Food group sees earnings fall

DIFFICULT trading conditions and currency losses resulted in falling earnings and stagnant growth for the full year at convenience food group Greencore.

The group, which last week announced the sale of its Scottish based water business, has reported sales in the year to September 25, 2009, fell 0.8%.

Profits before tax fell sharply from €55.3 million to €23.5m in the period.

Shareholders will be paid a final dividend of 4.5 cent per share bringing the total to 7.5c for the year compared with 13.51c for the previous year. The group is forecasting modest earnings growth in 2010.

Total sales fell €1.1 billion, while a 13% fall in the value of sterling against the euro, knocked €9.1m off its operating profits.

Measured on a constant currency basis, group sales were just 0.8% down against a decline of 15.6% on a reported basis.

Group operating profit was up 8% in constant currency terms at €72.9m, but down 5.7% on a straight reporting basis.

Margins improved in both divisions with convenience foods gaining 0.5% and ingredients and related property ahead by 0.3%.

At €284m, borrowings remained unchanged.

Broker reaction to thefigures was broadly positive but it was insufficient to impress investors and the shares fell 2 cent, or just under 1.5% on the day, to €1.37.

Greencore, which expanded its convenience food business into the US last year, suffered write offs of €25m for the year unrelated to these moves.

Overall the group expressed satisfaction with the performance of its food and malting businesses given the demanding trading environment. Chief executive, Patrick Coveney said: “This has been a year of real achievement in the face of considerable headwinds.

“Most importantly, we have driven significant performance improvement in our core convenience foods business — performance that improved with each passing quarter.”

Shares in the group hit a high of 560c at their peak 2007, but have lost the bulk of their value since then.

Analysts, though still lukewarm on the shares in the short term, believe the group is establishing a solid income stream in its core convenience food business, which now accounts for over 60% of earnings.