http://www.rns-pdf.londonstockexchange.com/rns/1840P_1-2024-5-20.pdf
21 May
2024
Strong profit growth as
recovery accelerates - full year to be ahead of current market
expectations1
Greencore Group plc ("Greencore"
or the "Group"), a leading manufacturer of convenience food in the
UK, today issues its results for the half year ended 29 March 2024
("H1 24").
SUMMARY FINANCIAL PERFORMANCE
|
H1 24
|
H1 23
|
Change
|
|
£m
|
£m
|
|
Revenue
|
866.1
|
925.8
|
-6.4%
|
Like-for-Like Revenue
Growth
|
|
|
+4.1%
|
Adjusted EBITDA
|
55.9
|
39.9
|
+40.1%
|
Group Operating Profit
|
25.3
|
3.6
|
+602.8%
|
Adjusted Operating
Profit
|
28.3
|
11.8
|
+139.8%
|
Adjusted Operating
Margin
|
3.3%
|
1.3%
|
+200bps
|
Profit/(Loss) Before
Taxation
|
14.7
|
(6.2)
|
+£20.9m
|
Adjusted Profit Before
Tax
|
16.9
|
3.4
|
+397.1%
|
|
|
|
|
Basic EPS (pence)
|
2.5
|
(0.9)
|
+3.4p
|
Adjusted EPS (pence)
|
2.8
|
0.5
|
+2.3p
|
Group Exceptional Items (after
tax)
|
(1.3)
|
(4.8)
|
+72.9%
|
|
|
|
|
Free Cash Flow
|
(26.5)
|
(24.3)
|
-9.1%
|
Net Debt (excluding lease
liabilities)
|
(198.0)
|
(219.4)
|
+£21.4m
|
Net Debt: EBITDA as per financing
agreements
|
1.4x
|
1.9x
|
+0.5x
|
Return on Invested Capital
("ROIC")
|
10.2%
|
7.5%
|
+270bps
|
FINANCIAL HIGHLIGHTS2,3, 4
·
Volume growth ahead of the wider
market3 driven by key category outperformance
·
Reported revenue decline reflects decision to
exit a number of low margin contracts in FY23 and the Trilby
Trading disposal, on a Like-for-Like ("LFL") basis4,
revenue growth was 4.1% with a 1.2% increase from volume growth and
mix impact
·
Strong growth in Adjusted Operating Profit to
£28.3m with 200bps margin improvement
·
ROIC increased 270bps to 10.2%, driven by
improvements across product portfolios, manufacturing footprint and
disciplined capital investment
·
Strong balance sheet at period end with Net Debt
(excluding leases) to Adjusted EBITDA as per financing arrangements
reducing to 1.4x (H1 23: 1.9x)
·
Target to return a further £50m to shareholders
over next 12 months, commencing with a share buyback of up to £30m
and if the business continues to trade as expected the Board
intends to declare a dividend for the year to September
2024
·
Currently expect FY24 Adjusted Operating Profit
in a range of £86-88m, ahead of current market
expectations1
STRATEGIC & OPERATIONAL HIGHLIGHTS
·
Strong progress across "Horizon 2", driving
efficiency, rebuilding profitability and enhancing
returns
·
Outstanding operational service levels of 99.2%
achieved in H1 24
· Continuing to
enhance performance across manufacturing footprint and will
consolidate soups business into single site providing efficiency
gains
·
New large ready meals contract win will be
onboarded at the Kiveton site in late Q4 24
· Transformation
programme launched in H1 24 addressing outdated IT infrastructure,
targeted at improving process efficiencies across the
Group
·
Expect a reduction of £9.8m in annual UK pension
funding contributions from September 2025
This announcement contains inside information for the
purposes of Article 7 of Regulation (EU) No 596/2014 which is part
of UK law by virtue of the European Union (Withdrawal) Act 2018
("MAR").
Dalton Philips, Chief Executive Officer,
said:
"Greencore delivered excellent progress against its strategic
priorities in the first half and continued to outperform the market
in a difficult consumer spending environment.
The Group's accelerating financial performance is very
encouraging as we focus on driving profitability and
returns. We are working with our major retail customers to
develop new products and new offerings which are driving the growth
of our Food to Go segment ahead of the market. We have exited low
margin business and are undertaking a range of actions to increase
the returns profile of each element of the portfolio. We have
many opportunities to continue to grow our business profitability
and have commenced investing in our IT infrastructure to create a
solid platform for growth and enable further efficiency gains
across the Group.
Notwithstanding this additional investment, and while our
seasonally stronger second half is still ahead of us, we now expect
FY24 adjusted operating profit in a range of £86-88m, ahead of
current market expectations1."
