Greencore revenue rises as it progresses with US expansion
Convenience food manufacturer Greencore reported strong first-quarter revenue growth and said its efforts to increase efficiency were offsetting inflation in raw materials, packaging and labour costs.
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For the quarter ended 30 December 2016, revenue of £417m was up 17.1% on a reported basis, while on a like-for-like basis, excluding revenue from The Sandwich Factory acquisition in July, sales rose 9.1%.
The company said that it continues to deliver strong revenue growth in the UK and US, following category growth and the roll-out of new business, the integration of December acquisition Peacock Foods in the US is on track at this early stage.
Inflation in raw material and packaging prices and labour costs are expected to increase for the remainder of the year, although the company anticipates that its supply chain, purchasing and pricing initiatives will mitigate this.
The company is confident that it will deliver 2017 financial year results in line with expectations, notwithstanding the investments in the US and UK.
In the convenience foods division, revenue increased 16.4% to £401.6m on a reported basis and up 8.9% on a LFL basis. In the UK, revenue rose 13.9% and up 9% on a LFL basis due to growth in the Food to Go business, which benefitted from new business wins.
A new convenience facility in Northampton is soon coming on stream and there is also investment being made in both the Wisbech and Warrington ready meal facilities to support renewed contracts.
In the US, revenue jumped 31.2%, and was up 8% on a LFL basis due to the addition of operations in Seattle.
For the ingredients and property division, which represents less than 5% of total revenue, revenue surged 41.3% to £15.4m on a reported basis and 16.5% higher on a LFL basis, following increased demand for dairy products.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: "Strong trading figures were perhaps less important to Greencore’s 5.8% price move this morning than the group’s bullish stance on impending inflation.
"Lower sterling will increase the cost of many of its inputs, but the group believes a combination of supply chain, purchasing and pricing initiatives mean that it remains on course to deliver results in line with market expectations."
Shares in Greencore were up 7.38% to 234.40p at 1437 GMT.