Greencore reveals latest financial group results

Greencore Group plc has today issued a trading update covering both its third quarter report (Q3) for the 13 weeks to June 29, 2018, and the 39 weeks to June 29, 2018, for its year-to-date, seeing good growth along the way.

The group recorded revenue of €717 million (£639.6 million) in Q3, an increase of 0.5% on the prior year on a reported basis.

On a pro forma basis, revenue increased by 8.1% in the quarter.

Year-to-date, the group recorded revenue of €2,105.4 million (£1,878 million), an increase of 14.0% on the prior year on a reported basis, and an 8.0% increase on a pro forma basis.

The group has revealed performance results for both its UK & Ireland, and its US convenience foods businesses.

Convenience Foods UK & Ireland

The division reported revenue of €421.4 million (£375.9 million) in Q3, an increase of 1.4% on a reported basis and a 7.8% increase on a pro forma basis.

Year-to-date, the division recorded revenue of €1,245.3 million (£1,110.8 million), an increase of 5.2% on a reported basis and an increase of 8.4% on a pro forma basis.

Growth in Q3 was driven by the Food to Go business, where reported revenue increased by 10.7% and pro forma revenue increased by 10.5%.

Growth in Food to Go was primarily driven by an increased revenue contribution from the distribution of third-party products through the group’s Direct to Store network.

There was some modest improvement in the rate of underlying category growth, compared to Q2 levels, according to Greencore.

Reported revenue in the other parts of the Convenience Foods UK & Ireland division decreased by 12.8% in Q3, reflecting the elimination of cakes and desserts revenue. On a pro forma basis, revenue increased by 2.5%.

The group continued to “optimise its UK business portfolio,” Greencore claims.

The phased closure of the desserts manufacturing facility in Evercreech was completed in June and the site was subsequently divested.

In addition, as part of the strategy to transition part of its ready meals portfolio to fresher ready meal propositions, the group is proposing to phase out longer-life ready meals manufacturing at Kiveton (where it will continue to manufacture quiche and soup) and transfer volume to other parts of its ready meal network.

The proposal requires employee consultation and, if agreed, the proposed closure of the ready meal unit will occur in March 2019, incurring modest cash costs.

Convenience Foods US

The division reported Q3 revenue of €295.6 million (£263.7 million), a decrease of 0.8%, but an increase of 8.6% on a pro forma basis.

Year-to-date, the division reported revenue of €860.1 million (£767.2 million), an increase of 29.9% on a reported basis and an increase of 7.5% on a pro forma basis.

The strong pro forma revenue growth in the quarter was driven by the former Peacock Foods business where pro forma growth accelerated to 19.4%, with a broadly similar level of volume growth.

The volume growth reflects good underlying category growth and the impact of new business.

Pro forma revenue in the original part of the US business decreased by 25.2% due to previously announced volume declines.

New business development continues to progress well. In Q3, several new product launches were successfully executed. In addition, future growth opportunities with key Branded Food Partner customers are progressing to plan.

Group Cash Flow and Returns

As anticipated, the scale of capital investment spending across the group normalised in Q3.

Greencore anticipates cash generation and returns to continue to improve through the second half of the 2018 financial year and beyond.

Strategic Update and Senior Management Appointments

The group continues to progress its refined US strategy to focus on the large and structurally growing branded food partner channel.

The year saw the recent appointment of Anton Vincent who joined the group as the CEO of Greencore USA in July.

Vincent has more than 20 years’ experience as a senior executive at General Mills, most recently as president of the Snacks Division.

In the UK, Peter Haden, currently group COO, has been appointed to the newly-created role of CEO of Greencore UK, effective as of October 2018.

Outlook

The group anticipates good pro forma revenue growth in the final quarter of the financial year.

The group reiterates its 2018 financial year (FY18) guidance of adjusted EEPS in the range of 16c – 18c (14.7p – 15.7p). The improving outlook for underlying cash generation and returns remains unchanged, Greencore says.

The group will report its FY18 results on December 4.

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