Presentation & Conference Call
A presentation of the results for
analysts and institutional investors will take place at 8.30am on
21 May 2024.
The presentation slides will be
available on the Investor Relations section on
www.greencore.com
from 7.00am that morning.
This presentation can also be accessed live
from the Investor Relations section on www.greencore.com or
alternatively via conference call. Registration and dial in details
are available at www.greencore.com/investor-relations/
Basis of preparation
Details of the basis of preparation
of the financial information within this Interim Financial Report
can be found in Note 1 to the attached financial
information.
Forward‐looking statements
Certain statements made in this document are,
or may be deemed to be, 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 based on information currently available to the
Group. The forward-looking statements contained in this
document include statements relating to the financial condition,
results of operations, business, viability and future performance
of the Group and certain of the Group's plans and objectives. These
forward-looking statements include all statements that do not
relate only to historical or current facts and may generally, but
not always, be identified by the use of words such as 'will',
'aims', achieves', 'anticipates', 'continue', 'could', 'develop',
'should', 'expects', 'is expected to', 'may', maintain', 'grow',
'estimates', 'ensure', 'believes', 'intends', 'projects',
'sustain', 'targets', or the negative thereof, or similar future or
conditional expressions, but their absence does not mean that a
statement is not forward-looking.
By their nature, forward-looking statements
are prospective and 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. There may be
risks and uncertainties that the Group is unable to predict at this
time or that the Group currently does not expect to have a material
adverse effect on its business. 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, whether as a result of new
information, future events or otherwise, other than as required by
law.
1 Market expectations as complied by Greencore from
available analyst estimates on 14 May 2024
(https://www.greencore.com/investor-relations/analyst-centre)
2
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 Half Year Results Statement.
3
Compared to Kantar grocery market
performance for the 26 weeks to 1st April
2024.
4
Like-for-Like ("LFL") Revenue Growth and
like-for-like volume growth adjusts actual revenue and volumes
respectively for the net impact of business wins and
losses.
For further information, please contact:
Curtis Armstrong
|
Finance Director - FP&A and
IR
|
Tel: +44 (0) 1246
384649
|
David Marshall
|
Head of Capital Markets
|
Tel: +353 (0) 1 605
1000
|
Jonathan Neilan
|
FTI Consulting
|
Tel: +353 (0) 86 231
4135
|
Nick Hasell
|
FTI Consulting
|
Tel: +44 (0) 203 727
1340
|
|
|
|
About Greencore
We are a leading manufacturer of convenience
food in the UK and our purpose is to make every day taste better.
To help us achieve this we have a model called The Greencore Way,
which is built on the differentiators of People at the Core, Great
Food, Excellence and Sustainability - The Greencore Way describes
both who we are and how we will succeed. We supply all of the
major supermarkets in the UK. We also supply convenience and travel
retail outlets, discounters, coffee shops, foodservice and other
retailers. We have 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.
During FY23 we manufactured 779m sandwiches
and other food to go products, 132m chilled ready meals, 45m
chilled soups and sauces and 245m jars of cooking sauces, pickles
and condiments. We carry out more than 10,400 direct to store
deliveries each day. We have 16 world-class manufacturing sites and
17 distribution centres in the UK, with industry-leading technology
and supply chain capabilities. We generated revenues of £1.9bn in
FY23 and employ 13,600 people. We are headquartered in Dublin,
Ireland. For further information go to
www.greencore.com
or follow Greencore on social media.
OPERATING REVIEW2
Strategic developments
The Group delivered excellent progress against
its strategic priorities in H1 24, underpinned by close customer
engagement in a difficult consumer spending environment.
LFL volume growth of 0.5% represented a strong
volume performance, relative to the wider market
performance3. The Group maintained outstanding
operational service levels during the financial period, working
closely with our customers and supply partners, with overall
service levels at 99.2% in H1 24 compared to 97.9% in H1
23.
Investment in new product development has
increased over the past year. In particular, there has been an
increase in demand for new premium product ranges,
alongside demand for affordable family formats from several
major retail partners. Greencore supported several major retailers
in the development of new products and premium priced offerings and
ranges. This has helped drive Food to Go category growth and
contributed to the Food to Go category growing ahead of the market
over the past year.
The Group has remained focused on proactively
managing commercial returns and capacity management. A number of
contracts, which delivered sub-optimal returns, were exited in FY23
and the Group shifted focus to maximising returns and optimising
use of our manufacturing footprint. This has led to improved
operational efficiencies in H1 24 across the manufacturing
footprint of the Group and an improvement in the returns profile of
the majority of sites.
The ready meals facility at Kiveton has been
operating with excess capacity. A new ready meals contract with an
existing customer will be on-boarded in Q4 24 at this site and is
expected to deliver improved site profitability and returns in
FY25.
