Bottom Feeding - DGE.LSE, BMY.LSE, and FAR.TSX
A look at a premium drinks conglomerate, a publisher, and a global drilling contractor.
Diageo (DGE.LSE)
DGE is a leading producer of alcoholic beverages, with a portfolio of over 200 premium drink brands including Johnnie Walker, Guinness, Don Julio, Smirnoff, and Baileys.
In the year ended 30 Jun 2024, it generated total revenue of $27,891m (FY23: $28,270m), gross profit of $12,198m (FY23: $12,266m), operating profit of $6,001m (FY23: $5,547m), and net profit of $3,870m (FY23: $4,445m).
Total equity at 30 Jun 2024 was $10,032m (FY23: 9,856m), entirely intangible, and it had net debt including lease liabilities of $20,975m (FY23: $19,542m).
DGE generated net cash flows from operations of $4,105m (FY23: $3,636m), and invested a net $1,595m into primarily purchases of property, plant, and equipment (FY23: $1,426m). Free cash flow was $2,478m (FY23: $2,102m), which it used to pay $2,242m in dividends (FY23: $2,065m) alongside share repurchases totalling $987m (FY23: $1,673m).
Market capitalisation: £45,863m ($62,167m)
Valuation: Using the FY24 figures, the shares currently offer a 6.2% earnings yield, 4.0% free cash flow yield, 3.6% dividend yield, and 5.2% shareholder yield (dividends + share repurchases).
Reason: The share price has been steadily sliding down from its 2022 peak as revenue and earnings have been pretty stagnant since then.
Interest level: Moderate - It certainly has a strong stable of brands, but it doesn't feel like you're going to get much more than a bond-like return from here.
Bloomsbury Publishing (BMY.LSE)
BMY is a publisher, with a portfolio that famously includes the Harry Potter book series.
In the year ended 28 Feb 2025, it generated total revenue of £361.0m (FY24: £342.7m), gross profit of £203.9m (FY24: £194.6m), operating profit of £33.3m (FY24: £40.6m), and net profit of £25.4m (FY24: £32.3m).
Total equity at 28 Feb 2025 was £214.8m (FY24: £202.5m), of which £77.4m was tangible (FY24: £122.2m), and the company had net cash including lease liabilities of £8.2m (FY24: £56.9m). Note: there was a £64.8m acquisition during FY25, which explains the substantial drop in net cash.
BMY generated net cash flows from operations of £41.9m (FY24: £37.6m), and invested a net £71.1m into primarily business acquisitions (FY24: £5.9m). Free cash flow was £30.6m (FY24: £28.7m), which it used to pay £12.2m in dividends (FY24: £11.3m) alongside share repurchases totalling £3.8m (FY24: £2.8m).
Market capitalisation: £427.63m
Valuation: Using the FY24 figures, the shares currently offer a 5.9% earnings yield, 7.2% free cash flow yield, 2.9% dividend yield, and 3.7% shareholder yield.
Reason: Seems there are some tariff fears, though books currently remain exempt. I'd mostly put it down to growth slowing after several strong years (revenue grew 24.3% in FY22, 14.8% in FY23, and 29.7% in FY24).
Interest level: Moderate - Undoubtedly a quality company with a strong history of growth, but probably not quite cheap enough for me yet.
Foraco International SA (FAR.TSX)
FAR is a global drilling contractor providing innovative solutions for mining, energy, water and infrastructure projects across 22 countries and 5 continents.
In the year ended 31 Dec 2024, it generated total revenue of $293,453k (FY23: $370,093k), gross profit of $63,056k (FY23: $93,862k), operating profit of $42,546k (FY23: $66,708k), and net profit $27,811k (FY23: $28,714k).
Total equity at 31 Dec 2024 was $77,496k (FY23: $85,923k), of which $21,863k was tangible (FY23: $20,305k), and it had net debt including lease liabilities of $60,948k (FY23: $65,198k).
FAR generated net cash flows from operations of $29,229k (FY23: $55,215k), and invested $18,871k into primarily purchases of property, plant, and equipment (FY23: $26,135k). Free cash flow was $6,895k (FY23: $24,103k), which it used to pay $4,544k in dividends (FY23: nil) alongside share repurchases totalling $1,231k (FY23: $1,475k).
Market capitalisation: CAD 176,550k ($128,581k)
Valuation: Using the FY24 figures, the shares currently offer a 21.6% earnings yield, 5.4% free cash flow yield, 3.5% dividend yield, and 4.5% shareholder yield.
Reason: Revenue has dropped off in its junior mining segment due to headwinds facing the sector; outlook continues to look weak for this segment going into 2025. It also had to dispose of some Russian assets which has had an impact on revenue.
Interest level: Moderate - Seems like it could be fairly cheap if revenue and free cash flow is able to inflect back up. It's core markets of North America and Australia are still achieving record results, which is helping to offset declines elsewhere. Whether these markets will also start to see declines is something to factor in.
Well that concludes this week's newsletter. If you own, or have studied any of the companies profiled, please share any additional insights you might have in the comments. See you next week for some more bottom feeding.