Appetite for food on the go lifts Greencore

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Greencore, which this year shifted its primary listing from Dublin to London, illustrated Britons’ growing appetite for food on the go, unveiling a 7.4 per cent like-for-like increase in sales for the year to the end of September.

The figures from the food producer, which supplies 430m sandwiches a year to the likes of Marks and Spencer and Asda, showed a strong outperformance over rivals.

The overall food industry has increased revenues 3 per cent in the year to October 13, according to Nielsen, against 5 per cent for convenience foods. Premier Foods, the UK’s second-biggest food producer, reported a 1.5 per cent increase in the nine months to the end of September, excluding milling.

Patrick Coveney, Greencore’s chief executive, described 2012 as a “breakthrough year”. In addition to integrating desserts group Uniq, Greencore has restructured its US business, with annual revenues of about $200m, and sharpened its focus on food-to-go in small stores. It is to start supplying Starbucks in the US northeast from the second quarter of next year.

Including acquisitions, revenues rose 44.5 per cent year on year to £1.16bn. Operating profit, before exceptionals and acquisition-related amortisation, rose 37 per cent to £70.7m.

However, the cost of some of the group’s purchases weighed on margins, which contracted 30 basis points to 6.1 per cent. The drag came from Uniq, which was acquired by its pension fund and then sold to Greencore. However, the business is already delivering the projected run rate of £10m in cost synergies.

Mr Coveney said business was bolstered by the addition of new customers during the year, including Waitrose and discounter Aldi, and a spurt in private label goods earlier in the year.

“Over the course of the year, we would have seen private label outperform brands,” he said. “That is beginning to unwind in the second half of 2012, when we have seen [branded manufacturers’] respond with more promotions.”

He also painted a bleak picture of trading conditions as Christmas shopping kicks off. “We are seeing more pressure on volumes than would have been the case a year ago, more weak consumer confidence … So we are more concerned about the overall environment than we were a year ago.”

Adjusted earnings per share rose 22 per cent to 12.8p and the group is proposing a dividend of 2.5p per share. Shares in Greencore closed up nearly 0.3 per cent at 90.75p on Tuesday.

FT Comment

Greencore has scrubbed up well since being jilted at the altar by Northern Foods last year. It is not only bigger and more global – no mean feats in the shrinking domestic world of UK food producers. It has been disciplined about paying down debt from cash flows – net debt came in comfortably below analysts’ expectations and now stands at 2.5 times earnings before interest, tax, depreciation and amortisation. But it has been amply rewarded. Shares are up over 70 per cent so far this year, strongly outperforming the broader market and putting it on an enterprise value to this year’s ebitda of about six times. A premium to peers looks fair; the caveat is that the sector as a whole is a bleak one.

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