The consolidation of two soup manufacturing
sites is planned in Q4 24. This will lead to the closure of soup
production capacity at the Kiveton facility and consolidation of
soup production at the Bristol site.
The Group launched a multi-year transformation
programme in H1 24 focused on bringing the Group's IT estate onto a
single enterprise resource planning platform and improving process
efficiency across the Group. An exceptional charge of £1.5m was
recognised in H1 24 relating to the programme. The Group expects to
invest £6.0m to £7.0m in total during FY24 in commencing this
multi-year transformation programme.
The Group's cost base has risen following
several years of high-cost inflation and therefore new initiatives
commenced in H1 24 targeted at reducing the cost base. We also are
partnering with academic institutions on industrial robotics
development to support increased manufacturing automation across
production lines.
The Group's priorities continue to be guided
by the strategic framework for recovery and growth, with goals set
across a three-horizon framework:
· The
first objective was to stabilise the business through the first
horizon, which was achieved in FY23;
· The
second horizon is focused on the rebuilding of profitability and
returns; and
· The
focus of the third horizon is to further develop our strong growth
platform.
Our horizon framework will guide
the prioritisation and sequencing of our long-term strategic
objectives.
The Group continued the
implementation of commercial and operational efficiencies to
support profitability and mitigate fixed cost inflation in H1 24
and made progress in implementing these in H1 24 as outlined
below.
· A
commercial excellence programme combining profit enhancement
activities across volume, cost, pricing and product mix:
o new product development and innovation has enabled the Group
to drive volume and unlock value for both Greencore and customers;
and
o in H1 24, the number of SKUs resigned by the business was 10%
with volume per SKU increasing 3%; while the Group continued to be
a supplier of choice to the Group's chosen partners.
· A
structured operational excellence programme has been established
across the business aimed at deploying best practice learnings
throughout the network. This involves:
o wider diagnostic benchmarking of the Group's manufacturing
facilities;
o implementation of four large pilot sites for improvement
activities, which together account for c.50% of the Group's cost of
goods sold; and
o new improvement methodologies introduced, with each of the
four sites focused on one of material waste, labour, planning,
supply chain planning or engineering.
The Group will continue to focus
on commercial and operational excellence and continued tight
management of costs.
Balance Sheet
Debt Re-financing
In November 2023, the Group
further strengthened its balance sheet and lengthened its debt
maturity profile when it refinanced a £340.0m Revolving Credit
Facility ('RCF') and a £45.0m term loan with a new five year
£350.0m sustainability linked RCF. The new RCF is a five year
facility with the option of two additional one year
extensions.
Pension funding
The Triennial valuation of the UK
defined benefit pension scheme was completed in March 2023. The
scheme is expected to achieve a fully funded position on a
triennial valuation basis by September 2025. Following discussions
with the UK scheme's trustees, it has been agreed that £9.8m of
annual pension contributions from the Group will cease when the
fully funded position is achieved. This is currently expected to be
no later than the end of September 2025.
Better Future Plan
The primary focus during H1 24 has been on
improving sustainability data and preparation for new upcoming
regulatory requirements including the Corporate Sustainability
Reporting Directive and transition plans.
We have also deepened collaborations with key
customers and supply chain partners. In particular, on scope 3
carbon and Healthy and Sustainable Diets.
Trading Performance
|
H1 24
£m
|
H1 23
£m
|
Change
(As
reported)
|
Change
(Like-for-Like
Basis)
|
Revenue
|
866.1
|
925.8
|
-6.4%
|
+4.1%
|
Group Operating Profit
|
25.3
|
3.6
|
+602.8%
|
|
Adjusted Operating
Profit
|
28.3
|
11.8
|
+139.8%
|
|
Adjusted Profit Before
Tax
|
16.9
|
3.4
|
+397.1%
|
|
Group reported revenue decreased by 6.4% to
£866.1m in H1 24. The decline was driven by the disposal of the
Trilby Trading business in September 2023, accounting for a
decrease of 4.6% and the proactive decision to exit a number of low
returning contracts during FY23 accounting for a further 5.9%
decline. This was partially offset by the impact of inflation
recovery and price totalling 2.9% and a 1.2% benefit from volume
increases (a combination of underlying growth and price mix). LFL
Revenue Growth increased by 4.1%.
Overall, Group Operating Profit in H1 24
increased 602.8% to £25.3m and Adjusted Operating Profit increased
by 139.8% to £28.3m. The Adjusted Operating Profit improvement was
driven by the increase in Gross Profit underpinned by the
operational and commercial initiatives implemented during the
financial period. Group Adjusted Profit Before Tax was £16.9m in H1
24, compared to £3.4m in H1 23.
