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Writer's pictureMark Watson-Mitchell

Greencore Group – After Q3, Brokers Claim It Has The Ingredients To Become Bigger, Better And More Rewarding For Shareholders

Capitalised at just over £820m, this FTYSE-250 Dublin-based group is a leading manufacturer of convenience foods in the UK, whose products, it is a fair assumption, we have all tasted at some time or another.


Could even be repeatedly if you are consumer of sandwiches sold at any of the UK’s supermarkets and other retail outlets, or even at service stations.


I have recently commented about the group and, what I consider, to be its undervalued investment rating.


Q3 Trading Update


Yesterday the Greencore Group (LON:GNC) announced its Q3 Trading Update for the 13 weeks to 28th June.


They showed a useful corporate advance in the period and at the same time gave guidance for market analysts to up their estimates for the current year.


CEO Dalton Philips stated that:


"Q3 represents another excellent performance by the business against a tough comparative period.


Our continued progress has been delivered through ongoing impactful operational and commercial initiatives, which we are continuing to implement at pace, supporting the improved profit conversion in the quarter.


Providing fresh and healthy foods to our customers and consumers each and every day is our core purpose, and our performance has once again been supported by our outstanding operational service levels, at over 99%. 


Delivering at this level alongside ongoing business improvement is not easy, and I would like to thank my colleagues across the Group for their hard work.


While Q4 remains a seasonally important trading period, our continued strong profit conversion performance means we now expect to deliver a full year Adjusted Operating Profit of £88-90m, ahead of previous guidance and market expectations."


The Business


The group supplies all of the major supermarkets in the UK, as well as convenience and travel retail outlets, discounters, coffee shops, foodservice and other retailers.


It has strong market positions in a range of categories including sandwiches, salads, sushi, chilled snacking, chilled ready meals, chilled soups and sauces, chilled quiche, ambient sauces and pickles, and frozen Yorkshire Puddings.


Analysts View


After the Trading Update, analysts Clive Black and Darren Shirley at Shore Capital Markets declared that yesterday’s Trading Update showed yet another beat of expectations, bringing about further upgrades.


They noted that Greencore had delivered another good period of trading against a tough comparative and the firm delivered positive underlying sales growth on a superior economic base that is leading to modestly raised profit guidance for FY24.


Current year estimates to end September are for £1,799m (£1,914m) sales, with adjusted pre-tax profits of £67.0m (£55.5m), generating 10.5p (8.9p) earnings, while expecting a 3.5p (nil) dividend per share.


For the coming year the analysts look for £1,835m revenues, £74.0m profits, 11.9p earnings and a 4.0p dividend per share.


They commented that Greencore, with other mass market players, faced into a notable salad recall, which has not distorted its anticipated full year out-turn.


The analysts conclude their views stating that:


“Accordingly, a very pleasing update, one where we can once again praise Dalton Philips, CEO, and his team, for the strategic thinking and ongoing execution, which has been exemplary in recent times.


As such, Greencore's equity story has the ingredients to become bigger, better and more rewarding, for its shareholders. Well done Mr P!”


My View


The group’s shares touched 188.80p yesterday before profit-taking clipped them back to 181.80p.


This morning, they have dipped to 177.40p but are now looking healthier again at 180p, at which level I still rate the shares of the Greencore Group as being a very attractive medium-term growth investment.



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