TIDMGNC
RNS Number : 2789N
Greencore Group PLC
19 May 2020
19 May 2020
Decisive response to COVID-19; strong financial and operational
model in place to build back the business
Greencore Group plc ('Greencore' or the 'Group'), a leading
manufacturer of convenience food in the UK, today issues its
interim results for the 26 weeks ending 27 March 2020 and updates
on its response to the COVID-19 pandemic.
HIGHLIGHTS (1,2,3)
- Comprehensive and rapid response to COVID-19 by keeping our
people safe, feeding the UK, and protecting our business with focus
now turning to building back Greencore volumes as social
restriction measures are eased
- Reported revenue growth of 1.6% and Pro Forma Revenue Growth
of 0.1%, impacted by effect of COVID-19 on food to go categories at
the end of the period
- Adjusted Operating Profit of GBP38.3m and Adjusted EPS of 5.8 pence
- Net Debt (excluding lease liabilities) of GBP311.1m at 27
March 2020 with Net Debt: EBITDA of 2.1x as measured under
financing agreements
- Total cash and undrawn committed facilities of GBP267.5m at 27
March 2020 with covenant waivers agreed for bank facilities; in
addition, confirmation of eligibility, in principle, to access
funding under the Covid Commercial Finance Facility (CCFF)
- As announced on 30 March 2020, the Group will not be
proceeding with an interim FY20 dividend payment and today
announces that it will not be proceeding with either a final FY20
or an interim FY21 dividend payment
- Appointment of Emma Hynes as Executive Director and Chief
Financial Officer with effect from 19 May 2020
SUMMARY FINANCIAL PERFORMANCE (1,2,3)
H1 20 H1 19 Change
GBPm GBPm
Group Revenue 712.7 701.4 +1.6%
Pro Forma Revenue Growth +0.1%
Adjusted EBITDA 63.8 62.5 +2.1%
Adjusted Operating Profit 38.3 44.7 -14.3%
Adjusted Operating Margin 5.4% 6.4% -100 bps
Group Operating Profit 35.6 41.3 -13.8%
Adjusted Profit Before Tax 31.1 37.7 -17.5%
Group Profit Before Tax 27.3 5.7 +378.9%
Adjusted EPS (pence) 5.8 6.4 -9.4%
Group Exceptional Items (after
tax) 0.4 28.8
Basic EPS (pence) 5.3 10.5 -49.5%
Interim dividend per share
(pence) - 2.45
Free Cash Flow 2.6 (19.4) +GBP22.0m
Net Debt 374.4 284.1
Net Debt (excluding lease liabilities) 311.1 284.1
Net Debt:EBITDA as per financing
agreements 2.1x 1.9x
Return on Invested Capital
("ROIC") 12.3% 14.6% -230bps
Commenting on the results, Patrick Coveney, Chief Executive
Officer, said:
"I am hugely proud of the way in which our people have responded
to the extraordinary challenges of COVID-19, and take this
opportunity to publicly thank them for their role in keeping the UK
fed over the last two months. We have implemented a broad range of
actions to mitigate the impact of COVID-19 on our business and to
position us for growth as the pandemic eases. More than ever
before, our deep customer relationships, leadership positions in
key food categories, well invested network, flexible model, and
outstanding people are key strengths that ensure we trade our way
resiliently through this uncertain period"
___________________________________________________________________________________________________
(1) The Group uses Alternative Performance Measures ('APMs')
which are non-IFRS measures to monitor the performance of its
operations and of the Group as a whole. These APMs along with their
definitions are provided in the Appendix to the Interim Financial
Report.
(2) The implementation of IFRS 16 Leases has been adopted by the
Group in its Interim Financial Report, with no restatement of
comparative information for prior periods. The impact on the
Group's results for the period are highlighted in this report with
further details on the transition impact outlined in Note 2 and
Note 11 to the Interim Financial Report.
(3) Net Debt: EBITDA as per financing agreements and is
calculated excluding the impact of IFRS 16.
COVID-19 UPDATE
Three clear priorities
The Group is managing through this challenging trading
environment with three priorities - keeping our people safe,
feeding the UK, and protecting our flexible business. The
organisation is functioning well in demanding working
circumstances, with a resilient supply chain and production network
enabling strong levels of customer service in a volatile demand
environment.
Greencore is playing an important role in a food industry that
has become a critical component of UK infrastructure through this
pandemic. The Group's colleagues have been designated as 'key
workers' and have performed with a powerful sense of commitment,
skill, spirit, and purpose. Greencore is immensely grateful and
proud of its own Food Heroes at this time. The Group is engaging
continuously with regulatory bodies including the Health &
Safety Executive and Public Health England, and in doing so has
carried out an extensive range of measures to support and improve
colleague safety across its manufacturing and distribution network.
This strategy and these initiatives are consistent with the Group's
broader sustainability agenda. These measures include a large
number of social distancing measures in the workplace, the
introduction of a range of new hygiene protocols, and the provision
of support to colleagues who are working in manufacturing
facilities and those who are working from home. Labour absence,
either through illness or through caring for ill or vulnerable
family members, has been managed effectively and sensitively.
Greencore is working hard with its customers, the Government and
the local communities in which it operates to provide high quality
freshly prepared food to both consumers and frontline workers
during this pandemic. The Group is contributing to the Government's
food parcels for the most vulnerable housebound people in the UK
and is donating thousands of food to go products to NHS workers
across numerous UK hospitals and care homes. In addition, it is
supporting the food industry charity, FareShare, and many other
local organisations and charities that provide support for those in
need at this time.
Performance since period end
In the first six weeks of H2 20, the COVID-19 pandemic has had a
dramatic and volatile impact on the shape of UK food consumption,
though there are signs that demand patterns have recently begun to
stabilise. Weekly demand in the Group's food to go categories
declined by up to 70% and is currently less than 60% below prior
year levels. There has been sustained growth in the Group's other
convenience categories, in particular cooking sauces, with growth
currently about 5% above prior year levels. Group revenue is now
approximately 60% of prior year levels on a proforma basis.
In response to these changed levels of consumer demand and in
order to maintain efficient production, the Group moved rapidly to
simplify its product ranges with its customers. Greencore has
worked collaboratively with its customers to quickly adapt to the
effects of the lockdown while maintaining customer service and
working together on ways to maintain the integrity of the supply
chain, while planning for activation as social restrictions begin
to ease.
The Group has taken prudent measures to protect profitability
and cashflow to ensure maximum flexibility through this uncertain
environment. It has:
- Tightened its food to go production network by temporarily
ceasing production at its Bow, Atherstone and Heathrow facilities
and rationalising production at its Northampton site.
- Furloughed a substantial proportion of colleagues, using the
Government's Coronavirus Job Retention Scheme.
- Eliminated all non-essential operating costs including
recruitment, travel, and other variable overheads.
- Announced on 30 March that the Board and the Executive
Directors have voluntarily agreed to take a 30% reduction in
respective fees and base salary for a period of three months, with
the wider senior teams also taking a voluntary reduction of between
10% and 20% of base salary for the same period.
The impact from the full suite of mitigating actions is now
returning the Group to modestly positive EBITDA.
Liquidity
The Group is also focussed on conserving balance sheet strength
and liquidity, and retains substantial and increased financial
headroom. Together with positive underlying market fundamentals and
the Group's market position, this leaves Greencore well placed to
deliver over the medium term.
Greencore had cash and undrawn committed bank facilities of
GBP267.5m at 27 March 2020. This includes a newly agreed GBP75m
committed debt facility which matures in March 2021.
- Since the end of H1 20, the Group secured formal agreement
with its lending syndicate of banks to waive its Net debt: EBITDA
covenant condition for the September 2020 and March 2021 test
periods. The Group is also in advanced stages of discussions with
the Private Placement holders in respect of a waiver of the
September 2020 and March 2021 leverage covenants contained in the
Private Placement documentation and the Group expects that an
agreement in respect of such waivers will be finalised and
concluded in the coming weeks.
- In addition, the Group also confirms that it has received
eligibility, in principle, to access funding under the Covid
Corporate Financing Facility (CCFF).
- The Group will defer a substantial portion of non-essential capital expenditure.
- As previously announced, the Group is not proceeding with an
interim FY20 dividend payment and the Group today announces that it
will not be proceeding with either a final FY20 or an interim FY21
dividend payment.
- Where relevant, the Group has agreed to defer cash
contributions into its legacy defined benefit pension schemes.
The Group believes that this provides more than sufficient
liquidity to manage through a range of different cashflow scenarios
including fluctuations in working capital over the next 12
months.
OUTLOOK - BUILDING BACK FOR BETTER
Whilst COVID-19 is clearly impacting Greencore's performance in
the short-term, the Group has taken a comprehensive set of actions
to ensure that it is strongly positioned to build back the business
as social restriction measures are eased. Greencore's medium-term
strategic ambition remains focussed on optimising its growth
potential in UK convenience food markets, supported by disciplined
strategic investment. The Group's confidence in achieving this
ambition is underpinned by its fundamental strengths; deep customer
relationships, leadership positions across attractive food to go
categories, a well invested and highly flexible network, an
experienced and ambitious team, a comprehensive capability set and
a positive resilient culture.
The Group is in close dialogue with customers on how to optimise
its operating model to respond to evolving demand requirements, and
the Group's commercial teams are exploring what future shopping
trends and buying behaviours are expected to look like as the
situation develops. The Group has demonstrated its agility and
flexibility in responding positively to the immediate challenges of
COVID-19 and expects to be able to deploy this agility again with
customers as the pandemic eases.
Given the ongoing level of uncertainty around the possible
duration and impact of COVID-19, the Group's financial guidance for
FY20 was suspended on 30 March and the Group's outlook for FY20
included in the FY19 Full Year Results Statement and FY20 Q1
Trading Update should no longer be considered current.
ADOPTION OF IFRS 16 LEASES
On 28 September 2019 the Group adopted IFRS 16 Leases, the new
accounting standard for leases. The Group transitioned to the
standard using the modified retrospective approach, which does not
require the restatement of comparative periods. On transition the
Group recognised a right-of-use lease asset of GBP41.2m and a lease
liability of GBP46.4m. The impact on the Group's H1 20 results are
detailed in the Financial Review, and are summarised as
follows;
Performance Measures GBPm
EBITDA +6.3
-----------
Group Operating Profit +0.3
-----------
Group Profit before taxation -0.2
-----------
Basic EPS (p) Immaterial
-----------
Net Debt +63.3
-----------
The impact of IFRS 16 on the Group's APMs are detailed in the
Appendix to this Report.
Forward--looking statements
Certain statements made in this document are forward--looking.
These represent expectations for the Group's business, and involve
known and unknown risks and uncertainties, many of which are beyond
the Group's control. The Group has based these forward--looking
statements on current expectations and projections about future
events. These forward-looking statements may generally, but not
always, be identified by the use of words such as 'will', 'aims',
'anticipates', 'continue', 'could', 'should', 'expects', 'is
expected to', 'may', 'estimates', 'believes', 'intends',
'projects', 'targets', or the negative thereof, or similar
expressions.
By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on
circumstances that may or may not occur in the future and reflect
the Group's current expectations and assumptions as to such future
events and circumstances that may not prove accurate. A number of
material factors could cause actual results and developments to
differ materially from those expressed or implied by
forward-looking statements. You should not place undue reliance on
any forward-looking statements. These forward-looking statements
are made as of the date of this announcement. The Group expressly
disclaims any obligation to publicly update or review these
forward-looking statements other than as required by law.
This announcement contains inside information for the purposes
of the Market Abuse Regulation
PRESENTATION
A webcast presentation of the results for analysts and
institutional investors will take place at 8.30am today. This
presentation can also be accessed live from the Investor Relations
section on www.greencore.com or alternatively via conference
call.
Participants wishing to dial into the conference call can do so
using the following details:
Ireland number: +353 (0)1 431 9615
UK number: +44 (0)20 7192 8000
US number: +1 631 510 7495
Confirmation code: 1582857
A replay of the presentation will be available on
www.greencore.com and also through a 7 day conference call replay
facility.
Ireland replay number: +353 (0)1 553 8777
UK replay number: +44 (0)33 3300 9785
US replay number: +1 917 677 7532
Replay code: 1582857
For further information, please contact:
Patrick Coveney Chief Executive Officer Tel: +353 (0) 1 486
3313
Emma Hynes Chief Financial Officer Tel: +353 (0) 1 486
3307
Jack Gorman Head of Investor Relations Tel: +353 (0) 1 486
3308
Rob Greening or Powerscourt Tel: +44 (0) 20 7250
Sam Austrums 1446
Billy Murphy or Drury | Porter Novelli Tel: +353 (0) 1 260
Louise Walsh 5000
About Greencore
Greencore is a leading manufacturer of convenience food in the
UK. It supplies grocery and other retailers including all of the
major UK supermarkets. The Group has strong market positions in a
range of categories including sandwiches, salads, sushi, chilled
snacking, chilled ready meals, chilled soups and sauces, chilled
quiche, ambient sauces and pickles, and frozen Yorkshire
Puddings.
