Greencore revenue rebound to 10% above pre-Covid levels

Dublin-headquartered food group Greencore saw profits grow and revenue rise 10 per cent above pre-Covid levels in the first half of this year, but has warned of headwinds tied to inflation and supply chain issues arising from the war in Ukraine.

Greencore, which supplies all the major UK supermarkets, as well as convenience and travel retail outlets, discounters, and coffee shops, published interim results for the six months ended March 25th, 2022, on Tuesday.

They show that overall group operating profit increased to £7.2 million (€8.4 million), which was up from £3.9 million the year before.

Adjusted operating profit increased to £17.2 million from just £200,000 the year before. This increase was driven by a return to profitability in the group’s food-to-go categories, which comprise sandwiches, salads, sushi and chilled snacking.

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Underlying profitability in the group’s other convenience categories was below the previous year’s levels due to “the timing of inflation recovery”.

Reported revenue in the period was £770.8 million, which an increase of 33.6 per cent. That was about 10 per cent above the equivalent pre-Covid levels in the first half of 2019.

Revenue in the food-to-go category totalled £502.1 million and accounted for about 65 per cent of reported revenue, while new business represented just over one-third of growth in the period.

Speaking on a media call after the publication of the results, Greencore executive chairman Gary Kennedy said the company was already seeing “a direct impact” from Russia’s invasion of Ukraine.

“Labour inflation has been a big, big challenge for us, but more importantly, so has utility inflation with the increases in gas and electricity and so on,” he said.

“We’re already seeing that. Also, from that particular territory, there are big suppliers of wheat, not directly to us, but to suppliers of bread.

“We know that inflation is going to continue is going to continue throughout 2022 and 2023. We hope it won’t be at the same level incurred to date, but it’s very much with us. The instability of that situation and how it might develop is hard to forecast.”

Company leadership

DAA chief executive Dalton Philips is to take over from Patrick Coveney as chief executive of Greencore in September, and Mr Kennedy said it would take some time for the company to establish its “direction of travel”.

“Like anything else, when there is a change of leadership, somebody needs a little bit of time to get their feet under the table and figure out the direction of travel,” he said. “We have a really good business. We’re very comfortable with our business in the UK.

“I’ve no doubt Dalton will bring a fresh thought process and direction of travel, and once we get through some of core challenges we have, I think it’ll be time to raise our heads a little bit above the parapet and think where strategically Greencore needs to go as a business.”

The group said the return to pre-Covid manufacturing volume levels has enabled it to “revitalise” its cost efficiency programmes, most notably in its manufacturing, purchasing, engineering and commercial functions.

They form “a critical element” of the group’s planned recovery in profit conversion this year and in future years.

The first phase of the programme will deliver an annual recurring benefit of approximately £30 million in 2024. The group said it will invest a total of approximately £24 million during this year and next.

Greencore’s net debt at March 25th was £272.3 million, which was a decrease of £59.8 million compared with a year earlier.

The group did not pay dividends to shareholders in the period, but said it intends to recommence value return to shareholders of up to £50 million over the next two years, initially in the form of a share buyback programme.