Private Label

Greencore Full-Year Results – What The Analysts Said

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Convenience foods firm Greencore has reported a 29% increase in group revenue in the year to 30 September – just the sort of positive start to give new chief executive Dalton Philips some momentum as he takes up his new position.

Here's how leading industry analysts viewed its performance.

Russ Mould, AJ Bell

“Sandwich maker Greencore seems to have finally got over the indigestion of problems relating to issues pre-COVID in its US business. With demand picking up again post-pandemic, the company is in a better financial state as debt is reduced, inflation is tackled by successfully putting up prices, and a new CEO is in place in the form of ex-Morrisons boss Dalton Philips.

“Unfortunately, earnings for its most recent financial year are at the lower end of previous guidance after business was disrupted by train strikes and the bank holiday for the Queen’s funeral. With further train strikes expected in the coming months and consumers under pressure to cut casual spending, life may become more difficult for Greencore as it moves into 2023.”

Clive Black, Shore Capital

"Greencore executed well in FY22 (September year-end) to us, coming in with 29% revenue growth and EBIT of c£72m, at the lower end of guidance but we believe it would have hit our £74m estimate without the death of Queen Elizabeth II and rail strikes (Greencore beat our net debt forecast incl., £10m share buyback). For FY23, in uncertain times, we cut our EBIT estimate by 10% to c£78m reflecting our view of the demand/mix/opex equation."

"We see Greencore stock as lowly rated, and so good value as Dalton Philips joins as CEO, trading on a FY23 PER of 6.8x and an EV/EBITDA multiple of 4.0x."

Jason Molins, Goodbody

"Greencore has released a post-close trading update in which it notes that FY22 adj. operating profit and adj. EPS are both expected to be at the lower end of its previously guided ranges of £72-£77m and 9.2p-10.0p. During the seasonally important Q4 period, trading was impacted by: i) UK rail strikes; and ii) the unscheduled bank holiday. The Group notes that so far consumer demand has held up well though remains watchful given the current environment.

"Against the backdrop of a number of one-off impacts during Q4, we are encouraged that the Group is expected to deliver a profit outcome in line with its guided range, albeit towards the low end. Importantly, taking the bottom end of the guided range (i.e. £72m) implies a H2 profit outcome of c.£55m, which compares to a pre-COVID high of £60m.

"Given the level of inflation recovery that Greencore has needed to achieve during the year, we believe this is a very solid performance, though note that inflation recovery will remain a persistent theme over the next 12 months."

Cathal Kenny, Davy

"Key takeaways from this ad-hoc release from Greencore include: (1) full-year profit will be at the lower end of the guidance range; (2) cash generation was slightly better than expected; and (3) the absence of FY23 guidance.

"The latter speaks to no material changes in demand patterns, with Greencore having substantially recovered inflation to date, although now 'making decisions whether to bid for or renew contracts based on their economics and ability to recover inflation'. The latter may infer that retailers are beginning to assert themselves across certain verticals.

"We will reduce our FY23 operating profit by £5m to c.£86m (weighted to the non-food-to-go business), noting that forecasting error remains high."

Seaspray Financial Update

"In a trading update for the year to the end of September, the convenience food manufacturer has reported a 'progressive' improvement in revenue and operating profit, supported by continued volume growth and significant recovery of inflation. The company said that its full-year revenues rose to about £1.7 billion, from £1.3 billion the previous year.

"The shares closed at 69.30 and are expected to open slightly weaker at the start of the earnings being at the lower end of forecasts."

© 2022 European Supermarket Magazine – your source for the latest private-label news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: European Supermarket Magazine.

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