Finsbury Food Group done a five-bagger and still presents compelling opportunities.

Sunday, Sep 18 2016 by

What is Finsbury Food Group?

The company is made up of five divisions, which includes:

1. Foodservices; - The brands involved are Kara and the newly acquired Johnstone’s. Both make special treats and premium snacks for coffee chains, hotels, pubs and fast food outlets in the domestic and international market.

2. Licensed Brands (most significant segment); - Finsbury Food got licenses to manufacture cakes and bread for some of these well-known brands such as Disney, Weight Watchers, Vogel, Thornton, Village Bakery and Cranks.

3. International; - It owns 50% of Lightbody Stetz, which helps distribute its manufactured products, particularly in France.

However, in 2014 it acquired Fletchers Group (a rival bakery business) for £56m that would double the size of Finsbury. This is paid for by raising £35m in equity.


By the time Finsbury report its result on 19th September, revenue (as mentioned in a trading update) would exceed £300m.

The question is how much it will make in earnings?

Given the significant changes taking place for Finsbury Food it is wise not to go into depth on the fundamentals but make observations.

The following are facts and figures on Finsbury Food:

Fact 1: - Revenue to reach £300m in annual turnover following the acquisition of Fletcher Group, compared to £110m in 2007.

Fact 2: - Current market capitalisation is £171m at £1.31/share; this grew from £0.25/share in the past five years.

The market likes the acquisitions and the objectives of management.

Fact 3: - Finsbury is now the second largest manufacturer in Morning Foods.

The company makes famous cakes like The Simpsons, Hello Kitty, Peppa Pig and Me to You.

Fact 4: - Finsbury made annual operating profits of £9.5m in 2015, but its interim results in 2016 jumped to £8m.

Also, operating margins increased to 5.1% in H1 2016, up from 4.2% in the previous period.

Extrapolating 5.1% on revenue of £315m would give predicted full-year earnings of £15.5m-£17m.

Net margin is 3.7% giving it projected earnings of £11.7m giving a PE of 14.

Fact 5: - Here is the history of its valuation is displayed as follows:


Source: Finsbury Food Group annual reports (Created by the writer).

The high valuations of both graphs are lifting off at record highs.

But as I explain later, this is somewhat misleading.

Now, for my…..


Final thoughts

Despite, the five-bagger you got for capital gains, there is more to come as it fully integrates the newly-acquired businesses.

The reasons are as follows:

- As mentioned, projected net profits of £10m-£12m giving it a PE of 14 to 15 times.

- The company net interest costs have been brought down to £1m making interest cover of 10 times, whereas in the past net interest of £2m-£3m helped to depress net income.

-With a larger slice of the action, it can reduce costs further from bulk buying raw materials.

-Net debt of £22m is half the size it was four years, despite the firm doubling in size.

-Dividends are likely to increase to £4m-£5m in the near future giving it a yield of 3%-4%.

-Net cash earnings are likely to exceed accounting profits meaning it will come in closer to £25m-£30m.

It would easily fund Cap Ex and payback loans.

-Finsbury Food could win further licenses to manufacturer other famous brands given the business size and reputation.

Verdict: The Company saw its shares recovered by 500%+, but with improving fundamentals and future earnings growth, the likelihood is the shares are travelling higher.

For the next year or two, shares in Finsbury Food could be higher by 50%-70% to current share price as of 16/09/16.

So, do you agree or disagree with my assessment?


I wrote this article myself, and it expresses my opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Plus, I do not own the stock of the company mentioned, unless stated.


By reading my articles and newsletters, you agree to use the research of at your risk. The purpose of this site is to educate and entertain readers. In no way, we are giving investment advice though the information provided is to my knowledge accurate at the time of the report. You should do your research, or seek advice from qualified professional investment advisors.

Do you like this Post?
8 thumbs up
0 thumbs down
Share this post with friends

Finsbury Food Group Plc is a United Kingdom-based bakery manufacturer. The Company is engaged in producing a range of cakes, bread and bakery snack products for retailers and the foodservice channel. The Company's segments include UK bakery, Overseas and Group Operations. The Company's UK Bakery segment manufactures and sells bakery products to the United Kingdom's multiple grocers and foodservice sectors. The UK bakery segment primarily includes the operations of Memory Lane Cakes Ltd, Lightbody Group Ltd, Campbells Cake Company Ltd, Johnstone's Food Service Ltd, Fletchers Bakeries Ltd and Nicholas & Harris Ltd. The Overseas segment is engaged in the distribution of the Company's product manufactured in the United Kingdom along with the sale of third party products primarily to Europe. Kara is the Company's foodservice brand. Its licensed brands include Disney, Thorntons, Weight Watchers, Vogel's, Village Bakery and Cranks. more »

LSE Price
Mkt Cap (£m)
P/E (fwd)
Yield (fwd)

  Is Finsbury Food fundamentally strong or weak? Find out More »

25 Posts on this Thread show/hide all

Orangetree 20th Sep '16 6 of 25

Should have updated this yesterday to make several important observations:

Net operating cash earnings came in at £20m+ though below my £25m projection, can be used to repay loans and meet CapEx.

