Good decisions reaping dividends for IAWS
That’s a good forecast and an endorsement of the strategic initiatives embarked on by the group nearly a decade ago.
Its first key move was the then purchase for €50m and additional earn-outs of Cuisine de France from its founders.
It seemed like, and indeed was, a high price for the business, but the strategic shift it signalled was huge.
Looking back it was the move that redefined IAWS Plc, up to then a provender milling company and maker of fertilisers and fish oil.
About as exciting as watching paint dry was IAWS up to that point. The purchase of Cuisine set the agenda and was followed by Delice de France in Britain and then Pierres.
All of those products go under the moniker Lifestyle Foods, now the key division in IAWS.
Since then the group has added La Brea artisan bread in the US to its range of products and joined up with the Canadian restaurant chain Tim Hortons.
Hortons has close to 2000 outlets across Canada and the United States that the two will supply with IAWS finger foods, pastries and par-baked breads.
This looks like a recipe set to continue to grow even beyond the next three years for the group as changing lifestyles demand convenience and quality product from their local stores.
Like every projection the IAWS forecast is subject to economic growth holding good and if the US were to hit a slump then the sector could be hard hit.
The US has been the inspiration of the food to go and fast food phenomenon for decades where pace of life has demanded the modern version of the chuck wagon.
As the US does, so too does the rest of the world eventually. IAWS has been smart in identifying better quality breads and par-baked offerings have been under-exploited in North America compared to fast food.
In the context of good economic growth still projected for the US and Europe beginning to show signs of life, IAWS is well placed to expand and develop for years to come.
NCB has placed a buy recommendation on the group at €11.70 as its food analyst Paul Meade says IAWS is better positioned than ever to sustain mid-teen earnings growth over the next three years for the following reasons:
* Organic growth momentum remains strong enough in its lifestyle food division to more than sustain mid-teen Earnings Per Share for the group
* Additional capacity in the US and probably new baking capacity in the UK coupled with accelerated R&D from Groupe Hubert in France support the positive view on organic growth.
IAWS is now trading on roughly 14.7 times prospective earnings against a multiple of 17.4 for its peers, which yields a target price of €14.00 or a 14-15% upside from the current price level.
Close peers like Hiestand Holdings and Greggs trade on multiples of 17-18 times earnings compared with the Irish group’s ratings.
Recently Goodbody Stockbrokers was a bit more circumspect. It noted in the past 10 years that IAWS grew its share price at a 23% annual average backed by an EPS annual average of 18%.
Mid-teen EPS suggests somewhat lower growth but either way the outlook is for pretty solid earnings in the coming years.
As Liam Igoe of Goodbody Stockbrokers put it, the model looks pretty secure with earnings from the agri side of the business becoming less important as the group evolves further in the lifestyle food sector.
In the past seven years the group spent about €700m on takeovers and further deals are a definite.
With projected sales growth at La Brea of about 20% per annum and the Hortons joint venture adding 5% to 10% per annum and with the Irish and British scenes rock solid the outlook has to be good.
Shares in IAWS rose 10 cents yesterday to €11.90.
