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Greencore has seen a strong rebound in revenues in its financial year to 30 September as on-the-go consumption returned, albeit slowed in the fourth quarter.

Pro forma revenue growth in its fourth quarter rose to 25% year on year, driven by a combination of increased volumes, a low-teen percentage increase in underlying pricing, the onboarding of new business in ready meals and increased revenue in the group’s Irish ingredients trading business.

Fourth quarter revenues growth of 25% was lower than the growth rate in Q3 due to a stronger comparative period, the volume impact of rail strikes and the unexpected bank holiday, and the full year effect of new business wins in the corresponding period last year.

Fourth quarter food to go growth was 23% compared to 35% for the full year, while other convenience food sales were up 29% compared to 19% for the full year.

Overall fourth quarter growth was also slowed than full-year group-wide growth of 29%, driven by strong volume recovery while recovering significant levels of ongoing inflation and enhancing profit and cash conversion.

Greencore saw a 35% increase in food to go categories during the full year, reflecting volume growth, the onboarding of new business and the impact of inflation recovery.

In the fourth quarter it also completed the onboarding of new business enabled by the £30m strategic capital investment across three manufacturing sites.

However, adjusted operating profit will be at the lower end of the previously guided range of £72-£77m after absorbing the impact on volume and operations of rail strikes and the additional September bank holiday.

In a positive outlook, Greencore said it does not currently see an impact from macro economic concerns as consumer demand has held up well, although it remains watchful and cautious about the potential impact of cost-of-living factors through the year ahead.

“We remain focused on the recovery of inflation through all mechanisms available and are working with our customers and supply partners to mitigate the ongoing impact of the persistently high inflation across the industry on consumer prices,” it stated.

“We have substantially recovered the inflation that we have experienced over the last 12 months, and we are making decisions whether to bid for or renew contracts based on their economics, including the ability to recover inflation.”

Greencore shares are down 1.4% this morning to 68.3p.

Morning update

Retail sales grew once more in September as higher prices compensated for lower sales volumes.

The BRC-KPMG Retail Sales Monitor for September found total sales were up 2.2% year-on-year, above the 3-month average of 1.9% but below the 12-month average of 2.7%.

UK retail sales increased 1.8% on a like-for-like basis from September 2021, when they had also decreased by 0.6%.

Over the three months to September, food sales increased 4.6% on a total basis and 4.2% on a like-for-like basis. This is above the 12-month total average growth of 1.1% and for the month of September food was in growth year-on-year.

Non-food retail sales decreased by 0.4% over the same three month period on a total basis and 1.1% on a like-for-like basis.

In-Store sales of non-food items increased 2.2% on a total basis and 1.1% on a like-for-like basis, while online non-food sales decreased by 2.6% in September, against a decline of 7.3% in September 2021.

BRC CEO Helen Dickinson commented: “While UK retail sales grew in September, this represented another month of falling sales volumes given high levels of inflation. As consumer confidence continued to fall, people shopped cautiously, avoiding large ticket items such as new computers, TVs and furniture. Many households are also preparing for higher energy costs this winter, with blankets, warm clothing, and energy-efficient appliances, such as air dryers and air fryers, all selling well.

“A difficult winter looms for both retailers and consumers. Costs are increasing throughout retailers’ supply chain, the pound remains weak, interest rates are rising, and a tight labour market is pushing up the cost of hiring. All of this is making it harder for retailers to reduce prices and help struggling households. The industry urgently needs clarity from the government about business rates next year and is calling for a freeze in the multiplier. Without this, retailers will face an £800m hike in their bills, which will inevitably put additional pressure on prices for UK consumers.”

Paul Martin, UK head of retail at KPMG, added: “Retail sales remained positive in September with growth of more than 2% on the same period last year – but much of this will be attributed to increased prices as volume of sales continue to be challenging.

