As the boss of one of London’s most shorted stocks, you’d expect Patrick Coveney to strike a resilient tone in his presentation of Greencore’s (GNC) half-year numbers. And despite announcing a 70 basis point contraction in the adjusted operating margin – no small number for a food-to-go manufacturer – the chief executive managed to be both bullish and contrite.
“We were absolutely disappointed in the second half [of 2017] in aggregate, and with the first profit warning in a decade in March,” Mr Coveney told us. “We hated having to do that, but after digging into the business we’re confident of the progress we can make in the second half.”
In particular, investors will hope that pain in the US division is largely stymied. Shuttering the four-year-old Rhode Island facility has come at a cost of $25.8m (£19.2m), and makes up just under half of the pre-tax exceptional items booked in the period. The blow from one-off reorganisation, business exit and US ‘rationalisation’ costs would have been heavier had Greencore not benefited from $24.9m of tax credits, largely stemming from December’s corporate rate change stateside.
Mr Coveney is also confident that inflationary pressures in both the US and UK either have been or can be offset by improved productivity, contractual recovery and by passing price increases on to customers.
Jefferies expects earnings per share of 14.5p in the 12 months to September 2018, below Greencore’s guidance range for 14.7p-15.7p.
| GREENCORE (GNC) | ||||
| ORD PRICE: | 172p | MARKET VALUE: | £1.21bn | |
| TOUCH: | 171-172p | 12-MONTH HIGH: | 257p | LOW: 120p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 343 | |
| NET ASSET VALUE: | 96p* | NET DEBT: | 76% | |
| Half-year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 1.01 | 11.7 | 1.7 | 2.1 |
| 2018** | 1.24 | -18.1 | 0.3 | 2.2 |
| % change | +23 | - | -82 | +5 |
| Ex-div: | 30 Aug | |||
| Payment: | 04 Oct | |||
| *Includes intangible assets of £1.04bn, or 147p a share. **26 weeks to 30 Mar 2018 | ||||
