Broker downgrades Greencore on concern over US business
Shares in the UK's largest sandwich maker, Greencore, may face further volatility today when they resume trading on the London stock exchange as investors seek greater insight into the health of the group's US business.
Yesterday Cantor Fitzgerald became the first broker to downgrade its investment rating on Greencore, citing concerns that the stock's slide stemmed from "some underlying event in the US".
The stock sank by 14pc between last Wednesday and Friday morning, as news filtered into the market about the apparent loss of a contract to US coffee giant Starbucks at its Jacksonville plant in Florida.
Noel O'Halloran, chief investment officer at KBI Global Investors, claimed "everyone in the market" knew about the Starbucks contract, and said management handled the issue poorly. He claimed the share price fall indicates the market now has a "credibility issue" with Greencore's management and warned investors will need further reassurance about the performance of the US business at future earnings updates.
He said the drop in the group's valuation also presented a "buying opportunity" on the basis that its purchase of US sandwich maker Peacock Foods for $747.5m will propel revenue and quadruple sales in the country.
Greencore sought to allay investor concerns to the share price volatility by issuing a statement on Thursday.
The group said it was not "aware of any developments" since its results that could have prompted the fall in valuation.
But Mr O'Halloran claimed there had clearly been a communication problem. He added that investors are likely to focus on what Greencore left out of the statement, arguing there was a paucity of information on the rest of the US business.