Dublin-based Greencore expects US profit increase following 'food-to-go' policy success

Greencore expects to see a significant step-up in profits in its US operations over the next couple of years after seeing its ‘food-to-go’ policy generate impressive growth on both sides of the Atlantic over the past 12 months.

The Dublin-based international convenience food group yesterday reported annual revenues of £1.34bn (€1.9bn) for the 12 months to the end of September, 5.2% up on the previous year.

Group operating profit was 10.6% ahead at £91.7m, adjusted pre-tax profit was up by 13.5% at £78m, and adjusted earnings per share grew by 13.2% to 18c.

“Our strategy, momentum, and pipeline of opportunities leave us well-placed to deliver further progress in financial year 2016 and beyond,” said group chief executive Patrick Coveney.

The core convenience food division delivered 6% like-for-like revenue growth to £1.29bn.

That division covers everything from cooking sauces and ready meals to sandwiches and salads for a range of leading UK and US retail clients such as Marks and Spencer, Starbucks, 7-Eleven, and Sainsbury.

Greencore bucks trend as profit jumps 33% https://t.co/0sdZiGtOVG

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Revenue from own label sauces slipped by just over 3%, but the ready meals offering, 20% of group revenues and damaged by the 2013 horsemeat scandal, recovered to show 2% sales growth, while the Italian chilled ready meals sub-sector, which bore the brunt of the horsemeat fall-out, increased 9.4%.

Food-to-go is what is really driving Greencore’s convenience offering and makes up 60% of group revenues.

The food-to-go units in the UK and US combined rose 0.4% last year.

In its outlook, Greencore said it is confident of achieving further growth in the current financial year and beyond, but warned that the UK grocery retail market remains “uncertain”.

However, many of the big players there, including Sainsbury, which accounts for around 10% of Greencore’s British sales are trending towards the convenience market, which is benefiting Greencore’s food-to-go policy.

Mr Coveney said such emerging trends in the UK are “matching perfectly” Greencore’s capability and are allowing it outpace the market in growth terms.

The UK grocery market grew 1% in the 12 months to the end of September, but Greencore managed to expand 5% in Britain.

Regarding the US, Mr Coveney reiterated that when planned new production facilities are operational, Greencore will have the long-term capacity to generate revenues of around $700m from US operations.

In the year just passed, Greencore’s US division, which represents 15% of group sales, delivered overall revenue growth of 28%.

Excluding the contribution from some acquisitions, revenue growth was 15.4%, however the division was still lossmaking.

“As a consequence of the disruption associated with this expansion programme, we made a modest operating loss in financial year 2015 [in the US],” management said.

“However, we expect to bring the US business up to group average operating margins in due course.”

“The engine of growth is its UK food-to-go business segment,” said Cathal Kenny of Davy Stockbrokers.