19th May 2015 12:11
LONDON (Alliance News) - Greencore Group PLC Tuesday reported huge growth in profit in the first half of its financial year, boosted by sales growth in its food-to-go business in the UK and US, and analysts believe the company offers "good value trading" as the its US business picks up.
The food producer reported pretax profit of GBP26.3 million in the half year ended March 27, more than treble the GBP8 million profit made in the same period the prior year, which it said was driven by growth in revenue of 3.2% to GBP639.8 million from GBP619.8 million, as well as continued operational improvements and focus on cost control.
It also made a GBP16.9 million loss from exceptional items in the prior year, which had set back its profit at the time.
Greencore said its revenue growth continues to be driven by the food-to-go business, which demonstrated combined like-for-like growth of 8.7% in the UK and US in the period.
Separately, food-to-go sales in the UK grew 7%, which Greencore said outperformed the market and was principally driven by the addition of new product lines for the principal customer of the Northampton facility, for which an extension was opened during the period.
Construction of a new production facility in Northampton adjacent to the existing site is also advancing as planned and is due to be commissioned in the spring of 2016, the company added.
Greencore noted that while revenue growth was lower in the rest of the UK portfolio, the other businesses still have "market-leading positions" in their respective categories and offer complementary capabilities to food-to-go.
In the US, food-to-go revenue grew 30.6%, although the exit of products including potato salad and sushi reduced the like-for-like sales growth, Greencore said, adding that underlying growth benefited from the roll out of new breakfast sandwiches to a key customer.
The US business also was hit following the completion of an extension to its Jacksonville, Florida facility in 2014, Greencore said, as it resulted in a significant uptake in orders, causing disruption to the supply chain. Customer orders were reduced during the half year in order to re-establish sufficient stock levels, but the business has now been stabilised and weekly production levels are increasing in line with its plan, the company said.
Analysts at Berenberg said that now the Jacksonsville facility is back on track, the US business should drive a 15% mid-term earnings per share compound annual growth rate, although it did warn that some risks remain on the timing of bringing the US margins up to group level of around 6% by 2016-17.
Berenberg added that Greencore offers "good value trading" on 16 times the price-earnings ratio for 2016, and said it has good visibility on sales growth.
Greencore will pay an interim dividend of 2.4 pence, an increase of 9.1% on the 2.2p paid in the same period the year before.
"The group has stepped up its capital investment programme in new sites, which will provide a solid platform for growth in the months and years ahead. We carry good momentum into the second half and remain confident in our ability to deliver adjusted [earnings per share] growth for the year in line with market expectations," Chief Executive Patrick Coveney said in a statement.
Shares in Greencore were trading up 2.3% at 356.50 pence Tuesday afternoon.
By Karolina Kaminska; [email protected] @KarolinaAllNews
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