Greencore Group plc – Q1 FY24 Trading Update

Strong start to FY24 trading; full year outlook in line with current market expectations ^[1]

Greencore Group plc (‘Greencore’ or the ‘Group’), a leading manufacturer of convenience foods in the UK, today issues its trading update for the 13 weeks ended 29 December 2023 (‘Q1’ or ‘the quarter’).

Q1 TRADING

PERFORMANCE

• Greencore delivered a strong financial and operational performance in Q1 FY24, underpinned by outstanding customer service levels (99.2%), and improved profit conversion year on year.
• Q1 FY24 Group reported revenue decreased by 4.7% to £441.3m. On a Pro Forma basis, adjusting for the disposal of Trilby Trading Limited in Ireland, revenue was broadly flat year on year. On a like for like (‘LFL’) basis^[2], revenue increased 5.8% year on year.
• Total manufactured volumes for the quarter declined 4.8%, due to the proactive decision to exit a number of contracts that were delivering sub-optimal returns in FY23. On a LFL basis^[3], manufactured volumes were 0.5% higher. For the four weeks to 24 December 2023, LFL volumes were 5.6% higher year on year, versus an overall market performance of 1.8%^[4].
• Q1 FY24 reported revenue in food to go categories increased 0.9% to £293.7m, on a LFL basis this was an increase of 5.8%. The LFL increase was primarily due to an increase in LFL manufactured volumes of 0.6% and inflation recovery initiatives. Total food to go manufactured volumes, including exited contracts, declined 2.9%. Overall Sandwich volumes increased 3% on a LFL basis versus a flat year on year market performance^[3].
• Reported revenue in other convenience categories was £147.6m, a 14.2% decrease year on year. On a Pro Forma basis this represented a 3.0% decrease, reflecting the disposal of Trilby Trading Limited. On a LFL basis this represented a 5.9% increase, which was driven by ongoing inflation recovery initiatives. Total volumes in other convenience categories, including exited contracts, declined 7.3%. On a LFL basis volumes increased 0.4%. Overall Chilled Ready Meals volumes increased 2% on a LFL basis versus a 2% market decline^[3].
• The decision to proactively exit several contracts in FY23, including a significant Chilled Ready Meals contract, accounted for approximately a 6% decrease in year on year revenue on a Pro Forma basis.
• Profit conversion in Q1 FY24 improved strongly year on year and was in line with management expectations. Profit conversion benefitted from on-going commercial, operational and cost initiatives with significant focus on innovation and an optimal product mix to unlock value for Greencore.
• As previously announced, Catherine Gubbins joins the business on 6 February 2024, following her appointment as Executive Director and Chief Financial Officer. Jonathan Solesbury will remain with the Group until the end of May 2024 to ensure a smooth transition.
• In Q1, the Group refinanced its debt facilities with a new five year £350m sustainability linked revolving credit facility (‘RCF’), maturing in November 2028 with the option to extend for up to a further two years. The facility also includes a £100 million accordion option. This new facility replaces the existing £340m RCF that was due to mature in January 2026.

OUTLOOK ^[2]

• Inflationary pressures on raw materials and energy are now easing, providing a more stable cost outlook in FY24 compared to the prior year. Wage inflation will persist due to National Living Wage increases, which we will continue to manage through ongoing recovery and mitigating actions.
• Following the strong financial and operational start to the year, with improved profit conversion, the Group expects to generate an FY24 outturn in line with current market expectations^[1].

Commenting on the performance, Dalton Philips, Chief Executive Officer, said:

“I am extremely encouraged by the strong start to the year for our business. Our manufactured like for like volume growth of 0.5% in the quarter, continued to outperform the market in the key categories in which we operate. This performance has once again been supported by our outstanding operational service levels to ensure availability of products to our customers. Our focus as a team is to provide fresh and healthy foods to our customers and consumers each and every day.

Our progress as a business has been delivered through continued effective operational and commercial initiatives, as detailed in November, this has supported improved profit conversion and a strong profit outturn in the quarter. We are committed to continuing to drive profitability through commercial discipline and are investing in several initiatives to develop a robust platform for future growth.

While we remain mindful of the seasonally important second half of the year, we are confident that the Group will deliver a full year outturn in line with current market expectations.”

Greencore will report its FY24 interim results for the half year ending 29 March 2024 on 21 May 2024.

¹ Consensus FY24 market expectations of Adjusted Operating Profit range of £80.5m to £85.0m, as compiled by Greencore from available analyst estimates on 15 January 2024 and as reported in the Investor Relations section of the Group website.

² Pro-Forma revenue growth (versus FY23) adjusts reported revenue in FY23 to reflect the disposal of Trilby Trading Limited. Like for like revenue growth (versus FY23) adjusts Pro forma revenue for business wins and losses.

³ Volumes are on a like for like basis and adjust for business wins and losses. Market performance in those categories, unless stated, is Circana data for the 12 weeks to 24 December 2023.

⁴ Kantar data based on 4 weeks to 24 December 2023.

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 Download the full statement here.