Greencore: ‘Work to do’ to rebuild investor confidence

Greencore: ‘Work to do’ to rebuild investor confidence
Patrick Coveney, chief executive, Greencore, at the group’s AGM in Dublin yesterday. Picture: Gary O’Neill

By Geoff Percival

Greencore boss Patrick Coveney has said the company needs to do more work in order to build shareholder confidence, particularly around its growth potential in the US, as it tries to steady a volatile share price.

Profit warnings from peer groups, currency fluctuations, uncertainty around customer relations in the US, and short-selling of the Greencore stock by hedge funds have all played havoc with the Dublin-headquartered convenience food group’s share price in the past 12 months.

In that time it has dropped by nearly 7%. Despite a strong trading update, published yesterday, and the disposal of the last crumbs of its underperforming cakes and desserts business, Greencore shares fell further this week, dropping nearly 5% in the last two days.

Speaking after the group’s AGM in Dublin yesterday, Mr Coveney said that “we have work to do this year to build confidence amongst our shareholder base that the US will deliver as the board expects”.

He said that while it might be beneficial to investors if management was more vocal and transparent on the nature of business-to-business contracts, such openness could damage customer relations.

Earlier, he told shareholders that he is “tremendously excited” about the potential of the entire business, adding “we know this year needs to be one of delivery, and I think it will be”.

Greencore’s first-quarter trading update — covering the three months to the end of December — showed total US revenue growth of 297% to £255.1m (€291m), driven by the €700m purchase of Peacock Foods, which has significantly grown the Irish group’s US scale and manufacturing capacity. Greencore’s underlying like-for-like sales growth in the US, excluding the Peacock contribution, was still up 5.1%.

The group expects the reduction in the US corporate tax rate to result in a one-off, non-cash credit of around $28m to its 2018 first-half income statement and for the tax change to benefit future earnings of the US division.

Greencore also reported 9.2% revenue growth in its core UK convenience food division. On a group basis, first-quarter revenue rose 53.6%, year on year, to £640.5m, with management saying it expects a strong year of growth and improved profitability, cash flow, and returns over the medium term.

Higher-than-expected restructuring costs and acquisition expenses saw Greencore’s profits plunge by more than 74% last year.

Meanwhile, 84% of Greencore shareholders voted in favour of its tweaked executive pay policy, at yesterday’s meeting, up from just 60% 12 months ago.

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