Trading at Greencore improves but group cites UK supply issues

Food group Greencore expects to deliver revenue of more than £1.3 billion (€1.5bn) this year as the recovery from the Covid-19 pandemic continues and the company works to "mitigate" Brexit-related supply chain and labour challenges in the UK.

The group, led by chief executive Patrick Coveney, is a leading manufacturer of convenience foods in the UK. It issued a trading update for the fourth quarter and full year ended September 24th, 2021, on Friday. It will publish its full-year results on November 30th.

It said there has been “further improvement” in revenue, profitability, and cash flow momentum during the final quarter, supported by a “continued increase in demand” for food-to-go categories.

Revenue trends “continued to recover” through the quarter, with group pro forma revenue 27 per cent above last year’s levels and 1 per cent above equivalent pre-Covid levels in 2019.

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For the full year the group anticipates a reported revenue outturn of about £1.3 billion. The group expects to generate a full year adjusted operating profit outturn towards the upper end of previous guidance of between £36 million and £40 million.

The group also expects net debt at year-end to be below £190 million, an improvement on previous guidance of below £240 million. It said strong free cash generation “continued in the final quarter”.

Working capital inflows were supported by increased volumes and from the timing benefit of an early year-end date.

There was an adjustment to the phasing of some capital expenditure projects into early 2022, and the disposal of an investment property for approximately £7 million was also completed.

“Good progress” was made on the group’s sustainability objectives, in particular the launch of fully recyclable, plastic-free sandwich skillet trials for customers in September 2021.

In terms of outlook, the group said it was “encouraged” by the progress seen in the final quarter.

“While the well documented supply chain and labour challenges persist across the UK food industry, the group is working closely with customers and suppliers to mitigate the impact and to deliver strong operational service levels,” it said.

“The group is also engaging intensively with customers to recover input cost and other inflation.”

Commenting on the performance, Mr Coveney, said: “We are pleased with the further improvement in our business in the fourth quarter, in particular the increase in demand across the business and our strong underlying cash generation.

“I am also excited by the progress we have made in the past quarter on our sustainability journey including the launch of the first fully recyclable, plastic-free sandwich skillet.

“None of our progress would have been possible without the energy and dedication of our teams and colleagues who, as throughout the Covid pandemic, continue to do a fantastic job.

“Greencore has a strong position in the dynamic UK convenience food market, and looking forward we remain confident in our medium-term prospects.”