Greencore shares slip 8.7% as profits and revenues fall

SHARES IN Irish-listed food group Greencore declined by 8.7 per cent in Dublin yesterday after the company revealed a drop in revenues and profits in the first half of its financial year and cut its dividend payment to shareholders.

Greencore, the world’s biggest maker of sandwiches, recorded a loss after tax of €32.4 million for the six months to March 27th. This compared with a profit of €38.8 million in the previous year.

The group’s bottom line performance was hit by a €25.1 million net exceptional loss on discontinued activities and restructuring costs, and the effect of a weakened sterling. About 80 per cent of Greencore’s sales come from the UK.

Its revenues declined to €550.1 million in the period, from €648.6 million last year. Much of this was due to the weakness of sterling. A 17 per cent depreciation in the average exchange rate impacted its operating profit by €5.7 million.

On a constant currency basis, which excludes the impact of the exchange rate, Greencore said group sales rose by 3 per cent while its group operating profit increased by 4.6 per cent.

The dividend payout to investors was cut to three cent a share from 5.3 cent a share one year earlier. In convenience foods, Greencore’s sales fell by 12.5 per cent to €365.8 million, while its operating profit was down 12.1 per cent to €19.6 million. On a constant currency basis, it increased its sales and operating profit by 2.8 per cent and 6 per cent respectively.

Greencore’s fledgling US convenience foods business recorded a 33 per cent rise in underlying sales and it expects this division to double its contribution to group turnover this year. “We are very pleased with our progress in the US,” Greencore chief executive Patrick Coveney said.

Greencore’s ingredients and property arm saw its sales decline by 4.3 per cent while its operating profit was 10.9 per cent down. On a constant currency basis, these metrics rose by 3.6 per cent and 2.1 per cent respectively.

Greencore also said it had refinanced €410 million in banking facilities in the past two months with a syndicate of eight Irish and international banks.

The food group said a higher interest rate applies to the new debt but declined to give a figure.

Mr Coveney described the results as a “resilient performance in a tough credit environment”.

“We are not complacent and we’re not particularly happy with where we are,” he said. “My view is that we are doing okay. Our business is still a long way short of fulfilling the potential it has.”

In a bid to trim costs, Mr Coveney said about 90 staff in its administration departments had left the company recently.

In addition, Greencore will move its head office from St Stephen’s Green to Northwood Business Park in Santry on Friday. This will save it a six-figure sum annually, Mr Coveney said.

Greencore’s board of directors, senior executives and managers will take a 5 per cent pay cut. “It will have a modest financial impact but a symbolic impact for the business,” Mr Coveney explained. Greencore’s shares closed at €1.049 yesterday.