Greencore H1 revenue breaks £1bn barrier – but UK profits are flat

Revenue at food-to-go business Greencore has soared following the acquisition of US company Peacock Foods.

Group revenue was up 46.1% to £1,010.3m and group EBITDA rose 31.2% to £79.1m, the business reported in its interim results for the 26 weeks ended 31 March 2017.

While some of the growth had been a result of the Peacock Foods deal, which completed in December, Greencore also reported a strong performance in food-to-go in the UK, with revenue from its UK division up 16.1%.

However, the company said operational change and investment in the UK, and challenging market conditions in parts of its non-food to go businesses, had resulted in flat UK operating profit and a drop in operating margin.

“This has been a transformational period for Greencore following the acquisition and integration of Peacock Foods in the US,” said Greencore CEO Patrick Coveney. “In the US, the addition of Peacock Foods has transformed our market and channel position and has given us a growth platform of real scale.

“In the UK, we have delivered significant expansion and investment following recent new long-term business wins, as our food-to-go business continues to grow rapidly.

The company recently created a new reporting structure comprising two segments: Convenience Foods UK & Ireland – which recorded revenue of £685.7m, up 16.1% as reported and up 10.6% on a pro forma basis, and Convenience Foods US – which recorded revenue of £324.6m, up 220.8% as reported and up 2.5% on a pro forma basis.

'Challenging backdrop'

Revenue growth in the UK had been driven by the continuing strength of the food-to-go business, despite a challenging political, economic and customer backdrop, said Greencore.

The company said new business wins and commercial launches in its UK prepared meals business had required “significant” operational change and investment in the period.

“As a result of this, as well as challenging market conditions experienced in parts of our non-food-to-go businesses, operating profit was flat and operating margin declined by 110bps,” it stated, adding it had offset a 2% increase in raw materials and packaging costs, and 4% labour inflation.

Greencore reported that the integration of the Atherstone facility – taken on when the business acquired The Sandwich Factory – had progressed well.

It said its Convenience Foods US business was performing in line with expectations, with volume growth in Peacock Foods approximately 9% on a pro forma basis – driven by underlying category market growth and new business wins. Greencore added that, as in the UK, operational adjustments caused by business wins affected performance in the period.

Strong volume growth

Looking to the second half of the year, Greencore said volume growth remained strong in the UK and the US, and that the business would benefit from the commercial activity in the first half.

“While the group expects an overall reduction in the level of business change in the second half, there remains further operational delivery to be completed in Northampton, Warrington and Carol Stream as well as challenging trading conditions in parts of our grocery business,” it stated.

Greencore added that it expected inflation in raw materials, packaging and labour in the UK to increase for the remainder of the year, but said these impacts were “fully mitigated”.

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