‘Modest’ Brexit impact for Greencore

Convenience foods firm Greencore, which only this week bought out another sandwich maker in Britain, said it will likely avoid any immediate big hit from the slump in sterling this year, though its debt load could rise in the longer term.

Sterling’s precipitous drop of 11% since the June 23 Brexit vote has implications for many manufacturers in Britain because it threatens to push up their raw materials and energy costs.

However, Greencore, which makes millions of pre-packed sandwiches, quiches, and other ready meals for grocers and coffee shops in the UK and the US, said there will likely to be no effect from sterling’s depreciation, though its debt could be higher than anticipated “due to translation of US dollar denominated borrowings”.

In a trading update, the company said its UK food operations import less than a quarter of its ingredients and packaging from outside Britain, suggesting that it is in part sheltered from sharp falls in the value of the pound.

Sales overall in the third quarter had risen 4% to £360.4m (€431m), with the UK driving the performance. US sales were over 4% higher, but fell by 1% when currency considerations are taken into account.

“Overall revenue momentum slowed sequentially in Q3, led by a modest revenue decline in the US,” Cathal Kenny, analyst at Davy Stockbrokers said.

“The development of the US revenue base is proving more volatile than anticipated owing to customer concentration and lumpiness in the off-take.

"Commentary on financial performance in North America is more encouraging and the UK business remains in excellent health. We envisage no material change to full year 2016 earnings per share forecasts,” the broker said.

Shares in Greencore had been falling before the UK referendum but had clawed most of their losses suffered since June 23. The shares were trading yesterday at 313 pence, down around 12% this year. That values the business at £1.3bn.

Greencore earlier this week said it had bought The Sandwich Factory, a UK firm which it described as a “bolt-on” for its enlarged facility, in Northampton. Yesterday, it said it had completed its new US facility in Seattle.

Liam Igoe at Goodbody Stockbrokers said Greencore’s expansion and commissioning plans in the UK and US have gone ahead as planned.

“The EU referendum has resulted in greater uncertainty with regard to the UK economic outlook and the longer-term implications remain unknown,” the firm said.

“At this stage, our assessment is that the short-term impact on Greencore is likely to be modest.”