Greencore Transport-2

Greencore said demand was returning, with sales down 28% in the fourth quarter compared with 53% in the prior three months

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Profits have slumped 40% at Greencore as the coronavirus crisis pushed up costs and saw revenues nosedive, but food-to-go demand started to return in the fourth quarter.

In a trading update for the year ended 25 September, the sandwich maker said revenues had declined 14% to £1.3bn. However, the decline slowed significantly in the final three months of the year, down 19% compared with 36% in the the third quarter.

Food-to-go sales were down 22% for the year as a result of shoppers making more lunches and meals at home rather than grabbing supermarket sandwiches. But the group said demand was returning, with sales down 28% in the fourth quarter compared with 53% in the prior three months.

Sales for other convenience food categories were up 3% for the year.

Adjusted EBITDA slumped 40% year on year to £85m after the business was hit with in excess of £10m of non-recurring operating costs during the crisis.

Greencore was forced to shut down its Northampton facility in August following a Covid-19 outbreak, but production was fully restored in mid-September.

Chief executive Patrick Coveney said: ”The fourth quarter of our financial year has seen an ongoing improvement in demand for our products.

”I am hugely proud of the way that our people are supporting each other and our customers during this extraordinarily challenging period, and it is their hard work and dedication that is driving a resilient and improving trading performance. Our agile business model, the depth of our customer relationships and the strength of our product range has enabled us to already capitalise on new business opportunities that will help underpin the build back in group revenue.

“We are realistic but also confident in our plans for FY21, and remain excited by Greencore’s longer term prospects.”

The group ended the year with net debt of approximately £345m, with ”strong liquidity” in place to support the business.

”Following a decisive response to the impact of Covid-19 in Q3, the board of Greencore is encouraged by the progress seen in the final quarter of FY20,” the group added. “While fully recognising the uncertainties that lie ahead, the Group is well placed to continue to build back the business in FY21.”

Shares in Greencore slumped 9.7% to 92p as markets opened this morning. The stock is worth 65% less than at the start of the year.

Morning update

Italian food group Newlat Food has proposed an acquisition of bread maker Hovis for an undisclosed price.

The group said in a short statement that the production and distribution structure of Hovis would offer the possibility to benefit from numerous synergies and to implement ”a virtuous cross-selling activity”.

”Newlat Food is awaiting feedback from Hovis shareholders and, therefore, any other details regarding the transaction will be communicated with the evolution of the negotiations”, the group said.

The FTSE 100 started the week on the front foot, opening 0.5% in the black to 5,930.90pts.

Early grocery risers this morning included Sainsbury’s, up 2.4% to 196.2p, WH Smith, up 2% to 949p, and McColl’s, up 1.9% to 24.2p.

Aside from Greencore, Applegreen was down 3.2% to 300p, Science in Sport fell 2.7% to 36p and Finsbury Food Group is down 1.9% to 54.9p.

This week in the City

Things are looking quieter on the markets this week as we move into October and the final quarter of the year.

But the big news scheduled for Wednesday the Tesco interims, with new CEO Ken Murphy facing investors and the press for the first time.

There is also a full-year trading update from tobacco giant Imperial Brands on Thursday and the EGM at Just Eat on the acquisition of Grubhub set for Wednesday.