Financial roundup: pandemic pummels food firms

Revenue plunged 15% in Greencore’s first financial quarter (Q1) of 2021, covering the 13 weeks to 25 December, hit by ‘the reduction in mobility arising from tiered restrictions and lockdowns in the UK’, the company stated. Food-to-go was inevitably affected, with Q1 sales down 21.7%. Sales in other convenience categories by comparison only fell slightly, down 2.1%.

Clive Black, head of research at Shore Capital, said under the circumstances Greencore had reported a ‘resilient’ performance and was well-placed to develop new business as 2021 progressed.

“In this respect we believe that new product development continues, we suspect including goods for the foodservice channel and the plant-based market as the group prepares for stronger H2​ [second half of its current financial year] trading activity,”​ he said.

High levels of liquidity​

“Greencore is expected by us to both tough it out but also be ready for the new norm that COVID vaccinated Britain may bring.” ​He noted it had recorded high levels of liquidity and positive pre-tax profit progress. Its extensive Brexit preparations had also cushioned it from much of the negative effects after the transition period ended.

“A focused Greencore should be very well positioned to deliver a much stronger H2 FY2021 [second half of its current financial year] and so see through the financial potential of its recovering product categories …”​ Black predicted it would be able to grow its shares of retail and foodservice markets as business picked up.

Greencore chief executive officer Patrick Coveney said: “We have secured a number of new business wins in the quarter and have a healthy commercial pipeline as we look forward …​

“We are confident that we have the capability and resources to build back the business rapidly as soon as market conditions allow; and we are optimistic about the medium-term prospects for Greencore.”​

RGF interim figures​

RGF revenue from continuing operations decreased by 26.4% in the six months to 30 September 2020, to £23.9m, compared with £32.4m in the same period in 2019.

The company achieved underlying adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of £0.3m despite the sales decline through a mixture of cost savings, new business and support from the Government’s furlough scheme. That said, the business reported a pre-tax loss of £4m, versus £2.5m in the same period during the previous year.

RGF’s Food Ingredients (Brighter Foods) business performed the best, chalking up underlying adjusted EBITDA of £1.1m, albeit down from £2.5m in 2019. Revenue was £4m lower than the first half of the previous year, reflecting a drop in revenue for its largest customer as a result of lockdown measures.

Its Cake Decoration (Renshaw and Rainbow Dust) business suffered a loss in underlying adjusted EBITDA of £0.6m (2019: £0.6m profit).  Revenues from the UK and Europe wholesale and sugarcraft markets fell significantly on the prior year as restaurants and consumer outlets experienced shutdowns and lower trading. However, RGF stressed the interim period was typically the quietest in the year for this division.

New products​

It also said both businesses had continued to innovate, with 35 new products being launched by Brighter Foods and 40 by Renshaw with hoped-for annual revenues of £8m and £2m respectively.

The business reported new business in the first half of the year and good recovery in overseas markets.

Executive chairman Mike Holt said: “Although the group inevitably had a difficult first half, due to the impact of COVID-19 and Brexit uncertainties, as reported earlier this month, Q3 performance was much improved on the first half and in-line with last year. Both our businesses are getting stronger and more resilient due to operational efficiencies made during the last 12 months. ​

Once COVID-19 restrictions are lifted, Brighter Foods is well-placed to continue the growth reported in FY20 – capitalising on its additional capacity, market opportunities and new product innovation capabilities – and Renshaw should continue to benefit from its recent restructuring and greater focus on product innovation and customer service.”​

AG Barr​

In a trading update for the financial year to 24 January, AG Barr acknowledged annual sales were down more than £28m on the previous year. However, it said pre-tax profit would be ahead of market expectations.

In the first four months of the second half, trading had been at the upper end of predictions, the company said. However, since early December 2020 social restrictions across the UK had increased leading to full lockdown in January. This had hit hospitality and ‘drink now’ purchases.

Chief executive Roger White said: "Within a volatile environment our sites have remained safe and operational and I wish to thank our employees who have worked tirelessly to support our customers and consumers in these testing times.​

“I am pleased with the performance we have delivered against a very difficult backdrop which further demonstrates the underlying resilience of our people, business and brands. We expect the months ahead to be challenging for everyone, however I remain confident in our ability to navigate these very uncertain times."​