Greencore revenues increase but UK trading still ‘challenging’

Revenue at convenience food manufacturer Greencore increased by 11.8 per cent in the three months to the end of June 2017 compared to the same period last year.

The pro-forma revenue increase was attributed to the company's "food to go" business in the UK and Ireland, while in the US the acquisition of Peacock foods at the end of last year helped growth.

On a half-yearly basis, the revenue wasn’t quite as strong but was still 8.8 per cent ahead of last year on a pro-forma basis. Growth in both the UK and Ireland was attributed to Greencore’s “food to go” business which accounted for more than 60 per cent of divisional revenue in the third quarter.

“This performance was driven by positive underlying market growth as well as by the delivery of the previously announced business wins with several of the group’s largest customers,” the company said in a trading update.

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Some new products at the group's Northampton facility in the UK, including sushi products, retailed at a slightly higher level than some sandwich products

“Our ‘food to go’ had unprecedented growth,” said Patrick Coveney, Greencore’s chief executive in a conference call with investors. Mr Coveney noted that the majority of UK growth was attributable to an increase in volume. However, he also said that the company saw some price recovery on the back of inflation recovery.

New products

Some new products at the group’s Northampton facility in the UK, including sushi products, retailed at a slightly higher level than some sandwich products and that helped with the growth in the “food to go” business.

In an effort to help deal with its UK growth the company acquired a sandwich manufacturing facility in West Drayton, near Heathrow airport, at the end of June 2017. “This modest acquisition enables Greencore to add additional high-quality manufacturing capacity to meet its ‘food to go’ growth agenda.”

However, trading conditions in the company’s ready meal, cake and dessert business was “challenging” during the quarter but the Irish ingredients businesses saw “strong revenue growth”.

A substantial revenue growth increase in the US was put down to the acquisition of Peacock foods in December 2016, while the company said it has been encouraged by progress in its packaged goods business.

Pro-forma volume growth in the US of 8 per cent in the quarter was driven by expansion of the group's Carol Stream facility in Illinois to cater for a contract win in meal kits.

Greencore anticipates that full-year performance will be in the range of current market expectations, however, trading conditions remain challenging in parts of the company’s UK portfolio.

“This is a transformational period for Greencore. The group is confident that this exciting phase of operational and network investment will allow it to take full advantage of its exposure to higher growth categories and, in turn, to enhance group profit, cashflow and returns,” the company said.

Davy analysts Cathal Kelly and Roland French said the challenging backdrop for the UK business needs to be better factored in to forecasts.

“We anticipate a modest downward revision to our full-year forecasts. Importantly, the key value drivers within the group remain intact,” the analysts said in a note to investors.

Goodbody analysts maintained their positive view on the stock. “The business remains well positioned to benefit from positive trends in UK “food to go”, together with an increased presence in the US,” it said.