Greencore increases profits by 7%

GREENCORE delivered results in line with expectations yesterday, recording strong profit growth and a steady performance in generating cash and reducing its debt.

Pre-tax profits for the year ended September were up 7% to €67.8 million. Its three main divisions, ingredients and agribusiness, chilled and frozen foods, and ambient grocery, performed well.

Total turnover fell by 18% to €1.47 billion as a result of a number of disposals and the closure of some businesses. Sales increased 1% on a like-for-like basis.

Chief executive David Dilger said the results demonstrated the potential of Greencore’s businesses. It had been transformed in recent years and was well-placed to achieve continued growth.

Profit in the chilled and frozen foods division rose by 13%, excluding the effects of weaker sterling. Its British convenience businesses made good progress and it was in the process of expanding its ready meals’ production capacity.

The group also consolidated its position as the world’s biggest sandwich manufacturer and entered the chilled soup market in Britain for the first time.

Mr Dilger said the performance in increasing margins was particularly impressive and showed that Greencore had the issue of pricing power under control.

He said Greencore’s smaller competitors were having trouble in maintaining margins and were exiting certain businesses, which was good news for larger players like Greencore.

The group’s ability to innovate was its main weapon in maximising efficiency and achieving the status of being a low-cost producer. He also praised the group’s financial discipline in increasing productivity and keeping costs down.

Greencore’s net interest bill fell by more than €10m to €41m as it made steady progress in reducing its overall debt burden.

Net debt stood at €430m at year end, which was €133m lower than the previous year and less than half the group’s debt in March 2001 after completing its last major acquisition, the purchase of British food group Hazlewood.

The group restructured its debt profile after the year end following a $302m (€254m) private placing in the United States.

Before the refinancing, two-thirds of Greencore’s debt was short-term in nature and due for repayment within 12 months. Its revised profile has spread the debt repayment schedule more evenly. Only half of Greencore’s debt is now repayable within the next five years.

Chief financial officer Patrick Kennedy said the debt arrangements had now reached “a steady state” and that there would be no substantial changes to Greencore’s debt profile next year. He said the US placing had been well received by the investor market.

The group also said it had appointed Pat McCann, chief executive of hotel group Jurys Doyle, as a non-executive director.