Research analyst Darren Shirley and head of research Clive Black stated Greencore had suffered through the coronavirus crisis, which could shrink food and beverage channels by more than 30%, through no fault of its own: “Challenges persist, of course, but we can see that Greencore is quicker, leaner, stronger and better, learning constructively from the pandemic.”
The pair added: “‘Other Convenience’ reported a sales increase of 3% through Q4 [the fourth financial quarter] 2020, a modest uptick from 2% in Q3 2020, we believe reflecting an improved performance in the group’s ready meals business in particular.”
However, they admitted: “There is more do around channel focus, range development and operating processes, for example automation, to best position the business for how the UK market is going to evolve.”
Greencore trading update
The comments follow the publication of Greencore’s trading update for the fourth quarter and the full-year ended 25 September 2020, ahead of its full-year financial results – to be published 24 November.
The manufacturer revealed an uptick in sales across the group from the third quarter (Q3) 2020 to the fourth quarter (Q4), with food-to go sales declines recovering from -53% to -28%.
However, with sales in the sector still substantially down, Greencore said the ongoing pandemic was leaving consumer sentiment and broader economic activity ‘fragile and subdued’.
Demand grew in Q3 thanks to Government measures to ease lockdowns, prompting it to work with its customers to tailor product ranges, formats and service models to this new environment, Greencore claimed.
Temporarily ceasing production
“Underlying demand improved through the quarter, notwithstanding the decision to temporarily cease production at the Northampton site during August 2020 following the COVID-19 outbreak in the area and at the site,” stated the company’s trading update. “Production was restored fully at the site by the middle of September 2020.”
Greencore anticipated full-year revenue at £1.27bn, while expecting adjusted earnings before interest, tax, depreciation and amortisation of £85m. That figure included £10m of non-recurring operating costs incurred by the Group in responding to the impact of COVID-19.
The business believed the drop in food-to-go sales would lead to a reported 14% fall in group sales for the full-year, compared to the previous financial year.
Shore Capital head of research Clive Black said: “We can see that Greencore is quicker, leaner, stronger and better, learning constructively from the pandemic.
“Taking this welcome statement into account, Greencore is a market leader to us operating in an industry that is undergoing significant and rapid change. The coronavirus crisis has served to be a catalyst for dramatic adjustment to the domestic food system, centred upon working from home.
“Such behavioural shift is the key factor behind a structural adjustment in the size of the British food and beverage channel to us, underscored by more recent restrictions on the pub and restaurant trade – such as the 10pm curfew.”
Commenting on the trading update, Greencore chief executive Patrick Coveney said the fourth quarter had seen an ongoing improvement in demand for Greencore’s products.
“I am hugely proud of the way that our people are supporting each other and our customers during this extraordinarily challenging period, and it is their hard work and dedication that is driving a resilient and improving trading performance,” Coveney added.
“Our agile business model, the depth of our customer relationships and the strength of our product range has enabled us to already capitalise on new business opportunities that will help underpin the build back in Group revenue. We are realistic but also confident in our plans for FY21, and remain excited by Greencore's longer term prospects.”
Meanwhile, last month saw Labour MP for Brent Central Dawn Butler has called for the Government to intervene to require Greencore to provide food factory workers with 100% of their normal pay during their period of self-isolation.