Greencore completes £90m share placing as profits plunge 81%

Irish food group – and UK’s biggest sandwich maker – hit by fall-off in demand due to Covid

Irish food group Greencore successfully completed a £90 million (€101 million) share placing on Tuesday morning, with the proceeds set to be used to shore up its balance sheet after it reported an 81 per cent plunge in its annual profit due to the coronavirus pandemic.

The Dublin-headquartered company said the recent resurgence of Covid-19 cases across the UK, and the imposition of new restrictions, had “hampered the recovery in demand in food-to-go categories”.

The group also posted results for the year to end of September, which show pre-tax profits dropped by 81 per cent to £17 million while headline revenue declined 12.5 per cent to £1.2 billion.

In a bid to limit the financial fallout, the UK’s largest sandwich maker opted for the placing of new shares to raise up to £90 million. A total of 79.7 million shares were placed at a price of 112.0 pence per placing share, which represents a discount of 5.7 per cent to the closing share price of 118.8 pence on November 23rd. The new shares being issued together represent about 18 per cent of the existing issued ordinary share capital of Greencore prior to the placing and subscription. It is expected that the new shares will be admitted for listing on the London Stock Exchange on November 26th.

A number of senior members of the board and the leadership team participated in the share placing, including chief executive Patrick Coveney (357,142 shares); chief financial officer Emma Hynes (80,357) and chairman Gary Kennedy (62,946).

Greencore said the placing was designed to “proactively manage debt levels to ensure appropriate liquidity and leverage headroom” while allowing the company avoid further cost reductions.

‘Mitigating actions’

The move is the latest in the series of “mitigating actions” undertaken by the group.

The London-listed company has already extended its banking facilities, suspended its annual dividend and imposed a 30 per cent pay cut on senior staff.

Mr Coveney said it had been “an exceptionally challenging year for Greencore”.

“There is a direct correlation between the performance of food to go and the nation’s ability to move around freely,” he said. “As a result, that part of our business has been significantly impacted by the social restrictions that have been put in place as a result of Covid-19.

“However, we remain confident that demand for our food-to-go categories will recover strongly as the effect of Covid-19 recedes, and were encouraged by the uplift in demand that we saw in Q4 as the UK economy slowly reopened,” he said.

‘Revolving credit’

In a statement regarding the share placing, Greencore said it intends to use a significant portion of the proceeds “to repay sums owing on its revolving credit bank facility, and the remainder for general corporate purposes”.

“Directors and members of the group’s senior management team will be participating alongside the placing and intend to contribute around £700,000 in total,” it said.

Greencore said its full-year 2020 performance was “materially impacted” by Covid-19. While trading in the first half of the year, prior to the impact of the pandemic, was in line with expectations, the introduction of the initial Covid-19 restrictions triggered a significant reduction in demand in food-to-go categories, which was only partially offset by an increase in other convenience categories, it said.

The group’s earnings per share fell by 82 per cent from 16 pence last year to just below 3 pence per share for the 2020 financial year.

Net debt, excluding lease liabilities, stood at £350 million as of the end of September.

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times