The Group's medium term financial ambitions are for mid
single-digit organic revenue growth, high single-digit Adjusted EPS
growth, the conversion of half of its Adjusted EBITDA to Free Cash
Flow and for mid-teen ROIC.
For further information go to www.greencore.com or follow
Greencore on social media.
OPERATING REVIEW (1,2,3)
Convenience Foods UK & Ireland
H1 20 H1 19 Change Change
GBPm GBPm (As reported) (Pro Forma
basis)
Revenue 712.7 701.4 +1.6% +0.1%
------ ------ --------------- ------------
Adjusted Operating
Profit 38.3 44.7 -14.3%
------ ------ --------------- ------------
Adjusted Operating
Margin % 5.4% 6.4% -100 bps
------ ------ --------------- ------------
Group Operating Profit 35.6 41.3 -13.8%
------ ------ --------------- ------------
Strategic developments
In H1 20, the Group executed well against the commercial,
operational and organisational objectives introduced during FY19.
This good momentum provided a strong foundation from which to
respond to the challenges presented by the COVID-19 outbreak. It
will also form a critical element of the Group's capability to
accelerate its growth again as the measures to combat the pandemic
are eased.
Freshtime, acquired in September 2019, performed well in H1 20.
It is integrating well into the Group and has successfully extended
the Group's presence in meal salads and chilled snacking.
Commercial activity has been encouraging, including increased
engagement with existing Group customers, and as such the business
provides a platform to drive growth and improve returns in these
categories. The Group also continued to benefit from the reset of
its ready meals product and facility footprint at Warrington,
Kiveton and Consett in FY19. Furthermore, the Group continued to
invest in a range of services to increase its relevance across the
value chain, including a new distribution centre in Tamworth that
will enhance capacity and maximise cost and operational
efficiencies in the Group's Direct to Store distribution model.
In H1 20 the Group also made good operational and organisational
progress. The Group advanced its pilot automation programme with
multiple additional projects initiated in the period that will
continue to be supported through the rest of the year. Greencore
has also progressed its sustainability agenda in the period,
notably in food packaging where the Group made significant progress
alongside customers in developing innovative solutions for the
recyclability of sandwich skillets.
Engagement and collaboration with customers deepened as the full
impacts of the COVID-19 pandemic became apparent. Joint initiatives
that were already in place on supply chain, waste and availability
were modified to reflect the rapid change in consumer demand and
shopper behaviours.
Performance
Reported revenue increased by 1.6% to GBP712.7m in H1 20. Pro
Forma Revenue Growth was 0.1%, after adjusting for the acquisition
of Freshtime, the exit of longer life ready meals manufacturing at
the Kiveton facility in H1 19, and any movement in foreign
exchange. Adjusted Operating Profit fell by 14.3% to GBP38.3m and
Adjusted Operating Margin fell by 100bps to 5.4%.
While the UK trading environment remained subdued for much of
the period, there were some signs of improvement before the UK
Government's escalating measures in March to combat the outbreak of
COVID-19. The business was significantly impacted in the second
half of March by the effect that these measures had on consumer
demand, most particularly in food to go categories.
H1 20 revenue in the Group's food to go categories (comprising
sandwiches, salads, sushi and chilled snacking) totalled GBP455.8m
and accounted for approximately 64% of reported revenue. Reported
revenues increased by 1.9% in these categories, driven by the
acquisition of Freshtime. Excluding this acquisition, Pro Forma
Revenue declined by 2.1%.
Underlying product revenue growth in food to go categories was
broadly in line with plan for most of H1 20. The final two weeks of
the trading period were negatively impacted by significantly
reduced demand in grocery retail, as well as the restrictions on
trading activity applied to other convenience and food service
channels.
Revenue for the distribution of third party products accounted
for approximately 6% of Group revenue. Following the acquisition of
Freshtime in September 2019, revenue from its products that were
previously distributed by Greencore is now classified as underlying
product revenue.
The Group's other convenience categories comprise activities in
the chilled ready meals, chilled soups and sauces, chilled quiche,
ambient sauces and pickles, and frozen Yorkshire Pudding
categories, as well as Irish ingredients trading businesses.
Reported revenue across these businesses increased by 1.0% to
GBP256.9m. Pro Forma Revenue increased by 4.0%, when adjusting for
movements in foreign exchange and excluding sites that have ceased
trading. This was driven by strong growth in ambient cooking
sauces, ready meals, soups and quiche based products in the final
month of the period. The Group's cooking sauce business benefitted
in particular from higher demand during the final two weeks of the
trading period. Revenue in the Group's Irish ingredients trading
businesses declined modestly in the period.
Inflation trends in the Group's main UK cost components were
broadly as anticipated. Raw material and packaging costs rose by
under 1% in H1 20. Direct labour inflation in the UK rose by
approximately 5%.
Overall, Adjusted Operating Profit declined by GBP6.4m to
GBP38.3m. In its food to go categories, while the performance
benefitted from the addition of the Freshtime business, the Group
experienced a decline in profitability driven in large part by a
deteriorating performance in the second half of March which
happened before any mitigating measures could be fully implemented.
This decline was only partly offset by an improvement in the
Group's other convenience categories, in particular in the ready
meals business following the reset of its product and facility
footprint over the last year.
Group Cash Flow and Returns
H1 20 H1 19 Change
GBPm GBPm (as reported)
Free Cash Flow 2.6 (19.4) +GBP22.0m
------ ------- ---------------
Net Debt 374.4 284.1
------ ------- ---------------
Net Debt (excluding lease
liabilities) 311.1 284.1
------ ------- ---------------
Net Debt: EBITDA as per financing
agreements 2.1x 1.9x
------ ------- ---------------
ROIC 12.3% 14.6% -230bps
------ ------- ---------------
Strategic developments
In H1 20 the Group focussed on balance sheet strength and
liquidity, extending the maturity of its GBP340m revolving credit
bank facility to January 2025 and entering into a new revolving
credit bank facility of GBP75m maturing in March 2021.
The Group retains substantial and increased financial headroom,
with cash and undrawn committed bank facilities of GBP267.5m at 27
March 2020.
Subsequent to the end of H1, the Group secured formal agreement
with its lending syndicate of banks to waive its net debt: EBITDA
covenant condition for the September 2020 and March 2021 test
periods. The Group is also in advanced stages of discussions with
the Private Placement holders in respect of a waiver of the
September 2020 and March 2021 leverage covenants contained in the
Private Placement documentation and the Group expects that an
agreement in respect of such waivers will be finalised and
concluded in the coming weeks.
In addition, the Group confirms that it has received
eligibility, in principle, to access funding under the Covid
Corporate Financing Facility (CCFF).
The Group today announces that it will not be proceeding with
either a final FY20 or an interim FY21 dividend payment. The Group
will seek to reinstate dividend payments as soon as is practicable
thereafter in accordance with its capital allocation strategy.
The Group also plans to defer a substantial portion of
non-essential capital expenditure which was planned for FY20.
The Group's capital allocation model has ensured a prudent
financial profile for the business and a strong foundation from
which to respond to the challenges presented by the COVID-19
outbreak.
Performance
Free Cash Flow was a modest GBP2.6m inflow in H1 20 compared
with an outflow of GBP19.4m in H1 19 which included the disposal of
the US business. The improvement was driven by lower working
capital outflows, a decrease in exceptional cash flows, and the
non-recurrence of cash outflows associated with discontinued
operations.
Net Debt increased to GBP374.4m at the end of H1 20. This
included the impact of IFRS 16 lease obligations of GBP63.3m. Net
Debt (excluding lease liabilities ) increased to GBP311.1m from
GBP284.1m at the end of H1 19 and GBP288.5m at the end of FY19. The
Group's Net Debt: EBITDA leverage as measured under financing
agreements was 2.1x at period end, compared to 1.9x at the end of
March 2019 and 1.8x at the end of September 2019. Net Debt: EBITDA
as measured under financing agreements is calculated excluding the
impact of IFRS 16.
ROIC was 12.3% for the 12 months ended 27 March 2020, compared
to 14.6% for the 12 months ended 29 March 2019. The reduction was
driven by increased investment over the last 12 months, in
particular the acquisition of Freshtime, and also the impact of the
recognition of leases on the Groups balance sheet under IFRS
16.
FINANCIAL REVIEW (1,2)
Revenue and Operating Profit
Reported revenue in the period was GBP712.7m, an increase of
1.6% compared to H1 19, primarily reflecting the acquisition of
Freshtime in H2 20 and the exit of longer life ready meals
manufacturing in H1 19. Pro Forma Revenue Growth was 0.1%.
Group Operating Profit declined by GBP5.7m to GBP35.6m primarily
driven by deterioration in profitability, as revenue from food to
go categories declined in the second half of March due to the
impact of COVID-19. Adjusted Operating Profit of GBP38.3m declined
GBP6.4m on the prior period, also driven by the impact of trading
performance in late March and includes the impact of IFRS 16.
Adjusted Operating Margin was 5.4%, 100 basis points lower than the
prior period.
Net finance costs
The Group's net bank interest payable was GBP7.2m in H1 20, a
decrease of GBP0.5m versus H1 19. The decrease was driven by
closing out swaps in the prior period.
The Group's non-cash finance charge in H1 20 was GBP1.5m (H1 19:
GBP3.1m). The Group recognised a GBP0.5m interest charge relating
to the unwinding of the IFRS 16 lease liability in the period. The
change in the fair value of derivatives and related debt
adjustments in the period netted to nil (H1 19 charge: GBP1.8m).
The non-cash pension financing charge of GBP1.0m was GBP0.3m lower
than the H1 19 charge of GBP1.3m.
Profit before taxation
The Group's Profit before taxation increased to GBP27.3m in H1
20 from GBP5.7m in H1 19, as higher finance costs in the prior
period, which includes an exceptional finance charge, offsets the
decline in Group Operating Profit in the current period. Adjusted
Profit Before Tax in the period was GBP31.1m, a decrease of GBP6.6m
from GBP37.7m in H1 19, primarily driven by a reduction in the
Group's Adjusted Operating Profit and a reduction in net interest
expense.
Taxation
The Group's effective tax rate in H1 20 (including the tax
impact associated with pension finance items) was 13% (H1 19: 15%).
This reflects the rate benefit resulting from the restatement of
the deferred tax assets, arising from the decision by the UK
Government to maintain the UK corporation tax rate at 19%. This
decision not to decrease the UK corporation tax rate to 17% results
in a one-off tax credit to the income statement, with a
corresponding increase to the Groups net deferred tax asset.
Exceptional items
The Group had an after tax exceptional credit of GBP0.4m,
comprised as follows:
Exceptional Items GBPm
Impact of COVID-19 pandemic (1.7)
------
Legacy US legal matters 2.2
------
Integration costs (0.5)
------
Exceptional items (before tax) -
------
Tax credit on exceptional items 0.4
------
Exceptional items (after tax) 0.4
------
These charges are described in Note 5 to the Condensed Group
Financial Statements.
Earnings per share
Basic earnings per share for total operations was 5.3 pence (H1
19: 10.5 pence). This was driven by a GBP41.8m decrease in earnings
due to the reduction in profits as a result of the disposal of the
Groups US business and the decline in profitability in the food to
go categories in late March. Basic earnings per share also
benefitted from a reduction of 261m in the number of shares in
issue as a result of the tender offer which was executed in January
2019. The weighted average number of shares in issue in H1 20 was
443.3m (H1 19: 620.9m). Adjusted earnings per share was 5.8 pence
(H1 19: 6.4 pence)
Cash Flow and Net Debt
Adjusted EBITDA was GBP1.3m higher in H1 20 at GBP63.8m, after
the impact of IFRS 16. The Group incurred a net working capital
outflow of GBP21.8m. Maintenance capital expenditure of GBP11.2m
was incurred in the period (H1 19: GBP12.8m). The cash outflow in
respect of exceptional charges was GBP2.6m (H1 19: GBP7.7m), of
which GBP2.1m related to prior year exceptional charges.
Interest paid in the period was GBP7.5m, including interest on
lease liabilities (H1 19: GBP9.2m) primarily reflecting the impact
of closing out swaps in the prior year. Cash tax increased by
GBP2.6m to GBP4.2m due to a one-off change in rules for the timing
of UK corporation tax payments impacting H1 20, resulting in a cash
tax rate in the period of 15.6% (H1 19: 4.7%). The cash tax rate
for the Group is expected to rise towards the Group's effective
rate in the medium term as a result of increased profitability and
a reduction in the degree to which UK losses may be utilised in any
one year. The Group's cash funding for defined benefit pension
schemes was GBP7.8m (H1 19: GBP8.0m).
These movements resulted in a Free Cash inflow of GBP2.6m
compared to an outflow of GBP19.4m in H1 19 driven by lower working
capital outflows, a decrease in exceptional cash flows, and the
non-recurrence of cash outflows associated with discontinued
operations.
