Greencore benefits from UK convenience and US sales

Like-for-like revenue growth was up by 9% – excluding its desserts business, which was sold to Müller Dairy UK Group in January 2013.

Greencore’s Convenience foods division delivered revenue of £305.6M, up by 6.9%, while like-for-like growth – excluding desserts activity – rose by 9.1%. 

In the UK, like-for-like revenue was 7.2% higher than in the previous year, in what the firm described as a “challenging grocery retail environment”.​ But the small store format continued to exhibit strong growth aiding food to go activity, said the firm.

“Economic conditions in the UK are steadily improving,”​ it noted in a statement. “While this improvement has yet to be seen in larger grocery stores, we are seeing more buoyant activity in small stores and in product categories which perform well in these stores, such as food to go.”  ​

Significant re-launch activity​

The firm said it had undertaken significant re-launch activity with several key customers. And it continued to develop a pipeline of future growth opportunities for financial year 2015. ​Input cost inflation remain unchanged at around 3%, with pressure in proteins and dairy.

US revenue was 26.2% higher, in constant currency, than the previous year reflecting the start of the Starbucks supply agreement. Greencore has targeted US sales​ of $0.5bn by 2019, according to FoodManufacture.co.uk’s exclusive interview with Greencore ceo Patrick Coveney last month.

Its Ingredients and property division – which represented less than 5% of group activity – reported revenue of £14.9M, 13.7% higher than the previous year in reported currency and 8.5% higher on a constant currency basis. 

Greenore said it was positioned as a “focused and disciplined convenience foods business in its chosen markets of the UK and US”.  ​

The group’s financial position remained strong with “good headroom within existing debt facilities”,​ it claimed.  Greencore confirmed in its full-year results statement in November 2013 that it had refinanced $65M of maturing US private placement notes in October 2013 with a new eight year maturity.

“Greencore has had a good start to the year and we remain confident in our ability to deliver financial performance for the year in line with market expectations,” ​it said.  

City analysts ​

City analysts Panmure Gordon and Investec both agreed Greencore had notched a strong start to its financial year 2014.

But Panmure Gordon analyst Damian McNeela noted that additional investment following a number of re-launches is likely to have held back margin expansion. “As such we maintain our forecasts for 12.9% earnings per share growth in financial year 2014,” ​said McNeela. “We believe that Greencore remains well positioned to benefit from further growth in convenience foods but that the current valuation looks up with events.”​

McNeela noted Nielsen estimated sandwich sales in the 12 weeks to December 27 grew by 9.4%, with prepared Italian ready meals down by 0.9%. Greencore’s performance was thought to be in line with the market in both categories, he added.

Panmure Gordon retained its ‘hold’ advice on Greencore stock.

Investec took a brighter view, issuing ‘buy’ advice. “This is an encouraging start to the year, but is just one quarter and, whilst we could expect the second quarter to be as good/better, we are conscious of the difficult backdrop of the UK food retail market,”​ said Investec analyst Nicola Mallard.

Meanwhile, don't miss this interactive timeline​ charting the rise and rise of Greencore shares.