- Strong revenue momentum
- Full-year profit outlook raised
- Nothing to report on Bakkavor interest
Shares in Greencore (GNC) fattened up 3% to 174.2p after the convenience foods manufacturer reported strong second quarter trading and upgraded full-year profit guidance in a surprise update.
The sandwiches, salads and sushi supplier now expects adjusted operating profit for the year ending 26 September 2025 will be in the £112 million to £115 million range.
That’s up from earlier guidance for profits of between £102.6 million to £107 million and roughly 8% ahead of consensus at the mid-point of the range.
PORTFOLIO NOURISHMENT
Guided by CEO Dalton Philips, Greencore said ‘strong’ revenue and volume momentum continued into the second quarter ended 28 March, supported by ongoing growth with customers and new business won during the previous financial year.
‘Profit conversion during Q2 was ahead of management’s expectations and underpinned by ongoing operational and commercial excellence initiatives and a continued focus on cost control,’ explained the FTSE 250-listed food producer, which supplies all the major supermarkets in the UK with everything from chilled ready meals and sauces to frozen Yorkshire Puddings.
MEATY UPGRADE
‘Just when it seemed, with no beat at the Q1 update in January, as though Greencore’s upgrade momentum may have been stymied by the cost burden of national insurance contributions and the National Living Wage, the group delivers a quite meaningful upgrade,’ observed Jefferies.
‘This demonstrates again the extent to which the cost and efficiency story still has legs to run, as detailed at the group’s February capital markets day,’ added the broker.
Dublin-headquartered Greencore is growing organically, but is clearly hungry to beef up its scale via acquisition, having made takeover overtures to rival Bakkavor (BAKK).
Still under the rules of the Takeover Code, Greencore was unable to update the market on its intentions, although a notice on Bloomberg last week indicated that an increased proposal had been made above the previously rejected offer of 189p per share, spurned by Bakkavor on the grounds it ‘significantly undervalued the company and its future prospects’.
ON A ROLL
Russ Mould, investment director at AJ Bell, said: ‘Sandwich maker Greencore is on a roll. Its bread and butter of supplying convenience foods is going exceedingly well and profit is now set to beat previous expectations. Investors feasted on the good news, breathing life back into Greencore’s shares after a recent pullback.’
Mould continued: ‘The end of the pandemic was the big turning point for Greencore. The more workers have been called back to the office, the bigger the demand for food on the go and Greencore has stepped up to the challenge. The return of the office commute has also eaten into people’s spare time and driven extra demand for ready meals, which is another part of Greencore’s output.
‘CEO Dalton Philips has certainly repaired his reputation with the success he’s had at Greencore. Previously ousted from Morrisons for presiding over poor performance, he’s regained his mojo at Greencore and taken the business to new levels.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
