Greencore lifts annual profits 15% to £65m

Greencore has announced a 15 per cent increase in its full-year operating profits to €82.6 million (£65 million). But its headline performance was held back by a poor performance from its US associate, Imperial Sugar.

All of the company's divisions generated improved profits and margins but, despite the strong underlying performance, profits before tax and exceptional items rose by just 0.5 per cent to €74.3 million.

A poor performance by Imperial Sugar, which was hit by the impact of adverse weather conditions and integration costs following its recent acquisitions, acted as a drag on pre-tax profits as did a higher interest charge.

Greencore, which holds a 15 per cent stake in the US company, said it no longer sees it as a long-term strategic stake.

The company's shares, which have significantly under-performed the market in the year to date, closed 2.7 per cent higher at €2.64 following the results, as the market welcomed the strong performance in the core business.

However, its chief executive, Mr David Dilger, said Greencore's management team was "very concerned" about the recent weakness of the share price which, he believes, is undervalued. The company would look at all options that could enhance shareholder value, including another share buyback.

But one route it will not be pursuing at present is a merger with rival agri-food group IAWS, long a topic of speculation in financial markets.

Mr Dilger said that there was not much in terms of cost savings or synergies to be extracted from a merger. But more importantly, he said, such a deal did not make sense at current valuations as it would involve Greencore shareholders swapping £1 worth of earnings for 50 pence worth.

"At current market values, a merger makes no sense for Greencore shareholders. It's pie in the sky," he said. Instead, the company plans to continue to exploit its low-growth cash-generative core businesses like sugar, flour and its agri-business, while building up its high-growth business in areas like baked and consumer foods, ingredients and malt. It also remains on the lookout for acquisitions, particularly in the food and ingredients sector.

The company said the current Irish sugar beet processing campaign was progressing well and total sugar tonnage in excess of its quota of 200,200 tonnes is anticipated.

Greencore also said it was just months away from a decision about a £20 million (€25.4 million) project to derive ethanol from sugar beet which would involve the growing of extra sugar beet and could result in significant expansion at its Mallow factory.