Harvesting of Uniq acquisition and focus on core business will deliver for Greencore, analysts

By Jane Byrne

- Last updated on GMT

As Greencore reveals progress in its plans to switch from euro to sterling for its reporting currency, analysts remain upbeat about the potential of the group’s core business and synergies arising out of the Uniq takeover.

The food group today issued a statement outlining the final process for its transfer from euro to sterling denomination. Greencore has changed its reporting currency from euros to sterling to avoid unnecessary currency distortions on what is predominantly a sterling business.

In a recent note, Nicola Mallard at Investec estimates that the company should now be in for a period of stability as it “digests Uniq and delivers the promised synergies” ​and that Greencore should benefit from an increased focus on its core business.

“The fundamentals are sound - solid top line growth in a difficult climate and stable (and above peer) margins,”​ added the note.

She points out that there has been considerable news around Greencore in the past year - its attempt to buy Northern Foods, the subsequent successful acquisition of Uniq and finally the

private equity approach which eventually came to nothing - all of which have perhaps served to detract the market from the underlying performance of the business.

In light of Greencore’s pending Q1 trading report, she said: “We expect revenues to continue to show solid growth, despite the lacklustre trade reported by UK grocers, supported by share gains and involvement in faster growing sectors of the convenience food market.”

When sister site Food Manufacture interviewed Greencore chief executive Patrick Coveney late last year, he emphasised the importance of him not taking his eye off the ball of the day-to-day business. “As a business, we are only as good as the delivery we have for our customers every day,”​ said Coveney.

Clive Black, analyst at Shore Capital, in a note on the stock today, also rated Greencore, citing critical factors such as its strong network of prepared food plants in the UK, the upside still to be harvested from its acquisition of Uniq and scope for “an additional medium-term stream of earnings to be created in the US.”

Back in January, he said Greencore’s share price warranted a higher value saying: “We believe Greencore is significantly undervalued, with a 2012 price earnings ratio at 4.9 times, an earnings before interest, taxes, depreciation and amortisation of 4.9 times and a dividend yield of 8.2%.”

He added: “This is more akin to a business in distress rather than one that, in our view, delivers differentiating value-added products to its customers and is in the early stages of improving both profitability and, importantly, cash generation.”

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