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Greencore – world’s largest sandwich maker sees profits quadruple, shares leap 20% with even more to come

The interim results from Greencore (LON:GNC), the major manufacturer of convenience food, saw a 6.4% fall in revenues to £866.1m (£925.8m), while its adjusted pre-tax profits were up 397.1% to £16.9m.

In reaction its shares leapt nearly 20% to 165.60p.

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Major Recovery

As I suggested in my article in late March this year, the group has undergone quite a reorganisation over the last few years, while rejuvenating its operating margins, with the recovery now beginning to show through with the results for the six months to end March this year.

Conveniently Tasty

Greencore is the world’s largest fresh pre-packaged sandwich maker, making nearly 800m sandwiches and other food to go items each year.

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It is not only in sandwiches that it is big, but also in other major convenience food categories, such as salads, sushi, chilled snacking, chilled ready meals, chilled soups and sauces, chilled quiche, ambient sauces and pickles and frozen Yorkshire Puddings.

Its 645 vehicles make over 10,400 ‘direct to store’ deliveries each day as it supplies all of the supermarkets in the UK, with over 1,600 of its products spanning across 20 categories.

Management Comment

Commenting upon the excellent recovery shown in the interims CEO Dalton Philips stated that:

“Greencore delivered excellent progress against its strategic priorities in the first half and continued to outperform the market in a difficult consumer spending environment.

The Group’s accelerating financial performance is very encouraging as we focus on driving profitability and returns. 

We are working with our major retail customers to develop new products and new offerings which are driving the growth of our Food to Go segment ahead of the market.

We have exited low margin business and are undertaking a range of actions to increase the returns profile of each element of the portfolio.”

My View

On 29th March I noted that after some tough remedial work in its recent efficiency drive it looks as though far better times are ahead for this group, suggesting that its shares are too cheap.

They were then just 112.90p, so the subsequent 46% rise to 165.60p over the last two months is more than pleasing.

However, I do feel that there is even more to come, especially with the group’s second half year always being its strongest in performance.

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