Greencore profits could jump to €48.2m

PRE-TAX profits at Greencore should jump from the €11.5 million the company reported in September to €48.2 million in 2003, Davy Stockbrokers predict.

Davy's respected food sector analyst, John O'Reilly reckons Greencore shares are value for money in an equity note circulated to the broker's clients before the weekend. Mr O'Reilly said Davy's think Greencore is well on the way to resuming earnings growth to the medium term, adding that the brokers believe Greencore already has some good propositions in British food manufacturing with leading and strong relative market positions in fast growing categories. Mr O'Reilly says the group has the potential to grow earnings by 10% per year and that the ultimate success from the Hazlewood acquisition, and the learning involved in assimilating and restructuring this, will better equip Greencore in its future development, especially in large-scale acquisitions.

"This is not to suggest that long term growth must be uniquely acquisition driven. Pioneering and dominating new categories was a Hazlewood competence, even though this may have been difficult to appreciate because of the wide scope and poor performance of its operations overall," he said. "we think Greencore shares at 8.6 times forecast earnings for this year and yielding 5% are value for money," he told clients. Mr O'Reilly said emerging from Greencore's recent results presentation came the realisation that like-for-like operating profit growth can be raised to 8%.

"Annual net cash generation can exceed 40m per year, the interest saving benefit of which combined with operating profits growth can deliver EPS (earnings per share) growth of 10% or more over the short to medium term," he added. "The group's shape will continue to evolve with strategic direction and needs to adapt the model to environmental change and performance

imperatives," he said.