Greencore shares fall despite rise in sales

GREENCORE’S SHARE price fell by more than 2 per cent in Dublin yesterday in spite of the convenience foods group posting interim results that were slightly ahead of analysts’ expectations.

Greencore’s group sales rose by 2.1 per cent to €434.5 million for continuing operations in the six months to the end of March.

But its core convenience foods division – which supplies sandwiches, ready meals, cakes and cooking sauces – recorded a 6.1 per cent rise in like-for-like sales. The convenience foods division now accounts for 90 per cent of Greencore’s business following the sale of its malt and water operations.

These disposals were largely behind an impressive 41.6 per cent reduction in net debt in the first half of its financial year. Greencore’s net debt stood at €194.2 million on March 26th compared with €332.6 million a year earlier.

“Our net debt to Ebitda [earnings before interest, tax, depreciation and amortisation] is two times, which is very low,” Greencore chief executive Patrick Coveney said. “This gives us plenty of headroom for growth whenever we want to do that.”

He said acquisitions in the US and British convenience food sectors were possible but no deal was imminent. “We see potential in both markets,” he added.

Greencore said its group operating profit from continuing operations rose by 43 per cent to €27.7 million. Its operating margin rose to 6.4 per cent in the latest period compared to 4.5 per cent a year ago.

On the outlook, Greencore said it expected to save €3 million on its interest bill in the second half of the year from its reduced debt bill. It also upgraded its earnings forecast for this year to 16 cent a share from a consensus of 15.2 cent.

The US convenience foods business achieved 27 per cent sales growth in the six-month period.

But in a note to clients yesterday, stockbroker Davy said its full-year sales estimate of €67 million in the US “now looks too high”.

In terms of its fledgling US convenience business, which is run out of Boston, Mr Coveney said: “From our perspective, the underlying market growth is absolutely fine. What we’re unlikely to do is to grow it any further by acquisition for the time being.”

Mr Coveney said $5 million (€4.06 million) was being invested in a facility in Boston for organic growth.

An interim dividend of three cent has been proposed for the half-year period – the same as a year ago.