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Greencore reports a good start to 2013

By Rick Pendrous , 29-Jan-2013
Last updated on 30-Jan-2013 at 13:29 GMT

Greencore’s latest trading results follow a successful previous year for the group against a tough trading environment. They have been welcomed as a “sound start” to the new financial year by analysts who predict “robust margins” within the group.

The group’s Convenience Foods division has proved to be the star of the show, recording revenues of £285.8M for the 13 weeks trading period to December 28 2012, 2.5% higher than in the year before. The revenue growth reflected both the contribution from acquisitions in the period but also the impact of business exited, notably in the former Uniq chilled desserts activity.

Flat UK revenues

In the UK, revenue in the first quarter was in line with the prior year on a like-for-like basis (excluding both the International Cuisine business based in County Durham acquired in August 2012 and the impact of the restructuring of the chilled desserts activity acquired as part of Uniq). Analysts Clive Black and Darren Shirley at Shore Capital described these UK revenues as “broadly flat”. They expect this trading momentum to be sustained into the second quarter and possibly beyond before potentially ticking up in Q4.

Greencore reported that its latest results reflected both a challenging UK food market where growth rates across its categories have moved down in line with the overall market.

The restructuring of the Uniq desserts business has now been completed. During the period, the Group announced that it had completed the disposal of its chilled desserts facility in Minsterley to the Müller Dairy UK Group.

US revenues doubled

In the US, revenues have more than doubled compared with the previous year, reflecting the acquisitions of MarketFare Foods and Schau partly offset by extensive portfolio rationalisation in the original business, principally at the Newburyport facility, in order to improve returns. The acquisitions have performed well in the period with underlying double digit revenue growth. The business has also started to supply to Starbucks in the greater Boston area during January.

Following the group’s AGM today, Gary Kennedy will succeed Ned Sullivan as chairman, when both Sullivan and Pat McCann will step down from the Board. Ann McSharry and John Warren will join as non-executive directors with effect from January 30.

Greencore predicted that market conditions would continue to be challenging, particularly in its core UK market, which shows little or no volume growth.  On the plus side, it expected input cost to be lower than the 4% experienced in the 2012 financial year.

Black and Darren were rather downbeat about Greencore’s performance in the US which, focusing on the US supermarket segment, they claimed did not deliver the desired results. However, they commended Greencore’s management for the work undertaken to inject larger and more visible revenues into its US business model, which now focuses on the foodservice segment and in particular 7-eleven stores.

With this trading performance and guidance, Shore Capital anticipates robust margins within the group, reflecting a firm grasp of input costs, a tight control of operating costs and the benefits harvested from the aforementioned acquisition activities.

Meanwhile, read why striking Greencore workers have described their bosses as "modern-day mill owners".

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