Will Greencore Group plc surge higher after today’s results?

Does Greencore Group plc (LON:GNC) (GNC.L) offer investment potential?


Convenience food manufacturer Greencore Group plc (LON:GNC) (GNC.L) has recorded a 4% share price fall after it released full-year results today.

Its adjusted EPS of 15.1p for the full year is in line with previous guidance. It recorded a rise in revenue of 4.2%, with adjusted operating profit moving 1.7% higher. This was weighted towards the second half of the year, while it has been able to reduce net debt by £18.1 million so that it now stands at £501.1 million.

Following the period end, the company agreed to sell its US business after receiving a compelling offer. It plans to return £509 million of capital to shareholders by way of a tender offer. It also believes it is well-placed to capitalise on its industry-leading position in its core UK market.

Greencore has clearly experienced a period of significant change in recent months. It will now shift its focus to the UK following the sale of its US operations. This makes it more reliant on the UK at a time when the prospects for the economy are relatively uncertain in my view. Brexit seems to be causing consumers to spend less, and this situation could continue over future months in my opinion.

At the same time, though, the company appears to be experiencing relatively favourable trading conditions in the UK. It also believes that it has the scale, depth and position within key food categories to deliver improving financial performance in future.

With Greencore forecast to post a rise in EPS of 8% in the current financial year, it seems to have relatively bright prospects in my view. A P/E ratio of around 11 suggests to me that it may offer a margin of safety compared to some of its sector peers. Therefore, while it is a period of change and uncertainty for the business, I’m optimistic about its long-term prospects.

About Robert Stephens 5151 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email [email protected] or use one of the other contact methods available on the 'Contact Us' page