Greencore’s results impress despite currency issues

GREENCORE, which recently bought convenience food group Home Made Foods in the US, increased its turnover and profits in the first half of the year.

Group sales at the international convenience food group rose 2.5% to €648.7m and by 10.4% on a constant currency basis, but sterling weakness was a major drag on figures. Operating profit rose 2.5% to €41.1m but were up 11.8% when the sterling difference is discounted.

Both rising material costs and currency exchange were dominant features of the trading period with the hike in food charges alone adding substantially to the costs, most of which were recovered.

However, the currency difference knocked €3.7m off the operating profit over the period and €2.7m from profits at pre tax level.

Adjusted earnings per share rose 7.4% to 13c. Greencore reported its convenience food division, which delivered 68% of operating profits, was underpinned by a good underlying momentum.

The ingredients division, mainly malting, had a very good first half where profits rose 61% from €8.2m to €13.2m on the back of sales that rose 27%.

The group has also been active on the acquisition front in the food area and has made three separate deals in the year to date.

The most recent, Home Made Foods in the US offers significant synergies for the group and is destined to become a major part of total activities within the division over the next 10 years, said Patrick Coveney, group chief executive.

Net exceptional gains of €18.1m were achieved due to a government decision to allot more of the EU restructuring aid for sugar to the group.

Greencore’s debt over the period improved significantly and fell 30% returning to ratios not seen since the 1990s.

The year on year figure to end march 2008 was €275 against €393m at end March 2007.

Shareholders will also be pleased to know that the dividend has been raised 5% to 5.3 cent per share.

“On a constant currency basis, we delivered strong double digit growth in sales, profit and EPS. This performance reflects a portfolio that is working strong customer relationships across Convenience Foods and Malt, excellent cost control and good inflation recovery”, he said.

Shares in the group were down by over 3.45% in late trading to €3.12 despite positive market reaction. The shares closed on Tuesday at €3.23.

NCB Stockbrokers have held their buy recommendation but cut their earnings forecasts for this year and next by 10% and 5% respectively due to the sterling factor and a fall of 0.5% in food margins.