Top story

Convenience foods specialist Greencore (GNC) has posted an improvement in underlying sales and profits after “fundamental reset” of the business following its exit from the US.

Reporting its results for the year to 27 September, Greencore said revenues from continuing operations fell by 3.5% in the period to £1.45bn, primarily reflecting the impact of site disposals and exits (Hull, Evercreech and Kiveton longer life ready meals).

It also completed the disposal of its US business on 25 November 2018, the results of which are included as discontinued operations.

However, pro forma revenues grew by 2.6%, driven by increased sales in its core food to go categories of sandwiches, salads, sushi and chilled snacking.

These categories totalled £962.5m of sales (or 66% of revenues) and were up by 3.6%. Excluding its 2019 acquisition of Freshtime, pro forma revenue growth in the category was 3.3% with growth of 7% in the first half and just 0.3% in the second half of the year.

Greencore said market growth was “below historical trends” due to a mix of the challenging market conditions, unseasonal weather, a varied trading performance across customers, and a strong comparative period in the second half of the year.

The Group’s other convenience categories comprise activities in the chilled ready meals, chilled soups and sauces, chilled quiche, ambient sauces and pickles, and frozen Yorkshire Pudding categories, as well as Irish ingredients trading businesses in Ireland.

Reported revenue across these businesses dropped by 15% to £483.6m. Pro forma revenue increased by 1.2%, when excluding sites either disposed of or that have ceased trading.

Overall adjusted operating profit rose by 0.9% to £105.5m and adjusted operating margin rose by 30bps to 7.3%.

Greencore said the improved bottom lined was delivered against the backdrop of a “subdued UK trading environment”, especially in the second half of the year, with “cautious consumer demand particularly in the context of uncertainty around Brexit”.

Headline operating profit increased from £49.8m to £99.8m as a result of a reduction in the level of exceptional items during the year.

On Brexit, Greencore said the direct impact remained “modest” in the period though it cautioned: “The group continues to believe that the risks from Brexit are manageable in the medium term, while acknowledging potential near-term challenges associated with a disorderly exit.”

CEO Patrick Coveney said: “Over the past twelve months we have fundamentally reset our business, anchored by a clear strategy to drive shareholder value by expanding our category and channel capabilities within the diverse, growing and attractive UK food to go market.

“The evidence of this can be seen in the launch of multiple commercial and innovation projects with key customers, and in the recent acquisition of Freshtime. As a result of this reset strategy, we anticipate another year of profitable growth in 2020.”

Greencore booked a profit of £55.9m on the disposal of its US business, including transaction and separation costs of £17.9m.

Morning update

Pork giant Cranswick (CWK) has made a “positive start to the year”, with the first half sales up year-on-year amid strong performance in the domestic market and rising exports.

Total revenue in the period was up 7.1% to £770m, with like-for-like revenue, excluding Katsouris Brothers up 5.4%.

This organic growth was primarily driven by pricing, with volumes up 0.6%. Revenue growth from fresh pork, pastry, continental products, bacon and poultry was partly offset by lower year-on-year revenue in other pork related categories.

Total fresh pork revenues were up 15.1% in the period, reflecting stronger wholesale and export demand through the first half of the year, with the number of pigs processed during the period increasing by 8.8%. Retail sales were also modestly ahead.

Poultry sales increased by 5%, with a more moderate growth profile compared to recent reporting periods primarily reflecting the annualisation of new business wins in the cooked poultry category.

Convenience revenues were up 5.1%, reflecting strong growth in continental products partly offset by lower cooked meats revenue. Excluding the contribution from Katsouris, like-for-like convenience revenue was a more modest 0.5% ahead.

Gourmet products revenue was in line with the same period last year, with strong growth in pastry and bacon offsetting lower sausage revenue.

Total export revenues jumped 65%, including Far East exports where revenues were 94% ahead

During the period Cranswick also commissioned a ‘world-class’ £75m primary poultry processing facility in Eye, Suffolk, which began in early November

Total adjusted profit before tax for the period was 3.6% higher at £46.4m compared to £44.8m in the corresponding period last year.

Adjusted earnings per share on the same basis was up 2.3% at 71.6p compared to 70p last year.

CEO Adam Couch commented: “We have made a positive start to the year with reported revenue growth of 7.1% underpinned by a very strong performance in our Far East export markets. The UK market remains highly competitive.

“We have again invested at record levels across our asset base to position the business for future growth. The Katsouris Brothers business, acquired in July, has been integrated successfully and is performing in line with our expectations.

“I remain confident that continued focus on the strengths of our business, which include long-standing customer relationships, breadth, quality and relevance of our products, robust financial position and industry leading infrastructure, will support the further successful development of Cranswick over the near and longer term.”

FTSE 100 catering giant Compass Group (CPG) has reported “strong” annual results this morning for the year to 30 September, with organic revenue growth of 6.4%,

Organic revenue growth of 6.4%, is above the group’s long term target range of 4-6% and was driven by excellent performance in North America.

