Shares in British sandwich-maker Greencore have risen by over 20% after news broke last month that Hong Kong investor, Oasis Management, had bought a substantial stake in the company. Despite this, financial analysts at Goodbody Stockbrokers warn that raising profitability will not be easy for Greencore. Oasis Management now possesses 5.16% of Greencore stocks. This follows their previous high-profile investments in UK-listed companies, Premier Foods and the Restaurant Group.
Last November, Dalton Philips, who has been Greencore’s CEO for 18 months, set the task of regrowing the company’s operating profit back to its pre-pandemic £106 million over a three-year period. This came after focusing initially on stabilising the company, which was just recovering from a failed ten-year investment in the US market. Then, it was subjected to the impacts of COVID-19, supply chain and labour issues, and inflation. Philips appointed Catherine Gubbins, a former DAA colleague, as chief financial officer last year.
Regarding the effects of Oasis’ considerable stake in Greencore, Goodbody’s financial analyst, Gary Martin, stated that there were no quick-fix solutions aside from improving operations. Martin also commented that the new managers were doing a good job in addressing profit margin and asset underperformance. In the last year, Greencore’s shares have surged by 63% to £1.30 in London, leading to a market value of £611 million. Still, these shares are 60% lower than their 2016 peak.
Under Philips’ leadership, the company has saved costs by making 250 managerial-level redundancies across a company that employs nearly 14,000 workers, predominantly in low-paid roles. Further savings were made by transferring over £200 million in inflation costs to supermarkets or finding other avenues to offset these costs. The company also discontinued contracts that were making minimal profit, amounting to sales of £110 million.
Daniel Wosner, European head of Oasis, quoted by The Sunday Times last month, stated that the firm had been an investor in Greencore for several years before the recent purchase of stakes. Wosner confirmed the investment firm’s supportive stance towards the management and their future strategy.
Exclaiming their shared aspirations for the firm, Oasis confirms considerable potential for bettering profit margins and crafting value, as per the comments. Nevertheless, it’s been voiced that Oasis is aggrieved over the fact that there have been no dividends disbursed by Greencore since 2020, an action that was halted during the COVID-19 crisis.
In the 12 months leading up to September, Greencore’s operational profit elevated by 5.7 per cent, reaching £76.4 million. Factors that contributed to this increase included the removal of 250 managerial positions by Mr Philips, using supermarkets or alternative methods to counterbalance inflation costs surpassing £200 million, and the deciding to no longer engage in certain low-profit contracts.
Oasis boosted its ownership in the Restaurant Group, the proprietor of brands such as Wagamama and Barburrito, to nearly 18 per cent in the previous year, as part of a strategic move against the company’s management. Following the group’s sale to American private equity colossus Apollo for £506 million in December, the active investor made a projected profit of £40 million.
Premier Foods was another company in Oasis’s crosshairs six years prior, where it held up to 17 percent stake. On Thursday, Oasis initiated a hostile move against the management group of Japanese cosmetic and household product conglomerate, Kao. Via a press release, Oasis urged the corporation to enhance its operations, without revealing the extent of its investment in the company.