Shares in Greencore soared by as much as 12 per cent on Wednesday after the convenience food group raised its full-year operating profit forecasts and said it remains on track to “drive value” from its takeover of rival British group Bakkavor earlier this year.
In a trading update on Wednesday morning, the London-listed ready-made sandwich supplier said revenues increased by 3.2 per cent in its third financial quarter to more than £1.02 billion (€1.19 billion) compared to the same period last year.
Speaking to The Irish Times, Greencore chief executive Dalton Philips said: “The weather’s been great. The World Cup’s been good for us. We’re feeling pretty good about life at the moment.”
The group, which supplies Marks & Spencer and – increasingly since the Bakkavor merger – Tesco with pre-packed sandwiches and other convenience foods, said manufactured food sales volumes increased by 0.7 per cent in the 13 weeks to the end of June. This was ahead of the wider grocery market, and was supported by the “broader portfolio of the enlarged” business, with the legacy Greencore element up 0.3 per cent and the Bakkavor side up 1 per cent.
READ MORE
The group now expects full-year adjusted operating profits of between £234 million and £242 million, ahead of market expectations, a “material upgrade” of 6 per cent, Philips said.
Greencore, which effectively doubled in size with the merger, also said it remains “confident” in its “ability to drive value from the Bakkavor acquisition”. It now expects to deliver “cost synergy” of about £15 million this year, it said.
Former DAA chief executive Philips, who said Greencore is well on track to deliver merger-related cost efficiencies of £80 million over three years, explained that the group’s synergy strategy has three main pillars: “organisational change”, procurement and also operations.
In the first area, he said Greencore had more than “200 senior leaders leave the business” in April, at the start of its third quarter. “Ultimately, you brought two businesses together, so you have two CEOs, two CFOs, and you work your way down,” he said. “We’re very sorry to see great people go, but that is the reality when you have two businesses come together.”
Shares in Dublin-headquartered Greencore, which were down by more than 9 per cent this year, advanced by more than 12 per cent in London following the update. The group’s share price fell in May after it reported a £13.4 million group operating loss in the first half of its financial year. This was largely attributable to one-off costs related to its £1.2 billion (€1.4 billion) acquisition of Bakkavor, it said at the time.
It also reported a 1.3 per cent drop in sales volumes from the Bakkavor side of the business in its first 10 weeks of ownership by the Irish group.
Meanwhile, Philips said the British consumer remains “very cautious” at the moment.
“There’s been no collapse in demand, but it’s a cautious consumer,” he said. “We beat the overall marketplace. We were 0.7 per cent ahead in terms of volume. The market is 0.4 per cent negative. So it is a difficult market. Having said that, we’ve had some good weather; we’ve had the World Cup [...] That’s obviously been a benefit.”