Dividends payout has doubled from last year, expect it to increase in the future, as the company completes repaying off its loans or pay down debt to a level agreeable with its banking creditors.

N.B. The cost of borrowing is cheaper than equity!

Blog: Walbrock Research
| Link | Share
Warranstar 21st Sep '16 7 of 25

Unfortunately there is a discrepancy between the updated EPS numbers in the stock report and the numbers in the news release. Both the stockreport numbers are shown as falling between 2015 & 2016, but all the EPS numbers in the news release are shown as increasing. I have reported the problem to Stockopedia and am awaiting a response.

| Link | Share
Warranstar 21st Sep '16 8 of 25

The reported EPS on the stock report and the news release do match up. The normalised figures do not correspond as explained by this link: So I now accept that the figures shown on the stockreport for the normalised EPS are valid & are a more useful comparison over time and between different companies.
The lesson I must learn from this is that a companies own version of adjusted EPS is not the appropriate version to make investment decisions on, and so I should wait for the updated stockreport for the trustworthy & independent version of the adjusted EPS.
Nevertheless, I will hold on to my increased Finsbury holding.

| Link | Share | 1 reply
Orangetree 22nd Sep '16 9 of 25

In reply to Warranstar, post #8

Warranstar, a word of advice never use adjusted EPS, Cash, EBITDA and so forth because it ignores other relevant costs. Therefore, boosting their performance.

Blog: Walbrock Research
| Link | Share | 1 reply
Warranstar 22nd Sep '16 10 of 25

In reply to Orangetree, post #9

Thank you. In future I will stick to:
Reported EPS & Normalised EPS as calculated by independent organisations.

| Link | Share
Howard Adams 28th Nov '16 11 of 25


Any holders of Finsbury Food (LON:FIF) might want to take a closer look at recent stock price performance. As of 15:30, 28/11/16 price drop today is 2.6% at 114.2p. It was 136.5p 15/09/16, so a drop since of 16.34%.

Having been an enthusiastic holder of Finsbury Food (LON:FIF) I have become concerned about the trajectory of the price even though the stock ranks are attractive. Preliminaries reported 19/9, a trading statement 23/9 felt, to me, like a bit of a veiled warning and director/main shareholder sells occurred 29/9. Being generally a buy and hold investor I was preparing to weather these, and possibly top up.

However, after absorbing Ed's excellent webinar, the other day about the Stockopedia team's research project examining profit warnings and associated stock price movements before, during and after such events I sense that Ed's model might be at play with Finsbury Food (LON:FIF). Full disclosure, I have sold all holdings this morning (and I do not do shorting).

This is of course entirely my own reactions to things, and knowing my luck the price will bounce. Also, you are likely to have different perspectives on things, but you might just want to take a look see.


| Link | Share | 1 reply
herbie47 28th Nov '16 12 of 25

In reply to Howard Adams, post #11

Thanks for the warning, I'm a holder also. Why are the directors sales not shown on Stockopedia?
I think the main problem from the latest update was the currency, with fall in £ than costs have risen, this of course could reverse, have seen the £ recover against the Euro. I think I will hold for now, only a small holding.

| Link | Share | 1 reply
Howard Adams 28th Nov '16 13 of 25

In reply to herbie47, post #12

HI Herbie47

I picked up the director/shareholder activities from Hargreaves.

27/9/16 LOndon Finance & Investment Grp, listed as a main shareholder, sold 1m shares @ £1.20 for £1.2m.

29/09/16 Paul Monk, Dep. Chair sold 146k @ £1.24 for £181.04k.

27/9/16 London Fin. & Inv. Grp sold further 1m @ £1.25 for £1.250m.

When I saw this a while ago I thought it was investors taking profits and rebalancing their holdings. But the recent continued share slide has spooked me. Sadly, as I thought Finsbury Food (LON:FIF) was going to be a nice steady long-term holding.

Hope that helps.


| Link | Share | 2 replies
herbie47 28th Nov '16 14 of 25

In reply to Howard Adams, post #13

Thanks, yes I have seen them before, just wondered why not showing up on here. Yes I thought likewise and defensives are hard to find. I did hold Hilton Food (LON:HFG) but sold them as margins so low and rely on one major supermarket it seems. Crawshaw (LON:CRAW) has gone wrong.

| Link | Share | 1 reply
Howard Adams 28th Nov '16 15 of 25

In reply to herbie47, post #14


I hold Hilton Food (LON:HFG) as well so I'll look closely into them now. As a third defensive I hold Total Produce (LON:TOT) which has done ok. But, that is also dropping today a little. I'm going to watch these closely over next days.


| Link | Share | 1 reply
gus 1065 28th Nov '16 16 of 25

In reply to Howard Adams, post #13

Hi Howard.

