29th Nov 2022 16:41
(Alliance News) - Greencore Group PLC shares fell sharply on Tuesday, despite reporting a big jump in annual revenue and profit, as a recovery in food-to-go sales after the Covid-19 pandemic now is threatened by cost inflation and recession.
Greencore shares were down 7.1% to 66.13 pence near the close in London on Tuesday. The stock is down 46% in the past 12 months. In February 2020, just before the virus pandemic took hold in the UK, they traded above 250p per share.
The Dublin-based convenience foods maker on Tuesday reported a 43% rise in pretax profit to GBP39.8 million in the 12 months that ended September 30 from GBP27.8 million the year before.
Greencore's revenue increased 31% to GBP1.74 billion from GBP1.32 billion, with 35% growth in the food-to-go categories. Greencore said this was driven by increased pricing as the business mitigated inflationary pressures, "strong" underlying volume growth, and a contribution from new business wins.
Convenience categories grew 19% following increases in underlying pricing and higher revenue in the Greencore's Irish ingredients trading business.
Greencore completed a GBP10 million share buyback programme in early October, which is the first phase of the GBP50 million value return to shareholders announced back in May. Greencore said it plans to return a further GBP15 million through a share buyback in financial 2022.
No cash dividend was declared for financial 2022, which is unchanged from the prior year.
Jefferies noted that the results were in line with the guidance that Greencore had provided back in October. But, the investment bank said, "we expect downward pressure on FY23 consensus," due to Greencore's outlook for the year ahead.
Revenue has held up in the early weeks of financial 2023, Greencore said, but it is seeing some mix effect between categories.
The company expects further substantial cost inflation in the year ahead. Greencore is working on cost recovery, and is making decisions on customer contracts which are "no longer economic".
"We remain cautious about the potential impact of the recessionary environment and cost-of-living factors on consumer spending through the year ahead," Greencore said.
Jefferies has a 'hold' rating on the stock with an 82p price target.
Davy Research said that, in the absence of more-specific earnings guidance for financial 2023 from Greencore, it also sees downside risk to its profit forecast.
By Jaskeet Briah; [email protected]; and Tom Waite; [email protected]
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