Shares in convenience foods company Greencore (GNC) cheapened 0.5% to 116p on Tuesday after the sandwiches, salads and sushi maker cautioned that first quarter group revenues fell 15% on the previous year due to the latest government lockdown.
Food-to-go sales were particularly impacted, with revenues down 35% year-on-year, although the firm said the effect of the restrictions was less severe than in March 2020 and it was ‘well positioned to build back the business rapidly as trading conditions recover’.
LOSING OUT FROM LOCKDOWN
For the 13 weeks to 25 December 2020, group revenue fell 15% to £312.7 million due to the impact of Covid-19 related restrictions on demand for its food-to-go categories, although Greencore showcased its resilience by generating a positive adjusted operating profit for the quarter.
A further national lockdown was introduced on 4 January 2021 and, as a result, group revenue is currently running 20% below prior year levels, said Greencore, with food-to-go category sales tracking approximately 35% below prior year levels and performance in other convenience categories remaining ‘stable’.
MANAGING COSTS AND CASH
‘The group will continue to proactively manage costs and cash flow through the duration of the current lockdown, while also preparing for recovery and growth as mobility restrictions begin to ease,’ explained Greencore, adding it is still too difficult to give guidance for the currently financial year.
However, chief executive Patrick Coveney did flag up ‘a number of new business wins in the quarter’ and stressed his charge has a ‘healthy commercial pipeline as we look forward. In addition, the operational, debt and equity measures that we have taken in recent months provide us with a strong foundation from which to navigate our way through all of the challenges of Covid-19.’
Shore Capital commented: ‘Whilst the current societal and so market context is requiring patience on behalf of all stakeholders, we believe that materially brighter times should be ahead of Greencore, a business with world-class prepared food manufacturing capabilities where through no fault of its own the pandemic has taken its commercial legs away.’
The broker believes a focused Greencore ‘should be very well positioned to deliver a much stronger H2 FY2021 and so see-through the financial potential of its recovering product categories with a greater share of both the retail and foodservice markets in the UK.’