Greencore has posted a 7.4% like-for-like full-year revenue increase on booming food-to-go growth after a period of significant strategic change.
Group revenues for the year to 26 September were up 6.4% on a reported basis to £1.27bn, while group operating profit rose by 11.4% to £82.9m and margins increased by 30bp to 6.5%.
The star performer was food-to-go, comprising sandwiches, sushi and salads, which saw revenue growth exceed 15% following a £30m investment in its Northampton factory.
The company’s food-to-go growth was supported by wider economic trends, the company explained: “Whilst the UK food retail environment overall remains challenging, our portfolio of products continues to benefit from the high rate of opening of convenience stores combined with increasing employment levels.”
Greencore also said it is building a nationwide US food-to-go business “of real scale” and announced today the development of its first west coast facility in Washington State. The new investment, which will cost around £20m and will service a contract the business has acquired, is in addition to the £7m investment in its Jacksonville site to manufacture frozen food-to-go products and a £20m project to construct a new facility in Rhode Island.
CEO Patrick Coveney commented: ” The Group’s focus on extending our leadership in the food to go market is yielding great results, with like for like revenue growth in that area of the business exceeding 15%.
“We have strong market positions, a clear strategy, and are continuing to lay the foundations for future growth through a significant capacity and capability investment programme in both the UK and the US.”
The UK food-to-go business now represents over 40% of group revenues.
Greencore’s prepared meals division saw 0.2% revenue growth in the period, with chilled ready meals modestly ahead of market growth. The market as a whole experienced 2.1% growth during the year, while Italian chilled ready meals grew by 4%. Greencore called this “a little disappointing” given that the horsemeat scandal of 2013 “depressed the market so materially last year”.
Greencore’s grocery business, which groups together its other activities in the UK market, grew like-for-like revenues by 1.1%, driven by a “good” performance in cooking sauces and dips. In May 2014, the business sold its foodservice desserts business, Ministry of Cake, to its management team for £8m upfront and deferred consideration of up to £3m.
Greencore concluded: “While the outlook for the UK grocery retail market is uncertain, we remain confident in our ability to deliver profitable growth across our well-focused portfolio with confirmed new business awards and exposure to the rapidly expanding convenience channel. FY15 will see a further significant step up in capital expenditure on capacity, productivity and capability initiatives; execution of these projects is a key area of focus.”
Analysts at Jefferies noted: “Greencore have capped a year of dramatic strategic and operational development with robust full year results… Another new contract win announcement in the US keeps the momentum going.”
Greencore shares leapt 7.5% to 279p in morning trading.