Greencore expects to resume dividend payments as UK economy reopens

Revenue down 19% due to Covid restrictions, as food company went into ‘survival mode’

Greencore chief executive Patrick Coveney: ‘This has been a challenging period for Greencore, but the consistent build in our revenues since early March as lockdown measures have eased and Covid-19 cases have fallen give us real cause for optimism.’ Photograph: Dara Mac Dónaill/The Irish Times

Greencore chief executive Patrick Coveney: ‘This has been a challenging period for Greencore, but the consistent build in our revenues since early March as lockdown measures have eased and Covid-19 cases have fallen give us real cause for optimism.’ Photograph: Dara Mac Dónaill/The Irish Times

 

Greencore is hopeful of resuming dividend payments to shareholders at pre-pandemic levels at around this time next year, as the food company benefits from the full reopening of the UK economy, its chief executive Patrick Coveney has told The Irish Times.

“It will be subject to a board decision but the current plan we have would be to reinstitute an interim dividend this time next year,” he said. “It will be driven by our earnings... but I hope to be able to get back to paying a dividend at a broadly similar payout ratio to what we had before [Covid], but we’ll have to finalise that as the business evolves.

“We were in survival mode as a business until March of this year, with a massive focus on people safety, keeping the production system going, stores serviced and people fed, and then a lot of protective measures on how we managed our capital, and our bank group and costs so we could basically keep the business as close to break-even as we could through the period.”

Greencore said on Tuesday that Covid-19 restrictions hit revenue in the first six months of its financial year, driving it 19 per cent lower as consumer mobility was hit.

The company issued its interim results for the 26 weeks ending March 26th, 2021, showing revenue of £577.1 million (€667 million) for the period. Its adjusted operating profit declined to just £200,000 from £38.3 million a year earlier.

Net debt was £271.3 million, a decrease of £79.2 million since the end of the previous financial year, underpinned by an equity placing in November 2020 that raised gross proceeds of £90 million.

Debt and liquidity

The food group said it had a strong liquidity position, with cash and undrawn committed debt facilities of £302 million at the end of the period.

Mr Coveney said Covid operating costs – both direct and indirect – in the six-month period amounted to about £10 million. These included Covid testing, top-up payments to furloughed staff, and a hit to productivity levels in its production halls.

On a positive note, Greencore said it had notched up some new business wins in the past year, supporting its rebuilding of its revenues, and there was a pipeline of new business opportunities being actively pursued. The new business wins will add about £175 million to its revenues over the next 12 months.

“This has been a challenging period for Greencore, but the consistent build in our revenues since early March as lockdown measures have eased and Covid-19 cases have fallen give us real cause for optimism,” Mr Coveney said.

Looking ahead, the group said it saw encouraging revenue momentum in the first seven weeks of the second half of the financial year. Revenue in food-to-go categories was bouncing back, running at about 123 per cent above prior-year levels. That was about 14 per cent below pre-Covid levels in 2019.

Continued loosening of Covid-19 restrictions and a rebuild of group revenue is expected to generate adjusted operating profit for the year above that achieved in the 2020 financial year.

Net debt is also expected to reduce further in the second half of the year.

The company, which is based in Dublin but listed in London and focused mostly on the British market, said Brexit has had a “minimal” impact on the business to date.

Mr Coveney said it had not been possible to supply certain sandwiches in its range to the Irish market due to delays being experienced by its retail customers in getting goods through customs and border checks.

It continues to provide other food items, including sushi and salads, to a number of British retailers operating in Ireland, including Tesco and Marks & Spencer.