Greencore reports strong start to FY24 trading

"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," said Greencore CEO, Dalton Philips

Full year outlook in line with current market expectations*, with "inflationary pressures on raw materials and energy now easing"

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AT A GLANCE: Q1 TRADING AT GREENCORE

Leading convenience foods manufacturer Greencore Group plc has issued its latest trading update for Q1, the 13 weeks ended 29 December 2023.

The group delivered a strong financial and operational performance in Q1 FY24, which it states was “underpinned by outstanding customer service levels (99.2%), and improved profit conversion year on year”.

“I am extremely encouraged by the strong start to the year for our business,” said Dalton Philips, chief executive officer. “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.”

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. Meanwhile, on a like-for-like basis**,  revenue increased 5.8% year-on-year.

The total manufactured volumes for the quarter declined 4.8%, due to what Greencore describes as “the proactive decision to exit a number of contracts that were delivering sub-optimal returns in FY23”. On a like-for-like basis***, manufactured volumes were 0.5% higher. For the four weeks to 24 December 2023, like-for-like volumes were 5.6% higher year on year, versus an overall market performance of 1.8%****.

Q1 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***.

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***.

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.

Greencore reports 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.

Catherine Gubbins is set to join 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, Greencore also 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

Greencore reports 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 Greencore says it will continue to manage through ongoing recovery and mitigating actions.

Following this strong financial and operational start to the year, with improved profit conversion, the group reports it expects to generate an FY24 outturn in line with current market expectations*.

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,” said Dalton Philips. “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,” he added.

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

^*(Source: 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)

**(Source: 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)

^***(Source: 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)

****(Source: Kantar data based on 4 weeks to 24 December 2023)

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