Greencore Group: Full Year 2014 Results Statement

Dublin / IR. (gg) Greencore Group PLC, a leading international convenience food producer, issued its results for the year ended 26 September 2014.

Financial Highlights

  • Group revenue of 1’273.5 million GBP, up 6.4 percent and up 7.4 percent on a like for like1 basis
  • Convenience Foods revenue of 1’213.4 million GBP, up 8.4 percent on a like for like basis
  • Group operating profit up 11.4 percent to 82.9 million GBP
  • Group operating margin of 6.5 percent, a 30 bps increase
  • Net exceptional charge of 11.4 million GBP, of which 8.3 million GBP relates to non-cash items
  • Growth in adjusted EPS of 13.6 percent to 15.9 GBPence
  • Proposed final dividend of 3.25 GBPence per share, giving a total dividend of 5.45 GBPence per share, up 13.5 percent
  • A reduction in net debt of 20.7 million GBP to 212.1 million GBP with net debt: Ebitda leverage comfortably below 2.0 times

Strategic Developments

  • Further build out of US food to go business with the acquisition of Lettieri´s LLC, investment in frozen production in Jacksonville, new site construction in Rhode Island and the announcement of the development of our first West Coast facility
  • Major multi-year investment programme in Northampton food to go facility to facilitate new business win and meet market growth
  • Disposal of foodservice desserts business, Ministry of Cake

Summary Financial Performance

. FY-2014 FY-2013 Change Change
. million GBP million GBP (as reported) (like for like)
Group revenue 1’273.5 1’197.1 +6.4 percent +7.4 percent
Group operating profit 82.9 74.4 +11.4 percent
Group operating margin 6.5 percent 6.2 percent +30 bps
Adjusted PBT 68.7 59.5 +15.5 percent
Adjusted EPS (GBPence) 15.9 14.0 +13.6 percent
Proposed dividend per share (GBPence) 5.45 4.8 +13.5 percent
Net debt 212.1 232.8 -20.7 million GBP
.
Convenience Foods Division
Revenue 1’213.4 1’129.2 +7.5 percent +8.4 percent
Operating profit 80.7 72.2 +11.8 percent
Operating margin 6.7 percent 6.4 percent +30 bps

Commenting on the results, Patrick Coveney, Chief Executive Officer, said: «This has been a year of strong strategic, operational and financial progress for Greencore. The Group´s focus on extending our leadership in the food to go market is yielding great results, with like for like revenue growth in that area of the business exceeding 15 percent. We have strong market positions, a clear strategy, and are continuing to lay the foundations for future growth through a significant capacity and capability investment programme in both the UK and the US. We enter the new financial year with good momentum and remain well positioned to deliver further progress in FY-2015 and beyond».

Strategic Development – Food to Go Focus

Over the last five years, Greencore has evolved into a focused, fast growing international convenience food business. We have refined this strategy further in the last 18 months to focus on deepening our leadership in the food to go segment where we see the most favourable, long-term consumer and channel trends. This food to go proposition is supplemented with complementary, market leading positions in other categories.

During FY-2014, like for like revenue growth in our food to go businesses was outstanding, exceeding 15 percent. We also continued to lay the foundations for future growth by commencing a significant capacity investment programme in both the UK and US to enable us to service known customer initiatives.

In the UK, this programme includes a 30 million GBP capacity investment in the Northampton food to go facility to facilitate a new business win and to service committed growth initiatives with that customer.

In the US, we are building a national food to go business of real scale. To facilitate this, we are undertaking a significant and complex programme of development. During the year, we undertook a seven million GBP capacity investment in the Jacksonville facility to manufacture frozen food to go products for a key customer. In February 2014, we acquired Lettieri´s, a leading manufacturer of frozen food to go products for the US convenience market, with significant surplus production capacity. In March 2014, we announced the construction of a new facility in Rhode Island at a cost of approximately 20 million GBP which will facilitate the closure of two leased sites in Massachusetts and generate annualised savings, once fully realised, estimated at five million GBP.

Now we are announcing the development of our first West Coast facility in Washington State. This facility will provide both production capacity and a development unit and will enable us to service a contract, which we are acquiring, with a key customer from H2/2016. The total cost of the initiative is expected to be approximately 20 million GBP.

The US business is experiencing rapid growth but is not yet operating at Group average operating margin levels. This is due both to the learning curve and ramp-up costs on the various growth initiatives as well as site specific challenges in Newburyport and Brockton. The delivery and integration of confirmed new business together with the successful implementation of these large projects should enable us to bring the US business up to Group average operating margin in due course. Having sold the Minsterley chilled desserts facility in January 2013, we focused the portfolio further with the disposal of the foodservice desserts business, Ministry of Cake, in May 2014.

Financial and Operating Performance

Whilst the UK food retail environment overall remains challenging, our portfolio of products continues to benefit from the high rate of opening of convenience stores combined with increasing employment levels. Weather patterns were also favourable overall with a mild winter and a reasonable summer. Reported Group revenue increased by 6.4 percent to 1’273.5 million GBP with like for like revenue growth in Convenience Foods of 8.4 percent. Operating profit conversion was good with Group operating profit up by 11.4 percent leading to a 30 basis points increase in operating margin. Adjusted earnings per share were 13.6 percent higher as a result of the growth in operating profit combined with lower financing costs. Despite the increase in capital expenditure, the Group again delivered a strong performance on cash generation. Net debt decreased by 20.7 million GBP to 212.1 million GBP. Net debt: Ebitda leverage stands comfortably below 2.0 times as a result.

Dividends

The Board of Directors is recommending a final dividend of 3.25 GBPence per share. This will result in a total dividend for the year of 5.45 GBPence per share representing an increase in dividend per share of 13.5 percent, in line with the growth in adjusted earnings per share.

Outlook

Greencore has strong market positions and a clear strategy. While the outlook for the UK grocery retail market is uncertain, we remain confident in our ability to deliver profitable growth across our well-focused portfolio with confirmed new business awards and exposure to the rapidly expanding convenience channel. FY-2015 will see a further significant step up in capital expenditure on capacity, productivity and capability initiatives; execution of these projects is a key area of focus. We enter the new financial year with good momentum and remain well positioned to deliver further progress in FY-2015 and beyond.

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