3rd Dec 2024 10:02
(Alliance News) - Greencore Group PLC on Tuesday impressed investors with a better-than-expected profit, a return to the dividend list, and a GBP10 million share buyback.
The Dublin-based convenience food maker said pretax profit increased 36% to GBP61.5 million in the financial year that ended September 27 from GBP45.2 million the year before. This was despite revenue declining 5.6% to GBP1.81 billion from GBP1.91 billion.
"The decline was driven by the disposal of Trilby Trading in September 2023, accounting for a decrease of 4.2%, and the proactive decision to exit a number of low returning contracts during FY23 accounting for a further 4.8% decline. This was partially offset by the impact of inflation recovery and price totalling 1.8% and a 1.6% benefit from volume increases," Greencore explained for the revenue decline.
Adjusted operating profit climbed 28% to GBP97.5 million from GBP76.3 million. This beat guidance provided by the company in October of GBP95 million to GBP97 million, itself raised from GBP90.5 million to GBP92.5 million before.
"Greencore is continuing to deliver, both operationally in terms of efficiencies and profit progression, but also in terms of expectations management, where 'beat and raise' has become the new normal," analysts at Jefferies said.
In response, shares in Greencore jumped 11% to 219.50 pence each in London on Tuesday.
Greencore said like-for-like volume growth was ahead of the wider market, driven by a strong performance in key categories and gross margin improvement to 33.2%, up from 29.7% the year prior.
Greencore proposed a 2.0 pence per share dividend. It did not pay one in the prior year, nor since financial 2019.
"Given the group's strong balance sheet and confidence in the outlook the group is today announcing the launch of an additional GBP10 million share buyback," it added.
The programme will commence Tuesday, and will end no later than the end of April 2025.
For the new year, it expects adjusted operating profit within the top half of the range of current market expectations, which it puts at GBP98.1 million to GBP107.1 million. Adjusted operating profit in the year just gone rose 28% to GBP97.5 million from GBP76.3 million.
Jefferies put the market consensus at GBP102 million, noting this implies a further upgrade to forecasts.
"Although it is early in the year and being mindful of the significant labour cost headwind announced in the UK budget, the group is encouraged by the business's underlying momentum. The group plans to offset the additional labour costs fully via further efficiency initiatives, alongside our usual inflation recovery measures in financial 2025", Greencore said in a statement.
Chief Executive Dalton Philips said the firm was "well positioned" to continue its momentum in the new financial year and over the longer term.
He said Greencore will share more details on its medium-term growth strategy at a capital markets day it will host in February.
By Jeremy Cutler, Alliance News reporter
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