In H1 20, the Group incurred strategic capital expenditure of
GBP9.9m (H1 19: GBP6.1m including GBP1.2m on discontinued
operations)
Equity dividend cash payments decreased significantly to
GBP16.7m (H1 19: GBP39.4m). The H1 20 payment was made on a reduced
number of shares, reflecting the impact of the Group's tender offer
which was executed in January 2019. The prior year period also
included the change in the phasing of dividend cash payments
resulting from the removal of the scrip dividend option (both the
interim and final dividend for FY18 were paid during H1 19).
The Group's Net Debt at 27 March 2020 was GBP374.4m, an increase
of GBP90.3m compared to the prior year period, primarily driven by
IFRS 16 lease obligations of GBP63.3m and the acquisition of
Freshtime in September 2019.
Financing
In the period the Group extended the maturity of its GBP340m
committed bank facility by one year to 2025. It also secured an
additional GBP75m committed debt facility which matures in March
2021. The Group had cash and undrawn committed facilities of
GBP267.5m at 27 March 2020, compared to GBP216.6m as at 27
September 2019.
As at 27 March 2020 the Group's committed facilities had a
weighted average maturity of 3.8 years and comprised:
- A GBP340m revolving credit bank facility with a maturity date of January 2025.
- A GBP50m bilateral bank facility with a maturity date of January 2022.
- GBP114.9m of outstanding Private Placement notes with
maturities ranging between October 2021 and June 2026.
- A revolving credit bank facility of GBP75m, with a maturity date of March 2021.
In addition, the Group has received eligibility, in principle,
to access funding under the Covid Corporate Financing Facility
(CCFF).
Pensions
All legacy defined benefit pension schemes are closed to future
accrual. The net pension deficit relating to legacy defined pension
schemes, before related deferred tax, at 27 March 2020 was
GBP52.3m, GBP39.7m lower than the position at 27 September 2019.
The net pension deficit after related deferred tax was GBP39.2m, a
decrease of GBP35.6m from 27 September 2019. The decrease in net
pension deficit was driven principally by a decrease in UK scheme
liabilities, resulting in a GBP32.0m actuarial gain, as relevant
bond yield assumptions increased offset by a reduction in the
return on scheme assets following the impact of COVID-19 on capital
markets in March 2020.
The valuations and funding obligations of the Group's legacy
defined benefit pension schemes are assessed on a triennial basis
with the relevant trustees. Following the most recent reviews, the
Group's annual cash funding requirement for defined benefit pension
schemes is approximately GBP15m. The Group is assessing
opportunities to further de-risk liabilities, that if implemented,
could modestly increase annual cash funding requirements. During
the period, the Trustees of one of the smaller UK legacy defined
benefit schemes, completed a buy-out of the scheme, transferring
insurance policies to individual scheme members removing the scheme
liabilities from the Group's Statement of Financial Position.
Dividends
The Group announced on 30 March 2020 that it is not proceeding
with an interim FY20 dividend payment and today announces that it
will not be proceeding with either a final FY20 or an interim FY21
dividend payment. The Group will seek to reinstate dividend
payments as soon as is practicable thereafter in accordance with
its capital allocation strategy.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on future Group performance and could
cause actual results to differ materially from expected and
historical results. The Board considers the risks and uncertainties
as described in detail in the section Risks and Risk Management in
the Annual Report and Financial Statements for the year ended 27
September 2019 issued on 26 November 2019, to remain applicable in
the second half of the year.
The Board has also considered an additional risk factor,
relating to the financial and operational impacts associated with
COVID-19, to be applicable in the second half of the year.
Greencore management are continuing to perform detailed assessments
of the continuing risks faced specifically in relation to COVID-19,
and defined strategies for mitigating these risks and the specific
actions for achieving these are already underway.
A description of the risks and uncertainties, including the
risks associated with COVID-19, are set out in the Appendix to the
Interim Financial Report.
Responsibility Statement
The Directors are responsible for preparing the Interim
Financial Report in accordance with the Transparency (Directive
2004/109/EC) Regulations 2007, the related Transparency Rules of
the Central Bank of Ireland and with IAS 34 Interim Financial
Reporting as adopted by the European Union.
The Directors confirm that, to the best of their knowledge:
-- the Condensed Group Financial Statements for the half year
ended 27 March 2020 have been prepared in accordance with the
international accounting standard applicable to interim financial
reporting adopted pursuant to the procedure provided for under
Article 6 of the Regulation (EC) No. 1606/2002 of the European
Parliament and of the Council of 19 July 2002;
-- the Interim Management Report includes a fair review of the
important events that have occurred during the first six months of
the financial year and their impact on the Condensed Group
Financial Statements for the half year ended 27 March 2020 and a
description of the principal risks and uncertainties for the
remaining six months; and
-- the Interim Management Report includes a fair review of
related party transactions that have occurred during the first six
months of the current financial year and that have materially
affected the financial position or the performance of the Group
during that period, and any changes in the related parties'
transactions described in the last Annual Report that could have a
material effect on the financial position or performance of the
Group in the first six months of the current financial year.
P.F. Coveney E.P. Tonge
Chief Executive Officer Chief Financial Officer
Date: 18 May 2020 Date: 18 May 2020
Half year ended 27 Half year ended 29
March 2020 March 2019
(Unaudited) (Unaudited)
Exceptional Exceptional
(Note (Note
Notes Pre- exceptional 5) Total Pre- exceptional 5) Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------------- ------------ -------- ----------------- ------------ --------
Continuing operations
Revenue 3 712.7 - 712.7 701.4 - 701.4
Cost of sales (475.7) - (475.7) (467.8) - (467.8)
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Gross profit 237.0 - 237.0 233.6 - 233.6
Operating costs, net (198.7) - (198.7) (188.9) (3.0) (191.9)
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Group operating profit
before acquisition
related
amortisation 3 38.3 - 38.3 44.7 (3.0) 41.7
Amortisation of
acquisition
related intangibles (2.7) - (2.7) (0.4) - (0.4)
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Group operating profit 35.6 - 35.6 44.3 (3.0) 41.3
Finance income 6 0.1 - 0.1 0.7 - 0.7
Finance costs 6 (8.8) - (8.8) (11.5) (25.4) (36.9)
Share of profit of
associates
after tax 0.4 - 0.4 0.6 - 0.6
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Profit before taxation 27.3 - 27.3 34.1 (28.4) 5.7
Taxation 7 (3.5) 0.4 (3.1) (5.4) 0.5 (4.9)
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Profit for the financial
period from continuing
operations 23.8 0.4 24.2 28.7 (27.9) 0.8
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Discontinued operations
Result from discontinued
operations 15 - - - 8.9 56.7 65.6
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Profit for the financial
period 23.8 0.4 24.2 37.6 28.8 66.4
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Attributable to:
Equity shareholders 22.9 0.4 23.3 36.3 28.8 65.1
Non-controlling interests 0.9 - 0.9 1.3 - 1.3
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
23.8 0.4 24.2 37.6 28.8 66.4
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Earnings per share (pence) - continuing operations
Basic earnings per share 9 5.3 (0.1)
Diluted earnings per share 9 5.2 (0.1)
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Earnings per share (pence) - total
Basic earnings per share 9 5.3 10.5
Diluted earnings per share 9 5.2 10.5
--------------------------- --- ----------------- ------------ -------- ----------------- ------------ --------
Half year Half year
ended ended
27 March 29 March
2020 2019
(Unaudited) (Unaudited)
GBPm GBPm
------------------------------------------------------ ------------ ------------
Items of income and expense taken directly to
equity for continuing and discontinued operations
Items that will not be reclassified to profit
or loss:
Actuarial gain/(loss) on Group legacy defined
benefit pension schemes 32.0 (11.1)
Deferred tax on Group legacy defined benefit
pension schemes (2.7) 1.9
------------------------------------------------------ ------------ ------------
29.3 (9.2)
------------------------------------------------------ ------------ ------------
Items that may subsequently be reclassified to
profit or loss:
Currency translation adjustment 1.0 9.4
Translation reserve transferred to Income Statement
on discontinued operations - (24.5)
Net investment hedge transferred to Income Statement
for the period - 22.3
Cash flow hedges:
fair value movement taken to equity 2.4 (2.2)
transfer to Income Statement for the period 0.1 1.6
------------------------------------------------------ ------------ ------------
3.5 6.6
------------------------------------------------------ ------------ ------------
Net income/(expense) recognised directly within
equity 32.8 (2.6)
Profit for the financial period 24.2 66.4
------------------------------------------------------ ------------ ------------
Total comprehensive income for the financial
period 57.0 63.8
------------------------------------------------------ ------------ ------------
Attributable to:
Equity Shareholders 56.1 62.7
Non-controlling interests 0.9 1.1
------------------------------------------------------ ------------ ------------
Total comprehensive income for the financial
period 57.0 63.8
------------------------------------------------------ ------------ ------------
Attributable to:
Continuing operations 57.0 6.4
Discontinued operations - 57.4
------------------------------------------------------ ------------ ------------
Total comprehensive income for the financial
period 57.0 63.8
------------------------------------------------------ ------------ ------------
March September
2020 2019
(Unaudited) (Audited)
Notes GBPm GBPm
----------------------------------------------------- ------ ------------ ----------
ASSETS
Non-current assets
Goodwill and intangible assets 10 480.9 483.3
Property, plant and equipment 10 333.3 332.5
Right-of-use leased assets 11 57.0 -
Investment property 10 5.8 5.8
Investments in associates 1.3 1.2
Retirement benefit assets 14 49.3 36.4
Derivative financial instruments 12 6.5 5.5
Deferred tax assets 32.5 37.1
----------------------------------------------------- ------ ------------ ----------
Total non-current assets 966.6 901.8
----------------------------------------------------- ------ ------------ ----------
Current assets
Inventories 48.0 45.9
Trade and other receivables 171.3 173.8
Current tax receivable 0.5 0.7
Cash and cash equivalents 34.5 41.6
Total current assets 254.3 262.0
----------------------------------------------------- ------ ------------ ----------
Total assets 1,220.9 1,163.8
----------------------------------------------------- ------ ------------ ----------
EQUITY
Capital and reserves attributable to equity holders
of the Company
Share capital 4.5 4.5
Share premium 0.4 0.1
Reserves 331.7 294.8
----------------------------------------------------- ------ ------------ ----------
336.6 299.4
Non-controlling interests 4.9 6.4
----------------------------------------------------- ------ ------------ ----------
Total equity 341.5 305.8
----------------------------------------------------- ------ ------------ ----------
LIABILITIES
Non-current liabilities
Borrowings 12 345.6 330.1
Derivative financial instruments 12 2.8 3.3
Lease liabilities 11 49.0 -
Retirement benefit obligations 14 101.6 128.4
Other payables 3.7 3.7
Provisions 13 5.1 6.7
Deferred tax liabilities 6.4 6.9
----------------------------------------------------- ------ ------------ ----------
Total non-current liabilities 514.2 479.1
----------------------------------------------------- ------ ------------ ----------
Current liabilities
Derivative financial instruments 12 0.2 0.3
Lease liabilities 11 14.3 -
Trade and other payables 335.5 358.4
Provisions 13 3.7 5.5
Current tax payable 11.5 14.7
Total current liabilities 365.2 378.9
----------------------------------------------------- ------ ------------ ----------
Total liabilities 879.4 858.0
----------------------------------------------------- ------ ------------ ----------
Total equity and liabilities 1,220.9 1,163.8
----------------------------------------------------- ------ ------------ ----------
Half year Half year
ended ended
27 March 29 March
2020 2019
Notes (Unaudited) (Unaudited)
GBPm GBPm
------------------------------------------------- ------ ------------ ------------
Profit before taxation 27.3 5.7
Finance income (0.1) (0.7)
Finance costs 8.8 11.5
Share of profit of associates after tax (0.4) (0.6)
Exceptional items - 28.4
------------------------------------------------- ------ ------------ ------------
Continuing Operating Profit (pre-exceptional) 35.6 44.3
Discontinued Operating Profit (pre-exceptional) 15 - 9.1
------------------------------------------------- ------ ------------ ------------
Operating Profit (pre-exceptional) 35.6 53.4
Depreciation 22.9 16.0
Amortisation of intangible assets 5.3 2.2
Employee share-based payment expense 0.9 1.5
Contributions to Group legacy defined benefit
pension schemes (7.8) (8.0)
Working capital movement (21.8) (51.2)
Other movements - (0.3)
------------------------------------------------- ------ ------------ ------------
Net cash inflow from operating activities
before exceptional items 35.1 13.6
Cash outflow related to exceptional items (2.6) (7.7)
Interest paid (including lease liability
interest) (7.5) (9.2)
Tax paid (4.2) (1.6)
------------------------------------------------- ------ ------------ ------------
Net cash inflow/(outflow) from operating
activities 20.8 (4.9)
------------------------------------------------- ------ ------------ ------------
Cash flow from investing activities
Dividends received from associates 0.3 0.5
Purchase of property, plant and equipment (19.3) (18.3)