With the exception of labour costs, inflation
in the Group's main cost components has slowed and the majority
incurred was recovered or mitigated in the period, through a range
of mechanisms, including pass-through of cost increases, cost
reductions, product and range reformulations, and alternative
sourcing. Efficiency initiatives also supported the offsetting,
recovery and mitigation of labour, fixed cost and other overhead
cost inflation. Labour costs will continue to increase with the
introduction of further national living wage increases in the UK
from April 2024.
An exceptional charge of £1.5m was recognised
in H1 24 for business transformation costs related to the group
wide technology and end-to-end processes transformation
programme.
The Group managed a very active commercial
agenda with customers in H1 24 and launched approximately 184 new
products, within the Group's total SKU range of more than 2,000
products. The new product development teams were more
active in the development of premium ranges and supported major
retailers in the development of numerous new products and
offerings.
LFL volumes increased 10% (1.1m units) on
the prior year during the Christmas period, across numerous
categories (sandwich, soup and sauce, grocery and quiche) and
the Group delivered 15.2m Christmas sandwiches to customers. Other
examples of launches with key customers during H1 24 were health
and vegan ranges launched in the new year and Valentine's Day meal
deal ranges across the ready meals and quiche market. The Group
also launched several seasonal limited-edition ranges across soup
and sandwiches to support key food trends.
Revenue in the Group's Food to Go categories
(comprising sandwiches, salads, sushi and chilled snacking)
totalled £578.9m and accounted for approximately 67% of reported
revenue. Reported revenue decreased by £1.5m in these categories,
as LFL volume growth, inflation recovery and pricing impacts were
offset by the proactive decision to exit a number of low margin
contracts. LFL Revenue Growth across the Food to Go category was
4.6% in the period. The Group experienced LFL volume growth of 2.5%
across the Food to Go sandwiches category, outperforming the wider
market3, however there were weaker performances in the
Food to Go salads and the own label sushi categories.
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. Reported revenue across these
categories decreased by 16.9% to £287.2m in H1 24. The decrease was
driven by the disposal of the Trilby Trading business and exiting
low margin contracts which offset inflation recovery. Volumes
declined 0.3% on a LFL basis in the period. LFL Revenue Growth
across the Other Convenience category was 3.1% in the period. The
Group achieved a strong volume performance in the chilled ready
meals category, increasing 1.7% on a LFL basis, outperforming the
wider market3. This was in addition to a strong LFL
volume performance across cooking sauce, table sauce and bakery
categories, however much of the remainder of the grocery category
saw a more challenging performance.
Group Cash Flow and Returns
|
H1 24
£m
|
H1 23
£m
|
Change (as
reported)
|
Free Cash Flow
|
(26.5)
|
(24.3)
|
-9.1%
|
Net Debt
|
(243.9)
|
(268.8)
|
+£24.9m
|
Net Debt (excluding lease
liabilities)
|
(198.0)
|
(219.4)
|
+£21.4m
|
Net Debt: EBITDA as per financing
agreements
|
1.4x
|
1.9x
|
0.5x
|
ROIC
|
10.2%
|
7.5%
|
+270bps
|
The Group continued to carefully manage both
Cash Flows and leverage in H1 24, in the context of recovering
profitability, seasonal working capital outflows, and the
investment programme to support future growth.
The Group recorded a Free Cash outflow of
£26.5m in H1 24 compared to an outflow of £24.3m in H1 23 as the
higher profitability in H1 24 was offset by increases in financing
and tax costs. Free Cash Flow conversion was 36.7% compared with
42.4% in H1 23.
The Group's Net Debt at H1 24 was £243.9m, a
decrease of £24.9m compared to H1 23. Net Debt excluding lease
liabilities was £198.0m, down £21.4m on the prior year due to
increased profitability, a reduction in capital expenditure and the
receipt of disposal proceeds of Trilby Trading Limited. The Group's
Net Debt: EBITDA leverage covenant as measured under financing
agreements was 1.4x at period end,
compared to 1.9x at H2 23.
In November 2023, the Group further
strengthened its balance sheet and lengthened its debt maturity
profile when it refinanced a £340.0m revolving credit facility and
a £45.0m term loan with a new five year £350.0m sustainability
linked revolving credit facility. As at H1 24, the Group had total
committed debt facilities of £446.7m, a weighted average maturity
of 4.0 years and cash and undrawn committed bank facilities of
£246.0m.
ROIC increased to 10.2% for the 12 months
ended 29 March 2024, compared to 7.5% for the prior year. The
year-on-year increase was driven primarily by increased
profitability in the 12-month period to 29 March 2024. Average
invested capital decreased year-on-year from £717.4m to
£709.8m.
