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Greencore shows appetite for US growth

Greencore is reaping the benefits of investment in its US and UK operations as the Irish food company recorded a 10 per cent increase in operating profits.

The company - which released full year results to the year ended September 25, 2015, yesterday - said that group revenue was up by 5.2 per cent to £1.34 billion. Revenue from the convenience food division was up by 6 per cent on a like for like basis to £1.29 billion.

According to Cathal Kenny, an analyst at Davy, Greencore’s results were a “standout” during a time of “subdued growth for many food manufacturers”.

“The engine of growth is its UK ‘Food to Go’ business segment,” Mr Kenny said. “Our model assumes that the baton for profit growth shifts to the US in 2016.”

Greencore, which specialises in producing chilled, frozen and ambient foods, will pay out a dividend per share of 6.15 pence - up from 5.45 pence in full year 2014 - as its operating profit was grew to £91.7 million.
Adjusted earnings per share grew in double digits for the fifth year in a row, at 13.2 per cent, and its after-tax profit increased to £59 million from £48.6 million.

Liam Igoe, an analyst at Goodbody, said the firm reported a “robust set of results” and that he maintained a “positive” on the stock.

“Greencore’s UK Food to Go sales increased by 8.9 per cent in the year, with like for like growth accelerating to 10.6 per cent in the second half of the year,” Mr Igoe said. “This was due to the impact of increased output at the Northampton site, where a further £12 million expansion is now planned. This will result in an extra £15 million of sales by 2017 for the key customer serviced by this plant. The additional capacity underscores the visibility of Greencore’s growth prospects beyond next year.”
Patrick Coveney, Greencore’s chief executive officer, said the firm’s “strategy, momentum and pipeline of opportunities” leaves it well placed to deliver further growth in the coming year.

“Greencore has had another strong year and our clear food to go led strategy has continued to drive growth in both the UK and US markets,” Mr Coveney said. “We delivered 6 per cent like for like revenue growth in Convenience Foods, 11 per cent group operating profit growth and our fifth consecutive year of double digit growth in adjusted earnings per share. We increased our investment in major capacity and capability improvement projects during the year, in each case underpinned by long term customer relationships.”

From 2010 to early 2014, the company expanded through strong market growth and acquisitions. Over the past 18 months it has focused on increasing capital expenditure to support capacity expansion in both the US and the UK.
It expanded its Jacksonville facility in the US in the summer of 2014 and the group also completed the construction of a greenfield facility in Rhode Island in March 2015 and has started the construction of its first west coast facility in Seattle - which is due to open in 2016.

In the UK, an extension of the sandwich facility in Northampton was commissioned earlier this year and it said the construction of a new production facility adjacent to the existing site is “well advanced”.

Yesterday Greencore announced that it will commission an additional manufacturing unit at its Northampton campus - which will require an additional £12 million of capital and will enter production in 2017.

Source: www.thetimes.co.uk - 25 November 2015