In contrast to the many producers shouting about their home-made food with locally sourced ingredients grown in their back garden, Greencore is the sandwich maker unashamed of its heft.
Proudly boasting of being “the world’s largest fresh pre-packaged sandwichmaker” (although the “pre” is an unnecessary ingredient), the Dublin-based firm makes 795 million sarnies, pies, soups, quiches and takeaway items for big supermarkets every year. Unsurprisingly, given its focus on “to-go” foods, Greencore suffered when we stopped “going” during lockdown: shares halved from £2.60 between January 2020 and the Covid explosion in March that year.
Since then, the stock has fallen further, languishing at 60p at the end of 2022, and today changing hands at 80p.
Greencore is now trading at just eight times forward earnings, compared to a five-year average price to earnings ratio of 12. Why? Well, on top of the industry being hit by workers’ office exodus, inflation hurt both the firm’s numbers and its appeal. With 23 factories in 16 locations, higher wage and energy bills have hit Greencore alongside the more obvious 19 per cent surge in food prices.
Despite this, Greencore seems undervalued. Commodity prices are easing. And Britons, who were eating £8 billion-worth of sandwiches before the pandemic, are back to 85 per cent of that, according to the British Sandwich & Food To Go Association. Employers’ campaign to get more staff back in offices is succeeding and research by grocery market analyst IGD suggests homeworkers, too, are splashing out on easy lunches. It predicts the overall food-to-go market will be worth £19.8 billion by the end of this year — 8 per cent higher than in 2019.
Greencore, run by former Morrisons boss Dalton Philips, makes almost £2 billion-worth of convenience food every year. At interim results last month, it posted a 20 per cent rise in first-half revenues to £925.8 million. Much was thanks to price rises but volumes were up 5 per cent, too. Inflation plus a £4 million rise in finance costs due to interest rate hikes saw operating profit halve to £3.6 million. But the trend is on the up.
Net debt was trimmed by £3.5 million in the half-year, to about £269 million — and it’s in the middle of a £50 million capital return and £10 million share buyback scheme. Clive Black, analyst at house broker Shore Capital, anticipates a “strong bounce back in profitability.” Sarnies might not improve with age, but Greencore should see tasty growth over the next few years: buy.
