Despite results, Greencore’s future uncertain
Despite difficult UK market conditions the convenience food group outperformed the market in its core categories of sandwiches and prepared meals.
Sandwich sales grew by 8.4%, well ahead of the 2.6% rise in value recorded generally in the UK market for that category.
Sales of chilled ready meals rose by nearly 20% in value against 9.4% for the sector generally.
Results were in line with forecasts and the outturn for the year as a whole will be in line with forecasts.
That offers some comfort to the top team in Greencore who were dealt a sucker punch by Indian businessman Ranjit Boparan who snatched Northern Foods from under its nose earlier this year.
Greencore looked set to deliver a cashless merger with Northern Foods until Boparan emerged with a strong cash bid, some argue reckless, to win the backing of the Northern Foods board and its shareholders.
That deal would have elevated Greencore to a new plane of activity bringing to it some key branded names such as Goodfellas pizza and Fox’s Biscuits, part of the Northern Foods stable.
It was not to be and since then the group’s future has looked to be uncertain with some of the view that it should be sold on.
Since it evolved out of the Irish Sugar Group Greencore has struggled to find a niche that will drive earnings and growth into the future. It has retained Barclays Capital to advise it on acquisitions but a recent report suggested it was looking to sell the business.
How the ball will bounce is anyone’s guess, but the credibility of management took a knock after the Northern Foods set back.
The group was also dogged by the fact that the acquisition of Hollywood in the UK, that now forms the core of its operations, had so much that was surplus to requirements.
As the results showed yesterday group sales were up 4.4% to over €440m, while operating profits fell 2.2% and operating margins were also down 0.4%.
Adjusted earnings per share, however, were up 35.4% at 6.8c, highlighting the ability of the group to deliver earnings growth in a tough trading environment.
Greencore, under its boss Patrick Coveney, still has to demonstrate it has the ability to take this good company to a higher plane.
Its move a few years ago to the north east of the US, Massachusetts, to be exact, raised prospects of strong growth from the acquisition of Home Made Brand Foods based in Newburyport for which it paid an initial $40 million (€28.35m).
Since then it has had to sell off parts of this chilled convenience food maker to give the operations more consumer appeal and greater focus. This move was backed by two years research, but progress to date has been disappointing.
At one point Greencore expected sales out of the US to rival those in the UK within a five-year period, but they are under pressure to deliver on that forecast.
On Monday the share price rose on the back of a rumour that Greencore was to be sold off.
Earlier the Telegraph reported Barclay Capital had been hired to assist in the purchase of all or part of Uniq, which trades in the same sectors as Greencore.
Despite the rumours there is no sign of any action and shares fell almost 2.5% yesterday on the back of the interim figures to €1.18.
Market reaction as been pretty muted with one analyst commenting that despite the hype about Barclays, etc, nothing of any substance seems likely to happen in the short term.
If this drags on much longer then top management may be forced to consider their positions.
