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Greencore shares surge 6.2pc after strong results

GREENCORE cheered investors yesterday with strong half-year results that sent shares surging.

The ready-meals maker increased revenue by nearly half to £567.7m (€703.5m) and forecast strong growth in earnings per share, despite a cautious outlook. Pre-tax profits for the six months to March 30 climbed 12pc to £19.2m.

Turnover was boosted dramatically by the acquisition of the British food company Uniq, which was completed last autumn. Stripping out this deal, revenue rose 9.3pc. Earnings per share climbed by nearly a fifth to 5.5p.

Company chief executive Patrick Coveney was pleased with his firm's performance so far this year but warned that the UK consumer -- upon which Greencore relies for the vast majority of its business -- was facing an increasingly challenged environment.

"We are very pleased with how the business has gone so far this year but we appreciate that there are challenges at hand in the British market," said Mr Coveney.

He added: "There is much more volatility in the consumer space than there was a few years ago and while the market seems a little more solid than it was a few months ago, things are a lot more unpredictable than they once were."

In its trading statement, Greencore said it did not expect "to see any material improvement in the trading environment in the UK in the second half and we have yet to see a material easing in inflationary pressure".

The company added that it was targeting "good underlying revenue growth and strong growth in adjusted earnings per share" this year.

Most analysts are forecasting earnings per share to grow between 1pc and 3pc for the rest of the year.

The acquisition of Uniq, which cost £113m (€140m), was progressing well, Mr Coveney said, with all the relevant targets being hit by the company so far. Greencore's "blended" operating margin climbed 80bps (book value per share) to 5pc.

Analysts were generally positive in relation to the results, with NCB Stockbrokers Darren Greenfield highlighting the positive outlook.

"We could see estimates increase on the back of these results. The economic environment doesn't appear to have had a large impact on Greencore's growth and this is likely due to the rationalisation of suppliers taking place in the sector," he wrote.

"Free cashflows have improved in H1, but they remain relatively low and a marked improvement in the second half of the year would give us confidence."

Goodbody stockbrokers' Liam Igoe took a similar view, saying he would upgrade his forecasts for the business.

"Greencore is on schedule to make £7m of the £10m planned savings from the Uniq acquisition in 2012. Following these strong results, we will upgrade our forecasts, likely reflecting the level of outperformance in the first six months."

Shares in the company closed up 6.2pc at 72.72p.

Irish Independent