Greencore has reported a 17 cent increase in pre-tax profits to £25.4 million for the half-year ended March 27th, although much of the increase was due to the EU fine of £6.9 million in the earlier year.
Excluding this, operating profits were up just 4 per cent to £25.8 million, due entirely to an improved performance in its foods division. The company said it is confident that profits for the second half of the year will show an improvement over the same period in 1997, due to a better currency climate and significant cost reductions. A major cost-cutting programme is also expected to lead to improved returns from its new Pauls Malts acquisition in the UK.
Group turnover increased by 23 per cent increased to £265 million from £216 million, though margins fell to 9.8 per cent from 11.5 per cent.
Earnings per share rose 18 per cent to 11.1p. An interim dividend of 2.85p is to be paid, an increase of 10 per cent and shareholders are also to receive details of a dividend reinvestment scheme, which will allow them to opt to reinvest dividends to buy more shares.
In the first half, the sugar and agri-business divisions saw their profits fall, due to falling sales and much tighter profit margins, but the other foods division improved strongly.
Greencore expects cost savings of between £7 or £8 million at Pauls Malt, which it acquired in April in a major expansion of its international operations.
The cost savings at Pauls Malt will mainly come through a reduction in manning levels, said chief executive, Mr David Dilger yesterday. He said the cost base at the company is "way too high" and he said the company is currently seeking to agree redundancy with 100 workers. He said that after this is achieved, a single management team for Greencore's overall malting business will be put in place.
Meanwhile a £5 investment in Odlums will mainly be focused on improving its mill, which is over 30 years old, said Mr Dilger. He added that £5 million will be spent over 18 months, with the possibility of more later on.
In the first half of this year, the operating profit of Greencore's sugar division fell by 13.4 per cent to £13 from £15 million, as sales dropped 9.6 per cent from £77.7 million to £70.3 million. The fall in sales was principally due to the absence of lower margin sugar sales to world markets and lower shipments to the UK, both of which are likely to improve in the second half, while currency changes should also help in the second half.
Mr Dilger said continuing cost savings will be made at its two sugar plants in Carlow and Mallow, Co Cork. He would not elaborate further and said the cost savings would not be directed at reducing manning levels.
Operating profits in its agribusiness section were down 13.6 per cent from £3.5 million to £3 million, on sales down 11.5 per cent to £54.1 million.
The fall in sales in this area was due to "generally difficult trading conditions with pressure on farm incomes and continuing difficulties in the beef sector," said chairman, Mr Bernie Cahill.
What the company calls its "other food" division performed best for the half year, seeing its operating profits rise 55 per cent from £6.3 million to £9.8 million, on sales up 81.7 per cent to £140.5 million. Its non-core food interests now account for 40 per cent of overall operating profit, group chief financial officer Mr Kevin O'Sullivan pointed out.
The contribution from associate companies fell significantly, down to £1.1 million from £3.3 million. This was mainly caused by the losses incurred by Greencore's American sugar associate, Imperial Holly which acquired Savannah Foods during the period.
This meant Greencore's shareholding was reduced from 26.9 per cent to 14.1 per cent. Imperial Holly had to bear costs relating to rationalisation and severe weather conditions in California where a large portion of its operations are based, which will affect profits for the year.
