Quick take on Finsbury Foods results...

...which is one of the stocks that made it into the Mechanical Compound Income Scores portfolio (MCIS)  as it had been scoring in the top decile back in April this year. Since then they had put out a positive year end update back in July which I wrote up at the time. It seems that their their turnover came in as expected being up by nearly 46%, with 6% like for like growth and expansion in the operating margin to  4.8%, which is close to their previous high of 4.9% achieved in 2010.

This translated into earnings per share of 7.7p which was 10% better than the 7p guesstimate I came up with in July, but a little shy of the 7.95p that analysts had moved up to post the last trading update, so maybe scope for a small bit of disappointment there. Otherwise the dividend seemed to be in line with forecasts at 2.5p which was up by 150% from last year.

The balance sheet and the level of the debt was the other factor which needed watching post the trading update in July given their acquisitions in the food service area in the last year and the increased capital expenditure they were flagging. This came in at £21.3m at the year end which compares with a market cap. of around £130m and apparently equates to about one times pro forma annualised EBITDA of the Group. That seems fine, but is worth bearing in mind and keeping an eye on if they should make more acquisitions for cash this year.

On the outlook the appropriately named Non Executive Chairman, Peter Baker, suggested that the group still have aspirations and the capabilities to grow further although he also suggested that the economic and market environment remained challenging. They seem to be alluding to and it seems to me that more acquisitions may be on the cards which may be an opportunity for further diversification and earnings enhancement, but not without its risks and the funding will need watching, but I guess they could issue shares if they saw a larger opportunity now the shares are more highly rated.

Talking of which, having had a spike up to around 105p to 110p recently, it seems that there may not be enough in these numbers to move the shares on from here today in the short term. However at 102p today's figures leave them on a fair looking 13.25x with a lowish 2.5% yield. On current forecasts for the coming year, assuming no changes on the back of these results, the shares are on around 11x with a 2.75% suggested yield.

This seems fine but given the run up in the shares and the lack of further icing on the cake in the figures, I suspect it might consolidate in the short term. So personally I would be tempted to take profits if I held them and the Compound Income Score has come down to 79 recently so it is also at risk of exiting the MCIS portfolio at the next quarterly review at the end of September. Otherwise it looks like a reasonable hold for the medium term as part of a diversified portfolio.