Greencore has announced a major cash investment in its food-to-go business after posting an 8.2% rise in first-half sales.
The company plans to inject £30m into its sandwich production facility in Northampton to service a major new contract and underpin future growth is the sector. The investment will enable Greencore to open a second facility at the site, more than doubling capacity.
The move reflects Greencore’s focus on food-to-go “in order to capitalise on favourable, long-term consumer and channel trends”, the company said.
As part of this concentration on core aspects of the business, the company announced today it has agreed to sell its foodservice desserts business, Ministry of Cake, for £8m in cash and a further deferred consideration of up to £3m.
It is understood the business has been sold to Ministry of Cake’s existing management team led by managing director Chris Ormrod and backed by private equity firm Lloyds Development Capital.
Greencore reported a rise in overall first-half revenues of 8.2% to £619.8m, representing 9.3% growth on a like-for-like basis. Operating profit for the 26 weeks to 28 March rose by 14% to £37.2m.
The strong performance was underpinned by continued growth in its convenience foods division, which saw revenues increase by 8.4%. Within the convenience business, its sandwich category grew by 12% and the broader food-to-go segment by 9.4%.
Greencore also made considerable progress its US business, which is also largely focussed on food-to-go products.
US sales grew by 25.2% (25.7% on a like-for-like basis) primarily driven by new business which came online last year and solid performance with its largest US customer. Greencore previously announced a £6m investment in its Jacksonville facility manufacturing frozen food-to-go products after buying US frozen foods specialist Lettieri’s in February.
Panmure Gordon analyst Damian McNeela welcomed the “pleasing” figures and saw both the Northampton investment and sale of Ministry of Cake as “positive”.
“We think the company remains well positioned to deliver further growth,” McNeela wrote. “Given the growth prospects and strong cash generation we believe the current valuation remains attractive.”
Greencore announced a rise of 18.6% in adjusted earnings per share to 7p and 2.2p per share interim dividend – an increase of 15.8% from the same period in 2013.
Greencore’s share price rose by 7.7% in early trading to 266p.
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