Greencore profits surge 10.6%

There was strong performance at Greencore, in a year of where it invested £93m to expand capacity.

Greencore, the sandwich and food-to-go company, saw operating profits for the full year ending September 2015 rise 10.6% to £91.7m (€130.2m).

Group revenue increased 5.2% to £1.34bn (€1.9bn), with convenience food revenues driving the growth (accounting for 96% of the business) – up 6% to £1.3bn (€1.85bn).

Operating margins for the group increased 30 basis points (bps) to 6.8%. Earnings per share increased 13.2% to 18.0p, making it the fifth consecutive year of double-digit growth in adjusted EPS.

“Our food-to-go-led strategy has continued to drive growth in both the UK and US markets,” said Greencore chief executive Patrick Coveney.

Over the last 18 months, the group has significantly increased capital expenditure from £51.3m (2014) to £93.1m (2015) to support capacity expansion in the US and the UK, with the group planning to spend £100m expanding capacity in 2016.

Having significantly expanded its Jacksonville facility in the US in the summer of 2014, the group completed the construction of a greenfield facility in Rhode Island in March 2015.

This led to the closure of Greencore’s other US facilities at Newburyport and Brockton. The group has also started the construction of its first west coast facility in Seattle, which is due to open in 2016.

This has seen net debt increase by £53.4m to £265.5m (€376.9m) giving a net debt to earnings (EBITDA) ratio of two times.

Convenience foods

Greencore’s convenience division comprises its prepared meals and food-to-go offerings. Reported revenue in the convenience foods division increased 6.3% to £1,3bn.

On a like-for-like basis, which excludes revenue from Ministry of Cake which was sold in May 2014, revenues were 6% ahead of last year. The US drove the revenue growth, which increased 15.4%, even after streamlining its product range.

Operating profit increased by 11% to £89.6m (€127.2m) driven by good like for like growth, strong operational performance and tight cost control.

The group said it made a modest operating loss in the US business during the year due to disruption costs as it ramped up production at the Rhode Island facility. Levels of labour turnover, materials waste and related operating cost were greater than anticipated.

In the UK, revenues were up 4.7% and the group extended its sandwich facility in Northampton. Greencore is to invest a further £12m over the next year at this site to increase production.

Food-to-go sales (sandwiches, sushi and salads) in the UK grew by almost 9% and now represent more than 40% of total group revenue.

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