Wednesday 20 June 2018

Greencore chiefs to lose bonuses for second year after loss

Greencore’s Patrick Coveney
Greencore’s Patrick Coveney

Gretchen Friemann

Greencore's executives face another year without bonuses after the convenience food manufacturer swung to an operating loss of £4.4m (€5m) for the first half of 2018, the Irish Independent understands.

The decision to scrap bonuses for a second time comes amid persistent difficulties in its US division and follows a shock profit warning in March that sent the share price into a tailspin and wiped a third off the Dublin-based group's market value.

However investor enthusiasm returned yesterday, as CEO Patrick Coveney partially reset the US strategy towards what he termed as the "structurally growing branded food partner segment in the US".

Shares surged by 11pc in the wake of the results, which beat market expectations.

The turnaround contrasts sharply with anger expressed by large investors earlier in the year.

While few in the market view Greencore as out of the woods, the improvement has kept agitation over Mr Coveney's stewardship of the company at bay.

But the Cork native was quick to dismiss any sense of complacency.

Speaking to the Irish Independent yesterday he said: "We have had a very painful and disappointing first half relative to what we expected at the start of the year.

"But you can only deal with the issues in front of you and we have certainly done that since March."

On a conference call with analysts, he said its revised strategy leaves Greencore "fishing where the fish are".

Following the $747m Peacock acquisition at the end of 2016, Greencore's largest customers in the US, are the global food giants Tyson, Kraft Heinz, Dole and Kellogg's and the company is now hoping to carve out more outsourcing contracts from these top clients as it targets double-digit profit growth over the next few years.

Greencore has scaled back what Mr Coveney dubbed the "distractions" of "speculative activity in parts of the grocery, food service and online channels".

Last year the company signed close to $50m of contracts with retailers Amazon, Target and Kroger.

But it is understood these strategies have been reined back.

In an effort to decisively tackle problems in its legacy US business, which accounts for 20pc of sales, Greencore has put its Rhode Island site up for sale - the facility is expected to fetch $5-$10m - while a Jacksonville site will be repurposed to food manufacturing linked to one of its food partners.

In the UK and Ireland, revenue rose 8.2pc to £734m (€837m) but Merrion Stockbrokers noted that despite an increase in unit volume sales, "operating profit only increased by 1pc", as inflation and weather affected some business lines.

Irish Independent

Business Newsletter

Read the leading stories from the world of Business.

Also in Business