Investec ups Greencore to 'buy' from 'add'

20th May 2014 11:52

Greencore, the manufacturer of convenience foods, delivered a 'good' first half result, with a strong 26 per cent increase in like-for-like sales at its Convenience Foods unit in the US, and there is increasing visibility on growth next year, Investec analyst Nicola Millard told analysts in a research note. In particular, there was an improvement in margins at the Foods unit, including some improvement from low margin UK businesses. Nonetheless, comparatives for revenue growth will get tougher as the year progresses, especially in the fourth quarter, depending on the weather. The increased visibility is a result from the US developments already announced but also of a new business win at Northampton, starting next year. As well, the group will extending its food-to-go site at a cost of £30m. Yet that will not increase expectations for net debt given that it will be funded asset disposals scheduled for the second half of the year. On the basis of all of the above the broker has lifted its forecast for profit before tax (PBT) this year to £66.2m from £65.5m and for next year to £75.2m to £76.8m.As a result of the aforementioned Investec increased its price-to-earnings ratio -based price target to 278p from 273p and, given recent weakness in the share price, upgraded the stock to 'buy' from 'add'. AB