Top story

Convenience food manufacturer Greencore (GNC) has reported a significant volume drop in its food-to-go categories, as it prepares to restore its business once social distancing measures are eased.

The company said over the past six weeks the coronavirus pandemic rapidly escalated in the UK, creating a “dramatic and volatile impact” on UK food consumption, though there were signs that demand patterns have recently begun to stabilise.

Weekly demand for Greencore’s food-to-go categories declined by up to 70% and is currently less than 60% below prior year levels. This was partly offset by around 5% growth in the company’s other convenience categories, in particular cooking sauces.

Prior to the crisis, food-to-go categories - comprising sandwiches, salads, sushi and chilled snacking - accounted for £455.8m or around 64% of reported revenues.

On a proforma basis, revenues are currently around 60% of prior year levels.

However, the business claimed to have had a “comprehensive and rapid response to COVID-19” by keeping its employees safe, feeding the UK, and protecting the business.

To maintain efficient production, it simplified its product ranges, working alongside customers to quickly adapt to the effects of the lockdown while maintaining customer service and developing ways to maintain the integrity of the supply chain, while planning for activation as social restrictions begin to ease.

“I am hugely proud of the way in which our people have responded to the extraordinary challenges of COVID-19, and take this opportunity to publicly thank them for their role in keeping the UK fed over the last two months,” CEO Patrick Coveney said.

“We have implemented a broad range of actions to mitigate the impact of COVID-19 on our business and to position us for growth as the pandemic eases.

“More than ever before, our deep customer relationships, leadership positions in key food categories, well invested network, flexible model, and outstanding people are key strengths that ensure we trade our way resiliently through this uncertain period”

These comments were announced alongside the publication of Greencore interim results for the six months to March 27.

Revenues rose 1.6% to £712.7m affected by the impact of the coronavirus crisis on food-to-go categories towards the end of the period - with a UK lockdown imposed on March 23.

In the first six months of the year, operating profits declined by £5.7m to £35.6m mostly due to the decline in food-to-go sales towards the end of the first half. 

As at March 27, net debt stood at £311.1m, with the company having access to total cash and undrawn committed facilities of £267.5m.

Greencore chose not to pay out an interim or final dividend for its financial year 2020, to preserve cash and deal with the effects of the coronavirus on its business.

Furthermore, to protect profitability and cashflow Greencore tightened its food to go production network by temporarily ceasing production at its Bow, Atherstone and Heathrow facilities and rationalising production at its Northampton site.

Furloughed a substantial proportion of colleagues, under the government’s Coronavirus Job Retention Scheme and eliminated all non-essential operating costs including recruitment, travel, and other variable overheads.

Its directors voluntarily agreed to take a 30% reduction in respective fees and base salary for three months, with the wider senior teams also taking a voluntary reduction of between 10% and 20% of base salary for the same period.

Looking ahead, as the UK prepares to ease social distancing measures, Greencore said it was in talks with customers to discuss how to ”optimise its operating model to respond to evolving demand requirements” while its commercial teams were exploring future shopping trends and buying behaviours.

“The group has demonstrated its agility and flexibility in responding positively to the immediate challenges of COVID-19 and expects to be able to deploy this agility again with customers as the pandemic eases,” the company added.

Greencore shares opened 4.6% lower at 144.20p.

Morning update

Imperial Brands (IMB) said today it was “disappointed” with its results for the first half of the year as it reported lower than expected revenues and a 19.6% fall in reported operating profit from £1.15bn to £925m.

The global tobacco giant also warned that the full impact of the coronavirus pandemic would be felt in its second half results as the crisis severely impacted its duty-free sales and led to changes on consumer behaviour.

Imperial said total revenue was up 2% to £14.7bn for the six months to 31 March. Net revenue from tobacco was flat at £ while net revenue from its ‘next generation products’ such as vaping lines were down 43.9% to £83m.

Having sold its premium cigar operations for £1.2bn to Allied Cigar Corporation last month, Imperial also said today that it would be reducing its dividend by a third as It looks to simplify its business and reduce debt.

“While we delivered against our revised expectations, we are disappointed with these results, and we remain fully focused on all opportunities to strengthen performance, said joint interim chief executives Dominic Brisby and Joerg Biebernick.

“We would like to thank our employees for their hard work and commitment in these challenging times. Their support has been outstanding and we continue to prioritise their health, safety and well-being.

“Our enhanced focus on tobacco has driven stronger in-market execution and an improved share performance, with gains in most of our priority markets. We have reduced our NGP spend following the poor returns on investment last year and this, together with recent weaknesses in the vapour category, has resulted in lower NGP revenue.

“Overall, COVID-19 has so far had only a small impact on trading but we expect this to be more pronounced in the second half due to continued pressures on our duty free and travel retail business, changes in consumption patterns including downtrading and a reversal of some first half inventory build.

“Agreeing the sale of our premium cigar business for €1.2 billion in the current climate was a major achievement and will further simplify the business and reduce debt. Deleveraging remains a key priority, such that the Board has decided to rebase the dividend by one-third to accelerate debt repayment, while retaining a progressive dividend policy, growing annually from the rebased level. This will strengthen the balance sheet and support a more flexible approach to capital allocation in the future.”

Household products manufacturer McBride (MCB) said demand levels has moderated since the surge seen in many markets as countries went into lockdown, but it remained above the run-rate levels seen before March.

The higher demand levels have been reported in most of the business’ major markets across surface cleaning and dishwashing products, with more limited impact in laundry products.

As a consequence of the increased demand levels, McBride expects full-year adjusted profit before tax to be 15% ahead of current market expectations - set at £18.6m.

The FTSE 100 opened up 0.7% at 6,089.98pts.

Early risers included McBride (MCB) up 11.9% at 64.20p, Restaurant Group (RTN) up 15.2% at 53p and SSP Group (SSPG) up 2.2% at 247p.

Fallers saw Imperial Brands (IMB) open down 4.1% at 1,585.50p, Tesco (TSCO) down 0.5% at 240.60p, Sainsbury’s (SBRY) down 0.2% at 187.35p and Marks & Spencer (MKS) down 1.5% at 86.10p.

Yesterday in the City

The FTSE 100 closed up 4.3% at 6,048.59pts, rising above the 6,000 mark for the second time since the coronavirus outbreak sent global stock markets into meltdown.

Risers included WH Smith (SMWH) up 12% to 929.50p, Nichols (NICL) up 8.7% to 1,337.50p and C&C Group (CCR) up 5.2% to 186.80p.

As the index closed mostly in the green, Ocado (OCDO) shares dropped 2.6% to 1,903.50p, Morrisons (MRW) was down 0.5% to 285p and Hotel Chocolat (HOTC) down 5% to 285p.