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Greencore investors welcomed the sandwich maker’s healthy profit growth this week as it posted “stronger than expected” full year results.
The group’s operating profit rose 28% to £84.3m in the full year to 27 September, as it maintained its progress towards building a “leaner, more agile” business.
The food manufacturer’s share price was up 10% in early trading on Tuesday and is now up 126% since the start of the year.
The FTSE 250 business has reorganised its operations since CEO Dalton Philips launched a turnaround plan for the company upon joining in 2022.
It is now in the second stage – horizon two - focused on rebuilding profitability to pre-pandemic levels before it looks to try driving growth.
“In time, we’ll look at new channels, new categories where there’s going to be further growth but for the moment we’re still very much focused on horizon two,” Philips told the Grocer.
Its search for efficiencies has included the sale of Trilby Trading to KTC in September 2023, a disposal that led Greencore’s total revenue to fall 5.6% to £1.8bn last year.
Greencore also finished consolidating its two soup factories by closing a site in Kiveton. Any further closures across the business are unlikely, said Philips, as “it’s not really in the Greencore to be rationalizing like that.”
“We thought we needed to do it based on the circumstances we found ourselves in,” he said. “Now all businesses are either covering their cost of capital or are on a trajectory to cover their cost of capital.”
Greencore said its decision to “resign a number of low margin contracts” in the previous financial year drove a £8m decline in annual revenue. Many of these were in the group’s food-to-go categories which accounts for 69% of its total revenue.
Excluding these, Greencore delivered like-for-like revenue growth of 3.4% through a combination of volume growth of 0.5% and the recovery of inflationary costs.
The company’s costs are expected to come under pressure from April due to a annualised rise of £15m in labour costs due to the national living wage and national insurance changes, although Greencore believes it can mitigate these with further efficiency drives and price rises.
The business is looking to ramp up new product development in the next 12 months with 106 people now working on innovation, said Philips. “Through the pandemic and cost-of-living crisis, retailers really had to pull back on their innovation engines because the consumers just weren’t prepared to take the risk of trying a new product.
“But we have seen all the retailers revamp all their core ranges over the last 18 to 24 months and invested first in improving their range with quality upgrades.”
Catherine Gubbins, Greencore CFO, added that given the strength of its balance sheet, the company is now starting to consider M&A with an eye to “opportunities in adjacent categories or channels” across a number of geographies.
Morning update
Marston’s is back in profit after selling its share in brewing giant Carlsberg earlier this year to focus solely on pubs.
Pre-tax profits rose to £14.4m from a £30.6m loss the year before as it also benefited from stronger operational efficiencies. Revenue was up 3% to £898.6m
In July, the business sold off its 40% stake in its Carlsberg Marston’s Brewing Company joint venture with the Danish beer group in order to focus on pubs.
Marston’s said the deal helped cut its net debt by more than a quarter to £883.7 million at the end of September, compared with £1.18 billion a year earlier.
CEO Justin Platt said it had been “a defining year” as the company begins “an exciting new chapter”.
“The sale of our stake in CMBC has been transformational, enabling us to significantly reduce debt, increase our flexibility and focus on what we do best: running great local pubs.”
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