode (albeit 3% at the PBT level). The main cloud on the horizon is the Deposit Return Scheme for Scotland, and we understand the Scottish Parliament will provide an update on plans in the next few weeks. We view this as short-term negative for AG Barr and hence have a y/y profit decline for FY22. Post today’s update we nudge our current year PBT up by 2% and FY21 by 2% also. There will be some investor relief this morning but given the anaemic growth outlook and ongoing headwinds we feel an FY21 P/E looks full. We stay at Hold.
Companies: A.G. BARR 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.
Companies: Cake Box Holdings Plc