Strong profit conversion in Q3; upgrade to full year guidance
Greencore Group plc (‘Greencore’ or the ‘Group’), the FTSE 250 leading manufacturer of convenience foods in the UK, today issues its trading update for the 13 weeks ended 28 June 2024 (‘Q3’ or ‘the quarter’).
- Strong financial and operational performance underpinned by outstanding customer service levels of 99.4%.
- Like for Like (‘LFL’) revenue[1] increased 1.4% year on year, with LFL manufactured volumes[1] more subdued resulting from the strong June 2023 comparator.
- Continued improvement in profit conversion year on year through ongoing commercial and operational actions.
- Completed rationalisation of soup sites and continued focus on operational initiatives aimed at deploying best practice learnings throughout the network.
- Strong underlying free cash generation delivering returns for shareholders. £30 million share buyback progressing well and intention to restore dividend for the full year.
- Upgrading FY24 outlook of £88-90m Adjusted Operating Profit, ahead of prior guidance and current market expectations[2].
Dalton Philips, Chief Executive Officer
“Q3 represents another excellent performance by the business against a tough comparative period. Our continued progress has been delivered through ongoing impactful operational and commercial initiatives, which we are continuing to implement at pace, supporting the improved profit conversion in the quarter.
Providing fresh and healthy foods to our customers and consumers each and every day is our core purpose, and our performance has once again been supported by our outstanding operational service levels, at over 99%. Delivering at this level alongside ongoing business improvement is not easy, and I would like to thank my colleagues across the Group for their hard work.
While Q4 remains a seasonally important trading period, our continued strong profit conversion performance means we now expect to deliver a full year Adjusted Operating Profit of £88-90m, ahead of previous guidance and market expectations[2].”
Trading Update
| Revenue | Revenue Growth (versus FY23) | ||||
| Q3 | Q3 | 9 Months | |||
| £m | Reported | LFL (1) | Reported | LFL (1) | |
| Group | 465.2 | (6.1%) | 1.4% | (6.3%) | 3.2% |
| Food to Go categories | 330.2 | (1.5%) | 2.4% | (0.7%) | 3.8% |
| Other Convenience categories | 135.0 | (15.7%) | (1.1%) | (16.5%) | 1.7% |
- Greencore delivered a strong financial and operational performance in Q3 FY24, underpinned by outstanding customer service and continued improved profit conversion year on year.
- Q3 FY24 reported revenue decreased by 6.1% to £465.2m, reflecting the year on year impact of the exit by Greencore of a number of low margin contracts in FY23 and the disposal of the Trilby Trading business. On a LFL basis[1], Q3 revenues increased 1.4% year on year.
- Q3 FY24 reported revenue in Food to Go categories decreased 1.5% to £330.2m, an increase of 2.4% on a LFL[1]
- Q3 FY24 reported revenue in Other Convenience categories was £135.0m, a 15.7% decrease year on year. On a LFL[1] basis this represented a 1.1% decrease.
- The Group saw a broadly flat LFL volume[1] performance in the sandwich category, versus an overall market decline of 1%[3]. This was in addition to a positive LFL volume[1] performance across other key categories including chilled ready meals, and cooking sauce. The sushi category also experienced LFL volume[1] growth in the quarter, however the salads category was more challenged.
- Profit conversion continued to improve year on year benefiting from ongoing commercial, operational and cost initiatives. The Group continued its rigorous focus on product innovation and delivering an optimal product mix to unlock value and drive returns for Greencore, with 174 new SKUs launched across Q3 FY24, in addition to ongoing existing product development.
- Product launches in the quarter included a number of premium food to go ranges, including a revamped premium range of sushi and the third phase of the Group’s ongoing programme of a premium product offering for a material customer. In addition, the Group also launched a new range of cooking sauces across standard and premium tiers, for which the Group was awarded an “Innovation Supplier of the Year” award.
- The Group continued to focus on operational initiatives aimed at deploying best practice learnings throughout the network during Q3 FY24, with continued focus on the effective use of labour and waste reduction at our sites. The Group also completed the consolidation of two soup manufacturing sites with the closure of the soup production facility at Kiveton.
- The Group generated strong underlying free cash in Q3 FY24. The previously announced £30m share buyback is ongoing and progressing well. As part of the previously announced £50m return to shareholders, the Board also intends to declare a dividend for the year to September 2024.
Outlook
Following the continued robust financial and operational performance across Q3 FY24, driving improved profit conversion, the Group currently expects FY24 Adjusted Operating Profit to be in a range of £88-90m, ahead of prior guidance of £86-£88m and ahead of current market expectations[2].
Greencore will report its FY24 results for the year ending 27 September 2024 on 3 December 2024.
