Showing confidence in uncertain grocery sector

Consumer foods group Greencore is confident of outperforming an “uncertain” UK grocery sector, by continuing to make inroads into the growing ‘food-to-go’ market.

While the Dublin-based group has seen a good recovery in its prepared/ready meals business, after taking a hit from last year’s horsemeat scandal, it sees “very good prospects” in the area of prepared salads, sandwiches, wraps, and paninis as consumer habits change and food–to–go becomes the fastest growing segment of the consumer foods market in Britain. It already comprises 40% of Greencore’s annual revenues.

Yesterday, the group reported a strong set of annual results. Those revenues —for the 12 months to the end of September — were up by 6.4% to just over £1.27bn (€1.6bn). Within that, the UK-focused convenience foods division saw an 8.4% jump in revenue to just over £1.2bn, with operating profit up by nearly 12% at £80.7m.

Group operating profit was up 11.4% at £82.9m, with adjusted earnings per share ahead by 13.6% at 15.9p and net debt down by nearly £21m to £212.1m. A proposed final dividend of 3.25p per share, results in a total dividend of 5.45p; 13.5% up on the previous year.

In its results presentation, Greencore said the outlook for the UK grocery retail market is “uncertain”, but it remains confident in its ability to deliver profitable growth across its portfolio.

It added that new business and increased exposure to a rapidly expanding convenience channel will hasten growth in Britain.

Davy Stockbrokers said forecasts call for “another year of double-digit earnings per share growth,” with analyst Cathal Kenny placing a 12.8% growth target. “The business remains well-positioned,” he said of Greencore in a research note.

The only downside to the group results was a 9.7% — in constant currency terms — decline in revenue in its non-core ingredients and property division, to £60.1m.

Meanwhile, yesterday also saw the publication of Greencore’s latest annual report. It showed that total remuneration for the two executive directors; Patrick Coveney and chief financial officer Alan Williams, grew by almost 18% to £3.23m. Mr Coveney’s full pay went from £1.74m to just over £2.06m, helped by deferred share awards and long-term incentive payments, as his basic salary remained stable at £625,000.