Greencore has upgraded its forecasts for a key profit metric following a report of volume growth that exceeds trends in the broader grocery sector.
In a trading update released today (22 July) for the 13-week period ending 26 June, the UK-based convenience-food manufacturer announced expectations for its annual adjusted operating profit to surpass “current market expectations,” estimating it will fall between £234 million ($312.8 million) and £242 million.
This announcement triggered a positive market response, with Greencore’s shares increasing by 11.6% during the morning session to reach 247.6p, having peaked at 250.8p, compared to a previous closing figure of 221.8p.
For the fiscal third quarter, Greencore reported group revenue of £1.02 billion on a pro forma basis, reflecting a 3.2% increase compared to last year. Revenue for the first nine months also rose by 3.2%.
Sales in the “food-for-now” category were up by 4.7% for the quarter, while the “food-for-later” segment saw a 1.8% increase. The company’s growth can be attributed to a combination of volume and product mix, which added 2.3 percentage points, with pricing and “inflation recovery” contributing an additional 0.9 points.
CEO Dalton Philips remarked, “The Greencore team has delivered another strong performance in Q3, with volume growing ahead of the market and excellent underlying profit growth, even against a robust Q3 last year.”
The company highlighted that the “underlying profit momentum” from both the legacy Greencore and Bakkavor businesses was better than anticipated, driven by increased volumes, improved margins, and effective cost management.
The acquisition of Bakkavor has resulted in a merged private-label food enterprise with approximately £4 billion in revenue.
Much like Bakkavor, Greencore focuses on private-label food-to-go and convenience items supplied to major retailers such as Tesco, Sainsbury’s, Asda, Waitrose, and Marks & Spencer.
Philips stated that the integration of the larger group is “fully on track” and indicated that customers are eager “to grow their business with us.”
Analysts at RBC noted that the update should alleviate concerns regarding Bakkavor’s foundational performance and working capital.
RBC analyst Ross Broadfoot referred to the announcement as “an impressive update,” indicating that the revised adjusted operating profit range suggests about a 6% uplift at the midpoint relative to earlier consensus estimates.
Greencore also mentioned that trading for the fourth quarter has begun “positively,” with ongoing volume growth and initial successes in cross-selling.