FINANCIAL REVIEW1
Revenue and Operating Profit
Reported revenue in the period was £866.1m a
decrease of 6.4% compared to H1 23, due to a decrease in volume
year on year, driven by the decision to proactively resign a number
of low margin contracts in FY23 and the disposal of the Trilby
Trading business. These decreases were partially offset by the
impact of the recovery of inflation and pricing, in addition to
underlying volume increases. LFL Revenue Growth was 4.1%, due to
LFL volume growth and inflation recovery and pricing impacts. LFL
Revenue Growth adjusts for the disposal of Trilby Trading Limited
in FY23 and the impact of net business wins and losses.
Group Operating Profit increased from £3.6m in
H1 23 to £25.3m in H1 24 as a result of the increased
gross profit performance underpinned by the operational and
commercial initiatives implemented during the financial
period. Adjusted Operating Profit was £28.3m compared
to £11.8m in H1 23. Adjusted Operating Margin was
3.3%, 200bps higher
than in H1 23.
Net finance
costs
The Group's net bank interest cost was £10.7m
in H1 24, an increase of £2.9m versus H1 23. The increase was
driven by higher cost of debt during H1 24. The Group also
recognised a £0.7m interest charge relating to the interest payable
on lease liabilities in the period (H1 23: £0.6m).
The change in the fair value of derivative
financial instruments and related debt adjustments including
foreign exchange in the financial period was a credit of £1.4m (H1
23: £0.8m charge) and the non-cash pension financing charge of
£0.6m in line with the H1 23 charge of £0.6m.
Profit before taxation
The Group's Profit before taxation
of £14.7m in H1 24 increased from a loss of £6.2m in H1 23. The
increase was driven by higher Group Operating Profit partly offset
by higher finance costs. Adjusted Profit Before Tax in the period
was £16.9m compared to £3.4m in H1 23.
Taxation
The underlying ETR for the half
year is 24% (H1 23: 21%) when adjusted for the change in fair value
of derivative financial instruments and related debt adjustments
and exceptional items included in the half year period. The Group
expects the annual ETR to be in line with the guidance rate of
c.25%. The increase in the effective tax rate reflects the increase
in the UK corporation tax rate.
Exceptional items
The Group had a pre‐tax
exceptional charge of £1.5m in H1 24, and an after-tax charge of
£1.3m, comprised as follows:
Exceptional Items
|
£m
|
Transformation costs
|
(1.5)
|
Exceptional items (before tax)
|
(1.5)
|
Tax on exceptional
items
|
0.2
|
Exceptional items (after tax)
|
(1.3)
|
The charge relates to costs
incurred for the Group's transformation programme launched in H1 24
focusing on transformation of the Group's technology infrastructure
and end-to-end processes.
Earnings per share
The Group's basic earnings per share for H1 24
was 2.5 pence compared to a loss of 0.9 pence in H1 23. This was
driven by a £16.3m increase in profit attributable to equity
holders and a decrease in the weighted average number of shares in
issue in H1 24 to 468.6m (H1 23: 505.9m) due to the impact of the
share buyback programme.
Adjusted Earnings were
£13.0m in the period, £10.3m ahead of H1 23
largely due to an increase in Adjusted Operating Profit partly
offset by an increase in interest and tax costs. Adjusted Earnings
Per Share of 2.8 pence compared to 0.5 pence in H1 23.
Cash Flow and Net Debt
Adjusted EBITDA was £16.0m higher in H1 24 at
£55.9m. The Group reported a seasonal net working capital outflow
of £43.2m (H1 23: working capital outflow of £32.3m). Maintenance
Capital Expenditure of £10.1m was recorded in the period (H1 23:
£8.8m). In H1 24, the Group recorded Strategic Capital Expenditure
of £2.5m (H1 23: £4.2m). The cash outflow in respect of exceptional
charges was £2.9m (H1 23: £2.3m).
Interest paid in the period was £10.1m (H1 23:
£8.2m), including interest of £0.7m on lease liabilities, an
increase of £1.9m on H1 23 reflecting higher interest costs on
borrowings in H1 24. The Group recognised tax paid of £4.2m (H1 23:
£1.4m) in the period. The cash tax payable by the Group will remain
low due to the availability of full expensing relief for capital
expenditure. The Group's effective tax rate will be higher than the
cash tax rate in the medium term as deferred tax liabilities will
arise on assets where full expensing relief has been claimed. The
deferred tax liabilities will release over the useful life of the
assets. Cash repayments on lease liabilities were £8.4m (H1 23:
£8.3m). The Group's cash funding for defined benefit pension
schemes was £6.7m (H1 23: £5.3m).
The Group made net share purchases of £15.2m
in H1 24 reflecting the completion of the Group's share buyback
programme in H1 24 with £15.0m of shares bought back in H1 24 and
the purchase of £0.2m of shares for employee share based payments.
