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Finsbury’s sweet outlook
Specialist bakery manufacturer Finsbury Food (FIF:AIM) has a platform for ambitious deals in a fragmented industry.
Already a bigger, more diversified business having integrated the Fletchers and Johnstone’s acquisitions, the cake, bread and muffin maker has consistently been a Shares favourite.
We remain bullish at 129p with 34% upside towards Investec’s 173p price target. Full year results (19 Sep) revealed 41% growth in adjusted pre-tax profit to £16m with organic growth of 5% well spread across the grocery and foodservice channels.
Enlarged Finsbury has favourable exposure to growing parts of the UK bakery market and the return to volume growth of key supermarket customers is a positive.
Net debt of £19.7m feeds into a modest leverage ratio of 0.8 times EBITDA, leaving Finsbury equipped to fund organic growth by investing in its high-quality asset base and with the firepower for bigger acquisitions.
For the year to June 2017, Investec forecasts pre-tax profit of £17.2m for earnings of 10.1p (2016: 9.7p) and an improved 3.1p dividend. A prospective PE of 12.8 leaves re-rating scope and Finsbury also offers a 2.4% yield. (JC)
We remain positive on Finsbury Food at 129p.