Home » News » FTSE 250 » Greencore Group plc Delivered good underlying growth in the UK
Greencore Group PLC

Greencore Group plc Delivered good underlying growth in the UK

Greencore Group plc (LON:GNC), a leading manufacturer of convenience food in the UK, today issues its results for the year ending 28 September 2018.

HIGHLIGHTS 1,2

· FY18 Adjusted EPS of 15.1p, in line with previously announced guidance 14.7p-15.7p 3

· US business results presented as discontinued operations following the disposal of the business for $1,075m

· Plan to return £509m of capital to shareholders by way of tender offer

· Pro Forma full year revenue growth of 8.7% in continuing operations

· Adjusted Operating Profit growth of 1.7% in continuing operations, weighted to the second half of the year

· Net Debt reduction of £18.1m to £501.1m, driven by a £14.4m increase in Free Cash Flow

· ROIC of 15.6% (FY17: 16.0%) generated in continuing operations, improving as year progressed

· Well positioned to capitalise on industry leading position and drive profitability and returns in core UK market

SUMMARY FINANCIAL PERFORMANCE

               

FY18

FY17

Change

£m

£m

Continuing Operations

Group Revenue

1,498.5

1,438.4

+4.2%

Adjusted EBITDA

140.0

137.7

+1.7%

Adjusted Operating Profit

104.6

102.9

+1.7%

Adjusted Operating Margin

7.0%

7.2%

-20 bps

Adjusted Profit Before Tax

79.6

80.1

-0.6%

Exceptional Items (before tax)

(52.2)

(53.2)

Group Operating Profit

49.8

45.5

+9.5%

Profit before taxation

17.8

15.8

+12.7%

Return on Invested Capital (“ROIC”)

15.6%

16.0%

-40 bps

Group

Adjusted EPS (pence)

15.1

15.4

-1.9%

Basic EPS (pence)

4.8

1.9

+152.6%

Total proposed dividend per share (pence)

5.57

5.47

+1.8%

Operating Cash Flow

136.6

117.8

+£18.8m

Free Cash Flow

92.4

78.0

+£14.4m

Net Debt

501.1

519.2

Net Debt:EBITDA as per financing agreements

2.3x

2.4x

ROIC

10.2%

12.2%

Commenting on the results, Patrick Coveney, Chief Executive Officer, said:

“2018 was a year of significant change for Greencore. We delivered good underlying growth in the UK, with favourable consumer and retailer trends helping drive our core food to go business. After the financial year-end, we took the decision to sell our US business having received a compelling offer for it. We will now focus all of our attention and resources on the significant growth opportunities that we see in the UK, both organic and inorganic. Despite the short-term uncertainties of Brexit, our scale, depth and expertise in attractive and structurally growing food categories mean that we are confident in the future growth prospects for Greencore.”

 

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.

2 Continuing operations for FY17 and FY18 include central costs previously allocated to discontinued operations.

3 On 13 March 2018, the Group issued a profit forecast stating “For FY18 the Group now anticipates Adjusted EPS in the range of 14.7p-15.7p”. It subsequently confirmed that guidance on 22 May 2018, 31 July 2018 and 15 October 2018. Actual FY18 Adjusted EPS was 15.1p, which was in line with the previously announced guidance.

4 Market/category growth rates are based on various Nielsen data for the 52 weeks to 6 October 2018.

CAPITAL RETURN

Following the sale of its US business, Greencore is committed to the prompt and efficient return of £509m of the transaction proceeds to shareholders (the ‘Capital Return’). After a consultation exercise with shareholders in recent weeks, the Group notes the preference of many of its shareholders to be offered a choice regarding their participation in the proposed Capital Return.

Taking these views into account, alongside the focus on an efficient return of capital, the Group intends to implement the Capital Return via a tender offer to all shareholders for up to £509 million (the “Tender Offer”). To the extent the full Capital Return is not effected through the Tender Offer, the Group intends to return any remaining proceeds shortly thereafter, anticipated to be by way of a special dividend.

Further information on the Tender Offer will be provided in a circular to Greencore shareholders. The Company will finalise the full details, including discussions with the relevant tax authorities, and will publish the circular as soon as practicable. The Capital Return is expected to be completed during the second quarter of FY19.

OUTLOOK

The disposal of the Group’s US business was completed on 25 November 2018. Its performance in FY19 will be presented as discontinued operations. The financial impact of the net proceeds, the associated capital return and leverage reduction, will all be included in the performance of the continuing operations.

The Group entered FY19 with a stronger and leaner business in the UK following the refinement of its portfolio and the implementation of its streamlining and efficiency programme. The Group anticipates continued underlying revenue growth in its key convenience food categories. Adjusted Operating Profit growth will be driven by this revenue growth, improved operational performance, and by a planned review of central overheads. Although the Group believes the risks from Brexit are manageable in the medium-term, the near-term challenges associated with a ‘no withdrawal agreement’ are uncertain. A strengthened balance sheet and strong underlying free cash generation leaves the Group well positioned to consider organic and inorganic investment consistent with its strategic and returns objectives.

Over the medium term, the Group expects that its market positioning, capability set, customer profile, well invested asset network and proven economic model will generate strong growth, cash generation and returns.