Greencore sees revenue fall 15% as lockdown impact felt

Covid-19 pandemic meant it was ‘another challenging period’, said Patrick Coveney

Sandwich-maker Greencore Group saw revenue decline by 15 per cent in the last quarter as it was impacted by the reduction in mobility arising from Covid-19 restrictions and lockdowns in the UK.

The company, which is led by Patrick Coveney, is a leading manufacturer of convenience foods in the UK. It published a trading update covering the 13 weeks to December 25th, 2020, on Tuesday.

The organisation, supply chain and production network “all functioned well” in the period, it said.

However, reported revenue in the quarter was £312.7 million (€351.8m), which was a decrease of 15 per cent on the prior year, “reflecting the impact of Covid-19 related restrictions on demand in food to go categories”.

In the group’s food-to-go categories, reported revenue was £188.5 million, which was a decrease of 21.7 per cent.

“The recovery in demand that was evident at the end of 2020 was impeded by the tiered regional restrictions on mobility introduced across the UK in October, and then by a subsequent national lockdown until early December, followed by the implementation of tiered regional lockdowns,” the group said.

Reported revenue in its other convenience food categories was £124.1 million in the period, representing a decrease of 2.1 per cent.

During the quarter, the company continued to focus on cost and cash flow mitigants to protect the business, including the renewed use of furlough supports, pay freezes, elimination of discretionary spending, and a reduction in planned capital expenditures.

These initiatives “supported the delivery” of positive adjusted operating profit and adjusted earnings before interest, taxes, depreciation, and amortisation (EBITDA).

The group’s liquidity and balance sheet was also strengthened in the quarter.

Its secured revised debt financing facilities and amendments on near term covenant conditions, raised gross proceeds of £90 million in an equity placing, and completed the sale of its molasses businesses for cash consideration of approximately £15.5 million.

In terms of outlook, group revenue is currently 20 per cent below prior year levels due to a further national lockdown introduced on January 4th.

Pro forma revenue in its food-to-go categories is currently running approximately 35 per cent below prior year levels, while performance in the group’s other convenience categories is “stable year-on-year”.

“The group will continue to proactively manage costs and cash flow through the duration of the current lockdown, while also preparing for recovery and growth as mobility restrictions begin to ease,” it said.

Due to the ongoing uncertainty regarding the duration and impact of Covid-19, the group’s financial guidance “remains suspended”.

Commenting on the performance, Mr Coveney said it had been “another challenging period” for Greencore.

“Although the difficult trading conditions are likely to persist in the near term, we remain confident that demand for our food to go categories will recover strongly as the effects of Covid-19 recede and mobility restrictions are removed,” he said.

“We secured a number of new business wins in the quarter and have a healthy commercial pipeline as we look forward.

“In addition, the operational, debt and equity measures that we have taken in recent months provide us with a strong foundation from which to navigate our way through all of the challenges of Covid-19.

“We are confident that we have the capability and resources to build back the business rapidly as soon as market conditions allow, and we are optimistic about the medium-term prospects for Greencore.”

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter