Greencore reports €27.2m loss

Food group Greencore, has reported a first half pretax loss of €27.2 million compared to a profit of €24.4 million for the same period in 2008.

Shares in Greencore were 5 per cent lower at €1.08 in Dublin by 10am, giving the company a market capitalisation of €222.6 million.

Revenues dropped from €648 million to €550 million while operating profits rose 4.6 per cent to €31.4 million, on a constant currency basis.

Over the period the euro/sterling exchange rate was 17 per cent lower than in the same period 2008. Greecore said its adjusted earnings per share was 7.4 cent.

Chief executive Patrick Coveney said sales had held up well in difficult conditions. He said the pretax loss was due to an exceptional charge of €25 million related to the disposal of its Drummonds grain trading business.

The convenience foods division which provided 64 per cent of group operating profit in the first half delivered a resilient performance in a “very challenging consumer environment”.

Operating profit for this unit was €19.6 million, down 12 per cent once the impact of a currency translation is included with sales slowing 12.5 per cent to €385.8 million. The operating margin for this unit widened by 10 basis points to 5.1 per cent.

Operating profits for this unit for the first half of 2008 has been restated by €5.6 million following the discovery of cost concealment at the group's mineral water business.

Its ingredients and related property division reported a 10.9 per cent drop in operating profits to €11.8 million on the back of a 4.3 per cent decline in sales to €159.6 million, once the impact of currency translation is factored in.

Net debt at the end of the first half was €332.6 million, a rise of €49.2 million year-on-year. The company also said it had successfully refinanced €410 million of bank lending.

In a note to investors Bloxham described the results as among the “most convoluted set of numbers we have come across in the agri-food sector” due to the inclusion of currency adjustments, ongoing exceptional items and restatements from previous periods.

“These make year-on-year movements difficult to define,” according to Bloxham. It said an operating profit of €7.2 million or a margin of just 1.3 per cent coupled with a rise in net debt "are not the signs of a business performing well”.

Greencore said it had decided to rebase its dividend payout ratio to between 40 and 50 per cent of adjusted earnings per share. It has proposed an interim dividend of 3 cent per share. This compares to an interim dividend of 5.3 cent last year.