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Greencore takes bigger bite of US market with Peacock deal

The convenience food specialist's big acquisition will be transformative for its US division and the group overall
November 15, 2016

Convenience foodmaker Greencore (GNC) has filled up on a major acquisition of US rival Peacock Foods. Dublin-based Greencore said the $748m acquisition, which cost £594m at the exchange rate when the deal was signed, generated revenue of roughly $1bn (£798m) and adjusted operating profit of $72.1m in the year to September 2016. A £439m rights issue will part-fund the purchase of Peacock, which makes frozen breakfast sandwiches, kids' chilled meal kits and salad sets and should sit well alongside its existing US operation, which counts Starbucks and 7-Eleven as its main clients. The US convenience division only accounts for 15 per cent of revenues, but the group has invested in expanding capacity there. New factories in Rhode Island and Seattle are already up and running.

IC TIP: Buy at 328p

The UK food-to-go business (45 per cent of revenues) reported like-for-like sales up 12.3 per cent thanks to new business wins. This figure excludes an extra week of trading and the acquisition of The Sandwich Factory. The expansion of its Northampton facility continues, with two of four production lines complete. Additional production lines were also added to two London sites thanks to another contract win from an existing customer.

Analysts at Davy expect pre-tax profit of £84.6m for the year to September 2017, leading to EPS of 19p, up from £48.2m and 11.6p in FY2016.

GREENCORE (GNC)
ORD PRICE:328pMARKET VALUE:£1.36bn
TOUCH:327-328.3p12-MONTH HIGH:397pLOW: 235p
DIVIDEND YIELD:2.0%PE RATIO:28
NET ASSET VALUE:68p*NET DEBT:116%

Year to 30 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20121.1629.99.04.30
20131.2041.517.14.80
20141.2744.411.85.50
20151.3459.414.36.15
20161.4848.211.66.65
% change+11-19-19+8

Ex-div: 1 Dec

Payment: 4 Apr

*Includes intangible assets of £552m, or 133p a share