Shares fall 9% on US expansion U-turn
Analysts see Greencore shares suffering further on investor concern over its growth prospects in the UK.
The group’s share price plunged nearly 9%, yesterday, as investors reacted badly to the Irish sandwich maker’s decision to sell its US business and revert to a sole focus on the UK market.
Greencore hopes to complete the $1.1bn (€950m) sale of its US business to Hearthside Food Solutions next month.
The money will partially be used to pay off debt, but Greencore also plans to return cash to shareholders via a £509m (€578m) special dividend.
Greencore is seeing around 10% growth in its main ‘food-to-go’ offering in the UK and has long-term sole supplier status with a number of big-name food retailers.
However, Mr McKinley said the group will need further bolt-on acquisitions and/or the introduction of new product concepts to complement its food-to-go offering in Britain.
In the latter regard, he said Greencore may put some of the market lessons it learnt in the US to work in its UK operations.
“Investors are likely to be concerned as to how much more they can grow in the UK, given now that this is the core focus once again,” said Mr McKinley.
Greencore chief Patrick Coveney expressed confidence in delivering further growth and returns in what he called a “dynamic” UK market.
“The proposed transaction would enhance our strategic and financial flexibility, which would allow us to build on our industry-leading position in our core UK market whilst also taking advantage of emerging organic and inorganic growth opportunities,” he said.