North America saw broad based organic revenue growth of 7.7%, while Europe posted growth of 4.1% with strong performances in UK defence and sports & leisure offsetting business & industry volume weakness

Rest of World growth of 4.3% driven by strong performances in Turkey, India and Spanish-speaking LATAM

Operating profits of £1.9bn were up by £84m or 4.7% on a constant currency basis as operating margin was maintained at 7.4%.

Statutory operating profit decreased by 5.4% as a result of the impact of the cost action programme offset by higher profits and foreign exchange benefit.

During the period Compass Group continued to strengthen and simplify its portfolio, having completed several acquisitions and disposals for net cash cost of £377m and agreed the proposed acquisition of Fazer Food Services in the Nordics for €475m.

Compass said the outlook for the group “remains strong”, with expectations of 2020 organic growth around the mid-point of its 4-6% guidance range whilst maintaining strong margins.

“Against the backdrop of a deteriorating macro environment in Europe we are taking prompt action to adjust our cost base,” the group said.

These actions, which have also been extended to certain Rest of World markets, result in non-underlying cash charges of around £160m over 2019 and 2020, and a non-cash charge of £140m.

CEO Dominic Blakemore said: “Compass has had another strong year… Despite this good performance, we are not immune to the macro environment. Deteriorating business and consumer confidence in Europe has impacted our Business & Industry volumes, new business activity and margin. Given these trends, we are taking prompt action in Europe and certain Rest of World markets to adjust our cost base

Our expectations for the Group in 2020 are positive although we remain cautious on the macro environment in Europe… In the longer term, we remain excited about the significant structural growth opportunities globally, the potential for further revenue and profit growth, combined with further returns to shareholders.”

Finally, pet goods retailer Pets and Home (PETS) has delivered a strongly improved first half performance for the 28 week period to 10 October and is on track to deliver full year profits ahead of plan.

It maintained sales momentum in its retail business during the period, with like-for-like revenue growth of 7.8%.

Omnichannel revenues were up 31.7% to £46.5m, while stores delivered positive LFL revenue growth and a solid operating margin

Its Vet Group underlying business also performed well, with LFL revenue growth of 6.4%

The group said it is introducing more customers to our complete pet care offer, with the number of its VIPs who purchase both products and a service has grown 22% year-on-year, and now represents 16% of all active members

The total number of subscription customers across the group is now over 790,000

Group underlying PBT, on a comparable pre-IFRS16 basis, up 18.9% year-on-year to £45m, driven by quality revenue growth in retail converting strongly to profit

Given progress in the first half, the group said it remains confident about the rest of the year despite continued consumer uncertainty, and expect full year profit towards top end of current market consensus.

CEO Peter Pritchard commented: “I am very pleased with what we have achieved in the first half of the year. We have executed our plans well, and this has been reflected in the strong customer sales growth across thegGroup.

“We have seen sustained momentum in Retail, with a 2-year like-for-like of 13%. This has been complemented by a meticulous delivery of our Vet Group recalibration. The programme to buy out a number of Joint Venture practices is already complete, whilst changes we have made to the fee arrangements for ongoing practices are already showing signs of positive progress and will be followed by further planned adjustments in the second half of the year.

“All this provides a strong foundation, meaning we have much to look forward to in FY20 and beyond, and we now expect to return to profit growth a year ahead of our original plan. In the meantime, we will remain focussed on serving our customers, their pets and our partners better than ever before.”

On the markets this morning, the FTSE 100 has consolidated yesterday’s gains, edging down a couple of points to 7,393.3pts.

Greencore has dropped 5.8% to 233.9p in early trading and Compass Group is down 6.1% to 1,945.5p.

Cranswick is up 2.2% to 3,278p and Pets at Home has surged up by 9.1% to 234p.

Other risers include Bakkavor, up 3.8% to 127.4p and PayPoint, up 2.7% to 991p.

Fallers include Devro (DVO), down 1.7% to 162p and Glanbia (GLB), down 1.2% to €10.69.

Yesterday in the City

The FTSE 100 started the week with a bang, jumping 1% to 7,396.3pts as optimism over US-China trade talks and a stable general election result in the UK helped improve market sentiment.

CAKE Box (CAKE) rose 10.4% yesterday to 153.5p after it announced sales had climbed 6% in the first six months of the year on the back of new store openings and increased demand.

Other strong retail risers yesterday included Marks & Spencer (MKS), up 4.6% to 200.8p, Pets at Home (PETS), up 2.6% to 214.4p, Ocado (OCDO), up 1.8% to 1,147p, B&M European Value Retail (BME), up 1.8% to 380.5p and WH Smith (SMWH), up 1.7% to 2,408p.

FeverTree (FEVR) continued its recovery from recent falls, rising a further 4.3% to 2,185p, which AG Barr (BAG) was up 2.5% to 625p, Coca-Cola HBC (CCH) rose 2.1% to 2,538p and Compass Group was up 1.9% to 2,071p ahead of its annual results this morning.

The days few fallers included Glanbia (GLB), down 3.4% to €10.82, Premier Foods (PFD), down 3.3% to 39.5p, Hotel Chocolat (HOTC), down 3.2% to 421p, Naked Wines (WINE), down 2.7% to 220p, McColl’s (MCLS), down 1.5% to 41.9p and Imperial Brands (IMB), down 1.2% to 1,669p.

Topics