Greencore to sell troubled water business to Highland Springs for €19m

By Brian O’Mahony

Friday, November 20, 2009

CONVENIENCE food and malting group Greencore is to sell its water business to Highland Springs for €19.6 million.

Up to €11.2m is payable on completion of the deal expected to be finalised by the end of April 2010.

Greencore Water is based in Scotland and supplies own-brand water to the British market from facilities at Campsie Springs in Scotland and Blaen Twyni in Wales.

The business was hit by an accounting scandal that cost the group €21m in profits.

The impact of the accounting deception within the subsidiary meant that amount had to be written off over two years.

Those write-offs followed a three-week investigation into the accounts of the mineral water subsidiary.

In the year ended September 25, 2008, Greencore Water generated a loss before taxation of €4.5m and net assets of about €20.1m.

This decision by the world’s biggest sandwich maker to sell the water business was greeted as a positive step by analyst Joe Gill of Bloxham Stockbrokers.

Mr Gill said the bottled water sector was in difficulty internationally.

"This is an unequivocal positive development for Greencore," he said.

"Every water company is grappling with the impact of a recession on water demand," he said.

Greencore was too small to compete effectively in the sector and had a poor history in performance terms.

The money from the sale could be used to lower the group’s estimated debt of €270m this year, or might well be channelled into US expansion where management believes returns and sustainable profits can be much better, said Gill.

In recent times the group has exited its frozen desserts business and sold its agricultural feed unit as part of a strategic repositioning of the group which is committed to make convenience food its core activity.

Last year it moved into the US food sector when it bought Home Made Brand Foods Inc, which chief executive Patrick Coveney said could generate sales of up to $1bn in five years.

This story appeared in the printed version of the Irish Examiner Friday, November 20, 2009