Greencore shares rise on improved US outlook

Patrick Coveney, Greencore CEO

Greencore shares rebounded by more than 9% yesterday after management reaffirmed the growth potential afforded by its recent purchase of US company Peacock Foods.

The Irish consumer foods group completed the near €700m acquisition of Peacock late last year — a deal it called “transformational” with the potential to quadruple Greencore’s US revenue base. Last month, however, Greencore’s share price fell by 7.5% as investors negatively reacted to one of its main US customers, Tyson Foods, agreeing to purchase rival group AdvancePierre — concerned it could see Greencore lose a major customer.

While shares stabilised on suggestion Greencore’s tie-in with Tyson, brought about by the Peacock deal, was strong and would be difficult to replicate, they grew more healthily yesterday on Greencore chief executive Patrick Coveney saying he did not see Tyson’s acquisition posing a problem for Greencore’s US growth plans.

“The enhanced capabilities, product offerings, and customer relationships that have been added to the group in a short space of time, combined with the strength of our underlying business, mean we are confident of making further progress in 2017 and beyond,” said Mr Coveney.

The Dublin group’s healthy first half results also played their part. Greencore reported a 46.1% year-on-year rise in revenues to £1.01bn (€1.17bn) for the six months to the end of March, with operating profit ahead by over 27% at £55.3m and adjusted pre-tax profit up 22.5% at £44.7m.

The convenience foods UK and Ireland division saw first half revenue grow by 16.1% to £685.7m, while the US division grew sales by 221% to £324.6m. The Peacock business delivered 9% volume growth in the second quarter — the first three months of contribution.

Greencore said it has been pleased with “the rate of progress on all fronts so far”, and is expecting this to continue in its more seasonally significant second half.

“The remainder of the year will also benefit from the commercial activity delivered in the first half and the pipeline of commercial opportunities continues to be encouraging,” management said, adding it remains confident of meeting full-year operating profit forecasts of between £142m and £146m.

Mr Coveney also said that management would seek greater levels of shareholder support before proposing further increases in director remuneration in the future. While passed by 60% of shareholders, a plan to double his performance-based share bonus — and increase that of chief financial officer Eoin Tonge — was opposed by 40% at Greencore’s February AGM.

Mr Coveney said that the group’s remuneration committee has met and opened negotiations with new institutional shareholders to discuss its pay plan.

While previously saying Brexit would damage the UK’s food industry — chiefly through higher labour and raw material costs — Mr Coveney said Greencore has taken on 1,500 extra staff in its British operations, with 75% being full-time staff, and has seen very little impact ahead of the UK formally starting its divorce talks with the EU.

Mr Coveney also played down the prospect of currency fluctuations impacting profits in the second half of the year.


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