Convenience food group Greencore today (31 July) reported higher quarterly sales, a performance cheered by analysts despite growth slowing a touch amid challenging conditions in the UK grocery sector.
Liam Igoe, food and beverage analyst, Goodbody Capital Markets
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“Growth in convenience foods remained strong into Q3, with growth from Greencore’s pre-US acquisition at +6.6% (mostly volume) while Uniq recorded growth of 7.3% (mostly price / mix) in the period (combined +6.8%). As expected, this is lower than the 9.7% attained in H1 in convenience foods since the effect of much of last year’s new business wins was front loaded into H112.
“We are updating our EPS forecasts to allow for the June acquisition of Schau by adding a modest 0.1p and 0.2p to FY13 and FY14 respectively. There is no change to our top-of-the-market forecast for FY12 EPS of 12.6p.”
Nicola Mallard, Investec
“Greencore’s Q3 trading update continues to show very good progress, despite more challenging grocery headwinds, with organic growth of 6.7%. Greencore has continued to strongly outperform the wider grocery market, delivering organic growth of 6.7% in its Q3, and this was despite some dampening effect from the climate in a literal and economic sense.
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By GlobalData“The group completed the MarketFare acquisition in April and this boosted reported growth in convenience foods to 11.5%. This deal along with the purchase of Schau (which will be reflected in Q4) and recent new business wins, should make a considerable difference to the outlook of the US operation.
“The group’s outperformance to date is due in part to new business wins secured late in FY11. Greencore will now start to lap tougher comparatives but we still expect it to report organic progress in the region of 5% in Q4. Hence, the group looks well on track to match our forecasts, which show EPS growth of 17%. Few companies will be matching this in FMCG.”
Shore Capital analyst Clive Black
“Leading prepared food manufacturer Greencore has issued a strong statement today for the 13 weeks to the 29th June and the combined year-to-date (YTD) performance, in our view. Shore Capital had harboured reservations that the very inclement weather in the UK and the tough trading conditions that the British supermarkets are demonstrably experiencing may have negatively impacted Greencore’s trading momentum more than it has done so.
“As such, whilst there has been an understandable deceleration in trading momentum in Q3, that the convenience business has delivered 6.8% underlying sales growth in its continuing business is highly commendable to our minds; that is assuming that the acquired Uniq business was part of the group for a full comparative period.
“In the USA, Greencore is clearly very pleased with the MarketFare acquisition and it states that the H.C.Schau purchase integration work is underway (USA annualised sales are expected to be circa US$230m from the 2012/13 financial year). Management is also able to announce a ‘significant’ new contract award Stateside, which is clearly good news. We further believe that a major programme of simplification work is underway at NewberyFoods and On a Roll in the USA to reduce SKUs and so make for better unit productivity. As such, management is seemingly more committed to the USA stating that: ‘the group now has a business of scale in the USA food-to-go market’.”
