Irish convenience food group Greencore, which has extensive operations in the US, has hailed its progress during a year of transformation but has expressed disappointment with pre-tax exceptional charges of GBP78.2m (US$103.9) which had a negative impact on its profits.
Announcing its full year results today, the Dublin-headquartered business – which is listed on the London Stock Exchange – revealed revenues had soared by 56.5% to GBP2.31bn but operating profit was down by 43.4% tp GBP42.7m.
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In a post-results presentation, the company’s CEO Patrick Coveney said: “There was a level of investment, restructuring and one off costs which were greater than expected and, in some aspects, frankly disappointing.”
These included costs linked to the purchase of Peacock Foods in the US at the end of last year and the closure of a manufacturing plant in the UK but there was also a GBP30m cost associated with the decision not to implement a new software system because it “didn’t stack up,” in Coveney’s words.
“We don’t feel good about having to write off GBP30m of assets in a year,” he said.
On a more positive note, Coveney said the “decisions made and work undertaken in FY17 have set us up very well for further progress”.
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By GlobalDataHe added: “The acquisition of Peacock Foods and the significant UK network investments made to support large new business wins have reshaped our business.
“We are pleased with the progress of the US integration to-date and with the development of our US commercial pipeline, as illustrated by a recently extended long term, strategic partnership with one of our largest and most important customers.”
In his post-results presentation, Coveney said: “We have created an exciting, strong, scaled US business that is four times the size it was a year ago and which is connected to key consumer and supply chain trends.
“The Peacock deal is working very well for us. The synergy delivery is strong and will become increasingly apparent as 2018 unfolds.”
Coveney also revealed that, in the UK, Greencore has become the only supplier of products such as sandwiches to some of its key customers.
In terms of future outlook, Greencore said it anticipates delivering a year of strong growth in FY18.
“Building on what has been an intense phase of strategic progress and network investment, Greencore will now take advantage of its exposure to higher growth categories in the UK and US convenience food markets,” it said.
“The group anticipates good revenue growth in FY18, driven by a full year contribution from Peacock Foods and organic growth in both the UK and the US.”
Analyst Martin Deboo at Jefferies International was largely upbeat, if cautious, about Greencore’s results.
“GNC {Greencore}’s testing FY17 comes to an end with results that are at the lower end of market expectations on EBITA. However, top line momentum into FY18 is strong, with positive operating leverage in the UK and synergy realisation in the US set to be incremental positives,” he said.
“We see the FY18 outlook as directionally consistent with our forecasts, but caution that we hold a lower-end view.”
During 2017, one of the big decisions Greencore made was to pull out of the desserts category. In May it began talks to facilitate the closure of its chilled desserts production facility in Evercreech, Somerset.
In August, in another tactical move, it said it was “refocusing” its plant in Jacksonville, Florida – replacing frozen food products with fresh.
And in November it confirmed to just-food that it was undergoing a restructuring exercise in the UK which would see its corporate structure simplified into two divisions.
