Greencore Share Discussion Threads

[richtea1701] 21/5/2014 17:27

Think we will see £3 shortly

[jungle jim] 21/5/2014 17:08

It's on the South East corner or Ireland, sir.

Sorry, I'll get me coat...

[richtea1701] 21/5/2014 16:16

Where's Wexford Boy

[richtea1701] 20/5/2014 13:52

Snagged on the school run Manics. Very happy to watch as got a fair few thousand of these from 90 upwards

[11023154] 20/5/2014 11:24

This business would be within Peter Lynch's criteria. Consistent growth. Great stuff.

[manics] 20/5/2014 10:35

Broker Forecasts ‏@BrokerForecasts
Investec has upgraded Greencore Group to Buy with a price target of 278.00p

[manics] 20/5/2014 08:29

Hope you grabbed a nice price Rich.

[richtea1701] 20/5/2014 07:24

Topping up first thing.

[manics] 20/5/2014 07:22

Con-call / webcast 08:30

[manics] 20/5/2014 07:21

If they can maintain this growth in EPS during HY2 then you're looking at 17.15 for this FY, a forward PE of just 14 for a company growing investing and expanding at this decent pace.

Cheap.

[richtea1701] 20/5/2014 07:15

Tidy numbers for a dodgy sandwich maker!

[manics] 20/5/2014 07:03

Looking good.

[manics] 19/5/2014 17:32

Bitter that I had to add 0.0000000000000000000000000000000004% to the accumulative RSI that I may suffer in old age to scroll down past a post that opens by admitting it's already got GNC 500% wrong.

[tigers1075] 19/5/2014 17:23

Someone sounds bitter

[manics] 19/5/2014 07:15

/startreading

Company: Greencore Group
Prior Post(s): 2012 & 2013
Ticker: GNC:LN
Price: GBP 261p

Aah, Greencore – my bete noire, my dodgy egg sandwich... How astonishing & ridiculous is it to note GNC's quintupled since my first TGISVP review a little over two years ago.

/stopreading

[richtea1701] 19/5/2014 07:11

Don't think they just make sandwiches ;) seminal work.

[wexboy] 19/5/2014 05:41

Company: Greencore Group

Prior Post(s): 2012 & 2013

Ticker: GNC:LN

Price: GBP 261p

Aah, Greencore – my bete noire, my dodgy egg sandwich... How astonishing & ridiculous is it to note GNC's quintupled since my first TGISVP review a little over two years ago. Can selling sandwiches to supermarkets really be that exciting?! I think bloody not... FY-2013 was virtually acquisition-free for Greencore, so 3.0% revenue growth's probably fairly representative of its actual growth potential. [And all this growth came from the US - the UK, Greencore's main market, was basically stagnant]. Granted, operating profit increased 8.1%, and adjusted EPS by 13.3% – quite respectable, but the bottom-line won't sustain this level of out-performance with that kind of top-line growth. And the company's tax rate is now an astonishing 1% (due to the utilization of Uniq tax losses) – a reversion to a more normal tax rate, in due course, will prove an enormous headwind.

The other big problems here are poor cash flow & excessive leverage. Plus the company's recurring exceptional (?!) expenses, of course – noting the relentless quest for lower unit costs, coupled with the usual margin pressure from the supermarkets, I don't expect these to end anytime soon. Greencore reported an operating margin of 6.4% (which tells you a lot about the reality of their business anyway), but operating free cash flow (Op FCF) margin came in at just 3.8% (mostly due to GBP 20 million of exceptional cash expenses). And that's no once-off phenomenon – 2012 Op FCF margin was 4.8%, while 2011 was only 1.4%. Awarding a 0.4 P/S multiple is quite generous, in the circumstances.

Of course, we'll adjust for the company's excessive leverage: Interest expense (at GBP 15.6 M) is a whopping 34% of Op FCF – we'd need to see total debt (of almost a quarter of a billion) cut by around 56% (or 138 M), to limit interest expense to 15% of Op FCF. We'll also throw in a net pension deficit of, coincidentally, another 138 M. [It's worth noting, in terms of potential future volatility, gross pension assets & liabilities are in a pretty daunting range of 400-500 M. btw Greencore also has a net payables position of almost 200 M - if suppliers ever turn nervous, this could turn into another funding headache]. This gives us:

(GBP 1,197 M Revenue * 0.4 P/S – 138 M Debt Adjustment – 138 M Net Pension Deficit) / 406 M Shares = GBP 50p

To me, Greencore continues to look ridiculously over-valued – I never learn, do I..? But I have to ask – why exactly does it deserve an 18.4 P/E?! [Based on adjusted diluted EPS. NB: For once, basic EPS is higher than adjusted EPS, but that's due to exceptional tax credits]. Considering the history of cash flow shortfalls, I think it's entirely appropriate to focus on free cash flow (FCF) here, rather than reported EPS. FY-2013 FCF amounted to a mere GBP 31.6 M (and 2012 FCF of 42 M wasn't much better in absolute terms) – that puts GNC now trading on 33.6 times FCF, vs. the 6.4 FCF multiple implied by my target price.

OK, one might argue both multiples sound equally crazy – but for an obviously over-leveraged sandwich maker, I'd happily bet underlying intrinsic value's far bloody closer to my multiple than the market's. In all likelihood, the outcome will be binary here: Investors often prefer to keep believing in the emperor's new clothes. As the all too familiar circular logic goes, the share price went up...so it must be a great company, right?! Well, unless things go horribly wrong (or a short selling research firm publishes a report)...then everybody will suddenly want to put the boot in!

Price Target: GBP 50p

Upside/(Downside): (81)%

[manics] 02/5/2014 13:49

HY results May 20th.

[burkedavid] 02/5/2014 12:47

clearly this is not allowed over 270p.

[manics] 02/5/2014 08:50

Retweeted by Greencore Group
Watchlist News ‏@WatchlistN 11h
Greencore Group plc Given "Outperform" Rating at Davy Research (GNC)

[manics] 24/4/2014 07:40

Well thank you Rich!

The spike to 300p was Henderson, Marshall and Blackrock closing a combined +1.5% institutional short.

-which suggests they each (separately, importantly) see the share price going a good way north of 300p eventually.

[richtea1701] 23/4/2014 21:49

Can only see 300+ here when she is good and ready. Good stats Manics.

[manics] 23/4/2014 21:25

FTSE250 on a PE of 22.99

Sector PE 19.75

Industry PE 15.7

GNC at PE of 17 -14.5p EPS

255p seems cheap-ish given the current performance of the business.

[mickeyb] 16/4/2014 14:57

nice bounce up 14.5p so far today, looks like news coming.