This compared to net share purchases of £15.2m in H1 23.
The Group's Net Debt excluding lease
liabilities at 29 March 2024 was £198.0m, a decrease of £21.4m
compared to the end of H1 23.
Financing
On 20 November 2023, the Group refinanced its
debt facilities with a new five-year £350.0m sustainability-linked
revolving credit facility ('RCF'), maturing in November 2028 with
the option to extend for up to a further two years. This new
facility replaces the previous £340.0m RCF that was due to mature
in January 2026. A £45.0m term loan due to mature in June 2024 was
also repaid in full as part of this debt restructuring.
At 29 March 2024 the Group had cash and
undrawn committed bank facilities of £246.0m (H1 23:
£277.8m).
Pensions
All of the Group's 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 29 March 2024 was £22.1m, £2.0m higher than the
position at 29 September 2023. The net pension deficit after
related deferred tax was £15.2m (FY23: £12.8m), comprising a net
deficit on UK schemes of £24.4m (H1 23: £28.3m) and a net surplus
on Irish schemes of £9.2m (FY23: £15.5m).
The increase in the Group's net pension
deficit was driven principally by net actuarial losses particularly
on the Irish scheme partially offset by contributions paid by the
Group.
Separate to this IAS 19 Employee Benefits valuation, the
valuations and funding obligations of the Group's legacy defined
benefit pension schemes are assessed on a triennial basis with the
relevant trustees. A full actuarial valuation was carried out on
the Irish scheme at 31 March 2022 and for the UK defined benefit
scheme at 31 March 2023. The Group expects the annual cash funding
requirement for all schemes to be approximately £12m - £15m in
FY24.
The UK defined benefit scheme is expected to
achieve a fully funded position on a triennial valuation basis by
the end of September 2025. Following discussions with the UK
scheme's trustees, it has been agreed that £9.8m of annual pension
contributions from the Group will cease when the fully funded
position is achieved. The Group has engaged with the trustees of
the UK scheme and, relative to the liabilities on the triennial
funding basis the UK scheme is now 100% hedged for movements in
gilt yields, reducing the Group's exposure to risk. The Group has
also agreed with the trustees that these contributions will cease
sooner if the UK scheme remains ahead of schedule.
Return of
value to shareholders
The Group completed its commitment to return
£50m to shareholders over two years in H1 24, with the remaining
£15.0m returned through buybacks in H1 24.
The Group has announced additional shareholder
distributions totalling £50m anticipated across the next 12 months,
initially in the form of a share buyback of up to £30m. The Board
continually reviews the Group's capital management policy and while
no final decision has been taken, if the business continues to
trade as expected the Board intends to declare a dividend for the
year to September 2024.
Principal risks and uncertainties
The Directors continue to assess
the principal risks and uncertainties of the Group on a frequent
basis. The principal risks and uncertainties faced by the business
at 29 September 2023 are described in detail in the Risk Management
section of the Annual Report and Financial Statements for the year
ended 29 September 2023 issued on 28 November 2023, a copy of which
is available on the Group's website.
A description of the principal
risks and uncertainties for the remaining six months of the
financial year is set out in the Appendix to the Interim Financial
Report.
Responsibility
Statement
Each of the Directors of Greencore
Group plc confirm that, to the best of each person's knowledge and
belief as required by the Disclosure Guidance and Transparency
Rules of the Financial Conduct Authority ('FCA'):
· The
Financial Statements have been prepared in accordance with
IAS 34 Interim Financial
Reporting as adopted by the European Union;
· The
Interim Management Report includes a fair review of important
events that have occurred during the first six months of the
financial year, and their impact on the condensed financial
statements, and also contains a description of the principal risks
and uncertainties for the remaining six months of the financial
year; and
· The
Interim Management Report includes a fair review of the related
party transactions that have taken place in the first six months of
the current financial year and that have materially affected the
financial position or performance of the entity during that period;
and any changes in the related party 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.
