Greencore optimistic on earnings

GREENCORE’S diversification and disposal strategy has enabled the food company to predict that it will meet stockbroking analysts’ forecasts on full-year earnings this year.

Initially, the market reacted to the news by knocking more than 4% off the share price in early morning trade, but by close of business the share price stood at €2.84, a rise of one cent, 0.35%, on the day.

In a brief pre-close trading statement, Greencore chief financial officer Patrick Kennedy said: “in accordance with its usual practice, Greencore will be meeting with stockbrokers’ analysts before entering its close period for the year ended September 26 2003.

At these meetings, Greencore will confirm that it remains confident of delivering full-year headline earnings per share in line with consensus analyst forecasts.”

The company said preliminary results in respect of the year ended September 26 2003 will be announced on November 25.

Goodbody’s Liam Igoe said they believe 2003 will be a watershed one for Greencore.

“The company’s acquisitions and disposals programme of the past few years has meant that the bulk of businesses are positioned in the faster growth convenience foods market, mainly in the UK and we expect its future earnings growth to reflect this,” said Mr Igoe, in a note to clients, recommending the shares as buy.

Merrion analyst Niamh Brodie said their forecast figures represents just 3% growth.

“This is a function of dilution from disposals masking double-digit underlying growth from continuing operations.

"While competitors have recently cited difficulties due to cost inflation and unusual weather patterns, Greencore has not been materially affected by either issue, suggesting a more resilient earnings profile,” he said.

Ms Brodie said Greencore has succeeded in reducing its dependence on declining commodity food categories and now has market-leading positions in growth convenience food products in Britain and Ireland.

“These more attractive categories now account for circa 60% of Greencore’s operating profits.

"Market demand remains strong in the chilled convenience sector and margins should expand with rising volumes. Coupled with interest cost reductions, we expect EPS growth of over 10% in financial year 2004,” she forecast.

Greencore’s risk profile has changed following the €700m acquisition of Hazlewood, with financial risk being introduced, and its customer base becoming increasingly concentrated on the retail multiples.

“Nonetheless, we believe that restructuring is at an end and a platform for sustainable growth has now been established,” she said.