Bumper results see sweet times at Greencore

GREENCORE is set for further strong growth in the current year after a bumper set of full year results. Analysts now predict the shares could rise above 420p within the next six months.

The shares jumped 8p to 370p after Greencore reported a 16 per cent increase in pre tax profits to £54.6 million. Margins continued to improve with the 16 per cent increase in profits coming from a rise of just 5 per cent in sales to £459 million.

Analysts in Dublin were enthusiastic about the results and Riada's Mr Joe Gill increased his 1997 profits and earnings forecasts for the group. Riada's revised 1997 earnings forecast of 27.8p a share puts Greencore on a prospective price/earnings multiple of less than 13.5 - well below the multiples of between 14 and 19 of major European sugar producers such as Danisco, Cultor and CSM.

"Given that Greencore will probably be debt free at the end of the current year, that rating is not expensive for a stock with such a strong balance sheet and strong earnings growth," said Mr Gill, who added that a rating for Greencore in line with the European sector suggested a share price of 420p.

Sugar continued to be a huge cash generator and profit earner for Greencore, with 20 per cent operating margins in the sugar business.

Chief executive Mr David Dilger says the current beet campaign will be a bumper one in terms of both yields of around 20 tons an acre and sugar content of 17 per cent. A total harvest of 220,000 tons is expected, leaving Greencore with 20,000 tons of so called "C sugar" for disposal on world markets.

In the current year, Greencore will also benefit from a full 12 month contribution from its 27 per cent sugar associate in the US, Imperial Holly, compared to a one month contribution in the year to the end of September.

Similarly, the agri business division based on malt and fertiliser will benefit in the current year, from a full year contribution from Williams Waller. Greencore is in the enviable position of having its malt order books in Ireland complete for the year ahead and the Belgian malt order book is almost complete.

In the consumer foods division, Greencore has completed a total relaunch of Erin Foods products, while the Kears 50 per cent owned bakery in Britain continues to perform well.

Animal feed remains one of the few problem areas for the group. However, Greencore's 19 per cent drop in feed volumes is far lower than the average 40 per cent drop in volumes across the industry.

Greencore ended the year to the end of September with negligible debt. Although £45 million has been spent on acquisitions - mainly on Imperial Holly and Williams Waller - analysts expect Greencore to generate sufficient cash to be in a similar negligible debt position this time next year.

With shareholders' funds growing from £137 million in 1993 to £238 million last year without the benefit of any large share issue, Greencore has enormous acquisition capacity.

But Mr Dilger warns Greencore will operate its usual rigorous approach to acquisitions. He adds the group has no immediate plans to increase its 27 per cent stake in Imperial Holly or the 50 per cent stake in Kears. "We have a mechanism where we can increase our stake in Imperial Holly, but we're comfortable at 27 per cent."

Earnings per share for the year were up almost 16 per cent to 25.7p while a final dividend of 4.5p per share has been declared. This brings the total dividend for the year to 6.8p, a 15.3 per cent increase on the 1995 payout.