Sunday 25 February 2018

Greencore takes advantage of weak sterling to buy UK food firm

Greencore chief executive Patrick Coveney
Greencore chief executive Patrick Coveney
Michael Cogley

Michael Cogley

Irish food firm Greencore is the latest in a line of overseas investors snapping up UK firms while sterling remains low.

Almost 60 deals have been concluded with a total value of $34.5bn (€31.4bn) since the Brexit vote, new Reuters data has shown.

The spending total has been dominated by SoftBank's massive $32bn (€29bn) deal for UK chip designer ARM Holdings.

Greencore, which is headed up by the brother of Housing Minister Simon Coveney, has splashed out £15m (€17.9m) on The Sandwich Factory as it looks to extend its presence in the high growth food-to-go industry.

Last year The Sandwich Factory, which operates from a single facility in Warwickshire in England, brought in £42m in revenue.

The move falls in line with Greencore's Brexit-proof UK strategy where it produces food within Britain for the domestic market.

Greencore chief executive Patrick Coveney said the deal makes "strong strategic sense" for the business.

"The Sandwich Factory will extend our reach into customer channels in which we are currently under represented, notably convenience stores and the travel sector, and will also bring new product types into the Greencore portfolio," Mr Coveney said.

The company expects the deal to make little impact on earnings this year, but will be modestly accretive thereafter.

"Greencore's acquisition of The Sandwich Factory looks very sensible as it allows it to extend its manufacturing capacity in the key food-to-go segment in the UK - a segment where the supply and demand dynamic is relatively balanced," Davy analyst Cathal Kenny said.

Mr Kenny predicts the deal will add around 6pc to Greencore's UK food-to-go revenue.

Greencore chief Patrick Coveney predicted that Britain would leave the EU in mid-June and said the outcome would be bad for Ireland.

Greencore generates the majority of its revenue in the UK. However, the company's exposure to Brexit is limited in that it manufactures in the UK for sale in the UK.

Speaking after the Brexit vote, Mr Coveney said: "I think the exposure we'll have will principally be on what happens to the overall UK economy. We have to work through over time what it means."

Shares in Greencore were hit by 12.26pc on June 23 but have gradually recovered as the initial shock over the referendum vote begins to lift.

Greencore, which has the likes of Heinz and Bisto under its umbrella, reported an 8.1pc increase in group revenue in the first half of its financial year.

In the six-month period to March 25 the firm posted revenue of £691.6m

Outside of its UK operations Greencore is also investing into the US in both capacity and capability.

In the first half of the financial year Greencore's Rhode Island facility became fully operational while its Seattle base was set for initial operational in June.

Merger and acquisition activity has kicked off in the wake of Brexit despite less deals being concluded.

In the month leading up to the vote there were 79 M&A deals completed, however the total value of the deals were $4.3bn.

Sterling fell to a 31-year low after the vote, which has seen a number of overseas investors looking at the UK as a good market to get value for money.

Irish Independent

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