I took a closer look at London Finance & Investment (LON:LFI) about a year ago and concluded there was significant embedded value in their holdings including a big chunks of Finsbury Food (LON:FIF) (about 10m shares this time last year). If you look at the London Finance & Investment (LON:LFI) business model, they seem to be something of a business angel/incubator investor in early stage food and drink companies (in addition to having a more traditional passive investment portfolio in leading MNC's) so I think it is pretty natural for them to sell down their holdings in the likes of Finsbury Food (LON:FIF) once the company reaches a state of maturity. Not sure there is anything troubling in their sell down here per se although I agree the shares have been on a bit of a wobble recently.

One thing I recall being a bit wary about with Finsbury Food (LON:FIF) was the pretty generous LTIP, although again no particular reason why this should be seen as an immediate problem issue.



| Link | Share | 1 reply
herbie47 28th Nov '16 17 of 25

In reply to Howard Adams, post #15

I do hold Total Produce (LON:TOT) and Fyffes (LON:FFY) from years ago. I think a lot of UK food producers will get hit by higher costs, its not just the £ but also oil prices.

| Link | Share | 1 reply
Howard Adams 28th Nov '16 18 of 25

In reply to gus 1065, post #16

Hi Gus

Thanks for joining in and offering the insights about London Finance & Investment (LON:LFI). I just took a quick look at their Stock report. I think I'll add them to my watchlist and look into them more deeply. Thanks for the heads up.


| Link | Share | 1 reply
gus 1065 28th Nov '16 19 of 25

In reply to Howard Adams, post #18

You're welcome Howard - here is the link to the review I did on London Finance & Investment (LON:LFI) about this time last year.


| Link | Share | 1 reply
Howard Adams 28th Nov '16 20 of 25

In reply to herbie47, post #17


Yes I think you are right. Clearly a narrative has been building about those issues and I have also picked up that there might be a swing away from defensives towards other areas (not sure precisely where that lodged in my mind from). I need to look more deeply into the balance of my holdings to think things through a bit more in this sector/industry space.

Thanks for your comments, useful as always.


| Link | Share | 1 reply
Howard Adams 28th Nov '16 21 of 25

In reply to gus 1065, post #19


Thanks for that link. That's a nice examination of London Finance & Investment (LON:LFI) and it has pricked my interest. I'll have look at it it in more detail over the next few days. Many thanks.


| Link | Share
herbie47 28th Nov '16 22 of 25

In reply to Howard Adams, post #20

I did read that also about switch away from defensives as they are not good value anymore but I note that tobacco shares have fallen, but I do not invest in tobacco, if that is not a problem for you certainly worth a look. Imperial Brands (LON:IMB) pay about 5% dividend.

| Link | Share | 1 reply
Howard Adams 28th Nov '16 23 of 25

In reply to herbie47, post #22


I added to Imperial Brands (LON:IMB) a little while ago. Thanks for the heads up.


| Link | Share
jonesj 28th Nov '16 24 of 25

I'm not going to buy a commodity food producer on a fancy PE ratio.

| Link | Share | 1 reply
herbie47 28th Nov '16 25 of 25

In reply to jonesjeff, post #24

Are you referring to £FIF?

If so I don't the PE of 11.5 is that fancy.

| Link | Share

What's your view on this thread? Log In to Comment Now

You can track all @StockoChat comments via Twitter

 Are Finsbury Food's fundamentals sound as an investment? Find out More »

Stock Picking Tutorial Centre

Most Popular Now
Ferrum Crescent  Interesting New Story
Ferrum Crescent - Interesting New Story
Ferrum Crescent 11th Nov

Video Trinity Exploration amp Prod at ShareSoc November 2017
Video: Trinity Exploration & Prod at ShareSoc November 2017
Trinity Exploration and Production Wed 11:39am

Russian Banks
Russian Banks
Financials Thu 6:22am

Let’s get you setup so you get the most out of our service
Done, Let's add some stocks
Brilliant - You've created a folio! Now let's add some stocks to it.

  • Apple (AAPL)

  • Shell (RDSA)

  • Twitter (TWTR)

  • Volkswagon AG (VOK)

  • McDonalds (MCD)

  • Vodafone (VOD)

  • Barratt Homes (BDEV)

  • Microsoft (MSFT)

  • Tesco (TSCO)
Save and show me my analysis