Food group Greencore plans a major redevelopment of its 900-acre landbank in Ireland and Britain, once its sugar production activities are wound up.
The ongoing property boom suggests Greencore will realise significant windfall profits by exploiting its portfolio, which has a book value of only €40 million.
With interim results from the group exceeding analysts' expectations, Greencore delayed notification about the formation of a new joint venture to supply the sugar market in Ireland as it finalised the text of an announcement with its partners. Official notice is expected soon.
Chief executive David Dilger said the group was legally entitled to the full 90 per cent of the €145 million EU compensation fund for the sugar sector. The assessment that the group would take a net charge of €44 million arising from its exit from sugar assumed it would receive this money, he said.
Mr Dilger said Greencore had "absolute confidence" about its legal right to the compensation, but said he could not say whether the group would get its entitlement as the matter was not in his control. The decision rests with Minister for Agriculture, Mary Coughlan, and the group's entitlement is strongly disputed by the Irish Farmers' Association and other industry interests.
In anticipation of its withdrawal from sugar, Greencore has moved in recent years to focus on convenience foods such as sandwiches and prepared meals.
The group is in the early stages of preparing area development plans in respect of its former sugar factories in Carlow and Mallow and it also wants to redevelop its 120-acre site at Littlehampton, near Gatwick airport in London, which is now leased for market gardening activities.
Mr Dilger insisted he "hadn't a clue" about the potential valuation of the property holdings and said it would not be in the group's interest to speculate. He said the intention was to add to asset value and its income stream.
However, chief financial officer Patrick Coveney said the group didn't expect to realise any proceeds this year or next.
Greencore reported a pretax loss of €11.27 million in the six months to March, but the sum included exceptional charges of €45.7 million, largely due to its withdrawal from sugar production. Excluding the exceptionals, profit before tax rose 11.7 per cent to €35.6 million on the back of a 4.4 per cent rise in revenue to €658.1 million.
Stripping out the exceptionals, adjusted earnings per share rose 2.2 per cent to 13.7 cent. An interim dividend of 5.05 cent per share was unchanged. NCB analyst Paul Meade said in a note that the results were "very positive", given profit warnings in the food sector. The market had expected a 10 per cent decline in earnings.
The convenience food unit, which will contribute 85 per cent of profits after sugar production ends, saw sales rise 8.1 per cent to €441.7 million, but a decline in operating profit margin to 6.9 per cent from 7.3 per cent meant operating profits rose 2.2 per cent to €30.3 million. Mr Dilger expects the unit to to perform well for the remainder of the year.
Stiff price competition in EU sugar markets and rising energy costs in the malt business meant operating profit fell 5.4 per cent to €11.8 million, while revenue fell 2.5 per cent to €216.4 million.
