Convenience food activity helps Greencore deliver 9% profit rise

A strong performance from its convenience food business helped Greencore post a 9 per cent rise in first-half pre-tax profit despite the impact on results of last year's disposals.

The food group reported pre-tax profits of €31.1 million in the six months ended March 28th, up from €28.4 million a year earlier. Adjusted earnings per share rose by 2 per cent to 14.1 cents, ahead of market expectations.

Turnover slipped by 21 per cent to €743.8 million, reflecting the impact of disposals and sterling weakness, but the firm said all three divisions improved like-for-like sales in constant currency terms and operating margins in the first half.

Its chilled and frozen food division performed very strongly, with like-for-like sales ahead by 3 per cent while operating profits rose by 12 per cent, or 19 per cent on a constant currency basis.

Its sandwich, quiche and ready meals businesses enjoyed strong growth, although its pizza business faced a more "challenging" first half, the company said.

But chief executive Mr David Dilger said the group expected "significant improvement in the second six months" in this area.

Greencore's ambient grocery division, which includes sauces and pickles, mineral water and bread and baked goods, recorded a 6 per cent rise in operating profits, or 13 per cent in constant currency terms, on turnover that was up by just 0.2 per cent.

While the bread division improved its performance following capacity rationalisation and cost reduction, the overall market remained challenging, Greencore said.

But Mr Dilger said Greencore was slowly moving the business up the value chain, from producing economy value sliced pans, which sell at only 17p-19p in the UK, to higher quality branded bread, which retails at 61p-91p.

He said the firm's ingredients and agribusiness continued to trade in a stable way and "throw off bucket loads of cash, filling a very important function for the group". Sales in this division, which includes the sugar and malt businesses, were up by 3 per cent on a constant currency basis while operating profits were up by 6 per cent.

Commenting on recent speculation that the firm was examining options for the sugar and malt businesses, including securitisation and strategic alliances, he reiterated that Greencore was "happy with the shape of its current portfolio" and expected to continue to own the businesses, though it would look at ways of maximising shareholder value.

Mr Dilger remained upbeat about the firm's outlook, saying Greencore was on course to deliver full-year earnings per share in line with consensus analyst forecasts.

Greencore plans to pay an interim dividend of 5.05 cents per share, up from 4.38 cents last year. But the group is not changing its policy of maintaining the dividend. Instead, it is rebalancing the payout so shareholders receive more in the first half than in the past.

The company also made progress on reducing its debt burden, cutting it by €66 million to €497 million.