Shares in Greencore fell by as much as 10 per cent on Wednesday after the convenience food group reported a £13.4 million (€15.5 million) group operating loss in the first half of its financial year.
The company said the loss was attributable to one-off costs related to its £1.2 billion (€1.4 billion) acquisition of British rival, Bakkavor. In interim results, the Dublin-headquartered group, which completed the takeover in January, says it incurred “one-off exceptional items” of £75.3 million over the period, largely related to the deal.
This included “acquisition and integration costs” of £60.6 million, which comprised professional fees alongside transaction costs of £38.6 million.
Still, London-listed Greencore says like-for-like revenues increased by 3.2 per cent from the same period last year to £1.3 billion in the first half of its current financial year. It said it expects to deliver full-year adjusted operating profits in line with average market forecasts of around £232 million this year.
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Speaking to The Irish Times on Wednesday, chief executive Dalton Philips said that more than two-thirds of the anticipated £90 million in one-off costs related to the Bakkavor deal had now been covered.
He said that figure was “very competitive, versus other M&A [merger and acquisition] transactions out there”.
Greencore’s London-listed share price slid some 9.2 per cent to just over £2.17 on Wednesday.
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Philips said the integration of Bakkavor was proceeding to plan.
“What’s really good is that since mid-January when we completed the acquisition, we’ve been running at 99 per cent service levels right across the combined business,” he said. “It’s always a bit tricky, that initial part of integration.”
Group operating profits before exceptional items were £60.3 million in the first six months of the financial year, up from £43.7 million last year.
Philips said that, following the Bakkavor deal, the group was in “a great place”. Looking ahead, he said it remained confident in the “short-term mitigations” it had put in place to deal with the fallout from the conflict in the Gulf.
“That’s principally about sourcing and supply,” the former DAA chief said. “We’re very confident that we won’t have any supply interruptions [arising from the war].”
Philips said the group had learned lessons from the Ukraine war and its impact on supply chains.
“The mitigations have really been around understanding who our suppliers are, what our supply lines are, what risks they may have,” he said, “because we’re bringing in tomatoes from the Middle East or the Far East. We’re bringing in oils from the Middle East at times.”
Philips said that Greencore’s size, which has essentially doubled since the Bakkavor deal, also gives it “greater resilience” with suppliers “because they really want to prioritise you”.
Despite his confidence that full-year adjusted operating profits will come in in line with market expectations, he said the grocery market in the UK remains “subdued” amid weak consumer sentiment and cost-of-living pressures.
“I think the consumer is increasingly adopting defensive behaviours, so they’re pulling back on their spending in noncore areas,” he said.
Greencore supplies Marks & Spencer and – increasingly since the Bakkavor merger – Tesco with pre-packed sandwiches and other convenience foods.