Purchase of intangible assets (1.8) (0.6)
Disposal of undertakings 15 - 811.4
------------------------------------------------- ------ ------------ ------------
Net cash (outflow)/inflow from investing
activities (20.8) 793.0
------------------------------------------------- ------ ------------ ------------
Cash flow from financing activities
Proceeds from issue of shares 0.3 -
Ordinary shares purchased - own shares - (0.6)
Drawdown of bank borrowings 12 16.8 42.0
Repayment of bank borrowings 12 - (210.0)
Repayment of non-bank borrowings 12 - (63.1)
Repayment of private placement notes 12 - (14.6)
Repayment of lease liabilities 11 (4.9) (0.4)
Dividends paid to equity holders of the Company (16.7) (39.4)
Dividends paid to non-controlling interests (2.4) (2.2)
Capital return via tender offer - (509.0)
Termination of swaps - (12.6)
------------------------------------------------- ------ ------------ ------------
Net cash outflow from financing activities (6.9) (809.9)
------------------------------------------------- ------ ------------ ------------
Net decrease in cash and cash equivalents (6.9) (21.8)
------------------------------------------------- ------ ------------ ------------
Reconciliation of opening to closing cash
and cash equivalents
Cash and cash equivalents at beginning of
period 41.6 37.0
Translation adjustment (0.2) 0.3
Decrease in cash and cash equivalents (6.9) (21.8)
------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents at end of period 34.5 15.5
------------------------------------------------- ------ ------------ ------------
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
At 27 September 2019 4.5 0.1 116.8 178.0 299.4 6.4 305.8
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
IFRS 16 Leases transition
adjustment
(note 2) - - - (3.4) (3.4) - (3.4)
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
At 28 September 2019 4.5 0.1 116.8 174.6 296.0 6.4 302.4
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Items of income and expense
taken directly to equity
Currency translation adjustment - - 1.0 - 1.0 - 1.0
Cashflow hedge fair value movement
taken to equity - - 2.4 - 2.4 - 2.4
Cashflow hedge transferred
to Income Statement - - 0.1 - 0.1 - 0.1
Actuarial gain on Group legacy
defined benefit pension schemes - - - 32.0 32.0 - 32.0
Deferred tax on Group legacy
defined benefit pension schemes - - - (2.7) (2.7) - (2.7)
Profit for the financial period - - - 23.3 23.3 0.9 24.2
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Total recognised income and
expense for the financial period - - 3.5 52.6 56.1 0.9 57.0
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Employee share-based payment
expense - - 0.9 - 0.9 - 0.9
Exercise, lapse or forfeit
of share-based payments - 0.3 (2.6) 2.6 0.3 - 0.3
Shares acquired by Employee
Benefit Trust - - (0.1) 0.1 - - -
Transfer to Retained Earnings
on grant of shares to
beneficiaries
of the Employee Benefit Trust - - 5.0 (5.0) - - -
Dividends - - - (16.7) (16.7) (2.4) (19.1)
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
At 27 March 2020 4.5 0.4 123.5 208.2 336.6 4.9 341.5
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
At 28 September 2018 7.1 650.8 105.1 (25.8) 737.2 6.4 743.6
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
IFRS 9 transition adjustment - - - (0.9) (0.9) - (0.9)
At 29 September 2018 7.1 650.8 105.1 (26.7) 736.3 6.4 742.7
Items of income and expense
taken directly to equity
Currency translation adjustment - - 9.6 - 9.6 (0.2) 9.4
Translation reserve transferred
to income statement on
discontinued
operations - - (24.5) - (24.5) - (24.5)
Net investment hedge transferred
to Income Statement - - 22.3 - 22.3 - 22.3
Cashflow hedge fair value
movement
taken to equity - - (2.2) - (2.2) - (2.2)
Cashflow hedge transferred
to Income Statement - - 1.6 - 1.6 - 1.6
Actuarial loss on Group legacy
defined benefit pension schemes - - - (11.1) (11.1) - (11.1)
Deferred tax on Group legacy
defined benefit pension schemes - - - 1.9 1.9 - 1.9
Profit for the financial period - - - 65.1 65.1 1.3 66.4
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
Total recognised income and
expense for the financial period - - 6.8 55.9 62.7 1.1 63.8
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
Employee share-based payment
expense - - 1.5 - 1.5 - 1.5
Tax on share-based payments - - - 0.1 0.1 - 0.1
Exercise, lapse or forfeit
of share-based payments - - (1.5) 0.8 (0.7) - (0.7)
Shares acquired by Employee
Benefit Trust - - (0.8) 0.2 (0.6) - (0.6)
Transfer to Retained Earnings
on grant of shares to
beneficiaries
of the Employee Benefit Trust - - 0.7 (0.7) - - -
Share capital reduction - (650.8) - 650.8 - - -
Capital Return via tender offer (2.6) - 2.6 (509.0) (509.0) - (509.0)
Dividends - - - (23.8) (23.8) (2.2) (26.0)
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
At 29 March 2019 4.5 - 114.4 147.6 266.5 5.3 271.8
---------------------------------- --------- --------- ---------- ---------- -------- ---------------- --------
OTHER RESERVES
Foreign
Undenominated currency
Share Own capital Hedging translation
options shares reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------- -------- -------------- --------- ------------- -------
At 27 September 2019 4.8 (8.2) 120.4 (1.0) 0.8 116.8
-------------------------------------- --------- -------- -------------- --------- ------------- -------
Items of income and expense
taken directly to equity
Currency translation adjustment - - - - 1.0 1.0
Cash flow hedge fair value
movement taken to equity - - - 2.4 - 2.4
Cash flow hedge transferred
to Income Statement - - - 0.1 - 0.1
-------------------------------------- --------- -------- -------------- --------- ------------- -------
Total recognised income and
expense for the financial period - - - 2.5 1.0 3.5
-------------------------------------- --------- -------- -------------- --------- ------------- -------
Employee share-based payment
expense 0.9 - - - - 0.9
Exercise, lapse or forfeit
of share-based payments (2.6) - - - - (2.6)
Shares acquired by Employee
Benefit Trust - (0.1) - - - (0.1)
Transfer to Retained Earnings
on grant of shares to beneficiaries
of the Employee Benefit Trust - 5.0 - - - 5.0
At 27 March 2020 3.1 (3.3) 120.4 1.5 1.8 123.5
-------------------------------------- --------- -------- -------------- --------- ------------- -------
Foreign
Undenominated currency
Share Own capital Hedging translation
options shares reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------------- --------- -------- -------------- --------- ------------- -------
At 28 September 2018 4.2 (8.1) 117.8 (1.5) (7.3) 105.1
-------------------------------------- --------- -------- -------------- --------- ------------- -------
Items of income and expense
taken directly to equity
Currency translation adjustment - - - - 9.6 9.6
Translation reserve transferred
to Income Statement on discontinued
operations - - - - (24.5) (24.5)
Net investment hedge - - - - 22.3 22.3
Cash flow hedge fair value
movement taken to equity - - - (2.2) - (2.2)
Cash flow hedge transferred
to Income Statement - - - 1.6 - 1.6
-------------------------------------- --------- -------- -------------- --------- ------------- -------
Total recognised income and
expense for the financial period - - - (0.6) 7.4 6.8
-------------------------------------- --------- -------- -------------- --------- ------------- -------
Employee share-based payment
expense 1.5 - - - - 1.5
Exercise, lapse or forfeit
of share-based payments (1.5) - - - - (1.5)
Shares acquired by Employee
Benefit Trust - (0.8) - - - (0.8)
Transfer to Retained Earnings
on grant of shares to beneficiaries
of the Employee Benefit Trust - 0.7 - - - 0.7
Capital return via tender offer - - 2.6 - - 2.6
-------------------------------------- --------- -------- -------------- --------- ------------- -------
At 29 March 2019 4.2 (8.2) 120.4 (2.1) 0.1 114.4
-------------------------------------- --------- -------- -------------- --------- ------------- -------
1. Basis of preparation
The Condensed Group Financial Statements of Greencore Group Plc
(the 'Group'), which are presented in sterling and expressed in
millions, unless otherwise indicated, have been prepared as at, and
for the 26 week period ended, 27 March 2020, and have been prepared
in accordance with the Transparency (Directive 2004/109/EC)
Regulations 2007, the related Transparency Rules of the Central
Bank of Ireland and IAS 34 Interim Financial Reporting as adopted
by the European Union.
These Condensed Group Financial Statements do not comprise
statutory accounts within the meaning of Section 340 of the
Companies Act 2014. The condensed Group financial information for
the year ended 27 September 2019 represents an abbreviated version
of the Group Financial Statements for that year. Those financial
statements, upon which the auditor issued an unqualified audit
report, have been filed with the Registrar of Companies.
In the prior year the results of Greencore's US business were
presented within profit from discontinued operations in the
Condensed Group Income Statement, following its disposal in
November 2018.
Going concern
The directors, after making enquiries, have a reasonable
expectation that the Group has adequate resources to continue
operating as a going concern for the foreseeable future. In
particular, the directors have taken into consideration cashflow
projections from potential stress scenarios regarding the duration
of the current COVID-19 lockdown and the timing of recovery as the
measures on social distancing are eased.
The implementation of social restriction measures by the UK
government, has resulted in a marked decline in Group revenue. The
current unprecedented economic environment has created uncertainty
in relation to the timing of a return to efficient production, the
ongoing availability and extent of certain government supports,
future consumer behaviour and the associated recovery of volumes
and margins. The timing and shape of recovery is uncertain and
accordingly, the Group has modelled a number of scenarios, taking
account of current levels of trading, consequential impact on
cashflows, including working capital, and availability of support
from the UK government. These scenarios are as follows:
- a gradual ramp up from current volumes between June 2020 and
October 2020, but not reaching FY19 volume levels until October
2021;
- a slower more gradual ramp up from current volumes between
June 2020 and January 2021, again not reaching FY19 volume levels
until October 2021;
- a gradual ramp up from current volumes from June 2020,
followed by a second lockdown in the winter of 2020, with a gradual
ramp up from January 2021, again not reaching FY19 volume levels
until October 2021.
These scenarios include various mitigation measures including
deferring certain cashflows. In all scenarios, the Group has more
than sufficient headroom in its available resources.
The resources the Group has available include cash and undrawn
committed bank facilities of GBP267.5m as at 27 March 2020. The
directors have taken steps to ensure adequate liquidity is
available to the Group for the likely duration of the crisis and
the recovery period.
- The Group has secured formal agreement with its lending
syndicate of banks to waive its Net Debt: EBITDA covenant condition
for the September 2020 and March 2021 test periods.
- The Group is in advanced stages of discussions with the
Private Placement holders in respect of a waiver of the September
2020 and March 2021 leverage covenants contained in the Private
Placement documentation and the Group expects that an agreement in
respect of such waivers will be finalised and concluded in the
coming weeks.
- The Group has agreed with its lenders that no dividend will be
declared or paid for the duration of the waiver period.
The Group's headroom was increased further following
confirmation of its eligibility, in principle, to access funding
under the Covid Corporate Financing Facility (CCFF).
Based on these scenarios and the resources available to the
Group, the directors believe the Group has more than sufficient
liquidity to manage through a range of different cashflow scenarios
over the next 12 months. Given the Group's strong liquidity
position, the directors adopt the going concern basis in preparing
the Condensed Group Financial Statements.
Critical Accounting Estimates and Judgements
The preparation of the Condensed Group Financial Statements
requires management to make certain estimates, assumptions and
judgements that affect the application of accounting policies and
the reported amount of assets, liabilities, income and expenses.
Estimates and underlying assumptions are reviewed on an ongoing
basis. Changes in accounting estimates may be necessary if there
are changes in circumstances on which the estimate was based or as
a result of new information or more experience. Such changes are
reflected in the period in which the estimate was revised.
In preparing the Condensed Group Financial Statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those applied to the Consolidated Financial
Statements for the 52 weeks ended 27 September 2019 with the
addition of assessing the impact of COVID-19 as set out below.
Impact of COVID-19
As at the 27 March 2020, the UK was in social 'lockdown' as a
result of its response to the COVID-19 pandemic, requiring the
Group to reflect the impact in its results for the half year.
The Group has considered the impact of COVID-19 and has taken
measures in response to the pandemic. The Group has tightened its
food to go production network by temporarily ceasing production at
its Bow, Atherstone and Heathrow facilities and rationalising
production at its Northampton site. The Group has considered the
impact of these measures and the impact of the reduction in revenue
with respect to all judgements and estimates it makes in the
application of the Groups accounting policies. The rationalisation
impacts have been factored into the Group's financial statements at
27 March 2020, including the impact on recoverability of inventory,
trade receivables and other assets.
Management have also carried out impairment testing of assets
including goodwill at the reporting date incorporating scenarios
regarding the duration and recovery from the current COVID-19
lockdown. The testing did not result in an impairment at balance
sheet date.
2. Accounting Policies
The accounting policies, critical accounting estimates and
judgments and methods of computation adopted in the preparation of
the Condensed Group Financial Statements are consistent with those
applied in the Annual Report for the financial year ended 27
September 2019 and are as set out in those financial
statements.
