Greencore shares fall 3.2% despite non-core asset sale

Greencore shares fell by 3.25% despite it completing its exit from the non-core dessert and cakes business amid upbeat sentiment surrounding its first trading update of the year, due today.

The Irish convenience food group has sold its remaining desserts and cakes business, based in Hull, to UK-owned ambient cake maker Bright Blue Foods, for a figure believed to be less than £10m (€11m).

Greencore began its retreat from the desserts end of the food line four years ago with the £11m sale of its Ministry of Cakes business in the UK. The group will now fully focus its UK growth on the food-to-go and broader convenience sectors.

The sale announcement came on the eve of Greencore’s annual shareholders’ meeting — being held this morning in Dublin — and a first quarter trading update; expected to show a solid start to its latest financial year, with mid-single digit percentage revenue growth in the UK and continuing momentum in the US.

Analysts expect Greencore to generate operating profits of nearly £170m in the 12 months to the end of September.

In November, the food group reported a 74% drop in annual pre-tax profits to £12.4m, due to restructuring costs and expenses associated with its €700m takeover of US company Peacock Foods. Operating profit fell by 43% to £42.7m.

However, at the time, Greencore boss Patrick Coveney forecast a material improvement in profitability this year.

The Peacock addition is expected to substantially drive Greencore’s US revenue growth in the coming years, despite the loss of one of its two Starbucks contracts and concern over the group’s ability to maintain others.