Greencore hopes for blue skies

Greencore (GNC) wants you to enjoy your lunch in the sun. Following the sale of the US business for £810m last year, which netted shareholders £509m (via a tender offer), convenience foods producer says its ‘food to go’ division will keep driving its earnings, increasing its reliance on the British weather – always a fraught prospect.

In the 26 weeks to March 29, the division brought in £447m, a 7 per cent increase on 2018, while the ready meals section was down 20 per cent. Management estimates that 55-60 per cent of revenue (up 5.4 per cent on a pro-forma basis) for FY2019 will come from the second half, and largely through food to go. 

Greencore chief executive Patrick Coveney said food to go was one positive part of the UK grocery business. “Overall the general environment for food volumes and grocery is pretty stagnant,” he said. “In this particular part of their range, there's still quite a lot of growth opportunity there”, though the division's products “index much more strongly in summer”.

The group's adjusted cash profit was also pretty stagnant, essentially flat from the FY2018 half year at £62.5m, although the gross margin did tick up 40 basis points to 33.3 per cent. The tender offer and bank repayments constrained cash flows, although it has been a period of transition, with debt and the associated derivative portfolio reshaped to reflect the removal of US dollar assets.

Bloomberg consensus gives adjusted EPS of 15.6p for the September 2019 year-end, rising to 18.3p in FY2020.