As broader markets in the US start off choppy in 2021, here are two global food companies headquartered in the UK that may want to keep investors on their radar for the next few weeks to smooth out the water. They are member Compass Group (LON 🙂 (OTC: CMPGY) and member Tate & Lyle (LON 🙂 (OTC :).
Here's a closer look at each:
1. Compass Group
Our first company is the Surrey-based multinational contract caterer Compass Group. It provides food and support services to a range of businesses, including industrial companies, healthcare institutions, educational institutions, sports and leisure venues, and offshore drilling rigs. It is active in 45 countries at more than 5,000 customer locations.
In 2020, many of these facilities were closed in many parts of the world. As a result, CPG stock is down about 25% over the past year. On January 5, it closed at 1,394p (or $ 19.1 for US stocks).
Compass Group Weekly Chart.
In November, Compass Group announced the full year for the year ending September 30. Sales were £ 20.2 (or $ 27.5) billion, down 18.8% year-over-year (year-on-year). Underlying profit before tax and EPS decreased by 75.9% and 77.8% respectively. Free cash flow was £ 213 (or $ 290) million, down 82.9% year on year.
CEO Dominic Blakemore said:
" … in the fourth quarter, we returned the business to profitability and are now cash neutral. … We are running at pace and expect underlying operating margin in the first quarter will be approximately 2.5% by 2021 … We are investing organically and inorganically in the business to support our long-term growth prospects, enhance our competitive advantages and further consolidate our position as a market leader in food services. "
Recent statistics highlight the negative impact of the pandemic on the "global catering services and food contract market, … which is expected to recover and grow at a CAGR of 8% from 2021 and reach $ 312.8 billion by 2023."
CPG Stock & # 39; forward P / E and P / S are 39.06 and 1.15, respectively. Since January 5, the UK has been fully shut down for the third time in nine months. In the coming weeks, there may be other countries following it to varying degrees. All of this suggests that companies in this niche market will need some time to get back to pre-pandemic corporate levels. That's why we want to wait for the next trading update by Compass Group before putting capital into the stock. In the event of a further drop of 5% -7%, the stock would provide better value in the long run.
Finally, in 2020 the board decided not to pay an interim or final dividend
2. Tate & Lyle
If you have a & # 39; sweet tooth & # 39; for dividends, our next stock could appeal to passive income seekers – London-based Tate & Lyle. The company, which supplies sweeteners and other bulk ingredients for the food, beverage and industrial markets, has numerous laboratories and more than 4,000 employees worldwide.
In the past year, shares of TATE have fallen by nearly 12%. On January 5, it closed at 676.6p ($ 36.5 for US stocks). The current price supports a dividend yield of more than 4%.
The company's origins go back to the efforts of Henry Tate, originally from Liverpool. Nearly two decades after the company was founded, Henry Tate opened the Thames Refinery in East London in 1878. In 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 is now the exclusive UK manufacturer of the Splenda artificial sweetener. In 2015, the Indiana-based Heartland Food Products Group purchased the brand from McNeil Nutritionals a subsidiary of Johnson & Johnson (NYSE :).
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 lower sugar and calorie foods and beverages" have increased significantly with this recent acquisition. The group's position in the ever-expanding Asia-Pacific market has also grown.
Tate & Lyle released it in early November. Sales were £ 389 million (or $ 529 million), down 4% year on year. Profit before tax was £ 180 million (or $ 245 million), up 3% year-on-year and adjusted EPS also increased 9% year-on-year. Free cash flow was £ 194 million (or $ 264 million), 11.8% higher than last year.
CEO Nick Hampton noted:
“We have signed an agreement to acquire a specialist tapioca food starch company in Thailand, expanding our customer offering of plant-based, clean-label texturing solutions … Duration and severity of the pandemic is unclear, out of home consumption remains exist below pre-pandemic levels and the annual sweetener round of contracts has yet to be finalized. Given this uncertainty, we are not providing guidance for the current year ending March 31, 2021. "
Forward P / E and P / S ratios are 12.15 and 1.61, respectively. We believe the historically modest valuation may reflect bad news. We like the stocks for both growth potential and current passive income.
