Greencore revenue growth up 52.6% ahead of FTSE currency changeover
With Greencore also set to transfer its FTSE share currency denomination from euro to sterling next Monday, the company could hardly have chosen a better time to release such a positive interim statement.
Monday’s currency switch to sterling is effectively just a base nominal change, a technical confirmation of the fact that Greencore has been trading in sterling-only shares since its switch to the FTSE index on Jan 20.
Nonetheless, the switch will once again draw attention to the rising stock, which has jumped by 25-30% since its move to the FTSE. British analysts have been closely watching Greencore ever since its acquisition of Uniq last year.
Greencore chief financial officer Alan Williams said: “The currency change on Monday is a narrow technical point. I can see that our share price has been rising all day today since we issue our interim management statement. It was at around 70p when I last looked at it.
“Uniq was big deal for us in value terms. We acquired it for a consideration of around £113 million, for which we needed to raise equity. The balance was around 50/50 between equity and debt.
“Now we are focused on integrating Uniq into our core business. When we announced the acquisition, we said we could realise £10m in cost savings. We have achieved £7m so far this year, so we are very much on target.
“We have made a case for consolidation in the UK convenience food markets, and we have nothing else planned that we care to talk about now. We see that there has been some activity among other companies, but we are going to keep our focus on integrating Uniq for now.”
Greencore also yesterday unveiled core underlying growth of 11.2% — assuming Uniq had formed part of the group throughout the prior year and excluding desserts products in Uniq which have been or are being exited.
In an advisory note to clients, London-based Investec analyst Nicola Mallard said: “We believe Greencore is significantly undervalued, with a 2012 price earnings ratio at 4.9 times, an earnings before interest, taxes depreciation and amortisation of 4.9 times and a dividend yield of 8.2%.”
Ms Mallard also said that Greencore is predominantly a British business now, especially since the acquisition of Uniq.
She added: “I think the sterling change was necessary. They are now vying for a place on the FTSE and I think previously being listed in euro may have put some investors off. Some investors can’t hold stock unless a business is listed in sterling and, for some, this may have been seen as an unnecessary hurdle.”
Other British analysts and financial advisors were queuing up yesterday to predict a surge in interest in Greencore stock in advance of Monday’s currency switch. The company’s stock is also expected to be included in the FTSE All-Share and the FTSE Small-Cap Indices from the start of business on March 19.
In the interim statement issued yesterday, Greencore reported that its Convenience Foods division recorded revenue of £353.8m, an increase of 57.2% on the prior year. The legacy Greencore businesses recorded revenue growth of 13.0%, with strong volume led growth across our key category businesses.
The continuing Uniq activities also exhibited strong growth with revenues up 8.2% year on year. As anticipated, there was a revenues in the parts of the Uniq business which it is exiting saw a decline of 18.1%, as some activities have now ceased, with the balance likely to be exited by June 2012.
It also reported that synergy delivery is in line with its expectations, in terms of integrating new British acquisitions such as its Northampton sandwiches business and Spalding salads. The ingredients and property division is performing in line with expectations, with revenue ahead by 3.2%.
Greencore stated: “The group has made a strong start to the financial year across its portfolio of businesses. We are particularly pleased with the performance of the Uniq businesses during a period of change and with the progress made to date on the integration.
“We expect the general economic and trading environment to remain challenging for the foreseeable future, however we remain confident in our ability to deliver good results for the year, in line with our expectations.”
In an advisory note issued yesterday, Darren Greenfield of stockbrokers NCB said Greencore’s report for the 17 weeks to the end of January was “encouraging”. It notes, however, that poor weather and cost input inflation also contributed to that positive performance.
NCB has put a ‘hold’ advisory on the Greencore shares, and is sticking to its 10.6p earnings per share prediction for the full year of 2012, based on its projections of c4% like-for-like and c36% reported revenue growth.
Greencore’s share price hovered at 71-72p for most of yesterday afternoon, having started the day at 67.75p. It began the week at around 65p.
The NCB 10.6p EPS projection is based upon a conservative 60p price target for the stock. The share’s 52-week high was 80.43p, while its 52-week low was 44.98p.
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