Breaking News
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. Upgrade now
0
Ad-Free Version. Subscribe now to follow markets, faster and distraction-free. More details

Looking For Tasty FTSE Returns? 2 Global Food Shares To Sample

By Investing.com (Tezcan Gecgil/Investing.com )Stock MarketsJan 06, 2021 08:20
ng.investing.com/analysis/looking-for-tasty-ftse-returns-2-global-food-shares-to-sample-49160
Looking For Tasty FTSE Returns? 2 Global Food Shares To Sample
By Investing.com (Tezcan Gecgil/Investing.com )   |  Jan 06, 2021 08:20
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

As broader markets in the U.S. start 2021 on a choppy note, here are two UK-headquartered global food businesses that investors may want to keep on their radars in the coming weeks to smooth the waters. They are FTSE 100 member Compass Group (LON:CPG) (OTC:CMPGY) and FTSE 250 member Tate & Lyle (LON:TATE) (OTC:TATYY).

Here's a closer look at each:

1. Compass Group

Our first company is the Surrey-headquartered multinational contract caterer Compass Group. It provides food and support services to a range of firms, including industrial businesses, health-care facilities, educational establishments, sports and leisure venues as well as offshore oil rigs. It operates in 45 countries at more than 5,000 client locations.

In 2020, many of these establishments were closed in many parts of the world. As a result, over the past year, CPG stock is down around 25%. On Jan. 5, it closed at 1,394p (or $19.1 for U.S.-based shares).

Compass Group Weekly Chart.
Compass Group Weekly Chart.

In November, Compass Group announced full-year results for the year ended Sept. 30. Revenue was £20.2 (or $27.5) billion, a decline of 18.8% year-on-year (YoY). Underlying profit before tax and EPS declined 75.9% and 77.8%, respectively. Free cash flow was £213 (or $290) million, down 82.9% YoY.

CEO Dominic Blakemore said:

… in the fourth quarter we returned the business to profitability and are now cash neutral.… We are executing at pace and expect the underlying operating margin in the first quarter of 2021 will be around 2.5%.... We are investing in the business organically and inorganically to support our long term growth prospects, enhance our competitive advantages, and further consolidate our position as the industry leader in food services.”

Recent metrics highlight the adverse effect of the pandemic on the “global catering services and food contracts market, … which is expected to recover and grow at a CAGR of 8% from 2021 and reach $312.8 billion in 2023.”

CPG stocks forward P/E and P/S are 39.06 and 1.15, respectively. As of Jan. 5, the UK has gone into a full lockdown for the third time in nine months. In the coming weeks, there could be other countries that follow it in varying degrees. All of this points to firms in this niche market needing some time before they get back to pre-pandemic business levels. Therefore, we’d like to wait for the next trading update by Compass Group before committing capital into the shares. In the case of a further 5%-7% decline, the stock would offer better long-term value.

On a final note, in 2020, the board decided not to issue an interim or final dividend.

2. Tate & Lyle

If you have a 'sweet tooth' for dividends, our next stock may appeal to passive income seekers—London-based Tate & Lyle. The company, which provides sweeteners and other bulk ingredients for food, beverage and industrial markets, has numerous laboratories and more than 4,000 employees globally.

In the past year, TATE stock is down close to 12%. On Jan. 5, it closed at 676.6p ($36.5 for U.S.-based shares). The current price supports a dividend yield of over 4%.

The company's origins go back to the efforts of Henry Tate, originally from Liverpool. Almost two decades after founding the company, Henry Tate opened the Thames Refinery in East London in 1878. The same year, the Tokyo Stock Exchange was established (as Tokyo Kabushiki Torihikijo) and Scottish-born inventor Alexander Graham Bell, whose company would later become AT&T (NYSE:T), demonstrated the telephone to Queen Victoria.

Tate & Lyle Weekly Chart.
Tate & Lyle Weekly Chart.

Tate & Lyle is now the exclusive UK producer of the Splenda artificial sweetener. In 2015, Indiana-based Heartland Food Products Group bought the brand from McNeil Nutritionals, a subsidiary of Johnson & Johnson (NYSE:JNJ).

Last month Tate & Lyle acquired Sweet Green Fields, which offers natural sweetener stevia-based ingredients and solutions. Management believes that Tate & Lyle's "capabilities to create foods and beverages that are lower in sugar and calories" have increased significantly with this recent acquisition. The group's position in the ever-growing Asia Pacific market has also grown.

Tate & Lyle released its half-year results in early November. Revenue came at £389 million (or $529 million), a decrease of 4% YoY. Profit before tax was £180 million (or $245 million), up by 3% YoY and adjusted EPS also increased 9% YoY. Free cash flow came at £194 million (or $264 million), 11.8% higher than last year.

CEO Nick Hampton commented:

"We signed an agreement to acquire a speciality tapioca food starch business in Thailand expanding our customer offering of plant-based, clean-label texturant solutions… The duration and severity of the pandemic is unclear, out-of-home consumption remains below pre-pandemic levels and the annual sweetener contracting round is still to be completed. Given this uncertainty, we are not issuing guidance for the current year ending 31 March 2021."

Forward P/E and P/S ratios are 12.15 and 1.61, respectively. We believe the historically-modest valuation reflects any potential bad news. We like the shares both for growth potential and current passive income.

Looking For Tasty FTSE Returns? 2 Global Food Shares To Sample
 

Related Articles

Looking For Tasty FTSE Returns? 2 Global Food Shares To Sample

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email