Dalton
Philips
Catherine Gubbins
Chief Executive
Officer
Chief Financial Officer
Date: 20 May
2024
Date: 20 May 2024
CONDENSED GROUP INCOME STATEMENT
For the half year ended 29 March
2024
|
Half year ended 29 March 2024
|
Half year ended 31 March
2023
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Notes
|
Pre- exceptional
|
Exceptional
(Note 4)
|
Total
|
Pre-
exceptional
|
Exceptional
(Note 4)
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Revenue
|
2
|
866.1
|
-
|
866.1
|
925.8
|
-
|
925.8
|
Cost of
sales
|
|
(585.0)
|
-
|
(585.0)
|
(662.2)
|
-
|
(662.2)
|
Gross profit
|
|
281.1
|
-
|
281.1
|
263.6
|
-
|
263.6
|
Operating costs
before acquisition related amortisation
|
|
(251.2)
|
(1.5)
|
(252.7)
|
(251.4)
|
(6.4)
|
(257.8)
|
Impairment of trade
receivables
|
|
(1.6)
|
-
|
(1.6)
|
(0.4)
|
-
|
(0.4)
|
Group operating profit before
acquisition related amortisation
|
2
|
28.3
|
(1.5)
|
26.8
|
11.8
|
(6.4)
|
5.4
|
Amortisation of
acquisition related intangibles
|
|
(1.5)
|
-
|
(1.5)
|
(1.8)
|
-
|
(1.8)
|
Group operating profit
|
|
26.8
|
(1.5)
|
25.3
|
10.0
|
(6.4)
|
3.6
|
Finance
income
|
5
|
0.5
|
-
|
0.5
|
0.4
|
-
|
0.4
|
Finance
costs
|
5
|
(11.1)
|
-
|
(11.1)
|
(10.2)
|
-
|
(10.2)
|
Profit/(Loss) before
taxation
|
|
16.2
|
(1.5)
|
14.7
|
0.2
|
(6.4)
|
(6.2)
|
Taxation
|
6
|
(3.4)
|
0.2
|
(3.2)
|
(0.2)
|
1.6
|
1.4
|
Profit/(Loss) for the financial period
attributable to the equity shareholders
|
|
12.8
|
(1.3)
|
11.5
|
-
|
(4.8)
|
(4.8)
|
|
|
|
|
|
|
|
|
Earnings per share
(pence)
|
Basic earnings per
share
|
8
|
|
|
2.5
|
|
|
(0.9)
|
Diluted earnings per
share
|
8
|
|
|
2.4
|
|
|
(0.9)
|
|
|
|
|
|
|
|
|
CONDENSED GROUP STATEMENT OF COMPREHENSIVE
INCOME
For the half year ended 29 March
2024
|
Half year ended
29 March 2024
|
Half year
ended
31 March
2023
|
|
(Unaudited)
|
(Unaudited)
|
|
£m
|
£m
|
Total comprehensive income for the
financial period
|
|
|
|
|
|
Items that will not be reclassified to
profit or loss:
|
|
|
Actuarial loss on
Group legacy defined benefit pension schemes
|
(8.2)
|
(9.5)
|
Deferred tax on Group
legacy defined benefit pension schemes
|
1.0
|
1.2
|
|
(7.2)
|
(8.3)
|
Items that may subsequently be
reclassified to profit or loss:
|
|
|
Currency translation
adjustment
|
(0.1)
|
0.1
|
Cash flow
hedges:
|
|
|
fair value movement taken to
equity
|
(0.9)
|
(1.9)
|
transferred to Income
Statement
|
(2.5)
|
(1.4)
|
|
(3.5)
|
(3.2)
|
Other comprehensive income for financial
period
|
(10.7)
|
(11.5)
|
Profit/(Loss) for the
financial period
|
11.5
|
(4.8)
|
Total comprehensive income for the
financial period attributable to equity
shareholders
|
0.8
|
(16.3)
|
|
|
|
|
|
|
CONDENSED GROUP STATEMENT OF FINANCIAL
POSITION
As
at 29 March 2024
|
|
March
2024
(Unaudited)
|
September
2023
(Audited)
|
|
Notes
|
£m
|
£m
|
ASSETS
|
|
|
|
Non-current assets
|
|
|
|
Goodwill and
intangible assets
|
9
|
459.3
|
461.1
|
Property, plant and
equipment
|
9
|
308.5
|
315.5
|
Right-of-use
assets
|
9
|
42.9
|
41.0
|
Investment
property
|
|
4.6
|
4.6
|
Retirement benefit
assets
|
13
|
11.2
|
18.4
|
Derivative financial
instruments
|
11
|
0.2
|
3.7
|
Deferred tax
assets
|
|
29.1
|
28.8
|
Trade and other
receivables
|
|
0.1
|
0.1
|
Total non-current
assets
|
|
855.9
|
873.2
|
|
|
|
|
Current assets
|
|
|
|
Inventories
|
|
67.8
|
72.9
|
Trade and other
receivables
|
|
235.4
|
234.2
|
Cash and cash
equivalents
|
10
|
108.9
|
116.5
|
Derivative financial
instruments
|
