Buyback to boost Total Produce's earnings by 5%

The €20m share buyback programme being initiated today by fruit distributor Total Produce is expected to boost the firm’s current full-year earnings per share by around 5.5%.

The former Fyffes spinoff firm yesterday announced its intention to return more funds to investors, the latest element of its ongoing capital investment allocation programme.

Last month, Total Produce reported an 8.2% annualised rise in first half revenue, to €1.43bn, increased its interim dividend by 15% and said it expected full-year earnings per share to meet the higher end of a recently heightened guidance range of 9.20c-10.20c.

Analysts warmly welcomed yesterday’s buyback news.

“We see this being a positive earnings event, as it will result in earnings per share increasing by an additional 5% to 6% in fiscal-year 2016, given the reduced share count,” said Merrion Capital’s Darren McKinley.

“The company continues to allocate capital in a very shareholder friendly way and we continue to view Total Produce as a core holding within an investment portfolio.

“With a robust balance sheet and excessive transaction multiples, currently, for potential deals, we view this return of cash to shareholders as a positive development for the stock,” said Patrick Higgins of Goodbody Stockbrokers.

The buyback programme begins today and will cover around 16m ordinary shares based on the €1.25 share price at close of business on Wednesday and will continue until the requisite number of shares have been purchased.

The newly purchased shares will be cancelled and will reduce the number of outstanding shares by around 4.8%.

“We estimate the buyback will be around 5% accretive to earnings growth in the current year on a pro-forma basis,” said Declan Morrissey of Davy Stockbrokers.