Greencore Group plc (LON:GNC), a leading manufacturer of convenience food in the UK, today issues its interim results for the 26 weeks ending 29 March 2019.
HIGHLIGHTS 1,2
· Pro Forma Revenue Growth of 5.4% in continuing operations, driven by 7.0% growth in food to go categories
· Adjusted Operating Profit growth of 0.9%, representing a 40 bps improvement in Adjusted Operating Margin
· Adjusted EPS growth of 16.4% to 6.4 pence
· Interim dividend increased by 11.4% to 2.45 pence
· ROIC of 14.6%
· US disposal completed with full reset of the Group capital structure
· Net Debt of £284.1m, a reduction of £217.0m since the end of FY18
SUMMARY FINANCIAL PERFORMANCE
| H1 19 | H1 18 | Change | |
| £m | £m | ||
| Group Revenue | 701.4 | 734.9 | -4.6% |
| Pro Forma Revenue Growth | +5.4% | ||
| Adjusted EBITDA | 62.5 | 62.4 | +0.2% |
| Adjusted Operating Profit | 44.7 | 44.3 | +0.9% |
| Adjusted Operating Margin | 6.4% | 6.0% | +40 bps |
| Group Operating Profit | 41.3 | 16.9 | +144.4% |
| Adjusted Profit Before Tax | 37.7 | 32.2 | +17.1% |
| Group Profit before taxation | 5.7 | 3.6 | +58.3% |
| Adjusted EPS (pence) | 6.4 | 5.5 | +16.4% |
| Group Exceptional Items (after tax) | 28.8 | (28.2) | |
| Basic EPS (pence) | 10.5 | 0.3 | |
| Interim dividend per share (pence) | 2.45 | 2.20 | +11.4% |
| Free Cash Flow | (19.4) | 11.5 | -£30.9m |
| Net Debt | 284.1 | 522.2 | |
| Net Debt:EBITDA as per financing agreements | 1.9x | 2.5x | |
| Return on Invested Capital (“ROIC”) | 14.6% | 9.7% | +490bps |
Commenting on the results, Patrick Coveney, Chief Executive Officer, said:
“‘Greencore has had a good first half to the year, with clear financial and operational progress as we have extended our leadership position in key food to go categories in the UK. We have reshaped and strengthened our capital structure, and now have a robust foundation from which to pursue a range of new food to go product and channel opportunities. While recognising that trading conditions in the wider UK grocery sector remain challenging, the growth outlook for our business continues to be encouraging, underpinned by favourable consumer trends and ongoing investment by our customers. As a result, we believe that our market positioning, capability set, customer relationships, well invested asset network and proven economic model will deliver strong future growth, cash generation and returns.”
1 The Group uses Alternative Performance Measures (‘APMs’) which are non-IFRS measures to monitor the performance of its operations and of the Group as a whole. These APMs along with their definitions are provided in the Appendix to the Interim Financial Report.
2 H1 18 has been re-presented to show the results of the US business as discontinued operations, with central costs previously allocated to discontinued operations now shown within continuing operations for H1 19 and H1 18.
3 References to market/category growth rates are based on various IRi/Kantar data for the 24 weeks to 24 March 2019.
DISPOSAL OF GREENCORE’S US BUSINESS AND ASSOCIATED CAPITAL RESTRUCTURE
On 25 November 2018 the Group completed the disposal of its US business to Hearthside Food Solutions LLC. Results for the US business are presented as discontinued operations in the Financial Statements. A profit on disposal of £56.7m was reported in H1 19 to reflect this transaction. Details of H1 19 performance of discontinued operations and disposal of undertakings are included in Note 6.
Following the disposal, the Group fully reset its capital structure. The Group returned £509m of capital to shareholders in the form of a tender offer, executed on 31 January 2019. The Group also reshaped its debt and associated derivative portfolio to reflect the removal of US dollar assets from the business and also refinanced its primary sterling bank debt agreements. An exceptional charge of £25.4m was recognised in H1 19 to reflect this reset.
DIRECTORATE CHANGE
The Group has announced this morning the appointment of Peter Haden to the Board as Executive Director with effect from 21 May 2019. In parallel, he will take up the role of Chief Operating Officer (‘COO’) of Greencore Group.
OUTLOOK
Greencore performed well in H1 19 and remains on track to deliver its strategic and financial objectives in the seasonally more significant second half of the financial year. The Group anticipates that underlying revenue growth in its key convenience food categories will underpin growth in Adjusted Operating Profit in the full year, notwithstanding trading conditions that are anticipated to remain challenging. This profit growth will also be underpinned by improved operational performance and by progress in the streamlining of central overheads. The Group continues to anticipate that FY19 Net Debt:EBITDA under financing agreements will be at the bottom end of its medium term target range of between 1.5x to 2.0x.
The Group is now focused on a vibrant and dynamic food market in the UK, with a considerably stronger balance sheet and a higher returns profile. It is a leader in structurally advantaged growth categories as a result of its capability set, customer relationships, well invested asset network and proven economic model. The Group sees significant opportunity to broaden its proposition in categories, channels and capabilities, particularly in food to go categories. These opportunities and continued development of the Group’s existing business will drive improved returns and enhanced value for shareholders over the medium term.
The Group will report its FY19 Results on 26 November 2019. In addition, the Group will host a Capital Markets Day in London on 26 September 2019. More information on this event will be released in due course.
