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Mar 13 2018, 12:40 GMT
While Greencore’s restructuring of its US network is not surprising, the associated impact on profit development is unexpected. Greencore’s legacy US business has been its Achilles heel. The challenge of converting new business wins has become a recurring feature of the business model, impacting the phasing (and confidence) of profit delivery. In light of today’s statement, we are reducing our EPS forecasts by c.12% and c.7% for FY 2018 and 2019 respectively. Notwithstanding valuation (mid-single-digit implied EBITDA multiple for the US), the scale of negative earnings momentum and associated uncertainty in North America prompt us to reduce our rating to ‘Neutral’.