No Greencore dividend amid 70% sales hit due to Covid-19

Convenience food group Greencore has reported a near 70 per cent collapse in demand for its food-to-go products on foot of the Covid-19 pandemic.

The Irish-based, London-listed group, the largest producer of pre-packed sandwiches in the UK, has also been forced to furlough more than 4,000 UK staff, close three high-profile sites and cancel its annual dividend as it deals with the fallout from the virus.

"Overall we're down about 40 per cent as a business year on year in terms of revenue right now," said chief executive Patrick Coveney.

“The changes that we’ve made since the end of March mean we can keep the business profitable at that lower level. But we’ve definitely been hit, I wouldn’t pretend otherwise and hit pretty hard on the food-to-go side of our business,” he said.

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Mr Coveney was speaking as the company reported interim results on Tuesday that show revenues up by 1.6 per cent to £712.7 million (€798 million) in the six months to March 27th. But group operating profit declined by almost 14 per cent to £35.6 million. It is not offering financial guidance for the year.

Greencore’s food-to-go categories – sandwiches, salads and chilled snacks it produces for various retail multiples – account for about two-thirds of its business or €1 billion of turnover.

“As of May, our food-to-go business is down about 60 per cent,” said Mr Coveney. It had been down 70 per cent at the height of the lockdown.

The decline was partly offset by growth in the company’s other convenience categories – ready meals, soups and cooking sauces – which account the remaining third of its business.

“We’re still substantially trading, we’ve got 60 per cent of the revenue we had a year ago. We’ve got the vast majority of our sites open and we’re keeping our customers well serviced,” said Mr Coveney.

In response to the impact of Covid-19, Greecore has rationalised its product range and production facilities, while furloughing a “substantial proportion” of staff which is thought to be more than 4,000 of its 12,000 UK staff using the UK government’s Job Retention Scheme. It has also implemented temporary pay cuts of up to 30 per cent for board members.

Agreement with lenders on net debt

Production has been halted at its Bow, Atherstone and Heathrow sites, while production has been rationalised at its Northamption plant.

In addition, it has secured formal agreement with its lenders to waive its net debt: Ebitda [earnings before interest, taxes, depreciation and amortisation] covenant condition for the next two reporting periods, September 2020 and March 2021. And it is in “advanced stages of discussions” with the private placement holders in respect of a waiver of the September 2020 and March 2021 leverage covenants. “The group expects that an agreement in respect of such waivers will be finalised and concluded in the coming weeks,” it said.

Mr Coveney also indicated the company may avail of one of the Bank of England’s liquidity schemes if needed.

He said he was confident demand would recover in the food-to-go channel. But he also admitted this may take time, with many workers likely to continue to work from home for the foreseeable future.

“I am hugely proud of the way in which our people have responded to the extraordinary challenges of Covid-19 and take this opportunity to publicly thank them for their role in keeping the UK fed over the last two months,” he said.

“We have implemented a broad range of actions to mitigate the impact of Covid-19 on our business and to position us for growth as the pandemic eases.”

Based in Dublin, Greencore is listed on the London stock market.