Business

Greencore shares soar after it announces strong results and £50m return to shareholders

Dublin-based company attributed a dip in revenue to its decision to exit a number of low-margin contracts in 2023

Greencore chief executive Dalton Philips said the company had exited a ready meals contract with British supermarket group Asda

Colin Gleeson
Tue May 21 2024 - 08:04

Shares in Dublin-based convenience foods group Greencore soared by almost 18 per cent on Tuesday after the company published half-year results slightly ahead of forecasts and announced a £50 million (€58.5 million) return for shareholders, via buy-backs and dividends.

Greencore, which is listed on the London Stock Exchange, is the world’s biggest sandwich maker. Three-quarters of its investors are based in the United States.

The group’s interim results for the half-year ended March 29th, 2024, published on Tuesday, show revenue decreased by 6.4 per cent to £866.1 million. This was partially down to a decline in business in September, accounting for a decrease of 4.6 per cent.

The company also attributed the drop in revenue to its decision to exit a number of low-margin contracts in 2023, as well as the €9.8 million sale of edible oils business Trilby Trading. It said like-for-like revenue growth was 4.1 per cent. The company is closing its soup-making plant in Kiveton Park in South Yorkshire, involving a net 60 redundancies, and consolidating production in Bristol.

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Operating profit increased 602.8 per cent to £25.3 million compared to 12 months earlier, while adjusted operating profit increased by 139.8 per cent to £28.3 million.

The adjusted operating profit improvement was driven by the increase in gross profit “underpinned by the operational and commercial initiatives implemented”, Greencore said.

Its adjusted profit before tax was £16.9 million compared to £3.4 million during the same period the year before. It now expects full-year adjusted operating profit in a range of £86 million to £88 million, which is ahead of current market expectations.

With the exception of labour costs, inflation in the group’s main cost components slowed, and the majority incurred was recovered or mitigated through a range of mechanisms, including pass-through of cost increases and cost reductions.

The group announced additional shareholder distributions totalling £50 million across the next 12 months, initially in the form of a share buyback of up to £30 million. If the business continues to trade as expected, it said it intends to declare a dividend for the year to September, with the balance of £20 million to be a mix of buy-backs and dividends.

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Like-for-like volumes increased 10 per cent on the previous year during the Christmas period across numerous categories including sandwich, soup and sauce, grocery and quiche. The group delivered 15.2 million Christmas sandwiches to customers.

Revenue in its food-to-go categories – comprising sandwiches, salads, sushi and chilled snacking – totalled £578.9 million and accounted for approximately 67 per cent of reported revenue.

Reported revenue decreased by £1.5 million in these categories, as like-for-like volume growth, inflation recovery and pricing impacts were offset by its decision to exit a number of low-margin contracts. Like-for-like revenue growth was 4.6 per cent in the period.

Greencore chief executive Dalton Philips told The Irish Times that the company had exited a ready meals contract with British supermarket group Asda, while securing a “material contract” with German discounter Aldi for ready meals, and is also now supplying sandwiches to cafe group Costa.

“We have exited low-margin business and are undertaking a range of actions to increase the returns profile of each element of the portfolio,” he added.

Colin Gleeson

Colin Gleeson

Colin Gleeson is an Irish Times reporter

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