Dublin-headquartered food group Greencore defied inflationary pressures in its key markets to grow revenue 35 per cent in its third quarter, driven by strong growth in both food to go and other convenience food categories.
Greencore, which supplies all the big UK supermarkets, as well as convenience and travel retail outlets, discounters and coffee shops, published results for the 14 weeks ended July 1st on Tuesday.
It said pro forma revenue grew 25.8 per cent year on year, after adjusting for the impact of an additional week in its full year accounting period and for movements in foreign exchange. Revenue was 22.3 per cent above equivalent pre-Covid levels in 2019.
Revenue growth was driven by a combination of increased volumes, a low-teen percentage increase in underlying pricing, and increased income in the group’s Irish ingredients trading business.
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Despite the inflationary challenges impacting the broader UK food industry at present, the group said there had been “limited demand impact” to date. It said it would continue to monitor the impact of increased prices at a consumer level closely.
Revenue in food-to-go categories increased 31.2 per cent, driven by continued recovery in underlying demand and augmented by “new business wins” and higher prices.
The strongest growth was seen among customers that have a balanced portfolio mix of urban and suburban locations. Revenue here was 19 per cent above pre-Covid levels.
Higher prices
Revenue in other convenience categories rose 15.5 per cent, driven by higher prices and revenue in its Irish ingredients trading business. There was a modest reduction in grocery volumes. Revenue was 30.2 per cent above 2019 levels.
Inflation remains elevated across the UK food industry, but Greencore said it was managing this through “constructive dialogue with customers, price recovery mechanisms, effective supply chain management and operational efficiencies”.
The company also announced its intention to “recommence value return” of up to £50 million (€59 million) over the next two years, initially in the form of a share buyback programme.
The group announced it would repurchase ordinary shares for up to a maximum aggregate consideration of £10 million.
Greencore said it would invest £24 million during 2022 and 2023, including capital expenditure of about £8 million.
The group said it continued to deliver good year-on-year volume growth, and it was confident in its ability to deliver “very strong” year-on-year profit and cash flow progression in the second half of the year, its peak seasonal trading period.
It expects to generate a full year adjusted operating profit of £72 million-£77 million, and adjusted earnings per share of 9.2p-10p.
Given strong cash flow momentum, net debt excluding lease liabilities is anticipated to be about £200 million at the end of its full year.
Greencore executive chairman Gary Kennedy said he was “encouraged” by the progress against the backdrop of inflationary pressures for the industry. “Revenue and profit conversion through the period has been encouraging and we are confident in our ability to continue to manage the various industry challenges and end the year strongly,” he said.
Greencore will report its full year results on November 29th.
