Greencore: announces resiliant performance in challenging times

Dublin / IE. (gg) Greencore Group PLC, a leading manufacturer of convenience food in the UK, issues a trading update covering the 13 weeks to 25 December 2020 (Q1/2021).

Financial Highlights

  • Consistent focus on the Group’s three priorities – keeping our people safe, feeding the UK, and protecting our business
  • Group revenue down 15.0 percent in Q1, impacted by the reduction in mobility arising from tiered restrictions and lockdowns in the UK during the period
  • Positive Adjusted Operating Profit and Adjusted Ebitda for the quarter
  • Continued to execute well against growth opportunities and secured additional new business during the quarter
  • Liquidity and balance sheet strengthened through revised debt financing agreements and a successful equity placing raising gross proceeds of GBP 90 million, protecting the business in the near term and supporting delivery of value creating opportunities as trading conditions recover
  • Latest lockdown significantly impacting demand in food to go categories, though not as marked as the initial lockdown in March 2020. Currently, pro forma Group revenue is approximately 20 percent below prior year levels, with performance in food to go categories down approximately 35 percent on prior year while other convenience categories remain stable
  • Continued near term trading uncertainty however, the Group is well positioned to build back the business rapidly as trading conditions recover

Summary Trading Performance

Revenue Growth
Mio.GBP Reported Pro forma
Group 312.7 -15.0% -15.1%
Food to go categories 188.5 -21.7% -21.7%
Other convenience food categories 124.1 -2.1% -2.1%

Pro Forma Revenue Growth

October 2020 November 2020 December 2020
Group -15% -17% -14%
Food to go categories -22% -24% -20%
Other convenience food categories -2% -2% -2%

Greencore’s purposeful leadership and its three priorities – keeping our people safe, feeding the UK, and protecting our business – continued to provide a clear direction for the Group in Q1. The organisation, supply chain and production network all functioned well in the period, enabling the Group to maintain its high levels of customer service and satisfaction in this challenging operating environment.

The Group’s reported revenue in Q1 was GBP 312.7 million, a decrease of 15.0 percent on the prior year, reflecting the impact of Covid-19 related restrictions on demand in food to go categories. On a pro forma basis, Group revenue decreased by 15.1 percent. The Group continued to execute well against growth opportunities and secured additional new business during the quarter.

In the Group’s food to go categories, reported revenue was GBP 188.5 million in Q1, a decrease of 21.7 percent on both a reported and pro forma basis. The recovery in demand that was evident at the end of FY20 was impeded by the tiered regional restrictions on mobility introduced across the UK in October, and then by a subsequent national lockdown until early December, followed by the implementation of tiered regional lockdowns.

Reported revenue in the Group’s other convenience food categories was GBP 124.1 million in Q1, a decrease of 2.1 percent on both a reported and pro forma basis.

During the quarter the Group continued to focus on cost and cash flow mitigants to protect the business, including the renewed use of furlough supports, pay freezes, elimination of discretionary spending, and a reduction in planned capital expenditures. These initiatives supported the delivery of positive Adjusted Operating Profit and Adjusted Ebitda in Q1.

The Group’s liquidity and balance sheet was also strengthened in Q1. The Group secured revised debt financing facilities and amendments on near term covenant conditions, raised gross proceeds of GBP 90 million in an equity placing, and completed the sale of its molasses businesses for cash consideration of approximately GBP 15.5 million.

Outlook

A further national lockdown was introduced on 4 January 2021 and, as a result, Group revenue is currently 20 percent below prior year levels. Pro forma revenue in the Group’s food to go categories is currently running approximately 35 percent below prior year levels, while performance in the Group’s other convenience categories is stable year on year. The Group will continue to proactively manage costs and cash flow through the duration of the current lockdown, while also preparing for recovery and growth as mobility restrictions begin to ease.

The free trade agreement negotiated between the EU and the UK entered into force on 1 January 2021. The operational impact has been modest to date as the Group had completed extensive Brexit planning and was well prepared for any near term volatility in the supply chain.

The ongoing uncertainty regarding the duration and impact of Covid-19 on the Group’s trading environment, and in particular on demand in its food to go categories, continues to make it difficult to predict FY21 performance. In this context, the Group’s financial guidance remains suspended.