Finsbury Food’s a tasty stock
Celebration cake-to-free from bread maker is coping well with challenging market
Ashare price pullback at diversified bakery group Finsbury Food (FIF:AIM) represents a buying opportunity ahead of full year results (18 Sep). Reassuring commentary despite trading amid tough industry conditions and potential for updates on new license and customer wins or even further acquisitions, are among the reasons to swoop at 109p.
Celebration cakes, artisan breads and muffins maker Finsbury Food faces a tough consumer market and rising input costs, but remains confident in its ability to maintain a market leading position and deliver profitable growth.
Shares admires Finsbury Food’s diversification across the retail and ‘out of home eating’ foodservice channels, as well as CEO John Duffy’s unwavering focus on product innovation, productivity gains and improving shareholder value. One example is the tough decision taken to close (23 Aug) Grain D’Or, Finsbury’s historically loss-making, London-based maker of premium baked goods for the UK pastry sector, in a move that removes a distraction and will improve group earnings quality.
Ahead of the results, Panmure Gordon’s Peter Smedley forecasts improved pre-tax profit of £17.1m (2016: £16.5m) for earnings of 9.9p (2016: 9.7p), rising to £17.7m and 10.2p respectively in 2018. On the latter estimates, Finsbury trades on 10.7 times prospective earnings, a rating which appears overly gloomy, while Finsbury offers a near-3% yield based on next year’s 3.2p dividend forecast. We also note significant 38% upside towards Smedley’s 150p target price.