I note that my old mucker Greencore (GNC) has announced in a terse statement that: 'Further to its announcement of 15 October 2018, the Board of Greencore Group plc ("Greencore") is pleased to announce that the sale of its entire US business, Greencore US, to Hearthside Food Solutions LLC completed on 25 November 2018'. Well bully for it.
I wrote back in mid-October that 'I think that essentially this was a panic move by a management team scared by the size of the debt burden...and when a half-reasonable offer came along, they took it'. Of course given shifts in the interim in capital market sentiment, the deal looks a bit more heroic right now but I still cannot help but being a bit disappointed. Yes, it is prudent, but the big growth angle for the group was building on its core UK/Irish sandwich expertise by pushing into the US where such trends are less mature. In my mind I have that big 180p support level as the point where I overtly buy more stock. In the meantime, mine's one of its superior vegetarian supermarket offerings if anyone is buying.
By contrast, I like the sound of Friday's announced sale by brick company Ibstock (IBST) of its US business. I called Ibstock one of my market volatility buys last month and I still have this view despite Friday's decent bounce. The reason why I am much more glass half-full for Ibstock's disposal is that (1) it has much more UK potential growth given the ongoing structural deficit in bricks; (2) it is investing to help close this gap and augment its market leading position and; (3) the US sale price at x8 ebitda is on my numbers accretive to the group. For me, Ibstock is still a buy below 250p in anticipation of another run closer to 300p again (last seen in July).
I know some people may find this strange given I am still cautious on UK property and related but my issue in this space is all to do with housebuilder margins and house prices per se. With bricks there is much better pricing power (back to that structural deficit - it is not as if the UK is going to ramp up supplies from the European Union) and still the structural need to build more and not fewer houses. So on the recent disposal news, don't 'brick it' on Ibstock.
Filed under: Greencore, Ibstock, Watchstone, Bearcast, Optibiotix, Ten Lifestyle Group, Greek Hovel
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