Greencore profits up 6.3%

Irish food company Greencore has reported a 6.3 per cent rise in first half profits despite coming under "severe pressure" in the wake of the horsemeat scandal.

The convenience food maker posted first half revenues of £572.9 million (€677.5 million), a 0.9 per cent increase on the same period in 2012 and operating profits of £33.7 million up 6.3 per cent.

In a trading statement, Greencore said revenues at its convenience foods division increased by 1.8 per cent to £542.1 million, while adjusted earnings per share were 10.9 per cent higher at 6.1 pence as a result of the growth in operating profit and lower year-on-year financing costs.

"We have made good progress on our strategic agenda during the first half of the year, despite the fact that market conditions throughout the period proved very challenging. In the UK, we have completed the Uniq integration with the restructuring of the desserts business and the disposal of the Minsterley facility ," chief executive Patrick Coveney said.

He attributed the 6.3 per cent rise in profits to lower margins, bank costs and tax costs, saying the revenue growth was modest due to weak consumer sentiment and overall low volume growth.

In the UK, like-for-like revenue was 1.3 per cent lower mainly due to the impact of the horsemeat scandal on the ready meals business.

The company became embroiled in the horsemeat scandal in February when horse DNA was found in an Asda bolognaise sauce made by Greencore.

More than 200 tests were conducted for the presence of horsemeat on both Greencore finished products and ingredients. All tests were negative at the Food Standards Agency’s 1 per cent threshold, except one positive test carried out by Asda, who withdrew the product.

“For two weeks the horsemeat scandal impacted on us before we were able to demonstrate no contamination. Since then though consumers have been buying less readymade meals,” Mr Coveney said.

In the US, Greencore revenues more than doubled following the acquisitions of MarketFare and Schau. Mr Coveney said revenues were $100 million last year, and were on course to be more than $200 million this year.

Greencore announced an interim dividend of 1.90 pence per share, an increase of 8.6 per cent versus the first half of 2012.

The net pension deficit increased to £155.9 million at 29 March 2013 from £141.8 million at 28 September 2012. The net pension deficit after related deferred tax was £126 million, an increase of £10.1 million from September.

Mr Coveney said the bulk of the pension deficit was in the UK scheme, adding that all of the company’s defined benefit pension schemes had been closed since early 2010.

He said the company was “working with trustees on a deficit repair plan over the next 10-12 years.”

The company expects market conditions to remain tough during 2013, particularly in the core UK market which shows little or no volume growth and where the ready meals category, which represents approximately 15 per cent of group revenue, is still to recover fully from the horsemeat scandal.