Twenty years of woes for Greencore shareholders
Greencore has recently de-listed from the Irish Stock Exchange and now plans on joining the British FTSE all share and small cap indices. It is the latest twist in a turbulent 20 years for the company, its shareholders and associated farmers alike. Irish Farmers Journal business editor Brian Leslie reviews the company's performance
Greencore was established in 1991, after the Government sold a 55% share in the nationalised Irish Sugar company.
The IPO saw the company's share price open at €1.46 but, today, 20 years later, the share price stands at just 64c.
The privatisation was fully completed in 1993, with the Government maintaining a 'Golden Share' and the company quickly got on the acquisition trail buying the US sugar refiner Imperial Holly in 1996 and acquiring Hazlewood in 2001. But the much-hyped privatisation and the subsequent frenetic acquisitions, policy did not live up to the expectations of its promoters as creating shareholder value has certainly not been Greencore's leading suit.
Share price comparisons may be unfair, considering rights issues and acquisitions involving Greencore over the past two decades, but it is interesting to compare the company's shareholder performance with the likes of the Kerry Group.
Such a comparison is illuminating. As can be seen from Figures 1 and 2, Kerry has continued to generate shareholder value since 1991, recording an increase of over €4.4bn in this period.
Greencore, on the other hand, was valued at €253m back in 1991. It is now just worth €202m today.
Successive Greeencore management teams have clearly failed to generate shareholder value, despite almost continuous corporate activity (acquisitions and disposals) over the years — an activity which most certainly delighted its expensive corporate advisers.
Since 2000, Greencore shareholders have seen the value of their holding fall by over 60%. Even when dividends are factored in, shareholders still witnessed a fall of over 30% in the value of their shares.
The company has steadily disposed of its agri-businesses, some of which were high margin 'cash cows' like Greencore Malt. They have continuously moved into the chilled/fresh convenience foods business, but the results for shareholders have been far from impressive. Kerry could easily acquire Greencore to complement its British consumer foods business, but it clearly has no interest in Greencore, which tells its own story.
Greencore has ventured into most parts of Irish agri-business over the years. The Irish Sugar Company, Grain/Malt, Armer Salmon, Erin Foods, Grassland Fertilisers, Drummonds and Interchem were once part of Greencore's portfolio.
But, today, its involvement within the agri-business arena is limited to Premier Molasses, which imports and distributes cane and beet molasses for animal feed through its facilities at Foynes and Ringaskiddy and its stake in United Molasses Ireland, which it owns in association with Tate and Lyle Plc.
Ninety per cent of Greencore's business activities and its 10,000 staff are involved in the manufacture of convenience foods, predominantly for the British market.
It also serves the Irish and US market from its 19 manufacturing sites (Figure 4).
The appointment of Patrick Coveney as Greencore CEO at the age of 37,was seen as inspiring but the shareholder value simply continued to remain static — some analysts would say dismal.
On reviewing the various acquisitions and disposals over the past 20 years, Greencore's strategic direction was unclear until recent years. It has struggled to find a market which it could dominate and it failed to grow profits and, most critically, shareholder value.
Greencore's concentration on the largely retailer dominated convenience food sector (accounting for 90% of sales now) has failed to convince the markets, as has their recent acquisition, i.e. Uniq.
On the positive side, its debt levels have fallen in recent years. Cash generation appears reasonably robust and with a fairly solid dividend cover.
However, the question remains, can Greencore finally break its dismal track record when it comes to generating shareholder value?