New accounting standards adopted in the current period:
IFRS 16 Leases
IFRS 16 Leases sets out the principle for the recognition,
measurement, presentation and disclosure of leases for both lessee
and lessor. It eliminates the classification of leases as either
operating leases or finance leases and introduces a single lessee
accounting model where the lessee is required to recognise assets
and liabilities for all material leases that have a term greater
than a year.
The Group has adopted IFRS 16 Leases using the modified
retrospective approach. Therefore the cumulative effect of adopting
IFRS 16 Leases was recognised as an adjustment to the opening
balance of retained earnings at 28 September 2019 with no
restatement of comparative information. The adjustment to retained
earnings includes the deferred tax asset recognised on transition
and after adjusting for existing lease incentives now included in
the right-of-use leased asset.
On adoption of IFRS 16 Leases, the Group recognised liabilities
in relation to leases which had previously been classified as
operating leases under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the Groups' incremental borrowing
rate as of 28 September 2019. The weighted average incremental
borrowing rate applied is 2.2%.
In applying IFRS 16 Leases for the first time, the Group has
used the following practical expedients permitted by the
standard:
-- The use of a single discount rate for portfolios of leases
with reasonably similar characteristics.
-- Accounting for low value operating leases and certain
operating leases with a remaining lease term of less than 12 months
as at 28 September 2019 on straight line basis as an expense
without recognising a right-of-use asset or a lease liability.
-- The use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
The adoption of IFRS 16 had a material impact on the Group's
Condensed Financial Statements which are set out below:
Group Statement of Financial position as at 28 September
2019
- Right-of-use leased assets +GBP41.2m
- Lease liabilities, Net debt +GBP46.4m
Group Income Statement for the half year ended 27 March 2020
- Depreciation +GBP6.0m
- Finance costs +GBP0.5m
- Operating lease charge -GBP6.3m
Group Statement of Cash Flows for the half year ended 27 March
2020
- Net cash flow from operating activities +GBP4.9m
- Net cash flow from financing activities -GBP4.9m
A reconciliation of the operating lease commitment previously
reported under IAS 17 to the discounted lease creditor as at 28
September 2019 under IFRS 16 is as follows:
GBPm
---------------------------------------------------------- ------
Operating lease commitment reconciliation
Operating lease commitments disclosed as at 27 September
2019 48.6
Adjustments for extensions and termination options 1.8
Low value and short-term leases for which the on-balance
sheet model was not applied (1.2)
Discounting using the Group's incremental borrowing rate
as at 28 September 2019 (2.8)
Lease liability recognised at 28 September 2019 46.4
---------------------------------------------------------- ------
comprising:
Current liabilities 12.2
Non-current liabilities 34.2
46.4
---------------------------------------------------------- ------
Set out below is the new accounting policy of the Group upon
adoption of IFRS 16 Leases:
The Group leases various properties, motor vehicles and
equipment. Rental contracts are typically made for fixed periods
but may have extension options. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and
conditions.
At inception of a contract, the Group assesses whether a
contract is, or contains, a lease. A right-of-use asset and lease
liability are recognised at commencement for contracts containing a
lease, with the exception of leases with a term of 12 months or
less or leases where the underlying asset is of low value, such
leases continue to be expensed through the Income Statement as
incurred.
The lease liability is initially measured at the present value
of the lease payments payable over the lease term, discounted at
the incremental borrowing rate. Lease payments include fixed
payments, variable payments that depend on an index or a rate are
included in the initial measurement of the lease liability payments
for an optional renewal period and termination option payments. The
lease term is the non-cancellable period of the lease adjusted for
any renewal or termination options which are reasonably certain to
be exercised. The Group has applied judgement to determine the
lease term for some lease contracts that includes renewal options
and break clauses.
Following initial recognition, the lease liability is measured
at amortised cost using the effective interest method. It is
re-measured when there is a change in future minimum lease payments
or when the Group changes its assessment of whether it is
reasonably certain to exercise an option within a contract.
The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus
any initial direct costs incurred and an estimate of costs to
dismantle and remove the asset less any lease incentives received.
After lease commencement, the Group measures right-of-use assets
using a cost model, reflecting cost less accumulated depreciation
and impairment. The right-of-use asset is depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
lease term.
IFRIC 23 Uncertainty over Income Tax Treatments
This IFRIC clarifies the accounting treatment for uncertainties
in income taxes and is applied in the determination of taxable
profit (or tax loss), tax bases, unused tax losses, unused tax
credits and tax rates, when there is uncertainty over income tax
treatments under IAS 12 Income Taxes.
The Group recognises provisions for uncertain tax positions as
current or deferred tax liabilities and does not separately provide
for uncertain tax positions. The Group reflects the effect of the
uncertainty in determining the related taxable profit, tax bases,
unused tax losses, unused tax credits or tax rate using the
methodology that better predicts the outcome of the uncertainty in
the event of a tax authority audit (being an expected value or most
likely approach, considered for each uncertainty) on the assumption
that tax authorities examine amounts they have the right to
examine. Following review of its tax provisions and its tax losses
the Group has determined that the adoption of this IFRIC has had an
immaterial impact on the Condensed Group Financial Statements.
3. Segment Information
Convenience Foods UK & Ireland is the Group's operating
segment, which represents its reporting segment. This reflects the
Group's organisational structure and the nature of the financial
information reported to and assessed by the Chief Operating
Decision Maker ('CODM') as defined by IFRS 8 Operating Segments.
The CODM has been identified as the Group's Chief Executive
Officer. The segment incorporates many UK convenience food
categories including sandwiches, salads, sushi, chilled snacking,
chilled ready meals, chilled soups and sauces, chilled quiche,
ambient sauces and pickles and frozen Yorkshire Puddings as well as
the Irish ingredients trading businesses.
Convenience
Foods
UK & Ireland
Half Half
year year
2020 2019
GBPm GBPm
------------------------------------------------------- ------- -------
Revenue 712.7 701.4
------------------------------------------------------- ------- -------
Group operating profit before exceptional items and
amortisation
of acquisition related intangible assets 38.3 44.7
Amortisation of acquisition related intangible assets (2.7) (0.4)
Exceptional items - (3.0)
------------------------------------------------------- ------- -------
Group operating profit 35.6 41.3
Finance income 0.1 0.7
Finance costs (8.8) (36.9)
Share of profit of associates after tax 0.4 0.6
Taxation (3.1) (4.9)
Result from discontinued operations - 65.6
------------------------------------------------------- ------- -------
Profit for the period 24.2 66.4
------------------------------------------------------- ------- -------
The following table disaggregates revenue by product categories
in the Convenience Foods UK and Ireland reporting segment.
Half Half
year year
2020 2019
GBPm GBPm
-------------------------------------------------- ------ ------
Revenue
Food to go categories 455.8 447.1
Other convenience categories 256.9 254.3
-------------------------------------------------- ------ ------
Total revenue for Convenience Foods UK & Ireland 712.7 701.4
-------------------------------------------------- ------ ------
Food to go categories include sandwiches, salads, sushi and
chilled snacking while the other convenience categories include
chilled ready meals, chilled soups and sauces, chilled quiche,
ambient sauces and pickles, and frozen Yorkshire Puddings as well
as Irish ingredients trading businesses.
4. Seasonality
The Group's convenience foods portfolio has historically been
second half weighted. This historical weighting has been primarily
driven by weather and seasonal buying patterns impacting, in
particular, the demand for chilled product categories. This year,
due to the impact of the COVID-19 pandemic, the normal seasonality
of the business will be significantly affected given the COVID-19
impact on the Group will be greater in the second half of the
financial year. The level of impact will depend on the duration of
the current COVID-19 lockdown and the different shapes of recovery,
as the Government's social restriction measures are eased.
5. Exceptional Items
Half Half
Year Year
2020 2019
GBPm GBPm
------------------------------------------------- ----- ------ -------
Impact of COVID-19 pandemic (a) (1.7) -
Legacy US legal matters (b) 2.2 -
Integration costs (c) (0.5) -
Profit on disposal of Greencore's US business (d) - 56.7
Debt restructuring post disposal of Greencore's
US business (e) - (25.4)
Guaranteed Minimum Pension ("GMP") equalisation (f) - (3.0)
------------------------------------------------- ----- ------ -------
- 28.3
------------------------------------------------------- ------ -------
Tax credit on exceptional items 0.4 0.5
-------------------------------------------------------- ------ -------
Total exceptional items 0.4 28.8
-------------------------------------------------------- ------ -------
2020 HALF YEAR
(a) Impact of COVID-19 pandemic
In the current period, the Group incurred GBP1.7m of costs
relating to the COVID-19 pandemic. The costs consist of inventory
and other asset write offs associated with product range
rationalisation, increase in the provision for bad debts for
certain customers and other costs of COVID-19 including the cost of
implementing measures to protect our people at our manufacturing
facilities.
(b) Legacy US legal matters
In the current period, the Group recognised a credit of GBP2.2m
on the settlement of a legacy US legal case, as an amount was
recovered under a Group insurance policy.
(c) Integration costs
In the current period, the Group recognised a charge of GBP0.5m,
comprising integration costs in relation to the acquisition of
Freshtime UK Limited in 2019. Details of the acquisition are set
out in note 15.
2019 HALF YEAR
(d) Profit on disposal of Greencore's US Business
In the prior period, the Group completed the disposal of
Greencore's US business to Hearthside Food Solutions LLC in
November 2018. A profit of GBP56.7m was recognised which included
transaction and separation costs of GBP17.9m. This was presented as
discontinued in the Group's Income Statement.
(e) Debt restructuring post disposal of Greencore's US business
In the prior period, following the disposal of Greencore's US
business, the Group reshaped its debt and associated derivative
portfolio to reflect the removal of US dollar assets from the
business. This resulted in a GBP25.4m exceptional charge in the
period comprising the recycling of the net investment hedge of
GBP22.3m, the recycling of ineffective interest rate swaps of
GBP1.0m and the write off of capitalised finance fees on associated
debt facilities of GBP2.1m.
(f) GMP equalisation
Due to a ruling in the High Court of Justice of England and
Wales in October 2018, pension schemes are under a duty to equalise
benefits for all members, regardless of gender, in relation to
minimum pension benefits. For the Group, an estimate was made of
the impact of equalisation, which increased the legacy defined
benefit pension scheme liabilities in the UK by GBP3.0m with a
corresponding charge to exceptional items. Whilst guidance has been
issued by the Department of Work and Pensions, legislative
provisions regarding the change are still being finalised.
Therefore in the continued absence of guidance, the Group has
maintained the estimate of GBP3.0m as at 27 March 2020.
Cash Flow on Exceptional Items
The total net cash outflow during the period in respect of
exceptional items was GBP2.6m (H1 FY19: GBP7.7m), of which GBP2.1m
was in respect of prior year exceptional charges. The remaining
current year exceptional cash flow includes GBP0.2m related to
COVID-19 costs and GBP0.3m of integration costs.
6. Net finance costs
Net Finance income and finance costs
Half Half
year year
2020 2019
GBPm GBPm
---------------------------------------------------------- ------ -------
Finance income
Interest on bank deposits 0.1 0.7
---------------------------------------------------------- ------ -------
Total finance income recognised in the Income Statement 0.1 0.7
---------------------------------------------------------- ------ -------
Finance costs
Net finance costs on interest bearing cash and cash
equivalents, borrowings and other financing costs (7.3) (8.4)
Net pension financing charge (1.0) (1.3)
Change in fair value of derivatives and related debt
adjustments 0.4 (0.6)
Foreign exchange on inter-company and external balances
where hedge accounting is not applied (0.4) (1.2)
Interest on lease obligations (0.5) -
Total finance expense recognised in the Income Statement (8.8) (11.5)
---------------------------------------------------------- ------ -------
Exceptional costs
Debt restructuring post disposal of Greencore's US
business (note 5) - (25.4)
---------------------------------------------------------- ------ -------
Total exceptional finance expense recognised in the
Income Statement - (25.4)
---------------------------------------------------------- ------ -------
Total finance expense recognised in the Income Statement (8.8) (36.9)
---------------------------------------------------------- ------ -------
7. Taxation
Interim period tax is accrued using the tax rate that is
estimated to be applicable to expected total annual earnings in the
financial year. The Group has taken the estimated impact of
COVID-19 on the full year result into consideration in determining
the effective tax rate for the half year ended 27 March 2020.
The tax rate is based on tax rates that were enacted or
substantively enacted at the half year end, including the impact of
the UK Corporation tax rate remaining at 19% which was
substantially enacted in March 2020.
8. Dividends Paid and Proposed
A dividend of 3.75 pence per share was approved at the Annual
General Meeting on 28 January 2020 as a final dividend in respect
of the year ended 27 September 2019 and a total of GBP16.7m was
paid on 25 February 2020 to all shareholders.
The Group announced on 30 March 2020 that it is not proceeding
with an interim FY20 dividend payment as part of its measures to
protect balance sheet strength and liquidity during the COVID-19
pandemic.