“Once again, clothing and footwear came to the rescue of the high street, and back to school purchasing was a driver in retail growth figures, with sales of children’s shoes up over 15%. Sales of household appliances and cooking accessories also moved into positive territory this month, as consumers look to purchase more energy efficient kitchen items in light of rising energy prices. Online sales remain down year on year, and those categories that did see some growth remained in single figures.

“With interest rates, inflation, labour, energy and costs of goods continuing to climb, retailers are heading into one of the most challenging Christmas shopping periods they have had to deal with in years. Consumer confidence remains low, and retailers are having to tread a very fine line between protecting their own margins and further denting confidence by passing on price rises. A laser focus on their own costs and efficiencies in order to remain price competitive this festive season will be essential. As consumers focus on getting value for money through switching to own brand items and seeking out discounts, getting pricing and promotional activity right could be the difference between a successful or dismal Christmas for retailers this year.”

Commenting on food and drink, IGD CEO Susan Barratt said: “Food and drink sales in September fell behind August as the weather cooled and life returned to normal after the holidays. However, there was a small uptick in sales in the week following the death of Queen Elizabeth II as the nation came together to mourn her passing, distracted momentarily from the stiffening economic headwinds.

“Nevertheless, the month was dominated by rising prices, particularly for food and energy, but the Energy Price Guarantee announced by the government contributed to a small rise in our Shopper Confidence Index. However, without much good news out there and shoppers facing a tough winter, there are still many challenges ahead.”

Elsewhere, Tesco is continuing its share buyback scheme, announced in April 2022, appointing HSBC to repurchase £100m as part of its existing £750m programme.

The purpose of these share purchases is to reduce the company’s share capital, Tesco said.

Pub group Marston’s has recovered its sales to almost pre-Covid levels despite the wider macro-economic concerns.

Total like-for-like sales for the 52-week period were down 1% 2019, with the small drop reflecting the impact of trading restrictions in December and January as a result of Omicron and the corresponding impact on consumer sentiment in the first half.

Total retail sales in the Group’s managed and franchise pubs were up 2% as drink sales have continued to outperform food sales.

Like-for-like sales were “encouraging” and continued to improve in the 10 weeks from 24 July to 1 October; being 3% up against 2019 and 4% up on last year.

Growth continues to be predominantly driven by drink sales, the group said, with food sales weaker principally due to the hot weather.

“The level of customer demand remains encouraging, notwithstanding the continued uncertainty around the cost of living. We continue to have confidence that our pub strategy is beginning to deliver positive momentum, evidenced by this good trading performance.”

“Our strategy is centred upon delivering affordable pub experiences for our guests in a quality environment both inside and out. Looking forward, the combination of our strategy and the predominantly community-based location of our pubs means we are well-placed to meet the challenging consumer environment.”

On the markets this morning the FTSE 100 has opened 0.9% down to 6,896.8pts.

Early risers include Marston’s, up 3.3% to 37.1p, Devro, up 6% to 176.8p and McBride, up 6.8% to 26.7p.

Fallers include Virgin Wines, down 4% to 48p, Bakkavor, down 3.8% to 93.4p and Kerry Group, down 3.5% to 89.4p.

Yesterday in the City

The FTSE 100 closed down 0.5% yesterday at 6,959.3pts.

Fallers included THG, down 9.7% to 32.3p, AG Barr, down 4.2% to 448p, Premier Foods, down 4.1% to 92.8p, Cranswick, down 3.8% to 2,626p, Just Eat Takeaway.com, down 3.5% to 1,208.8p, Greencore, down 3.4% to 69.3p and Deliveroo, down 3.1% to 79.5p.

The day’s risers included DS Smith, up 12.1% to 271.1p, FeverTree, up 4% to 875.5p, Kerry Group, up 3.2% to 92.7p, Marks & Spencer, up 2.8% to 96.5p, Coca-Cola HBC, up 2.8% to 1,959p, Tesco, up 2.7% to 206.1p and B&M European Value Retail, up 2.6% to 315p.

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