Greencore sees Numis remove ‘buy’ rating on stock

Irish food group delivers upbeat presentation on UK food-to-go operation to investors

Greencore is the UK’s biggest sandwich maker. Photograph: PA

Greencore is the UK’s biggest sandwich maker. Photograph: PA

 

Shares in Greencore spent most of Wednesday in negative territory in London after London-based stockbroker Numis removed its “buy” rating on the stock on valuation grounds after the convenience foods group held an investor seminar this week in the UK.

Greencore, the UK’s biggest sandwich maker, has emerged as a “big winner” in recent years as supermarkets narrow their lists of suppliers, according to Numis analyst Charles Pick.

“Of late, Greencore has moved to 100 per cent supply status for sandwiches with M&S, Sainsbury’s, the Co-op, Asda and Morrisons,” said Mr Pick, noting that the Irish company, led by chief executive Patrick Coveney, only delivered 100 per cent of Co-Op and Morrisons sandwiches three years ago.

“It also has a 50 per cent Boots share and 40 per cent for Waitrose. ”

Greencore, which limited investors’ and analysts’ questions at the seminar at its Northampton facility to its UK food-to-go operations, increased the number of employees in this division by 800 last year to 7,000. The M&S business comprises just under a quarter of the operation and is expected to grow as the supermarket giant plans to add 400 Simply Food stores in the next five years alone, according to Mr Pick.

However, the Numis analyst has moved to downgrade his stance on the stock to “add” from “buy” as his £2.85 price target offered just 14 per cent upside from Tuesday’s closing price. A share needs to have at least 20 per cent growth potential to enjoy a “buy” rating at Numis.

Shares in the company fell by as much as 1.2 per cent on Wednesday before ralling in the final moments of trading to close 0.2 per cent higher at £2.494, valuing the company a £1.75 billion (€2 billion). The shares have gained about 14 per cent from their lows in January.

Meanwhile, Investec analysts, who rate the stock a “buy”, said that Greencore has opportunities to grow its UK food-to-go business outside the grocery channel in areas such as travel, leisure and coffee shops.

Still, analysts will be more interested in the group’s planned site visit in June for investors to the Peacock Foods business, which it acquired in December in a $747 million (€692.35 million) deal that saw Greencore raise equity from investors.