9. Earnings per Ordinary Share
Half year 2020 Half year 2019
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------ ------------- ------ ------------ ------------- ------
Profit/(loss) attributable
to equity holders
of the Company 23.3 - 23.3 (0.5) 65.6 65.1
---------------------------- ------------ ------------- ------ ------------ ------------- ------
Numerator for earnings per share calculations
Denominator for earnings per share calculations
Half Half
year year
2020 2019
'000 '000
-------------------------------------------------------- -------- ----------
Shares in issue at the beginning of the period 446,007 706,978
Effect of shares held by Employee Benefit Trust (2,779) (3,399)
Effect of shares issued in the period 76 4
Effect of share reduction due to tender offer - (82,729)
-------------------------------------------------------- -------- ----------
Weighted average number of Ordinary Shares in issue
during the period 443,304 620,854
-------------------------------------------------------- -------- ----------
Dilutive effect of share schemes 1,752 637
-------------------------------------------------------- -------- ----------
Weighted average number of Ordinary Shares for diluted
earnings per share 445,056 621,491
-------------------------------------------------------- -------- ----------
Earnings per Share Calculations
Half year 2020 Half year 2019
------------------------------- ----------------------------------- -----------------------------------
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
pence pence pence pence pence pence
------------------------------- ------------ ------------- ------ ------------ ------------- ------
Basic earnings per Ordinary
Share 5.3 - 5.3 (0.1) 10.6 10.5
------------------------------- ------------ ------------- ------ ------------ ------------- ------
Diluted earnings per Ordinary
Share 5.2 - 5.2 (0.1) 10.6 10.5
------------------------------- ------------ ------------- ------ ------------ ------------- ------
10. Intangible Assets, Property, Plant and Equipment, Investment
Property, Capital Expenditure and Commitments
During the six-month period to 27 March 2020, the operations of
the Group made approximately GBP21.1m of additions to property,
plant and equipment, investment property and intangible assets
through ongoing capital expenditure. A total depreciation and
amortisation charge of GBP22.2m was recognised, GBP0.2m of assets
were disposed of and an FX gain of GBP0.1m was incurred.
At 27 March 2020, the Group had entered into contractual
commitments for operations for the acquisition of property, plant
and equipment amounting to GBP10.0m (H1 19: GBP8.9m).
During the prior six-month period to 29 March 2019, the Group
made approximately GBP18.3m of additions to property, plant and
equipment, investment property and intangible assets through
ongoing capital expenditure. A total depreciation and amortisation
charge of GBP18.2m was recognised and an FX loss of GBP0.2m was
incurred.
11. Leases
The Group adopted IFRS 16 Leases with effect from 28 September
2019. At the date of transition, the Group calculated the lease
commitments outstanding at that date and applied appropriate
discount rates to calculate the present value of the lease
commitment which was recognised as a lease liability and a
right-of-use leased asset on the Group's Statement of Financial
Position.
The movement in the Group's right-of-use leased assets during
the period is as follows:
Land and Plant &
buildings machinery Motor vehicles Total
GBPm GBPm GBPm GBPm
------------------------------- ----------- ----------- --------------- ------
At 27 September 2019 - - - -
IFRS 16 Transition adjustment
(note 2) 24.3 5.2 11.7 41.2
Additions 15.6 1.0 5.3 21.9
Disposals - - (0.1) (0.1)
Depreciation charge for the
period (2.1) (1.1) (2.8) (6.0)
------------------------------- ----------- ----------- --------------- ------
Right-of-use leased assets
at 27 March 2020 37.8 5.1 14.1 57.0
------------------------------- ----------- ----------- --------------- ------
The movement in the Group's lease liabilities during the period
is as follows:
Total
GBPm
---------------------------------------- ------
At 27 September 2019 -
IFRS 16 Transition adjustment (note 2) 46.4
Additions 21.9
Disposals (0.1)
Payments (5.4)
Lease interest 0.5
---------------------------------------- ------
Lease liabilities at 27 March 2020 63.3
---------------------------------------- ------
11. Leases (continued)
An analysis of the maturity profile of the discounted lease
liabilities arising from the Group's leasing activities as at 27
March 2020 is as follows:
27 March
2020
GBPm
------------------------------ ---------
Within one year 14.3
Between one and five years 32.0
Over 5 years 17.0
------------------------------ ---------
Total 63.3
------------------------------ ---------
Analysed as:
Current liabilities 14.3
Non-current liabilities 49.0
Total 63.3
------------------------------ ---------
The Group avails of the exemption from capitalising lease costs
for short-term leases and low-value assets where the relevant
criteria are met. The following lease costs have been charged to
the Income Statement as incurred:
Half year
March 2020
GBPm
---------------------------- ------------
Short-term leases 0.1
Leases of low value assets 0.5
Total 0.6
---------------------------- ------------
The total cash outflow for lease payments during the period was
as follows:
Half year
March 2020
GBPm
------------------------------------------------------------ ------------
Cash outflow for short-term leases and leases of low value 0.5
Lease payments relating to capitalised right-of-use leased
assets 5.4
Total 5.9
------------------------------------------------------------ ------------
12. Borrowings and Derivatives
March September March
2020 2019 2019
GBPm GBPm GBPm
------------------------- -------- ---------- --------
Bank borrowings (230.7) (213.9) (189.0)
Private placement notes (114.9) (116.2) (110.6)
------------------------- -------- ---------- --------
Total borrowings (345.6) (330.1) (299.6)
------------------------- -------- ---------- --------
The maturity profile of the Group's borrowings is as
follows:
March September March
2020 2019 2019
GBPm GBPm GBPm
---------------------------- -------- ---------- --------
Between one and two years (102.1) - -
Between two and five years (212.1) (298.4) (254.0)
Over five years (31.4) (31.7) (45.6)
---------------------------- -------- ---------- --------
(345.6) (330.1) (299.6)
---------------------------- -------- ---------- --------
Bank Borrowings
In the period the Group extended the maturity of its GBP340m
committed bank facility by one year to 2025 and secured an
additional GBP75m committed debt facility which matures in March
2021. The Group's bank borrowings, net of finance fees comprised of
GBP230.7m at 27 March 2020 (September 2019: GBP213.9m) with
maturities ranging from January 2022 to January 2025, the earliest
of which is the Group's GBP50m bank bilateral facility which
matures in January 2022. The Group had GBP233m (September 2019:
GBP175m) of undrawn committed bank facilities in respect of which
all conditions precedent had been met. Uncommitted facilities
undrawn at 27 March 2020 amounted to GBP6.5m (September 2019:
GBP7.0m).
12. Borrowings and Derivatives (continued)
Subsequent to the period end, the Group secured formal agreement
with its lending syndicate of banks to waive its Net Debt: EBITDA
covenant condition for the September 2020 and March 2021 test
periods.
Private Placement Notes
The Group's outstanding Private Placement Notes net of finance
fees comprised of GBP114.9m (denominated as $120.9m and GBP18m) at
27 March 2020 (September 2019: GBP116.2m, denominated as $120.9m
and GBP18m). These were issued as fixed rate debt in October 2013
($65m) and June 2016 ($74.5m and GBP18m) with maturities ranging
between October 2021 and June 2026.
The Group has swapped the $120.9m Private Placement Notes from
fixed rate US Dollar to fixed rate sterling using cross-currency
interest rate swaps. The fixed rate US dollar to fixed rate
sterling swaps are designated as cash flow hedges under IAS 39
Financial Instruments; Recognition and Measurement.
The Group is in advanced stages of discussions with the Private
Placement holders in respect of a waiver of the September 2020 and
March 2021 leverage covenants contained in the Private Placement
documentation and the Group expects that an agreement in respect of
such waivers will be finalised and concluded in the coming
weeks.
Derivatives Fair value hierarchy - IFRS 13 (level 2 inputs)*
March September March
2020 2019 2019
Level Level Level
2* 2* 2*
GBPm GBPm GBPm
----------------------------------------------------- ------ ---------- ------
Assets carried at fair value
Cross-currency interest rate swaps - cash flow
hedges 6.5 5.5 -
Interest rate swaps - not designated as hedges - - 0.1
----------------------------------------------------- ------ ---------- ------
6.5 5.5 0.1
----------------------------------------------------- ------ ---------- ------
Liabilities carried at fair value
Interest rate swaps - cash flow hedges (2.8) (2.9) (2.6)
Cross currency interest rate swaps - cash flow
hedges - - (1.6)
Forward foreign exchange contracts - not designated
as hedges (0.2) (0.7) (0.2)
----------------------------------------------------- ------ ---------- ------
(3.0) (3.6) (4.4)
----------------------------------------------------- ------ ---------- ------
* For definition of level 2 inputs please refer to the 2019 Annual
Report.
13. Provisions
Half year
March
2020
GBPm
---------------------------------- ----------
At beginning of period 12.2
Utilised in period (1.2)
Released in period (2.2)
At end of period 8.8
---------------------------------- ----------
March September
2020 2019
GBPm GBPm
------------------------- ------ ----------
Analysed as:
Current liabilities 3.7 5.5
Non-current liabilities 5.1 6.7
8.8 12.2
------------------------- ------ ----------
In the current period, the Group settled a legacy US legal case
which was re-covered under the Group's insurance policy resulting
in a provision release of GBP2.2m which was accounted for as an
exceptional item (note 5).
14. Retirement Benefit Obligations
The Group operates three legacy defined benefit pension schemes
in the Republic of Ireland (the Irish schemes) and two legacy
defined benefit pension schemes and one legacy defined benefit
commitment in the UK (the UK schemes). These are all closed to
future accrual and there is an assumption applied in the valuation
of the schemes that there will be no discretionary increases in
pension payments. The scheme assets are held in separate Trustee
administered funds. The Group continues to seek ways to reduce its
liabilities through various restructuring initiatives in
co-operation with the respective schemes.
In consultation with the independent actuaries to the scheme,
the valuation of pension obligations have been updated to reflect
current market discount rates, rates of increase in salaries,
pension payments and inflation, current market values of
investments and actual investment returns.
14. Retirement Benefit Obligations (continued)
The Group's retirement benefit obligations moved from a net
liability of GBP92.0m at 27 September 2019 to a net liability of
GBP52.3m at 27 March 2020. This movement was primarily driven by an
actuarial gain on liabilities arising from an increase in the
discount rates used to value these liabilities. The move in the
discount rate is driven by the corporate bond rate.
During the period, the Trustees of one of the smaller UK legacy
defined benefit schemes, completed a buy-out of the scheme,
transferring insurance policies to individual scheme members and
removing the scheme liabilities from the Group's Statement of
Financial Position.
A full valuation of the UK legacy defined benefit scheme is in
progress with a valuation date of March 2020.
The principal actuarial assumptions are as follows:
March September
2020 2019
UK Ireland UK Ireland
----------------------------------------- ------ -------- ------ --------
Rate of increase in pension payments * 2.50% 0.00% 2.95% 0.00%
Discount rate 2.35% 1.65% 1.80% 0.85%
Inflation rate 2.60% 1.00% 3.05% 1.50%
----------------------------------------- ------ -------- ------ --------
* The pension increase rate shown above applies to the majority
of the liability base. However there are certain categories within
the Group that have an entitlement to pension indexation and this
is allowed for in the calculation.
The financial position of the schemes was as follows:
March 2020 September 2019
UK Irish UK Irish
Schemes Schemes Total Schemes Schemes Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- --------- --------- -------- --------- --------- --------
Fair value of plan assets 205.4 254.8 460.2 251.3 273.4 524.7
Present value of scheme liabilities (306.2) (206.3) (512.5) (378.8) (237.9) (616.7)
------------------------------------- --------- --------- -------- --------- --------- --------
(Deficit)/surplus in schemes (100.8) 48.5 (52.3) (127.5) 35.5 (92.0)
Deferred tax asset/(liability) 19.1 (6.0) 13.1 21.6 (4.4) 17.2
------------------------------------- --------- --------- -------- --------- --------- --------
Net (liability)/asset at end
of the period (81.7) 42.5 (39.2) (105.9) 31.1 (74.8)
------------------------------------- --------- --------- -------- --------- --------- --------
Presented as:
Retirement benefit asset** 49.3 36.4
Retirement benefit obligation (101.6) (128.4)
------------------------------------- --------- --------- -------- --------- --------- --------
** The value of a net pension benefit asset is the value of any
amount the Group reasonably expects to recover by way of a refund
of a surplus from the remaining assets of a plan at the end of
the plan's life.
