Greencore pays effective tax rate of just 1% in Ireland
Irish food firm avails of tax credits at a UK subsidiary to cut its liability
Greencore chief executive Patrick Coveney: “When we bought the Uniq business in the UK four years ago, there were a load of unused tax losses and capital allowances and we’re simply working our way through those.” Photograph: Eric Luke/The Irish Times
Convenience food giant Greencore, which generated €1.6 billion in sales last year, pays an effective tax rate in Ireland of just 1 per cent. The UK-listed, Irish domiciled company uses “deferred tax assets” acquired through its takeover of UK rival Uniq to reduce its liability here. It bought Uniq for £113 million in 2011 in a deficit-for-equity swap deal, which saw Uniq’s pension scheme escape a deficit of about £430 million in exchange for taking equity in the business.
On foot of tax credits and allowances stemming from historic losses at Uniq, Greencore’s Irish corporate tax bill of £5.5 million last year ended up as a tax credit of £4.2 million. “When we bought the Uniq business in the UK four years ago,m there were a load of unused tax losses and capital allowances and we’re simply working our way through those,” Greencore chief executive Patrick Coveney told The Irish Times.
He said the company had used about a third of the tax attributes in its UK subsidiary so far, suggesting it was likely to benefit from a low tax rate for some time to come.
Since Greencore, an offshoot of the now-defunct Irish Sugar Company, changed its listing from Dublin to London in 2012, its shares have rocketed from 52.5p sterling to £3.56, generating a near sevenfold return for shareholders.
Mr Coveney was speaking after the company posted another set strong results for the first half of its financial year, despite a slowdown in the UK’s food-to-go sector, its main market.
Revenue for the six-month period to the end of March was £639.8 million, an increase of 3.2 per cent on the equivalent period last year, while operating profit rose by 7.8 per cent to £40.1 million.
The company’s convenience food division, which accounts for 95 per cent of its business, rose by 4.6 per cent to £614.7 million. In the UK, food-to-go sales grew by 7 per cent on foot several new customer contracts, with the company noting it was selling more products into smaller retail units.
Greencore, which already boasts a client list that includes Marks & Spencer, Waitrose, Sainsbury’s and Tesco, said sales of prepared meals in the UK grew by 2.4 per cent. However, it put a 1.2 per cent decline in its UK grocery division down to a declining market and lower seasonal cake volumes.
The company also noted the extension of its flagship UK sandwich plant in Northampton, which was at the centre of a controversy over hiring practices last year, was on schedule.
Greencore also reported a 30.6 per cent jump in sales in the US principally on the back of a trebling of orders from one large client, understood to be the coffee chain Starbucks, which Greencore supplies with breakfast sandwiches.
To facilitate the increase, Mr Coveney said the company had to treble capacity at its plant in Jacksonville, Florida. Greencore said its other big plant, on the US east coast in Rhode Island, came on stream in March, bringing to seven its US factories.
The company announced an interim dividend of 2.4 pence per share, up 9.1 per cent on the same time last year.