20th May 2014 08:45
LONDON (Alliance News) - Greencore Group PLC Tuesday raised its interim dividend 15.8% after reporting a good first half of the year driven by strong growth in the UK food-to-go market, although its pretax profit took a hit due to restructuring costs.
The Irish convenience food business said it had outperformed a buoyant food-to-go market in the UK, and also benefited from the first full year of supply to a major new customer in the US. It cautioned that although UK economic conditions are steadily improving, the country's grocery marks continues to face pricing pressure and uncertainty.
"Notwithstanding the strong comparator period, we expect to deliver good revenue growth in the second half and remain confident in our ability to deliver adjusted earnings per share growth for the financial year in line with market expectations," the company said in a statement.
Greencore reported a pretax profit of GBP8.0 million for the six months ended March 28, down from 12.2 million a year earlier, after booking GBP16.9 million in exceptional costs, more than double the previous year. Most of the exceptional costs in the period were related to the planned exit from its Newburyport and Brockton manufacturing facilities in the US, and an impairment charge for the disposal of its food service desserts business Ministry of Cake Ltd.
Excluding exceptional costs, the group's pretax profit increased to GBP25.0 million, from GBP20.3 million, as revenue rose to GBP619.8 million, from GBP572.9 million, driven by like-for-like growth of 9.6% in its convenience foods division.
Its UK and US food-to-go business combined delivered like-for-like revenue growth of 19% in the first half.
"In addition, both the UK Prepared Meals and Grocery businesses have delivered steady performances during the period against the backdrop of extremely competitive grocery market conditions," the company said in a statement.
The company has been growing its food-to-go business which provides sandwiches, sushi, snacks and side salads to supermarkets and retailers. The business now represents around 40% of its convenience foods revenues.
"We have chosen to focus on food to go, supplemented by strong positions in other attractive convenience food categories, in order to capitalise on favourable, long-term consumer and channel trends. This strategy is bearing fruit," the company added.
Greencore is scaling up in the US, recently buying food-to-go products manufacturer Lettieri's. It is also planning to build a new greenfield sandwich making facility in Quonset, Rhode Island for GBP20 million, and make a GBP6 million investment in its Jacksonville facility in Florida so it can manufacture frozen food-to-go products.
Greencore said Tuesday that it will invest GBP30 million over several years in its Northampton, UK facility to service a new business contract for chilled sandwiches and to underpin future growth opportunities with the same customer.
"These investments, as well as the strong trading momentum that we are seeing across our group, have left us well positioned for further growth in the months and years ahead," said Chief Executive Patrick Coveney in a statement.
The company spent GBP17.2 million in capital expenditure in the first half of the year, and said spending in the second half of the year will be significantly higher than the previous year due to the construction of the new facility in Rhode Island, and its investments in Jacksonville and Northampton.
Greencore shares were up 5.1% at 258.80 pence Tuesday afternoon, one of the biggest gainers on the FTSE 250.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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