The Company has been on the acquisition trail for the last few years which has dramatically changed the size of the business. It has also opened up some new markets that they can and suggest they are exploiting.
FIF is largely UK based with an operation based in France selling into continental europe.
My take on the overall industry is that it is largely ex growth. We are not going to buy 2 cakes instead of one or 2 loaves instead of one. But there will be changes in terms of what cake or loaf we buy and where we buy it. This can mean there is fierce competition for the existing market, but it also makes the market less interesting to new joiners. As a larger incumbent FIF seems well placed to invest to keep costs down and margin up. Diverse enough to support areas where short term extreme competition exists and willing to grow through acquiring weak competitors.
Given all this FIF is a play on acquisition led growth that management seem to be delivering on. This I expect to be patchy as I hope management do not overpay and only acquire where they can see real value. An ongoing play on margin improvement from capital investment that many cannot/will not match. A play on diversification in markets allowing some LFL growth in overall sales and when not acquiring a play on strong cash generation and growing dividends.
These seem to be born out by the recent results.
Sales up 46% YoY. Showing acquisition led growth.
LFL growth in sales stated as 7.4% with mention in the accounts that many of the Groups markets are mature and either ex growth or slightly declining.
Gross Profit % up to 32% from 31.2% in the previous 6 months and 30.2% from the 6 month before. Management suggest this is largely from improved efficiency from capital investment rather than different higher margin sales.
Interim dividend up 12%.
The two downsides that I saw in the accounts was a significant growth in stock levels. Most of this may well be due to the increased sales levels but I will be monitoring this as it does seem excessive. The use of share options which have gone from 155k in 2014 to 1.6m in the last 26 weeks. There is no point in holding a company where management give it to themselves. Again this is an item to watch.
Overall I am impressed by the delivery of FIF and interested in the opportunity. As long as management continue to deliver and do not get excessively greedy I intend to hold. My target price has not been amended following the last results.