Total Produce (TOT:ID, TOT:LN) was one of my very first blog write-ups , back in Nov-2011 at EUR 0.3

activist investors , Balmoral International Land Holdings , Carl McCann , empire-building , Fyffes , Greencore cool room ideas Group , intrinsic value , Irish shares , Irish value investing , private equity funds , share buyback , TOT , Total Produce , Warren Buffett
Total Produce (TOT:ID, TOT:LN) was one of my very first blog write-ups , back in Nov-2011 at EUR 0.39 . [And I've written about it a number of times since ]. Less than two years later, we’ve enjoyed a nice double on the stock – which is now trading within spitting distance of my original EUR 0.882 fair value target. This warrants a fresh perspective… cool room ideas But looking back, now I remember – even then, I offered up a very specific perspective:
So we re talking a business that really runs itself, just what I like! Particularly as I don t have great respect for management (except if you compare them say to Greencore Group (GNC:ID) management – whose shareholders may finally cool room ideas be put out of their misery with a potential bid, rumoured to be coming from Dubilier Clayton & Rice). Carl McCann is Chairman, while his brother David’s in the Chairman seat over at TOT s sister company Fyffes cool room ideas (FFY:ID) , and neither is really a patch on their father Neil McCann (I was sad to hear he passed away recently) who joined cool room ideas Fyffes in 1948. I think of the crazy worldoffruit.com online cool room ideas effort in the v late 90s (which received a very positive reaction from within the produce industry and looks set to dramatically change the way in which fresh fruit and vegetables are traded across the globe ), the lack of earnings growth in the past few years, the ludicrous de-merger of Fyffes, Total Produce & Blackrock cool room ideas (now Balmoral Int’l Land Holdings , whose shares subsequently collapsed & are now delisted), etc.
I also look at the excessive B/S Cash of EUR 89.6 mio , and I m bemused (and slightly alarmed) to remember a colleague telling me many years ago his impression that having large amounts of Cash on hand appeared to give management the warm and fuzzies, and they appeared to enjoy playing the banks off against each other for deposits cool room ideas (and perhaps even some jolly currency switching). cool room ideas All very well, I confess I ve been through all that myself professionally, but always felt frustrated at having giant hoards of Cash on hand to invest in an ideal world , I knew the best thing for shareholders and Return on Equity was to have zero Cash and just come in each day and draw down/pay down on a Debt/CP facility. With TOT, of course, the obvious answer to this Cash is frequent execution of small/medium sized acquisitions across Europe (similar to what DCC (DCC:LN) has done for years in its Energy business) considering the nature/scope of potential business acquisitions, I think there s a marvelous opportunity here to hoover up cos and double their operating margins v quickly through cost elimination and economies of scale.
Then of course there s the silent but deadly fart in the room finally figuring out it s time to swallow their pride and reverse the Total Produce/Fyffes break-up a nil-premium merger is the obvious way to achieve this and I imagine could easily yield 2-3 years of decent EPS growth even if the underlying business remained unchanged. But kudos to management for the 22 mio share buyback last year ! I was impressed, can you please repeat?
Wow – considering how new the blog was (and how dirt-cheap TOT was at the time), I’m astonished I was so critical of management! But I’m sure I was also conscious of how limited my audience was back then… On the other hand, these comments nicely illustrate that I’ve had an activist perspective since day one. Now, with the share price so much higher, it’s that much more important to focus on management – their strategy & their failings .
[Note: I'm also including 2006 segment results for reference. Plus TOT's results for the Last Twelve Months (LTM), which incorporate their most recent interims - I'll return to these a little later].
Since the de-merger, Total Produce has raised revenue by 51% in the past 6 years (albeit a significant portion of the increase came back in 2007). Adjusted EBITA’s their preferred measure of operating profitability – a cumulative 39% increase has lagged cool room ideas revenue, as their (fairly static) adj EBITA margin has averaged 1.83% since (versus 2.09% in 2006). Adjusted diluted EPS has clocked up the same increase, for a slow but steady 5.7% CAGR . It’s worth noting this comment from the interims: cool room ideas ‘T rading conditions are satisfactory and the Group is revising upwards its full year earnings target into the upper half of the range between 8.00 to 8.80 cent per share.’ With the current EPS run-rate already at EUR 8.38 cts , I think we can confidently expect at least 8.8 cts for FY 2013. That would mark two yrs of 10%+ earnings growth – which we haven’t seen