Financial analysis: Farsons – a year of strategic importance

Last week, Simonds Farsons Cisk published its annual report and financial statements for its 2024-25 financial year, which came to an end on January 31, 2025.

It was yet another record financial year for the group, with revenue from the beverage businesses growing by 5.5% to €101.8 million, while revenue from the food businesses increased by 6% to €39.7 million. As such, the group’s total revenue amounted to a new all-time high of €141.5 million, compared to €132.9 million the previous year.

The operating profit of the beverage businesses climbed by 9% to €15.6 million, while the operating profit of the food businesses amounted to €3.1 million. Overall, the group’s operating profit increased by 7.9%, also to a fresh record of €18.8 million (FY2023/24: €17.4 million).

The group’s operating profit margin remained virtually unchanged at 13.2%. Excluding depreciation and amortisation charges, EBITDA increased by 8.8% to €28.7 million, translating into an EBITDA margin of 20.3% (FY2023/24: 21.0%).

Farsons reported a profit after tax of €17.0 million (+23.7%) from the beverage businesses and a profit after tax of €1.66 million (+5.8%) from the food businesses. Overall, the group’s net profit reached a record of €18.6 million, which is 22% higher than the previous year, and translates into a return on average equity of 11.9% (FY2023/24: 10.6%).

Last week, in conjunction with the publication of the annual report, the directors of Farsons resolved to recommend a final net dividend (out of tax-exempt profits) of €0.14 per share, representing an increase of 27.3% compared to the final net dividend of €0.11 per share last year.

When including the net interim dividend of €0.06 per share paid in October 2024 (Oct 2023: €0.05), the total net dividend attributable to FY2024-25 amounts to €0.20 per share, which is 25% higher than the total net dividend attributable to the previous financial year, and represents a conservative payout ratio of 39%.

A ‘dividend-in-kind’ of circa €1.30 per share should be attributable to all Farsons shareholders in the months ahead

In his address to shareholders in the annual report, chairperson Louis A. Farrugia described the past financial year as a “year of strategic importance”. Farrugia explained that following a strategic review concluded in 2024, the board has determined that the food business is now well-positioned for further expansion as an independent, focused entity.

The review concluded that this reorganisation intends to maximise value for shareholders and stakeholders, driving both organic and inorganic growth, while maintaining alignment with the Farsons Group’s long-term vision.

At the AGM to be held on June 26, shareholders will be asked to approve a resolution for the spin-off of the food businesses, namely Quintano Foods Ltd and Food Chain Ltd, into a separate, publicly-listed company to be called Quinco Holdings plc and whose shares will also be listed on the Malta Stock Exchange. The spin-off and eventual listing of Quinco Holdings plc is expected to be concluded by December 31, 2025.

Quinco Holdings plc will have the same number of shares as those in Simonds Farsons Cisk plc (i.e. 36 million), and the spin-off will take place as a ‘dividend-in-kind’ to the shareholders of Simonds Farsons Cisk plc, proportionate to the number of shares they hold. This is similar to the property spin-off into Trident Estates plc that took place in 2018.

Earlier this week, Farsons published an explanatory circular with further details on the proposed spin-off, including a detailed vision for the Quinco Group and the basis for determining the value of the ‘dividend-in-kind’. This is being determined by reference to the net asset value per shares on the record date of the distribution.

Based on the pro forma financial statements as at January 31, 2025, the net asset value amounts to €1.30 per share. Although this may change until the record date is established in due course ahead of the listing, this should not be material and therefore a ‘dividend-in-kind’ of circa €1.30 per share should be attributable to all Farsons shareholders in the months ahead.

The Farsons chairperson clearly stated that the first decision for the newly formed board of directors of Quinco Holdings plc is to devise an ambitious growth plan for the business.

Meanwhile, in the 2024-25 annual report, CEO Norman Aquilina explains that “the food category remains excessively fragmented, with growing signs of expected market consolidation, many recognising this inevitability to hold on to a competitive position”. Aquilina also noted that “Quintano Foods is working towards strengthening its brand portfolio in anticipation of the move to the new distribution centre”. Indeed, in the 2023-24 annual report, the CEO had highlighted that through the group’s investment in a new warehouse and logistics centre in Ħandaq, the company will more than triple its current storage capabilities.

In the explanatory circular, it is clearly stated that the Quinco Group aims “to unlock significant growth potential (both organic and inorganic) to drive long-term value for stakeholders”.

The upcoming addition of Quinco Holdings plc to the MSE should be an interesting development not only for Farsons shareholders, who would be receiving their shares in the new entity in due course, but also for the wider investing community in Malta. It could prove to be a precursor to some merger and acquisition activity, as Quinco’s stated vision is to consolidate the food importation segment as well as the restaurant franchising business.

Meanwhile, Farsons Group maintains a positive outlook for the current financial year ending in January 2026, “supported by ongoing investments in infrastructure, a dynamic tourism sector, and prudent financial management”. The publication of the financial analysis summary due by the end of July should give a clear indication of the anticipated growth in the beverage segment, which remains the key profitability driver.

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