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News : International Last Updated: Nov 27, 2012 - 10:15 AM


Markets: Greencore says 2012 was 'breakthrough year' after Uniq acquisition boosted results
By Finfacts Team
Nov 27, 2012 - 10:10 AM

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Christine Lagarde, managing director of the IMF, speaking at a press conference in Brussels, early Tuesday, Nov 27, 2012, following a new Eurozone-IMF deal on Greece.

Greencore today reported group operating profits of £70.7m for the year to September 30, up 37.3% on the previous year. Revenues jumped  44.5% to £1.16bn from £804.2m, boosted by the acquisition of Uniq  - - a UK sandwich and pudding maker

The company's pre-tax profits rose to €28.86m from €11.17m.

Patrick Coveney, CEO  said: "2012 has been a breakthrough year for Greencore.  The acquisition of Uniq has reshaped the performance, scale, capability and long-term prospects of our Group, with all elements of the targeted benefits now delivered.  More broadly, our strategy, enlarged portfolio and team are working well as we continue to build out industry leading convenience food businesses in the UK and increasingly in the US.  The Group delivered revenue growth of 45%, with like-for-like Convenience Foods revenues up 7.4% despite challenging market conditions.  Operating profits, adjusted earnings and EPS were up 37%, 71% and 22% respectively and strong after tax cash flows have reduced leverage to below 2.5 times, even after acquisition activity.  Despite increasingly challenging consumer conditions, little industry growth, and increasing levels of retailer competition, Greencore remains well positioned to deliver further progress in FY13 and beyond."

Results detail

Liam Igoe of Goodbody comments: Greencore’s FY12 results were better than we had forecast, with outperformance at the operating line driven by the core Convenience Foods businesses, while Ingredients & Property was slightly behind due to less property transactions.

The UK Convenience Foods business delivered 7.4% lfl revenue growth, comprising 7.7% from the Greencore pre-Uniq operations (mainly volume driven) and 6.7% from the Uniq operation (mainly price / mix driven). Sales growth was strong in the two largest categories. Within the core UK Food to Go category, sales were up 9.8% (versus 5.4% for the overall market) while Chilled Ready Meals increased by 7.7% (versus overall market growth of 10.1%).

The biggest variance in the results statement was net debt of £258m coming in £30m (or 10%) lower than we had forecast. The main reason for this was that Uniq’s working capital was £23m better than forecast, mainly with the payables line changing to Greencore terms, though Uniq’s receivables and inventories were also reduced.

The outlook statement anticipates 'further progress' in FY13 and beyond despite 'challenging' market conditions in the core UK grocery market which is not helped by the re-emergence of input cost inflation. At first glance, we anticipate that eps growth will be c.7-8% above the FY12 outcome (at 13.8p, versus our current forecast of 14.2p). On a PER of 6.6x and forecast debt/ebitda falling to c2.4x, its valuation remains undemanding."

Justin Doyle, Investec Bank Ireland, said today:

1.   At last, some agreement on the Greek debt situation.

2.    The Eurogroup decided to reduce interest payments on Greek debt, extend maturities on bilateral and EFSF loans by 15 years and defer interest payments of Greece on EFSF loans by 10 years. There was also a commitment by countries to pass on any income from the SMP portfolio (ECB profits from holdings of Greek debt) to Greece.

3.   There was also new, rather ambitious debt to GDP ratio targets set for the country: 175% by 2016, 124% by 2020 and 110% by 2022.

4.   All in all this ensures that Greece will get its €44bn it needs to survive in the short term. They will get €35bn in December while just over €9bn will be disbursed in three tranches in Q1 2013. The Troika is hoping to finalise the payment by Dec 13th, one day before Greece's next major debt redemption of €5.4bn.

5.  There has been a rather muted reaction to the news with Asian and European equity markets closing and opening slightly in the black and the euro coming off its highs of close to $1.30 and £0.81

Economic View: Bond buyback may still be a sticking point in Greek deal; Dermot O'Leary comments - - "The deal finally hammered out by euro area finance ministers and the IMF last night contains a series of carrots and sticks. It will get an immediate reduction of 1% on the bilateral loans in its first programme, a 0.1% reduction in the EFSF loan guarantees, a deferral of interest and a 15 year extension on these loans and a reimbursement of profits made by the ECB on its Securities Markets Programme. In terms of targets, the IMF agreed to relax its insistence of a 120% of GDP debt level in 2020. Debt is now assumed to fall to just 124% of GDP by 2020, but will apparently fall to below 110% by 2022.

