Greencore shares flop on profit warning

Shares in Greencore plummeted today after the food-to-go supplier warned that problems at its US division would dent profits.

The sandwich maker flagged the weak performance of "underutilised" US sites, the timing of new business contributions and the sterling/dollar exchange rate as having led to a reduced expectation in profit growth.

As a result, earnings per share for the year are now expected to be between 14.7p and 15.7p, compared with market expectations of 15.7p to 16p.

The news sent shares sliding 23% to 140p.

Greencore acquired US-based Peacock Foods in 2016 and is now exploring ways to best utilise the manufacturing network of approximately 2.5 million square feet.

To this end, it announced a major shake-up of the division that will include closing its Rhode Island facility and see chief executive Patrick Coveney spending half his time in the US to take "a direct role in the strategic, organisational and commercial leadership".

The restructure reflects "the commercial pipeline" and aims to address these "utilisation challenges", Greencore said.

Greencore anticipates a £3m one-off cash cost for "resetting" the US network.

But it added that the programme will help give it a boost next year, saying: "Plans are well advanced which, if successful, would secure significant new business at several sites in the Midwest region.

"The group anticipates that such new business would contribute revenue and earnings from the first half of full year 2019."

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