DAVY VIEW

The key debate for Greencore’s equity is the extent to which the current pandemic influences its long-term growth model. In the near-term, social distancing measures and recessionary forces will shape footfall patterns, in particular for convenience aisles across the lunch day-part. The potential structural effects of changing purchasing patterns (e.g. delivery) and new working habits (e.g. telecommuting) are more difficult to predict. The crisis will likely accelerate Greencore’s need to extend its proposition beyond the core flywheel. An expanding M&A pipeline is likely but will be juxtaposed against a systemwide shift towards more prudent capital structures. We pare our FY20 EBITA estimate by 38%, with key cash levers softening the revenue downdraft.