These measures should be relatively straightforward to implement. The final important element of the Greek plan – debt buy-backs – may not. The deal last night includes buy-backs on Greek sovereign debt that is expected to reduce the debt ratio by c.10% of GDP. It is reported that this is done at a price of 35c which is equivalent to the closing prices on Greek debt on Friday 23rd November. IMF Managing Director, Christine Lagarde, made it very clear last night that the disbursement of IMF funds would be dependent on the successful implementation of this buyback. We know from the Greek restructuring last year that these types of operations tend to drag and the December 12th deadline (for a December 13th disbursement) may prove to be ambitious. There is also the issue of market participation and the extent to which there will be holdouts to consider.

This issue may prove to be a sticking point over the coming weeks but markets are likely to welcome the deal on Greece today. With maturity extension and the recycling in profits from SMP there are some important precedents set for Ireland and Portugal if their programmes look like falling short in the coming years. That’s a topic for another day."

A new deal for Greece, Ireland next? Conall MacCoille of Davy comments - - "Overnight, EU leaders have agreed further interest rate cuts and term extensions for Greece's borrowing from EU funds. The interest rate on the Greek loan facility is being cut by 1% and the term of EFSF loans is being extended by 15 years, with a deferral of interest payments on EFSF loans of ten years. The euro-group of finance ministers has also approved a debt buy-back scheme and agreed to return profits relating to the ECB's SMP purchases of debt back to Greece.

However, the measures agreed last night do not include official sector involvement in a second round of debt-restructuring for Greece. The agreed measures are expected to reduce Greece's debt/GDP ratio to 124% by 2020, down from the 144% previously expected. The Eurogroup expects the debt/GDP ratio to fall to 110% by 2022, and indicated that further interest rate cuts may be considered to ensure a credible decline in the debt/GDP ratio. The next €43.7bn tranche of EU funds will be disbursed to Greece by December 13th. IMF managing director, Christine Lagarde, indicated that once debt buy-backs have been completed, the IMF will also be likely to participate in funding Greece. However, it will be interesting to see if the IMF now judges Greece's debt as sustainable.

The developments overnight must surely strengthen Ireland's hand in negotiations with the EU, following the commitments from EU leaders to consider additional measures to help Ireland's programme. Thus far, the negotiations appear to have focused on extending the term of Ireland's borrowing from the ECB, via IBRC bank, and potential ESM capital injections into Irish banks. However, with Greece securing further interest rate cuts and term extensions on its borrowing from the EU, perhaps changes to the terms of Ireland's borrowing from the EU could also be considered."

AIB Bank says "it remains well capitalised"; Claims "continued evidence of stabilisation"

Eurozone and IMF agree new deal terms for Greece

US Markets

In New York Monday, the Dow fell 42 points or 0.33% to 12,967.

The S&P 500 slid 0.20% and the Nasdaq added 0.33%.

Asia Markets

The MSCI Asia Pacific Index rose 0.5% Tuesday.

Japan's Nikkei 225 closed up 0.37%; China's Shanghai Composite Index fell 1.30%; South Korea's Kospi added 0.87%; Australia's S&P/ASX 200 advanced 0.74% and in Mumbai, the Bombay Stock Exchange's Sensex 30 climbed 1.63%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.49% in morning trading Tuesday.

The ISEQ  has risen 0.20%.

Greencore is up 3.87% in London. AIB Bank has a tiny trading float.

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.2964 and at £0.8085.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

On Thursday, July 15, 2010, the index fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Monday this week the BDI closed up  4 points or 0.37% at 1,094 - -  the BDI is down 37.05% in 2012.

Freighter Oversupply Weighs on Shipowners and Banks - - Jan 26, 2012: The New York Times says vessels bought during the global commodity boom are only now being delivered, putting pressure on the European banks that financed the purchases.

The skyscrapers and immaculate beaches of Singapore's seaport look out on one of the world’s largest parking lots: mile after mile of empty cargo ships, as far as the eye can see.

Similar fleets bob at anchor, with empty cargo holds, off the coasts of southeast Malaysia and Hong Kong. And dozens of newly built ships float empty near the giant shipyards of South Korea and China, their owners from all over the world reluctant to accept delivery during one of the worst markets ever for the global shipping industry.

As recently as six weeks ago large freighters that can carry bulk commodities like iron ore or grain were fetching charter rates of $15,000 a day. Now, brokers and owners say, the going rate is $6,000 a day. If any customers can even be found.

Crude oil for January 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $88.13 up 39 cents from Monday's close. In London, Brent for January delivery is trading on the International Commodities Exchange at $111.17. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is at $23 - - The Globe and Mail says that for the past 10 months, Canadian producers - - whose prices are tied to WTI - - have been taking steep discounts for their oil compared with international crude prices that are benchmarked against North Sea Brent, which can be shipped more readily. In the past, WTI tended to trade at a small premium to Brent, because it is easier to refine.

That spread hit a peak of $28.08 (US) on Oct. 14, but has fallen dramatically since then. After plans for more pipeline capacity at Cushing, Oklahoma, the differential narrowed.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,748.80, down 60 cents from Friday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 06, 2011.

Check out our subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

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