Sunday 25 August 2019

Greencore in Amazon deal boost as profits slump 74pc

Greencore’s Patrick Coveney
Greencore’s Patrick Coveney

Gretchen Friemann

Greencore has struck a deal with Amazon to provide meal kits and sandwiches to the US giant's online grocery delivery service, according to sources.

The addition of such a globally prominent brand to the convenience food producer's retail customer base is likely to boost confidence in the group, which yesterday unveiled a 74pc plunge in pre-tax profits to £12.4m on the back of £78.2m in exceptional charges.

Industry sources said Greencore has agreed similar deals with Target and Kroger, the largest supermarket chain in the US, as the London-listed, Irish-incorporated company targets aggressive growth in the North American market.

In addition to the trio of high-calibre new customers, Greencore is understood to have extended its relationship with its most valuable US customer, Tyson Foods - a move that will ease a long-standing anxiety among investors.

Earlier this year Greencore's shares slumped by 7pc in one day after Tyson snapped up AdvancePierre, a sandwich-maker and rival to the group's newly acquired Peacock Foods.

Greencore declined to comment on the identity of its new customers.

But at an earnings presentation to investors and analysts in London, CEO Patrick Coveney, pictured, said the new relationships, which amount to six in total, as the group has also struck contracts with three consumer packaged goods companies, will generate $50m in revenue in 2018.

The positive news caps a torrid year for Greencore, which endured the loss of a Starbucks contract at its Jacksonville plant in Florida - an event that sent its share price tumbling 14pc in less than two days. Yesterday however Mr Coveney moved to ease jitters about Greencore's ability to increase margins as it reduces its capital expenditure to less than £90m next year.

A spate of investments aimed at expanding its UK business and securing a sizeable footprint in the US with the $748m purchase of Peacock, has squeezed margins and raised its net debt, although its leverage remains 2.4 times ebitda - the same level as last year.

Greencore aims to reduce this to 2 times ebitda in 2018.

Mr Coveney said Greencore has "never been stronger", and insisted investors will reap the benefits of the restructuring in the years ahead, as capital expenditure as a percentage of revenue begins to dwindle, delivering better shareholder returns.

But he acknowledged it had been a difficult year and said, as a result, Greencore has scrapped bonus payments this year.

The group has worn hefty exceptional charges this year, the bulk of which stem from a decision to abandon the roll-out of a software package across its systems.

Greencore made the call four years into the investment by which stage it had burned through £29.7m.

But investors cheered Greencore's stronger growth prospects, pushing the share price up 2.5pc yesterday to 196.8gbp.

Irish Independent

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