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Greencore has reported a 15% drop in first quarter sales due to the impact of new Covid restrictions, but the effect on food to go remains less severe than during the initial lockdown in March 2020.

The group’s reported revenue in 13 weeks to 25 December 2020 was £312.7m, a decrease of 15% on the prior year, reflecting the impact of COVID-19 related restrictions on demand in food to go categories

In the group’s food to go categories, reported revenue was £188.5m in Q1, a decrease of 21.7% on both a reported and pro forma basis.

It said the recovery in demand that was evident at the end of its fourth quarter was impeded by the tiered regional restrictions on mobility introduced across the UK in October, and then by a subsequent national lockdown until early December, followed by the implementation of tiered regional lockdowns.

However, the negative effect is not as marked as the initial lockdown in March 2020. Currently, pro forma group revenue is approximately 20% below prior year levels, with performance in food to go categories down approximately 35% on prior year while other convenience categories remain stable

Meanwhile, Greencore said it continued to execute well against growth opportunities and secured additional new business during the quarter.

Reported revenue in the Group’s other convenience food categories was £124.1m in Q1, a decrease of 2.1% on both a reported and pro forma basis.

During the quarter the Group continued to focus on cost and cash flow mitigants to protect the business, including the renewed use of furlough supports, pay freezes, elimination of discretionary spending, and a reduction in planned capital expenditures.

These initiatives supported the delivery of positive adjusted operating profit and adjusted EBITDA in Q1.

Forward looking guidance remains suspended due to the uncertainty regarding the during and impact of the coronavirus on the group, but it said the operational impact of Brexit has been “modest” to date due to extensive planning to mitigate supply chain volatility.

CEO Patrick Coveney commented: “This has been another challenging period for Greencore, and as ever I would like to thank all of our colleagues for the outstanding professionalism and resilience that they are showing. Although the difficult trading conditions are likely to persist in the near term, we remain confident that demand for our food to go categories will recover strongly as the effects of COVID-19 recede and mobility restrictions are removed.

“We secured a number of new business wins in the quarter and have a healthy commercial pipeline as we look forward. In addition, the operational, debt and equity measures that we have taken in recent months provide us with a strong foundation from which to navigate our way through all of the challenges of COVID-19.

“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.”

Greencore shares are down 1.2% to 115.2p on the news.

Morning update

AG Barr is on course to post annual pre-tax profits ahead of market expectations after a strong recovery in its second half before new COVID restrictions were introduced.

Updating the market on its performance for the year to 24 January 2021, the Irn Bru maker said revenue for the year is expected to be £227m, which although down from the £255.7m posted last year is marginally ahead of current guidance.

Operating margin before exceptional items across the full financial year is expected to be in line with the prior year leading to a profit before tax and exceptional items performance ahead of market expectations.

In the first four months of the second half trading was at the “upper end” of its scenario plans.

However, COVID-19 developments since early December 2020, in particular increased social restrictions across the UK and the entry into full lockdown in January 2021, are now having an impact, most notably in the hospitality and “drink now” categories.

CEO 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.”

The full year results are expected to be announced on 30 March 2021.

Soap and beauty products supplier PZ Cussons has continued to see a sales boom during the coronavirus period, with first half sales up by almost 15%.

Revenue in the six months to 30 November were up 14.6% to £312.9m with growth in all three Regions.

Europe & Americas was the group’s star performer with “outstanding” growth related to the performance of Carex as a result of the demand for hand wash and hand sanitiser associated with the COVID-19 pandemic, allied to a strong performance in Asia Pacific and an improved performance in Africa.

Its ‘focus brands’ revenue grew 21.9% in the period, driven by Carex, Morning Fresh, Cussons Baby and St Tropez.

Revenue growth of 32.6% driven by Carex, as the number one choice of consumers in both the hand wash and hand sanitiser categories.

Europea & Americas revenues were up 32.6% in the period, though Imperial Leather adversely impacted by the prioritisation of Carex production with re-listing of products late in the second quarter. Original Source saw growth in its core proposition but declined due to a reduction in promotional activity and the simplification of its portfolio.

Beauty revenue showed a modest reduction with on-line performance of St Tropez and Sanctuary almost offsetting the decline in the UK high street.

Asia Pacific sales increased by 4.2% with growth in key markets of Australia and Indonesia.

Africa revenues were up by 5.9% driven by growth in all categories across its Nigerian business.

Group adjusted operating profit at £36.4m was 14.8% higher than last year with growth in all three Regions.

There was excellent profit growth in the UK with beauty also growing profit despite a modest reduction in revenue. Indonesia and Australia delivered an increase in operating profit, while Nigeria grew profit with increased revenue and improved margin offsetting transactional foreign exchange losses.

On an IFRS basis, reported operating profit was down marginally to £37.8m from £39m, with the decline driven by the profit on disposal of its Greek business last year and exceptional costs related to the extension of our group strategy project to include Nigeria simplification.

In the second half PZ Cussons expects continued economic uncertainty associated with COVID-19, the risk of weaker consumer confidence combined with already evident upward cost pressure.

Despite these external headwinds it plans to continue to increase investment in its brands and performance to remain in line with current market expectations.

