Year of relentless activity underpins excellent health of Irish food company

ANALYSIS:Takeovers and a shift to listing in London are key Greencore milestones

IT’S BEEN quite a year for Greencore. Last year at the publication of its full-year results, the Irish company announced plans to merge with Northern Foods. Within a year that deal fell through, Greencore snapped up British rival Uniq, announced it was to move its main stockmarket listing to the UK, and received a takeover approach from an American private equity firm which ended without agreement.

The past year’s relentless acquisition activity is reflected in the financials.

Greencore’s 2011 results were characterised by a number of unusual, pre-exceptional items such as the hefty €19.4 million in costs relating to acquisitions including Northern Foods, Uniq and another aborted bid, as well as a settlement and restructuring charge. These were in turn offset by a €11.7 million credit related to tax issues.

During the year, Greencore also refinanced and completed a rights issue.

Nonetheless, yesterday’s results gave analysts and shareholders an opportunity to take a look at the fundamentals of Greencore’s business. The results were encouraging.

A 4.3 per cent increase in revenues on a like-for-like basis during the year is impressive in the context of an extremely tough consumer climate, while the 5.3 per cent rise in operating profit in the company’s core convenience foods division shows the underlying business’s resilience. Margins also held up well, despite input-cost inflation.

The big question is how well the integrated Uniq business – which will add about £250 million to Greencore’s revenue – will perform. With the acquisition of Uniq completed just a week before the end of the 2011 financial year, the financial impact is unknown, but the signs so far are good. Greencore is confident that the projected €7 million in savings will be achieved this year. In relation to Uniq’s underperforming dessert business, Greencore has reiterated its commitment to the previous management’s review of the business which involves a significant scale-back in size. Undoubtedly, questions will continue to be asked as to whether Greencore will eventually offload the business.

Chief executive Patrick Coveney’s assertion yesterday that the company will still look at opportunities is not surprising, while the recent takeover approach will be taken by some as a validation of Greencore’s strategy. Nonetheless, analysts and shareholders and, no doubt, management may be hoping for a little more down time in 2012, as Greencore positions itself for the next chapter in its history.