Food group to take €40m hit

Food group Greencore will take a €40 million hit to its annual accounts following the disposal of one of its UK businesses, the company said yesterday.

The group announced that it had agreed to buy the British sandwich business Oldfields for €17.3 million and had sold its German meat processor, Feldhues, for €10 million. Oldfields produces 25 million ready-made sandwiches a year and has an exclusive contract with the coffee shop chain, Starbucks.

Dublin-listed Greencore said it had sold its underperforming UK-based Greencore Pizza business to members of the division's management team for a nominal sum. The deal means that its financial statements for the year to the end of September 2005 will include an exceptional charge to reflect the reduction in its assets.

"The gross assets of Greencore Pizza as at 30 September 2004 were €36 million," the group's statement said yesterday. "An exceptional charge of approximately €40 million, net of tax, relating primarily to a write-down of asset values, will be reflected in the September 2005 statements."

Chief financial officer Patrick Coveney told The Irish Times that the writedown reflected the value of the division's plant and facilities, rather than its actual trading value.

The pizza division consists of the Paramount Foods business that Greencore bought in 1998 for IR£33 million, and part of Hazlewood, the British group it purchased in 2001 for €328 million.

The business produced topped pizzas and pizza crust for sale in supermarkets. The company said that while its performance had improved over the past year, it had already flagged in its 2004 annual report and had failed to deliver the returns the group demanded. Mr Coveney said its poor sales were largely down to changing consumer tastes.

Investors welcomed the news and Greencore shares gained 6 cent, to close at €3.63 in Dublin last night. Analysts gave the company a broadly positive rating following the announcement.

East London-based Oldfields has assets of €5.4 million. Along with its Starbucks supply contract, the company also has significant extra capacity, something that Greencore has been seeking for its UK sandwich business in that country for some time.

The move will allow it to grow this part of its operations by 25 per cent. Sandwiches are part of its convenience food division, which accounted for €876 million in sales in the year to the end of September 2004. It had operating profits of €53.7 million.

A Dutch private investment group, ON Nederland BV, has bought Feldhues. Greencore sold the company as it did not regard it as central to its business. It has operations in Germany and Monaghan and has gross assets of €7 million.

Greencore chief executive David Dilger said yesterday the deals were designed to "rebalance" its UK operations towards delivering attractive returns on capital.