Sensitivity of pension liability to judgemental assumptions
Increase in Scheme Liabilities
UK Irish
Assumption Change in assumption Schemes Schemes Total
------------------- -------------------------------- ------------ ----------- --------
Discount rate Decrease by 0.5% 27.7 12.8 40.5
Rate of inflation Increase by 0.5% 20.0 4.2 24.2
Members assumed to live 1 year
Rate of mortality longer 9.5 8.2 17.7
------------------- -------------------------------- ------------ ----------- --------
Sensitivity of pension scheme assets to yield
movements
Increase in Scheme Assets
UK Irish
Assumption Change in assumption Schemes Schemes Total
------------------- -------------------------------- ------------ ----------- --------
Change in
bond yields Decrease by 0.5% 13.3 23.0 36.3
------------------- -------------------------------- ------------ ----------- --------
15. Acquisition and disposal of undertakings
Freshtime UK Limited
On 3 September 2019, the Group acquired 100% of Freshtime UK
Limited ('Freshtime') for GBP56.2m. Freshtime was a
well-established supplier of meal salads, chilled snacking and
prepared produce in the UK, operating from a single facility in
Boston, Lincolnshire. The fair value of the assets acquired,
determined in accordance with IFRS have now been finalised and are
presented in the table below. In particular, provisional values
relating to property, plant and equipment have been revised to
reflect an external property valuation resulting in a GBP1.2m
reduction to the net assets as reported on 27 September 2019.
Deferred tax on fair value adjustments has also been finalised.
September
2019
GBPm
------------------------------- -----------
Assets
Intangible assets 17.5
Property, plant and equipment 4.1
Inventory 1.2
Current tax receivable 0.5
Trade and other receivables 11.7
------------------------------- -----------
Total assets 35.0
------------------------------- -----------
Liabilities
Provisions (0.1)
Deferred tax liabilities (3.0)
Trade and other payables (14.2)
Current tax payable (1.3)
------------------------------- -----------
Total liabilities (18.6)
------------------------------- -----------
Net assets acquired 16.4
------------------------------- -----------
Goodwill 39.8
------------------------------- -----------
Total enterprise value 56.2
------------------------------- -----------
Greencore's US Business
In the prior year, the Group completed, on 25 November 2018, the
disposal of its US business to Hearthside Food Solutions LLC. In
the period ended 29 March 2019, a profit of GBP56.7m was recognised
with a net cash inflow arising on the disposal of GBP810.4m.
Hull
In the prior year, the Group received GBP1m of deferred cash
consideration from the disposal of its Cakes and Desserts business
at Hull ("Hull") to Bright Blue Foods Limited in February 2018.
16. Contingencies
The Company and certain subsidiaries have given guarantees in
respect of borrowings and other obligations arising in the ordinary
course of business of the Company and other Group undertakings. The
Company and other Group undertakings consider these guarantees to
be insurance contracts and account for them as such. The Company
treats these guarantee contracts as contingent liabilities until
such time as it becomes probable that a payment will be required
under such guarantees.
The Group has provided bank guarantees to third parties for an
amount of GBP8.2m to the Group's insurance providers (Sept 2019:
GBP7.7m).
The Group and certain of its subsidiaries continue to be subject
to various legal proceedings relating to its current and former
activities. Provisions for anticipated settlement costs and
associated expenses arising from legal and other disputes are made
where a reliable estimate can be made of the probable outcome of
the proceedings.
17. Subsequent events
Since 27 March 2020, the COVID-19 pandemic has had an
unprecedented impact on the shape of UK food demand and on Group
revenue. The Group has taken prudent measures to protect
profitability and cashflow including temporarily ceasing production
at some of its facilities and furloughing a substantial proportion
of colleagues, using the Government's Coronavirus Job Retention
Scheme.
As set out in Note 12, subsequent to the period end, the Group
secured formal agreement with its lending syndicate of banks to
waive Net Debt: EBITDA covenant condition for September 2020 and
March 2021. The Group is also in advanced stages of discussions
with the Private Placement holders in respect of a waiver of the
September 2020 and March 2021 leverage covenants contained in the
Private Placement documentation and the Group expects that an
agreement in respect of such waivers will be finalised and
concluded in the coming weeks.
The Group also confirms that it has received eligibility, in
principle, to access funding under the Bank of England's Covid
Corporate Financing Facility.
18. Information
Copies of the Interim Financial Report are available for
download from the Group's website at www.greencore.com.
APPIX: ALTERNATIVE PERFORMANCE MEASURES
The Group uses the following Alternative Performance Measures
('APMs') which are non-IFRS measures to monitor the performance of
its operations and of the Group as a whole: Pro Forma Sales Growth,
Adjusted EBITDA, Adjusted Operating Profit, Adjusted Operating
Margin, Adjusted Profit before Tax ('PBT'), Adjusted Earnings,
Adjusted Earnings per Share, Maintenance and Strategic Capital
Expenditure, Free Cash Flow, Free Cash Flow Conversion, Net Debt,
Net Debt excluding lease liabilities and Return on Invested Capital
('ROIC'). Free Cashflow Conversion is measured and reported on an
annual basis at year end.
On 28 September 2019 the Group adopted IFRS 16 Leases, the new
accounting standard for leases. The Group transitioned to the
standard using the modified retrospective approach, which does not
require the restatement of comparative periods . The changes
introduced by the standard impacted profit for the financial year
by replacing operating lease costs with a depreciation and interest
charge. In the statement of financial position, net assets are
impacted by an uplift in the right-of-use assets offset by the
lease obligations and after adjusting for the tax effect of the
transition. The impact on APMs on transition to IFRS 16 Leases is
set out in the table below.
Performance Measures
Adjusted EBITDA (GBPm) +6.3
-----------
Adjusted Operating Profit (GBPm) +0.3
-----------
Adjusted Profit Before Tax (GBPm) -0.2
-----------
Adjusted EPS (pence) Immaterial
-----------
Free Cash Flow (GBPm) -
-----------
Net Debt (GBPm) +63.3
-----------
ROIC (%) -0.5
-----------
PRO FORMA REVENUE GROWTH
The Group uses Pro Forma Revenue Growth as a supplemental
measure of its performance. The Group believes that Pro Forma
Revenue Growth provides a more accurate guide to underlying revenue
performance.
Pro Forma Revenue Growth adjusts reported revenue to reflect the
ownership of Freshtime for the full period in FY19 and excludes the
impact of revenue from the exit of longer life ready meals
manufacturing at the Kiveton facility in H1 19. It also presents
the numbers on a constant currency basis.
Half year 2020
Convenience
Foods
UK & Ireland
%
------------------------------- ---------------
Reported revenue 1.6%
Impact of disposals and exits 1.0%
Impact of acquisitions (2.6%)
Impact of currency 0.1%
--------------------------------- ---------------
Pro Forma Revenue Growth (%) 0.1%
--------------------------------- ---------------
The table below shows the Pro Forma Revenue split by food to go
categories and other convenience categories. This is in line with
the disclosure requirements in IFRS 15 Revenue from Contracts with
Customers requiring revenue to be disaggregated.
Half year 2020
Food to
go Other convenience
categories categories
% %
------------------------------- ------------ ------------------
Reported revenue 1.9% 1.0%
Impact of disposals and exits - 2.6%
Impact of acquisitions (4.0%) -
Impact of currency - 0.4%
-------------------------------- ------------ ------------------
Pro Forma Revenue Growth (%) (2.1%) 4.0%
-------------------------------- ------------ ------------------
ADJUSTED EBITDA, ADJUSTED OPERATING PROFIT AND ADJUSTED
OPERATING MARGIN
Adjusted EBITDA, Adjusted Operating Profit and Adjusted
Operating Margin are used by the Group to measure the underlying
and ongoing operating performance of each business and of the Group
as a whole.
The Group calculates Adjusted Operating Profit as operating
profit before amortisation of acquisition related intangibles and
exceptional charges. Adjusted EBITDA is calculated as Adjusted
Operating Profit plus depreciation and amortisation of intangible
assets. Adjusted Operating Margin is calculated as Adjusted
Operating Profit divided by reported revenue.
The following table sets forth a reconciliation from the Group's
profit for the financial year to Adjusted Operating Profit,
Adjusted EBITDA and Adjusted Operating Margin:
Half year 2020 Half year 2019
Convenience Discontinued Total Convenience Discontinued Total
Foods Operations Foods Operations
UK & Ireland UK & Ireland
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- -------------- -------------- ------- -------------- -------------- -------
Profit for the financial
year 24.2 - 24.2 0.8 65.6 66.4
------------------------------- -------------- -------------- ------- -------------- -------------- -------
Taxation(A) 3.1 - 3.1 4.9 - 4.9
Net finance costs(B) 8.7 - 8.7 10.8 0.2 11.0
Share of profit of
associates after tax (0.4) - (0.4) (0.6) - (0.6)
Exceptional items - - - 28.4 (56.7) (28.3)
Amortisation of acquisition
related intangibles 2.7 - 2.7 0.4 - 0.4
------------------------------- -------------- -------------- ------- -------------- -------------- -------
Adjusted Operating
Profit 38.3 - 38.3 44.7 9.1 53.8
Depreciation and amortisation
(C) 25.5 - 25.5 17.8 - 17.8
------------------------------- -------------- -------------- ------- -------------- -------------- -------
Adjusted EBITDA 63.8 - 63.8 62.5 9.1 71.6
------------------------------- -------------- -------------- ------- -------------- -------------- -------
Adjusted Operating
Margin (%) 5.4% - 5.4% 6.4% 5.3% 6.2%
------------------------------- -------------- -------------- ------- -------------- -------------- -------
(A) Includes tax credit on exceptional items of GBP0.4m (2019: GBP0.5m)
(B) Finance costs less finance income
(C) Excludes amortisation of acquisition related intangibles.
The current period includes depreciation of right-of-use lease
assets
ADJUSTED PROFIT BEFORE TAX ('PBT') FOR CONTINUING OPERATIONS
Adjusted PBT is used as a measure by the Group to measure
overall performance before associated tax charge and exceptional
items.
The Group calculates Adjusted PBT as profit before taxation,
excluding tax on share of profit of associates and before
exceptional items, pension finance items, amortisation of
acquisition related intangibles, FX on inter-company and certain
external balances and the movement on the fair value of all
derivative financial instruments and related debt adjustments.
The following table sets out the calculation of Adjusted
PBT:
Half Half
year year
2020 2019
GBPm GBPm
------------------------------------------------------------------------ -------- ------
Profit before taxation for continuing operations 27.3 5.7
Taxation on share of profit of associates 0.1 0.1
Exceptional items - 28.4
Pension finance items 1.0 1.3
Amortisation of acquisition related intangibles 2.7 0.4
FX and fair value movements(A) - 1.8
------------------------------------------------------------------------ -------- ------
Adjusted Profit Before Tax for continuing operations 31.1 37.7
------------------------------------------------------------------------ -------- ------
(A) FX on inter-company and certain external balances and the movement
in the fair value of all derivative financial instruments and related
debt adjustments
ADJUSTED EARNINGS PER SHARE ('EPS')
The Group uses Adjusted Earnings and Adjusted EPS as key
measures of the overall underlying performance of the Group and
returns generated for each share.
Adjusted Earnings is calculated as Profit attributable to equity
holders (as shown on the Group's Income Statement) adjusted to
exclude exceptional items (net of tax), the effect of foreign
exchange (FX) on inter-company and external balances where hedge
accounting is not applied, the movement in the fair value of all
derivative financial instruments and related debt adjustments, the
amortisation of acquisition related intangible assets (net of tax)
and the interest expense relating to legacy defined benefit pension
liabilities (net of tax). Adjusted EPS is calculated by dividing
Adjusted Earnings by the weighted average number of Ordinary Shares
in issue during the year, excluding Ordinary Shares purchased by
Greencore and held in trust in respect of the Annual Bonus Plan and
the Performance Share Plan. Adjusted EPS described as an APM here
is Adjusted Basic EPS.
The following table sets forth a reconciliation of the Group's
Profit attributable to equity holders of the Company to its
Adjusted Earnings for the financial years indicated.
Half
Half year year
2020 2019
GBPm GBPm
------------------------------------------------------ ---------- ---------
Profit attributable to equity holders of the Company 23.3 65.1
Exceptional items (net of tax) (0.4) (28.8)
FX effect on inter-company and external balances
where hedge accounting is not applied 0.4 1.2
Movement in fair value of derivative financial
instruments and related debt adjustments (0.4) 0.6
Amortisation of acquisition related intangible
assets (net of tax) 2.2 0.3
Pension financing (net of tax) 0.8 1.1
------------------------------------------------------ ---------- ---------
Adjusted Earnings 25.9 39.5
------------------------------------------------------ ---------- ---------
Half
Half year year
2020 2019
'000 '000
------------------------------------------------------ ---------- ---------
Weighted average number of ordinary shares in issue
during the year 443,304 620,854
------------------------------------------------------ ---------- ---------
Pence Pence
------------------------------------------------------ ---------- ---------
Adjusted Earnings Per Share 5.8 6.4
------------------------------------------------------ ---------- ---------
CAPITAL EXPITURE
MAINTENANCE CAPITAL EXPITURE
The Group defines Maintenance Capital Expenditure as the
expenditure required for the purpose of sustaining the operating
capacity and asset base of the Group, and to comply with applicable
laws and regulations. It includes continuous improvement projects
of less than GBP1m that will generate additional returns for the
Group.
STRATEGIC CAPITAL EXPITURE
The Group defines Strategic Capital Expenditure as the
expenditure required for the purpose of facilitating growth and
developing and enhancing relationships with existing and new
customers. It includes continuous improvement projects of greater
than GBP1m that will generate additional returns for the Group.
