Greencore, which claims to hold a 60% share of the UK grocery sandwich market, has reported almost 20% growth in its food-to-go sales in the past year.
Reporting its results for the full year ending 29 September, the Dublin-based business said its UK operations had benefited from business wins and by extending a number of contracts. It now has multi-year sole supply agreements in place with all of its core customers.
This had contributed to pro forma revenue growth of 18.8% and reported revenue growth of 24.4% in the firm’s food-to-go business, which includes sandwiches, sushi and salad.
The company’s total UK & Ireland reported revenue rose 14.3% to £1,438.4m, which Greencore said had been achieved against the backdrop of a “challenging UK trading environment comprising intense retail competition and significant cost inflation”. Adjusted operating profit rose 2.6% to £106.8m.
Greencore said the wider food-to-go market was continuing to expand, with 6.6% category growth in the grocery channel this year.
“This growth is supported by favourable consumer trends, including a desire for convenience, an increase in snacking occasions, and a preference for healthier products,” stated the company, adding that growth was also being supported by retailers giving more space to the category.
Activity by the business in the past year has included investments in the Park Royal and Bow sites to enable the launch of a new contract.
This summer, Greencore acquired a 40,000sq m manufacturing facility opened by Tasties of Chester two years ago. The processing site at West Drayton, near Heathrow, produces hot and cold food-to-go products.
The company today said the acquisition of the “modern, well invested site” gave it scope to grow with new customers outside the main grocery retail channel.
Greencore recently announced the streamlining of its UK organisation and cost structure to reduce overheads. The group has also ended the planned multi-year rollout of a common Enterprise Resource Planning (ERP) platform across the UK business, saying it would now focus on more targeted and cost-efficient technology investments.
Revenue growth across other parts of the UK and Ireland division, including ready meals, chilled soups, quiche, Yorkshire pudding and cakes and desserts, grew 2.7%.
Greencore said trading conditions had been challenging in the cakes and desserts businesses, due to business churn and high levels of inflation. Earlier this year, the company announced the phasing out of manufacturing at its desserts facility in Evercreech.
The company is continuing to monitor the potential implications of Brexit, including any changes to supply chain costs and labour availability, but added: “It is worth noting Greencore’s business in the UK is largely local (made and sold in the UK), and therefore carries limited trade risk.”
Greencore said integration of US business Peacock Foods, acquired a year ago, was proceeding to plan.
Revenue for the company’s US division rose 295% to £881.3m, primarily reflecting the Peacock acquisition, with pro forma revenue growth up 5.9%.
The acquisition contributed to a 56% hike in total group revenue (UK and US) to £2,319.7m, with adjusted EBITDA up 37.1% to £189.7m. However, exceptional charges including £29.7m for axing the UK rollout of the ERP system pushed profit before taxation down 74.3% year on year to £12.4m.
"Greencore has been substantially transformed this year and the decisions made and work undertaken in FY17 have set us up very well for further progress,” said Greencore chief executive Patrick Coveney. “The acquisition of Peacock Foods and the significant UK network investments made to support large new business wins have reshaped our business.
“We are pleased with the progress of the US integration to-date and with the development of our US commercial pipeline.
“While we have delivered good financial and operating progress in the year, the transformation has not been without its challenges. However, we are confident that our strategy, portfolio, business model and momentum positions Greencore well to drive profitability, cash flows and returns in FY18 and beyond."