Good underlying revenue growth
Refined US strategy
Greencore Group plc (‘Greencore’ or the ‘Group’), a leading manufacturer of convenience food in the UK and US, today issues its interim results for the 26 weeks ended 30 March 2018.
HIGHLIGHTS
- Strong underlying revenue growth in both the UK and the US
- Profit growth impacted in particular by previously announced challenges in the original part of the US business
- Reviewed and refined US strategy and organisation
- Improving cash generation as strategic capital expenditure normalises
- FY18 EPS guidance reiterated
SUMMARY FINANCIAL PERFORMANCE1
| H1 18 | H1 17 | Change | |
| £m | £m | ||
| Group Revenue | 1,238.5 | 1,010.3 | +22.6% |
| Adjusted EBITDA | 86.5 | 79.1 | +9.4% |
| Adjusted Operating Profit | 59.7 | 55.3 | +8.0% |
| Adjusted Operating Margin | 4.8% | 5.5% | -70bps |
| Adjusted Profit Before Tax | 47.2 | 44.7 | +5.6% |
| Adjusted EPS (pence) | 5.5 | 6.3 | -12.7% |
| Interim dividend per share (pence) | 2.20 | 2.10 | +4.8% |
| Exceptional Items (pre-tax) | (53.1) | (22.9) | |
| Exceptional Items (post-tax) | (28.2) | (20.5) | |
| Group Operating (Loss)/Profit | (4.4) | 24.5 | |
| (Loss)/Profit before taxation | (18.1) | 11.7 | |
| Basic EPS (pence) | 0.3 | 1.7 | -82.4% |
| Operating Cash Flow | 32.7 | 24.3 | +£8.4m |
| Net debt | (522.2) | (556.6) | -£34.4m |
| Net debt:EBITDA as per financing agreements | 2.5x | 2.7x |
Commenting on the results, Patrick Coveney, Chief Executive Officer, said:
“The first half of FY18 has been challenging for Greencore and its shareholders. While we delivered strong revenue growth in both the UK and US, profit growth was impacted by the challenges experienced in the original part of Greencore’s US division. As a result of the significant strategic, network and organisational measures that we have taken in order to address these challenges, we believe that our US business is now much better positioned to deliver an improved performance in the second half of the year and beyond. We anticipate strong organic growth for the remainder of FY18”.
STRATEGIC DEVELOPMENTS
Convenience Foods UK & Ireland
- Deepened the Group’s leadership position in the food to go category by further expanding the sole supply partnership model and extending contractual arrangements, whilst continuing to develop new channel and product opportunities
- Initiated key restructuring and change programmes in H1 focusing on indirect and overheads reduction and an investment in a new operational effectiveness programme
- Normalised strategic investment activity in the division during H1 after a phase of increased spending in FY16 and FY17 to support growth in the division. The key remaining project is the refurbishment and extension of the Group’s largest ready meals facility in Warrington which progressed well in the period
- Continued optimisation of the UK portfolio with the disposal of the Group’s cakes and desserts business which together with the planned closure of the desserts manufacturing business announced in FY17, marks Greencore’s exit from the UK cakes and desserts sector
Convenience Foods US
- Refined and refocussed strategy around (i) capitalising on growth opportunities in value added, assembly-led manufacturing with its Branded Food Partners and (ii) improving operational performance and efficiencies in assets dedicated to Retail Partners
- Enhanced the US leadership team
- Production ceased at the Rhode Island facility on 25 March, and after reviewing available options, this facility will now be divested in due course. The Minneapolis and Jacksonville facilities are being incorporated into the network serving Branded Food Partners
- Continued progress with the commercial pipeline, now focussed on opportunities with existing and new Branded Food Partners
OUTLOOK
The Group anticipates good organic growth in the seasonally more significant second half of the financial year. UK profit conversion will be driven by strong year on year performance in Food to Go and US profitability will be supported by strong year on year performance in the former Peacock Foods business.
The Group reiterates its FY18 guidance of Adjusted EPS in the range of 14.7p-15.7p. Underlying cash generation continues to strengthen, as the Group progresses towards its benchmark leverage ratio of approximately 2x Net Debt to EBITDA.
For the full report and presentation, please click here.
