Greencore: announces FY 2015 results statement

Dublin / IR. (gg) Greencore Group PLC, a leading international convenience food business, issued its results for the year ended 25 September 2015.

Financial Highlights

• Group revenue of 1’340.3 million GBP, up 5.2 percent (as reported) and up 5.4 percent on a like for like basis
• Convenience Foods revenue of 1’290.2 million GBP, up 6.0 percent on a like for like basis
• Group operating profit up 10.6 percent to 91.7 million GBP
• Group operating margin of 6.8 percent, a 30 bps increase
• Growth in adjusted EPS of 13.2 percent to 18.0p
• Proposed final dividend of 3.75 Pence per share, giving a total dividend of 6.15 Pence per share, up 12.8 percent
• Net debt of 265.5 million GBP with net debt : Ebitda leverage as measured under financing agreements of 2.0 times

Strategic Developments

• Strong momentum, focus and investment behind food to go strategy in the UK and US resulting in 10.4 percent like for like revenue growth, well ahead of market performance
• Phase one extension of Northampton facility successfully completed and second phase well underway. We are announcing further investment in the Northampton campus to support customer growth
• Roll out of new product range from extended Jacksonville facility in the US
• New build in Rhode Island coming on stream and work commenced on new build in Seattle

Summary Financial Performance

	FY-2015	FY-2014	Change	Change
	mio. GBP	mio. GBP	(as reported)	(like for like)
Group revenue	1’340.3	1’273.5	+5.2 %	+5.4 %
Group operating profit	91.7	82.9	+10.6 %
Group operating margin	6.8 %	6.5 %	+30 bps
Adjusted PBT	78.0	68.7	+13.5 %
Adjusted EPS (Pence)	18.0	15.9	+13.2 %
Proposed dividend per share (Pence)	6.15	5.45	+12.8 %
Net debt	265.5	212.1	+53.4 mio. GBP
Return on Invested Capital (ROIC)	14.1 %	13.7 %	+40 bps
Convenience Foods Division
Revenue	1’290.2	1’213.4	+6.3 %	+6.0 %
Operating profit	89.6	80.7	+11.0 %
Operating margin	6.9 %	6.7 %	+20 bps

 

Chief Executive’s Commentary

Commenting on the results, Patrick Coveney, Chief Executive Officer, said: «Greencore has had another strong year and our clear food to go led strategy has continued to drive growth in both the UK and US markets. We delivered six percent like for like revenue growth in Convenience Foods, eleven percent Group operating profit growth and our fifth consecutive year of double digit growth in adjusted EPS. We increased our investment in major capacity and capability improvement projects during the year, in each case underpinned by long term customer relationships. Our strategy, momentum and pipeline of opportunities leave us well placed to deliver further progress in FY-2016 and beyond».

Strategic Development – Food to Go focus

The vision and strategy of Greencore is to be a fast growing international convenience food leader. The Group is focused on deepening its leadership in the food to go segment in the UK and US as this is where we see the most favourable long-term consumer and customer trends and where we have our strongest market positions and deepest capability. Like for like revenue growth across our UK and US food to go businesses in FY15 was 10.4 percent, well ahead of the level of market growth.

From 2010 to early 2014, our footprint in food to go broadened through strong market growth supplemented by acquisition. By contrast, the last 18 months have seen us materially increase capital expenditure to support capacity expansion in both the US and the UK. Having significantly expanded the 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 which enabled the closure of the Newburyport and Brockton facilities, whilst at the same time providing significant capacity enhancement. The Group has also started the construction of its first west coast facility in Seattle which is due to open in 2016.

In the UK, an extension of the sandwich facility in Northampton was successfully commissioned in H1 FY15 and the construction of a new production facility (“Unit D”) adjacent to the existing site is well advanced. Transfers into Unit D will begin in Q3 FY16. Current sandwich volumes and growth trends at Northampton are strong. This positive trajectory, together with the recent award of specific incremental new business, has taken the projected future volumes at Northampton above the levels anticipated in our May 2014 announcement. Accordingly, we are today announcing that we have decided to commission an additional manufacturing unit at our Northampton campus. This unit will bring new, technically distinct, food to go competencies and products to our campus, will require an additional twelve million GBP of capital, and will enter production in Q2 FY17. The overall economic impact of this enhanced production footprint at Northampton is positive but it will lead to a modest delay in the transfer of certain products relative to the timetable anticipated in May 2014. However, the growth trajectory in core sandwich volumes at Northampton, alongside good commercial momentum across other parts of our Food to Go division, will fully compensate for this delay in FY16.

In the US, we have embarked on a large and complex capacity expansion programme, most notably in Jacksonville and Rhode Island. In H1 FY15, the scale and ramp up of production volumes in Jacksonville resulted in supply chain disruption. These issues have since been addressed and the site is now performing in line with plan. In H2 FY15, we commissioned our new greenfield site in Rhode Island and began the phased transfer of production from our facilities in Newburyport and Brockton. Those transfers were completed subsequent to year end, and we have now fully exited both Newburyport and Brockton. In ramping up production capability in Rhode Island, we have experienced greater levels of labour turnover, materials waste and related operating cost than anticipated. As a consequence of the disruption associated with this expansion programme, we made a modest operating loss in FY15. However, we expect to bring the US business up to Group average operating margins in due course.

Financial and Operating Performance

industry and amongst our customers. Our business has continued to trade well given its focus on convenience offerings which continue to exhibit volume growth. In the US, customer specific initiatives continue to drive strong revenue growth. Reported Group revenue increased by 5.2 percent to 1’340.3 million GBP with like for like revenue growth in Convenience Foods of 6.0 percent. Operating profit at the Group level grew by 10.6 percent to 91.7 million GBP leading to a 30 basis points increase in operating margin. Adjusted earnings per share were 13.2 percent higher driven principally by the growth in operating profit.

As planned, the Group has significantly increased capital expenditure recently in capacity enhancement and capability building initiatives. While net debt increased by 53.4 million GBP to 265.5 million GBP, tight cash management and strong growth in Ebitda resulted in leverage of 2.0 times as measured under our financing agreements.

Dividends

The Board of Directors is recommending a final dividend of 3.75 Pence per share. This will result in a total dividend for the year of 6.15 Pence per share representing an increase in dividend per share of 12.8 percent, broadly in line with the growth in adjusted earnings per share.

Outlook

Greencore has a clear strategy, strong positions in the growing food to go market and a clear pipeline of future opportunities. The business is investing heavily in capacity and capability enhancement to meet growing consumer and customer demand for the years ahead. While the outlook for the UK grocery retail market remains uncertain, we are well placed to deliver further progress in FY16 and beyond (Image: Greencore).