Shares in Greencore (GNC) have slumped by almost 9% today after the sandwich maker tried to reassure investors over the continued fall in value of the stock during 2017.
The listed group said in a statement to the stock exchange this morning that its US business was on track and there was no change to the outlook for the current financial year.
The share price is down 13% this week after another fall of 8.9% to 197p today. Greencore’s market cap is 23% lower than at the start of 2017, with the group valued at more than £300m less at £1.3bn.
It means the company is now trading on a price/earnings multiple of about 12x, which is a 40% discount to the sector, according to analysts at Societe Generale.
“The board of Greencore Group notes the recent weakness in its share price,” the statement from the company said.
“The group is not aware of any developments since the release of its third quarter trading statement on July 27 that changes the outlook contained in that statement. As outlined in that statement, the integration of our US business is on track and we continue to be encouraged by the pipeline of commercial opportunities being explored with existing and new customers.”
Shares also fell 15% in 2016 as the City reacted warily to the $747.5m US acquisition of Peacock Foods in December, with worries about competition from the likes of Tyson Foods.
Greencore added: “The group notes there has been some level of churn in the legacy retail part of the US business. Specifically, it has decided to refocus its Jacksonville, Florida, site on fresh product offerings and will withdraw from current frozen product production on that site.
“This change is being managed seamlessly with the relevant customers and the board anticipates that the impact on profitability will be minimal.”
Starbucks was taking frozen products from the site but the agreement, worth about £70m or 2.5% of group sales, has now ended, although the fresh business with the coffee chain is unaffected.
Peel Hunt head of research Charles Hall said: “We will be reducing our sales forecasts for the loss of business, but not our profit forecasts. Clearly, it is unhelpful to lose volume with a key customer; however, this is in a volatile category that had not delivered a material bottom line contribution. It also dents management reputation given all the investment in the US.
“However, in group terms, the loss of this contract is a minor item. We reiterate our buy recommendation as we expect the overall business to deliver strong growth as the benefits of recent investments in the UK and the Peacock acquisition come through.”
In July, Greencore reported soaring growth in the UK and US in the third quarter to 30 June, with revenues up 77% to £636.5m. In the US, sales rose almost 400% to £265.9m thanks to the Peacock deal.
However, Greencore warned in its half-year results in May that higher raw material and wages were hitting the bottom line, with pre-tax profits falling 44% to £20.8m – although some of that stemmed from costs associated with the Peacocks deal. The group said it was more exposed to currency fluctuations in the pound and the dollar as a result of its increased presence in the US.
Greencore will issue its full-year trading update on 28 November.