Strategic Capital Expenditure is generally expansionary expenditure
creating additional capacity beyond what is necessary to maintain
the Group's current competitive position and enables the Group to
service new customers and/or contracts or to enter into new
categories and/or new manufacturing competencies.
The following table sets forth the breakdown of the Group's
purchase of property, plant and equipment and purchase of
intangible assets between Strategic Capital Expenditure and
Maintenance Capital Expenditure:
Half year 2020 Half year 2019
--------------------------------- ------------------------------------- -------------------------------------
Convenience Discontinued Total Convenience Discontinued Total
Foods UK Operations Foods UK Operations
& Ireland & Ireland
--------------------------------- ------------ -------------- ------- ------------ -------------- -------
GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------- ------------ -------------- ------- ------------ -------------- -------
Purchase of property,
plant and equipment 19.3 - 19.3 17.1 1.2 18.3
Purchase of intangible
assets 1.8 - 1.8 0.6 - 0.6
--------------------------------- ------------ -------------- ------- ------------ -------------- -------
Net cash outflow from
capital expenditure 21.1 - 21.1 17.7 1.2 18.9
--------------------------------- ------------ -------------- ------- ------------ -------------- -------
Strategic Capital Expenditure 9.9 - 9.9 4.9 1.2 6.1
Maintenance Capital Expenditure 11.2 - 11.2 12.8 - 12.8
--------------------------------- ------------ -------------- ------- ------------ -------------- -------
Net cash outflow from
capital expenditure 21.1 - 21.1 17.7 1.2 18.9
--------------------------------- ------------ -------------- ------- ------------ -------------- -------
FREE CASH FLOW
The Group uses Free Cash Flow to measure the amount of
underlying cash generation and the cash available for distribution
and allocation.
The Group calculates the Free Cash Flow as the net cash
inflow/outflow from operating and investing activities before
Strategic Capital Expenditure, acquisition and disposal of
undertakings and adjusting for lease payments and dividends paid to
non-controlling interests.
The following table sets forth a reconciliation from the Group's
net cash inflow from operating activities and net cash outflow from
investing activities to Free Cash Flow:
Half year 2020 Half year 2019
Convenience Convenience
Foods UK Discontinued Foods UK Discontinued
& Ireland Operations Total & Ireland Operations Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------------ ------------- -------- ------------ ------------- --------
Net cash inflow/(outflow)
from operating activities 20.8 - 20.8 7.3 (12.2) (4.9)
Net cash (outflow)/Inflow
from investing activities (20.8) - (20.8) 794.2 (1.2) 793.0
----------------------------------- ------------ ------------- -------- ------------ ------------- --------
Net cash inflow/(outflow)
from operating and investing
activities - - - 801.5 (13.4) 788.1
Strategic Capital Expenditure 9.9 - 9.9 4.9 1.2 6.1
Disposal of undertakings - - - (811.4) - (811.4)
Repayment of lease liabilities (4.9) - (4.9) - - -
Dividends paid to non-controlling
interests (2.4) - (2.4) (2.2) - (2.2)
----------------------------------- ------------ ------------- -------- ------------ ------------- --------
Free Cash Flow 2.6 - 2.6 (7.2) (12.2) (19.4)
----------------------------------- ------------ ------------- -------- ------------ ------------- --------
NET DEBT AND NET DEBT EXCLUDING LEASE LIABILITIES
Net Debt is used by the Group to measure overall cash generation
of the Group and to identify cash available to reduce borrowings.
Net Debt comprises current and non-current borrowings less net cash
and cash equivalents.
Net Debt excluding Lease Liabilities is a measure used by the
Group to measure Net Debt excluding the impact of IFRS 16 Leases.
Net Debt excluding Lease Liabilities is used for the purpose of
calculating leverage under the Groups financing agreements.
The following table sets out the calculation of Net Debt
excluding lease liabilities and Net Debt:
Half Half
year year
2020 2019
GBPm GBPm
-------------------------------------- -------- --------
Cash and cash equivalents 34.5 15.5
Bank borrowings (230.7) (189.0)
Private Placement Notes (114.9) (110.6)
Net debt excluding lease liabilities (311.1) (284.1)
Lease Liabilities (63.3) -
-------------------------------------- -------- --------
Net Debt (374.4) (284.1)
-------------------------------------- -------- --------
RETURN ON INVESTED CAPITAL ('ROIC')
The Group uses ROIC as a key measure to determine returns from
each business unit, along with the measurements of potential new
investments.
The Group uses invested capital as a basis for this calculation
as it reflects the tangible and intangible assets the Group has
added through its capital investment programme, the intangible
assets the Group has added through acquisition, as well as the
working capital requirements of the business. Invested Capital is
calculated as net assets (total assets less total liabilities)
excluding Net Debt and the carrying value of derivatives not
designated as fair value hedges, it also excludes retirement
benefit obligations (net of deferred tax assets). Average Invested
Capital is calculated by adding together the invested capital from
the opening and closing balance sheet and dividing by two.
The Group calculates ROIC as Net Adjusted Operating Profit After
Tax ('NOPAT') divided by average Invested Capital for continuing
operations. NOPAT is calculated as Adjusted Operating Profit plus
share of profit of associates before tax, less tax at the effective
rate in the Income Statement.
The following table sets forth the calculation of Net Operating
Profit After Tax ('NOPAT') and invested capital used in the
calculation of ROIC for the financial years.
12 months 12 months
to to
March 2020 March
2019
GBPm GBPm
------------------------------------------ ------------ ----------
Adjusted Operating Profit 99.1 105.0
Share of profit of associates before tax 0.9 1.2
Taxation at the effective tax rate(A) (14.2) (14.6)
------------------------------------------ ------------ ----------
Group NOPAT 85.8 91.6
------------------------------------------ ------------ ----------
Half year Half year
2020 2019
GBPm GBPm
Invested Capital
Total assets 1,220.9 1,052.7
Total liabilities (879.4) (780.9)
Net Debt 374.4 284.1
Derivatives not designated as fair value hedges (3.5) 4.3
Retirement benefit obligation (net of deferred
tax asset) 39.2 79.9
Invested Capital for the Group (B) 751.6 640.1
------------------------------------------------- ---------- ----------
Average Invested Capital for ROIC calculation
for the Group 695.9 628.2
------------------------------------------------- ---------- ----------
ROIC (%) for the Group 12.3% 14.6%
------------------------------------------------- ---------- ----------
(A) The effective tax rates for the financial period ended 27
March 2020 and 27 September 2019, were 13% and 15% respectively
(B) The invested capital for the Group in March 2018 was
GBP1,306.1m less GBP689.8m for net assets of the disposal group
held for sale
APPIX: PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group are
reported annually within the Annual Report and Financial Statements
and are summarised below. Consideration of Brexit risks has been
incorporated into the Group's principal risks as appropriate.
In light of the COVID-19 pandemic the Group has considered the
impact of this on its business and reassessed its risk factors
accordingly. COVID-19 will have an unpredictable impact on all
businesses. Greencore management performed a detailed assessment of
the risks faced specifically in relation to COVID-19, and defined
strategies for mitigating these risks and the specific actions for
achieving these are already underway.
The Group's response is detailed in the Operating Review.
COVID-19 impacts almost all principal risks below with a summary by
risk area.
Strategic
Competitor activity: The Group operates in highly competitive
markets. Significant product innovations, technical advances and/or
the intensification of price competition by competitors, both
direct manufacturing competitors or competitors of our customers,
could adversely affect the Group's results.
Growth and change: The Group is pursuing a strategy of growth
and expansion in the UK. Delivery of our stated strategy will
necessitate organisational change and investment, major capital
investments and exploiting corporate development opportunities.
Major capital investments and corporate development opportunities
are often high cost and may involve significant change including
the addition of a material number of new employees.
COVID-19 impact : The crisis is having an unprecedented impact
on the Group's activities and the industry it operates in, which
may impact its medium-term strategy. It is working with its
customers to anticipate a 'new normal' and how it can position
itself for the change. However, this 'new normal' is uncertain. The
Group is also monitoring strategic opportunities as and when they
are practicable to execute.
Commercial
Changes in consumer behaviour and demand: In common with other
food industry manufacturers, unforeseen changes in food consumption
patterns or in weather patterns may impact the Group. In addition,
demand for a number of the Group's products can be adversely
affected by fluctuations in the economy.
Key customer relationships and grocery industry structure: The
Group benefits from close commercial relationships with a number of
key customers. The loss of any of these key customers, tightening
of commercial terms, or brand or reputational damage associated
with such supply could result in a material impact on the Group's
results. The Group is also exposed to poor performance and
execution by the customers in the categories it supplies. Changes
to the grocery industry structure may also adversely affect
performance.
Raw material and input cost inflation: The Group's cost base and
margin can be affected by fluctuating raw material and energy
prices and changes in cost and price profile. The Group also relies
on a concentrated number of key suppliers for certain materials. A
loss or interruption of supply from a key supplier could cause
short term disruption to the operational ability of the Group and
adversely affect its results.
COVID-19 impact : The crisis has immediately changed the demand
patterns for the Group's products. It has also put pressure on its
supply chains. T he Group has simplified its product ranges with
its customers and is working with customers to maintain the
integrity of the supply chain and plans for activation once social
restriction measures are eased. There is a risk that it may take
some time for the Group to recover to pre-crisis levels.
Operational
Food industry and environmental regulations: As a producer of
convenience food and ingredients, Greencore is subject to rigorous
and constantly evolving laws and regulations, particularly in the
areas of food safety and environmental protection. Failure to
comply with such regulations may lead to serious financial,
reputational and/or legal risk.
Product contamination: The Group produces a large volume of food
annually and there are risks of product contamination through
either accidental or deliberate means. This may lead to products
being withdrawn or recalled, or causing harm to customers. As well
as being a significant draw on resources, product contamination
could result in a financial, reputational and/or legal impact on
the Group.
Disruption to day-to-day group operations: The Group is at risk
of disruption to its day-to-day operations from the breakdown of
key manufacturing equipment or the loss of part or all of a
significant facility.
IT systems and cyber risk: The Group relies heavily on
information technology and requires continuous investment in
systems to support our business. In common with most large
companies, the Group is susceptible to cyber security attacks with
the threat to the confidentiality, integrity and availability of
such systems. Losses caused by accidental or malicious actions,
including those resulting from a cyber security attack, could have
a significant impact on the Group.
COVID-19 impact: The crisis has had a profound effect on the
Group's operations. To respond to the changing demand patterns, the
Group has had to make significant changes to its production
network. The Group has also had to develop plans for extended
social distancing which will impact the efficiency and
effectiveness of its operations. The Group's system and cyber risk
has also increased, given intensifying global cyber activity during
the crisis as well as the increased pressure on the Group's systems
to support the changed working environment.
People
Health and safety: In addition to the obvious human cost, a
serious workplace injury or fatality could inevitably carry serious
financial, reputational and/or legal risk.
Labour availability and cost: Due to political and economic
uncertainty and change, there is a risk that labour cost and
availability may be affected and this could have a detrimental
impact on the Group.
Ethical Compliance: The Group has identified ethical compliance
as a standalone principal risk. Greencore is a large employer and
also sources ingredients from supply chains which in certain cases
can be complex. Any failure to comply with ethical standards for
our workforce may have a financial, reputational and/or legal
impact for the Group. Failure to ensure that products are sourced
responsibly and sustainably across supply chains may result in
breaches of laws or regulations and may have a financial,
reputational and/or legal impact for the Group.
Recruitment and retention of key personnel: The ongoing success
of the Group is dependent on attracting and retaining high quality
senior management who can effectively implement the Group's
strategy.
COVID-19 impact : The crisis has impacted people first and
foremost. Firstly, it has put more pressure on the Group's overall
Health and Safety agenda and the Group has had to implement
numerous measures to keep its people safe. The Group has accessed
the UK Government's Coronavirus Job Retention Scheme to enable
labour flexibility during this uncertain period. There is a risk
this scheme is not extended.
Financial
Interest rates, foreign exchange rates, liquidity and credit:
There are inherent risks associated with fluctuations in both
foreign exchange rates and interest rates. In addition, the Group's
credit rating and overall credit profile impacts its ability to
obtain funding for future development and expansion.
Employee retirement obligations: The Group's defined benefit
pension schemes are exposed to the risk of changes in interest
rates and the market values of investments, as well as inflation
and the increasing longevity of scheme members. Volatility in
worldwide equity and bond markets can impact the risk of employee
retirement obligations.
COVID-19 impact : The crisis is affecting the capital markets
overall which may impact various elements of our financial
instruments and legacy defined benefit pension schemes.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EADSPFFPEEAA
(END) Dow Jones Newswires
May 19, 2020 02:00 ET (06:00 GMT)
Greencore (LSE:GNC)
과거 데이터 주식 차트
부터 6월(6) 2024 으로 7월(7) 2024
Greencore (LSE:GNC)
과거 데이터 주식 차트
부터 7월(7) 2023 으로 7월(7) 2024