YOU PROBABLY HAVEN’T heard of Greencore. Or its CFO, Alan Williams. But there are several hundred million reasons (and a FTSE listing) why that will change. As for Williams, his background is as interesting as that of his relatively unknown employer.
Taking Williams first, the 42-year-old was a key player in putting together the defence of Cadbury, which subsequently saw him lead Kraft through its newly acquired business. He has also been active in working Greencore through acquisitions, refinancing and geographic growth since February 2011.
As for Greencore – you’ve no doubt eaten their products. It is the world’s largest maker of sandwiches – 350 million a year – with a 36% share of the UK market, supplying to Tesco, Asda, M&S, Sainsbury’s and Waitrose, and it turns over a £1bn, with its last half-year profits coming in at £31.7m.
So why the low profile?
Greencore’s originated as an Irish state-owned agri-business dual-listed in Dublin and London. As a monopolistic sugar processor, it generated huge cash flows, and moved into supplying animal feeds. It then diversified into UK food business – at one point, it even owned a toilet roll producer.
But the EU’s sugar tariff regime of 2005 made its sugar business untenable. Top that off with a UK food production outfit that had just come through being highly indebted, and the company needed to restructure. Greencore exited sugar, sold off its agri-businesses, and instead found itself in UK and US convenience foods.
Williams explains that, while the food production unit was performing well, reporting its numbers in Ireland – where the pound had depreciated against the euro in 2007/2008 – “masked” that performance.
“It was too complex,” explains Williams. “In the malt division, you could have £100m-plus swings in working capital and profitability, depending on where barley prices were. It didn’t fit with a business that wanted to be a solid, defensive stock and a food-producing business.”
By 2010, a deal with Northern Foods – a straight nil-premium merger – fell through when Northern was itself acquired at a premium. Greencore tried to interject, but Northern’s pension fund wanted a share of proceeds and the deal became uneconomic. “So in my first week, we’d taken the decision not to go ahead with the cash bid,” says Williams.
A few months later, he was involved in the company’s acquisition of Uniq. Ironically, the thing that killed off the Northern deal was also a key aspect of the Uniq deal – pensions.
Uniq was the old milk delivery provider Unigate. As the business sold off assets to fill a pensions hole, all that was left was a £400m deficit and a chilled food business with a market cap of “next to nothing”, according to Williams.
In what he describes as a “radical restructuring”, Uniq’s management gave its pension fund 90% equity of the chilled food business, and 10% to the shareholders.
“You have to take your hat off to what the Uniq board of directors did, so shareholders got something where they were getting nothing,” says Williams. Within minutes of handing over equity to the pensions fund, the fund announced it would look to sell on the stake.
Raring to go
While “there was a certain amount of fatigue” in Greencore after the failed Northern transaction, Williams – new in – was “fresh and raring to go” (see box). The Uniq deal bought Greencore another eleven points of market share, through its supplies to M&S.
But the competition authorities didn’t dive in. “Retailers are good at fighting their own battles,” says Williams. “And the authorities look at white-label food manufacturers as competitive.”
He has been involved in the strategic direction of Greencore, during what has been a crucial 18 months. With $85m (£52m) of revenues in the US, it needs to be a bigger business to attract the best talent, and working out its next step in the UK has also been on the agenda.
In May 2011, Greencore negotiated a new £280m credit facility – easier after funds had been lined up for the Northern deal – enabling the company to move quickly for Uniq. A rights issue was launched to help fund the acquisition.
Uniq’s business sits in a fast-growing market. But revenues of £300m with a £4m operating profit show efficiencies can be made. Loss-making divisions have been divested, leaving it with £150m in revenues to improve margins.
In the US, the big challenge is persuading Americans, who have a strong deli culture, to buy pre-made sandwiches. But convenience stores are seeing a decline in tobacco revenues, and those attached to a petrol forecourt are looking into sandwiches, Williams explains.
The acquisition of Schau in June, with facilities in Chicago, Illinois and Jacksonville, Florida, form a key part of its plan to spread the reach of its products. Crucially, Schau has good links with famous store chain 7-Eleven.
The US acquisitions will now be integrated. “We’re trying to get them to work as a whole,” says Williams. He is focused on making sure the financials reach the UK. “We’re aligning month-end dates, setting up processes and routines.
“I enjoy the detail – I’ve done transactions and negotiations. I enjoy the pulling-together to create something new.” ?