Shares in Greencore closed up more than 7 per cent in London yesterday after the company published interim results in line with market expectations and indicated it would hit analyst forecasts for the full year.
Greencore reported a 46 per cent rise in group revenue in its first half of its financial year, on the back of its acquisition of Peacock Foods in the United States in late 2016.
Revenue at the Dublin-headquartered group rose to £1,010.3 million (€1.2 billion) in the 26 weeks to March 31st, while earnings (ebitda) rose 31.2 per cent to £79.1 million.
Group operating profit was up 27.1 per cent to £55.3 million, while pretax profit rose 29 per cent to £34.6 million. Peacock began contributing to Greencore’s results from January 1st.
Consensus analyst forecasts indicate a full-year operating profit of about £144 million, which means the company will have to step up its performance in the second half of the year.
US deflationary pressure
"We are very pleased with the performance of Peacock . . . the growth of the business has stepped up," Mr Coveney told The Irish Times, adding that this was against a backdrop of significant deflationary pressures in the US market at present.
Mr Coveney said an “encouraging pipeline of new business” was emerging at Peacock and signalled that the group was on target to achieve its synergy targets of $15 million a year.
Greencore’s legacy business in the US increased sales by 6 per cent in the reporting period and Mr Coveney . This is being integrated with Peacock’s operation, with a single leadership team now in place, and its former base in Boston due to close in in 10 days’ time in favour of a location in Chicago.
Greencore is also looking to maximise cross-selling opportunities between its two US units.
Despite the “challenging political, economic and customer backdrop”, the group’s Irish and UK business saw strong growth in the period, with revenue up 16.1 per cent, driven by the “continuing strength” of the food-to-go business.
However, the group noted it now had increased exposure to sterling-dollar foreign-exchange translation movements as a result of the Peacock acquisition.
US profits
“If the current rates are sustained, this will result in a modest adverse impact on translated US profits in the second half,” the company said.
Mr Coveney said it was a “transformational period” for the food group. “In the UK we have delivered significant expansion and investment following recent new long-term business wins, as our food-to-go business continues to grow rapidly. In the US, the addition of Peacock Foods has transformed our market and channel position and has given us a growth platform of real scale.”
On Brexit, the group said it would continue to monitor the potential implications. It also reported a 4 per cent increase in labour costs in the UK and Ireland. Mr Coveney said the rise in Ireland amounted to about 2.5 per cent.
Greencore declared an interim dividend of 2.10 pence per share, representing a payout of 39.2 per cent of its adjusted earnings.
