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Greencore (GNC) says it will be “more resilient” to Brexit after exiting the US, following the £817m sale of its US arm to Hearthside Food Solutions.
The own-label sandwich producer dismissed accusations its US expansion had been a failure, as it exited North America less than two years after committing to the region with the £594m acquisition of Peacock Foods.
CEO Patrick Coveney said Greencore would be “strengthened” by the sale, but with the share price falling 5% to 198p this week, Jefferies analyst Martin Deboo said the move would have left “red faces” in Greencore’s boardroom.
“The US division disposal isn’t entirely surprising given how it has struggled for several years,” added AJ Bell analyst Russ Mould.
After the Brexit referendum, Greencore more than doubled the size of its US operations with the acquisition of East Coast-based ready meals and food to go specialist Peacock for £594m, a move that was seen at the time as an attempt to tap into growth markets while limiting its exposure to the UK.
But the loss of a contract with Starbucks among others, and slower-than-expected new business wins, led to a company profit warning in March 2018, which saw Greencore lose a third of its share value overnight, forcing Coveney to spend half his time in the US, running the business directly.
Coveney said the sale was driven by a desire to “crystallise” value for shareholders, instead of hoping for growth amid Brexit uncertainty.
Read the full story on The Grocer’s finance page later today
Morning update
French drinks giant Remy Cointreau delivered an acceleration in sales in the second quarter despite fears the slowing Chinese economy would impact sales.
Better-than-expected cognac sales in China helped to drive the spirit group to 9.1% organic growth in the three months to September, beating analysts’ expectations of 8.3%.
Sales of Remy Martin cognac jumped 12% in Asia during the period, alongside “solid sales in the US”.
The company’s liqueurs and spirits division grew more modestly, up 0.8% for the period, helping the group to €329m total sales in the quarter.
Brands St Remy and Mount Gay both recorded a decline in volumes, but saw significant increases in value per case.
The distiller was also boosted by the strong performance of The Botanist gin, and a “remarkable performance” in whisky, driven by its Scottish single malts including Port Charlotte.
Elsewhere, Whole Earth owner Wessanen saw sales slip 2% to €144m in the third quarter after private label losses.
Warm weather over the summer also heavily impacted tea sales across Europe, including those of Clipper Tea, Alter Eco and Zonnatura brands.
The company said it expects growth for the year to be at the lower end of its guidance after faltering UK sales.
“One main reason for the unsatisfactory own brands growth in the quarter was an accelerated decline of our brands in the UK due to grocery listings we previously lost and lack of promotional support from the trade,” the supplier said in a trading update.
The FTSE 100 has shrugged off global equity weakness to rebound this morning, jumping 0.2% to 7,043p.
This morning’s early risers include Kerry group (KYGA), up 1.3% to 90.5p, Tesco (TSCO), up 1% to 211.1p, and Unilever (ULVR), up 0.8% to 4,017p.
The early fallers include Stock spirit group (STCK), down 2.7% to 198p, Majestic Wine (WINE), down 2.25 to 396p, and Premier Foods, down 2% to 39.1p.
Yesterday in the city
The FTSE 100 declined once more, as a Wall Street sell off dragged it down at the end of the day’s trading - the index finished the day down 0.4% to 7,027pts.
Unilever (ULVR) dropped 0.9% to 3,986.5p yesterday, after announcing an acceleration in sales growth boosted by warm weather and a recovery in Brazil.
Other fallers over the day’s trading included Smurfit Kappa Group (SKG), down 2.7% to 2,544p, Kerry Group (KYGA), down 2.1% to 89.3p, and Just Eat (JE.), down 25 to 611.5p.
Hilton Food group climbed 1.5% to 928p after it agreed to buy a 50% share in Dutch vegetarian food producer Dalco Food.
Other climbers included Dominos pizza group (DOM), up 5.4% to 274.9p, McColl’s (MCLS), up 4% to 130p, Tate & Lyle (TATE), up 3.1% to 657.4p, and Diageo (DGE), up 2.2% to 2,624.5p.
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