Morning Equity Briefing
Total Produce
(TOT ID)
Strong first half; Guiding towards the upper end of its full year EPS target range
Aiden O' Donnell
| Closing Price: | 35c | Rating: | Outperform | 14/05/10 | Previous: | Neutral | 30/06/09 |
FACTS: Total Produce reported earnings per share for the first half of 2010 of €4.12c, representing an increase of 1.5% year-on-year (yoy).
ANALYSIS: After a slow start to the year due to severe weather conditions in Northern Europe, demand recovered for the company's produce as the half progressed. Revenues increased 1.7% yoy on a reported basis and fell marginally on a constant currency basis. The stronger SEK and sterling benefitted the group in the period. Adjusted EBITA, at €27.1m, increased 2.7% yoy.
Its Fresh Produce division performed very well, especially taking into context the weak first quarter. Like-for-like volumes were marginally ahead and selling prices were unchanged. Within the division, eurozone fresh produce performed well and the Scandinavian fresh produce division benefitted from the positive impact of foreign exchange movements. Its UK fresh produce division saw revenues fall 12% with mid-digit decreases in both volumes and average selling prices.
The company’s consumer goods business, which is small in the grand scheme of things, lost money in the first half reflecting the tough trading conditions in that space.
The group continues to generate strong free cash flow. Free cash flow for the 12 months ended June 30th amounted to €25.2m. There were yoy decreases in capex and cash flows on acquisitions.
DAVY VIEW: Overall this is a strong out-turn for Total Produce, especially given the weak first quarter. We can only assume that the business gained strong momentum as the half progressed. The company is guiding for EPS at the upper end of its target range of 5.5-6.5c. We are currently guiding for EPS of 6.2c, but this may be too low. We reaffirm our 'outperform' rating.