CEO Jonathan Myers said: “Our focus in the first half of this year has been to deliver a fast start for the business, with emphasis on profitable revenue growth as well as maintaining our strong balance sheet discipline. We saw this as essential to reset both in terms of organisational pace and agility to adapt to changing consumer and shopper habits.

“In parallel, we completed our review of the strategy to become a brand-led and consumer-focused organisation, delivering sustainable profitable growth with hygiene, baby and beauty at our core.”

Real Good Foods has reported a 26.4% slump in first half revenues from continuing operations as a result of COVID lockdowns.

Sales were down 26.4% to £23.9m as customers reduced orders during the pandemic.

Food Ingrediants (Brighter Foods) revenue in the six-month period was £4m lower than the first half of last year, having been impacted by revenues at its largest customer reducing by £4.8m due to the covid-19 lockdowns

Cake Decoration (Renshaw and Rainbow Dust) saw a significant reduction in revenues from the wholesale and sugarcraft markets (both in the UK and Europe) with restaurants and consumer outlets experiencing shut-downs and lower trading during covid-19.

The impact of lower revenues was partially mitigated by cost savings, new business, and the Government’s furlough scheme, meaning underlying adjusted EBITDA was still positive at £0.3m compared to £2.8m last year.

Loss before tax was £4m compared to a £2.5m loss last year.

Mike Holt, executive chairman, 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.”

Retail technology group Eagle Eye has posted a trading update for the 6 months ended 31 December 2020.

Group revenues were up 8% to £10.8m in the period, driven by new business wins in the UK and internationally, securing Woolworths Group in Australia, Pret a Manger in the UK and a leading speciality office and home products & services retailer in the US.

COVID-19-related UK lockdown continues to negatively impact the group’s food & beverage, non-grocery retail revenue streams, which accounted for approximately 10% of Group revenue pre-COVID-19.

However, continued careful management of the cost base whilst ensuring the necessary investment in the business continues, resulted in an increase in adjusted EBITDA for the eriod of 62% to £2.1m.

The group said that the coronavirus may continue to cause new contract discussions to be extended, and is expected to continue to impact the Group’s F&B and Non-Grocery customer segment, causing the board to remain cautious in its outlook for this segment.

However, the careful management of the business, successful new wins in the first half of the year and growth of the existing customer base, mean profit for the financial year ending 30 June 2021 remains in line with the board’s expectations.

CEO Tim Mason said: “The pandemic has highlighted the need for retailers to digitally engage with their customers, and yet the digital transformation of the global loyalty, promotion and gift markets is still very much in its infancy. With our growing international customer base we have proven that Eagle Eye has the potential to sit at the heart of this transformation, presenting us with an exciting long-term growth opportunity.

“While it is clear COVID will adversely impact a section of our customer base for the remainder of the financial year, we are confident that we will continue to grow our sales and profits, and our pipeline has never been stronger both in quality and quantity.

“With high levels of recurring revenue, very low levels of customer churn and an expanding customer base, the Board is encouraged by the significantly increased breadth of Eagle Eye’s opportunity and believes there is considerable potential for expansion as the situation normalises.”

Finally, Supermarket Income REIT has acquired a Morrisons supermarket in Wisbech, Cambridgeshire from Aberdeen Standard Investments.

The store was developed in the 1980’s and was subsequently extended and refurbished by Morrisons in 2011 to comprise 37,000 sq ft net sales area. It is being acquired with a new 26 year lease (with a tenant-only break option in year 20) and is subject to five yearly, upwards only, RPI-linked rent reviews.

The total consideration is £30m (excluding acquisition costs) representing a combined net initial yield of 5.0%.

Ben Green, Director of Atrato Capital Limited, the Investment Adviser to Supermarket Income REIT, said: “This modern store is a great addition to our growing portfolio of omnichannel stores. The property has strong underlying fundamentals with an attractive lease term providing inflation linked income in excess of 20 years.”

On the markets this morning, the FTSE 100 has recovered 0.6% to 6,677.2p so far this morning.

Early risers include McBride up 4.6% to 82.4p, Compass Group, up 3.1% to 1,363p and Ocado, up 2.3% to 2,818.4p.

Fallers so far include Marston’s, down 1.8% to 74.5p, Bakkavor, down 1.7% to 83p and Greencore, down 1.2% to 115.2p.

Yesterday in the City

The FTSE 100 started the week on the back foot yesterday, dropping 0.8% to 6,638.9pts on intensifying concerns over the spread of the coronavirus and global vaccination efforts.

One more food to go and travel groups were in the firing line, with SSP Group down 8% to 307.4p yesterday, WH Smith down 7.7% to 1,593p, Compass Group down 5.2% to 1,321.5p and Greggs down 2.8% to 1,999p.

Other fallers included Science in Sport, down 6.4% to 44p, Pets at Home, down 3.6% to 417.4p and DS Smith, down 3.4% to 370.4p.

The day’s risers included online wine business Naked Wines, up 4.7% to 762p and consumer health and cleaning giant Reckitt Benckiser, up 4.5% to 6,554.

Other risers included Coca-Cola European Partners, up 3.9% to €38.97, Bakkavor, up 3.6% to 84.4p, PZ Cussons, up 2.8% to 238p, Ocado, up 2.4% to 2,754p and Domino’s Pizza Group, up 2.3% to 345.4p.

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