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Greencore expands across the pond

Alongside strong full-year results, Greencore announced plans to expand capacity in the US
November 26, 2014

Stripping out £16.1m in restructuring costs and impairments, Greencore Group (GNC) delivered an operating profit of £75.2m for the year to September - up 13 per cent on the previous year. The operating margin ticked up by 30 basis points to 6.5 per cent, while bottom-line earnings fell due to a £27m tax credit booked last year. This was a strong performance overall, driven by new contract wins and improved economic prospects in the US.

IC TIP: Buy at 267p

Indeed, the US is an increasingly important driver of growth for Greencore, which continues to expand its footprint there through 'grab and go' products. But if the company's US operations continue to grow strongly, their margins remain below the group average. This is partly due to ramp-up costs associated with various growth initiatives. Greencore certainly isn't taking its foot off the peddle. Plans are afoot to increase its market penetration across the pond by developing its first plant on the Pacific West coast - home to the Starbucks chain, one of Greencore's blue-ribbon customers in the US. The new facility in Washington State, which will cost around £20m, will increase production capacity and enable Greencore to service a newly acquired contract.

Closer to home, Greencore revealed encouraging numbers from its key UK 'food to go' business, including top-line growth of 15 per cent. Investec expects EPS to rebound to 17.2p in the current financial year.

GREENCORE GROUP (GNC)
ORD PRICE:267pMARKET VALUE:£1.1bn
TOUCH:266p-267p12M HIGH / LOW:304pLOW: 181p
DIVIDEND YIELD:2.0%PE RATIO:23
NET ASSET VALUE:69p*NET DEBT:75%

Year to 26 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p) †Dividend per share (p)
20100.7426.28.14.81
20110.8011.27.03.85
20121.1628.99.04.25
2013 (restated)1.2041.517.14.80
20141.2744.411.85.45
% change+6+7-31+14

Ex-div: 4 Dec

Payment: 2 Apr

*Includes intangible assets of £499m, or 122p a share.

† Adjusted for 2011's five-for-six rights issue