Greencore stock set to ‘outperform’
In a detailed report on the company, published yesterday, Davy said that “enhanced cash conversion, an improved UK business, and a US platform poised for sustainable growth catalyse a move to ‘outperform’”.
Greencore is still headquartered here, but now has its shares listed in London, on the FTSE All-Share and Small Cap Indices. It said tough trading conditions were continuing, but that it expected to meet its main financial targets for its current financial year, despite the horsemeat scandal knocking around £6m/€7m off its revenues in the year to date.
Recently published results for the six months to the end of March showed a relatively flat revenue figure of just under £573m, but an increase of over 6% in first-half operating profits to over £32m.
The group’s US operations grew first-half revenues by 120% — helped both by its existing subsidiaries and new supplier deals with leading chains like 7-Eleven and Starbucks.
Davy said: “The US market opportunity in prepared food-to-go is real and growing. Customer alignment is excellent, and a capable and experienced US management team is in place. Our key take-away is that the US-prepared FTG opportunity for Greencore is no longer an ‘option value’, but a sustainable value creation opportunity. The market opportunity is real and growing.”
Davy said that Greencore’s share price — currently trading around the 127p-128p mark — has the potential to reach around 153p by the end of its current financial year. While its positivity surrounding Greencore’s US play was based on a recent visit there, Davy has pointed to an improving UK proposition.
“A heightened regard for competence, a different and more positive view of the UK business, and a belief that the US represents a very good opportunity lead us to abandon a long-held ‘neutral’ rating and move our call to ‘outperform’,” Davy said.
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