Greencore tackles US woes, boosting sales and profit

In the UK the company said it had built on its strong foundation in food-to-go by expanding its position as sole supplier and extending contracts, while developing new channel and product opportunities.

These include a new contract with discount retail chain Poundland to provide an improved chilled offer to all its UK stores. Poundland confirmed the offer combined the best of its best-selling existing range of fresh items with a rolling offer of promotional and clearance items on guest appearance. It covers staples such as bread and milk alongside lunchtime options such as sandwiches and pies.

The move came after Poundland’s existing supplier entered administration earlier this month.

Commenting on the deal separately to its interim report, Vince McVerry, commercial director at Greencore Direct to Store said: “We at Greencore are very pleased to be working with Poundland in the reinstatement of chilled food ranges for their customers and look forward to developing the future range and proposition with them as we seek to develop chilled food sales that meet the changing needs of their shoppers.”​

However, despite such market developments, while the company succeeded in growing adjusted pre-tax profit, US struggles hit group operating profit, causing a loss of £4.4m in the half-year period.

Overheads​

In addition to new ventures, Greencore said it had launched targeted programmes to cut direct and indirect overheads and invested in a new operational effectiveness programme. While continuing to invest, it said it had scaled back a little on 2016 and 2017 levels.

A key outstanding project was the refurbishment and extension of its Warrington ready meals plant, which it said was progressing well.

The firm forecast strong year-on-year performance in UK food-to-go in the remainder of the financial year as well as strong US growth in the former Peacock Foods business.

US factories​

Greencore confirmed production had ceased at its US Rhode Island facility on 25 March and said it planned to sell the factory. Its Minneapolis and Jacksonville plants were being dedicated to branded food partners.

It said it had refined and refocussed its strategy around capitalising on growth opportunities in value-added, assembly-led manufacturing, including sandwiches, salad kit and snack kits, with its branded food partners. It had also worked hard to improve operational performance and efficiencies in assets dedicated to retail partners. It had taken a £25.8m hit over the financial reporting period as a result of the total US rationalisation.

Considerable future growth lay in US companies outsourcing their food production, an area Greencore expected to grow significantly over the next five years.

Chief executive Patrick Coveney said: “The first half of the full year 2018 has been challenging for Greencore and its shareholders. While we delivered strong revenue growth in the UK and US, profit growth was impacted by the challenges experienced in the original part of Greencore’s US division.​

‘Better positioned’​

“As a result of the significant strategic, network and organisational measures that we have taken in order to address these challenges, we believe that our US business is now much better positioned to deliver an improved performance in the second half of the year and beyond.”​

Coveney predicted strong organic growth in the second half of the financial year.

Greencore reported adjusted profit excluding taxes, depreciation and the falling value of ageing assets up 9.4% from £79.1m to £86.5m, comparing the 26 weeks to 30 March to the same period last year, on sales up 22.6% from £1bn to £1.2bn. It had also improved operational cash flow across the business, from £24.3m to £32.7m. However, group operating profit fell from £24.5m in the same period last year to a £4.4m loss as a result of US woes.

At the end of January, Greencore reported tripling US revenue in the first quarter of its financial year​​. It also confirmed it was exiting its cakes and desserts business, with the sale of its Hull operation to venture-capital-backed ambient cake manufacturer Bright Blue Foods​​. In interim results posted today the company said it was also on track for the disposal of its Evercreech facility in its third financial quarter.