Sandwiches, salads and sushi maker Greencore (GNC) returned to sales and profit growth in the year ended 24 September 2021 as the lifting of pandemic restrictions and gradual return of workers to the office bolstered growth in its food to go categories.
However, shares in the FTSE 250 convenience food supplier softened 0.5% to 122.5p on the absence of upgrades for the current year, with Greencore warning industry-wide supply chain and labour challenges continue to impact the ‘pace of profit conversion’.
Profitability will also be weighted towards the second half of the year, said Greencore, reflecting the seasonality of its food to go categories.
TASTY RECOVERY IN FOOD TO GO
Dublin-headquartered Greencore’s annual results came in ahead of expectations set out at its year-end trading update and also highlighted reassuringly robust free cash flow.
Greencore swung from a £10.8 million loss to a pre-tax profit of £27.8 million as revenue rose 4.8% to over £1.32 billion, driven by a return to growth in its food to go categories and ‘solid growth’ in other convenience categories.
POSITIVE TRAJECTORY
‘Greencore has weathered the storm and emerged strongly from a difficult period’, said long-serving CEO Patrick Coveney, who recently surprised the market with the news he is leaving to take over as the boss of SSP (SSPG).
‘Following a challenging first half in FY21, we made good progress in rebuilding revenues, cashflows and profitability in H2 and are confident of maintaining this positive trajectory in the year ahead, particularly in the seasonally important second half’, he continued.
‘The strong recovery of the UK food to go market, as well as solid performance in other convenience food categories, underpins this confidence. New business wins achieved last year are contributing to our momentum, and we anticipate delivery of profits for the year ahead in line with current market expectations.’
Greencore said trading in the early weeks of the new financial year has been ‘encouraging’, with continued positive revenue momentum across the business as mobility increases towards pre-pandemic levels.
The company, which supplies major supermarkets with everything from chilled ready meals to frozen Yorkshire Puddings. expects 2022 profits will be in line with current market expectations, although this assumes ‘no material resumption of mobility restrictions’ or Covid lockdowns.
THE SHORE CAPITAL VIEW
‘Much progress has been made by Greencore to rebound from the depth of deep lockdown 1.0, indeed the underlying trading signs are encouraging’, said broker Shore Capital.
‘Whilst so, Covid has a habit of staying one step ahead, and so Omicron reminds us of the fragility of rebuilding mobility. Post the full year 2021 update, we leave our full year 2022 and full year 2023 pre-tax profit and earnings per share expectations unchanged at £62 million and 9.4p respectively, rising to £77.4 million and 11.2p’, added Shore Capital.
The broker also insisted that for Greencore, ‘overcoming Covid should yield considerable potential capital upside’.