11
|
1.5
|
0.9
|
Total current assets
|
|
413.6
|
424.5
|
Total assets
|
|
1,269.5
|
1,297.7
|
|
|
|
|
EQUITY
|
|
|
|
Capital and reserves attributable to
equity holders of the Company
|
|
|
|
Share
capital
|
|
4.7
|
4.8
|
Share
premium
|
|
89.7
|
89.7
|
Other
Reserves
|
|
119.7
|
120.8
|
Retained
Earnings
|
|
234.4
|
244.5
|
Total equity
|
|
448.5
|
459.8
|
|
|
|
|
LIABILITIES
|
|
|
|
Non-current
liabilities
|
|
|
|
Borrowings
|
11
|
203.5
|
125.8
|
Lease
liabilities
|
|
31.3
|
30.7
|
Other
payables
|
|
2.4
|
2.4
|
Derivative financial
instruments
|
11
|
0.3
|
-
|
Provisions
|
12
|
6.7
|
6.9
|
Retirement benefit
obligations
|
13
|
33.3
|
38.5
|
Deferred tax
liabilities
|
|
18.7
|
15.2
|
Total non-current
liabilities
|
|
296.2
|
219.5
|
|
|
|
|
Current liabilities
|
|
|
|
Borrowings
|
11
|
103.4
|
144.7
|
Trade and other
payables
|
|
398.8
|
446.0
|
Lease
liabilities
|
|
14.6
|
14.3
|
Provisions
|
12
|
2.5
|
3.0
|
Current tax
payable
|
|
5.5
|
10.4
|
Total current
liabilities
|
|
524.8
|
618.4
|
Total liabilities
|
|
821.0
|
837.9
|
Total equity and
liabilities
|
|
1,269.5
|
1,297.7
|
CONDENSED GROUP STATEMENT OF CASH
FLOWS
For
the half year ended 31 March 2023
|
|
Half year ended
29 March 2024
|
Half year
ended
31 March
2023
|
|
Notes
|
(Unaudited)
|
(Unaudited)
|
|
|
£m
|
£m
|
Profit/(loss) before
taxation
|
|
14.7
|
(6.2)
|
Finance
income
|
5
|
(0.5)
|
(0.4)
|
Finance
costs
|
5
|
11.1
|
10.2
|
Exceptional
items
|
4
|
1.5
|
6.4
|
Group operating profit before
exceptional items
|
|
26.8
|
10.0
|
Depreciation of
property, plant and equipment and right-of-use assets
|
9
|
26.7
|
26.8
|
Amortisation of
intangible assets
|
9
|
2.4
|
3.1
|
Employee share-based
payment expense
|
|
3.1
|
1.4
|
Contributions to
Group legacy defined benefit pension schemes
|
13
|
(6.7)
|
(5.3)
|
Working capital
movement
|
|
(43.2)
|
(32.3)
|
Other
movements
|
|
0.1
|
1.0
|
Net cash inflow from operating
activities before exceptional items, interest and
tax
|
|
9.2
|
4.7
|
Cash outflow related
to exceptional items
|
4
|
(2.9)
|
(2.3)
|
Interest paid
(including lease liability interest)
|
|
(10.1)
|
(8.2)
|
Tax paid
|
|
(4.2)
|
(1.4)
|
Net cash outflow from operating
activities
|
|
(8.0)
|
(7.2)
|
|
|
|
|
Cash flow from investing
activities
|
|
|
|
Purchase of property,
plant and equipment
|
|
(12.0)
|
(12.0)
|
Purchase of
intangible assets
|
|
(0.6)
|
(1.0)
|
Net cash outflow from investing
activities
|
|
(12.6)
|
(13.0)
|
|
|
|
|
Cash flow from financing
activities
|
|
|
|
Ordinary shares
purchased - own shares
|
|
(0.2)
|
(2.0)
|
Capital return via
share buyback
|
7
|
(15.0)
|
(13.2)
|
Drawdown of bank
borrowings
|
11
|
32.3
|
19.9
|
Repayment of lease
liabilities
|
|
(8.4)
|
(8.3)
|
Net cash inflow/(outflow) from financing
activities
|
|
8.7
|
(3.6)
|
Net decrease in cash and cash
equivalents and bank overdrafts
|
|
(11.9)
|
(23.8)
|
|
|
|
|
Reconciliation of opening to closing
cash and cash equivalents and bank overdrafts
|
|
|
|
Cash and cash
equivalents and bank overdrafts at beginning of the financial
period
|
10
|
32.8
|
46.7
|
Translation
adjustment
|
|
0.1
|
(0.1)
|
Decrease in cash and
cash equivalents and bank overdrafts
|
|
(11.9)
|
(23.8)
|
Cash and cash equivalents and bank overdrafts at end of the
financial period*
|
10
|
21.0
|
22.8
|
|
|
|
|
|
|
|
|
* Cash and cash equivalents and bank
overdrafts is made up of cash at bank and in hand of £108.9m (H1
23: £68.3m) and bank overdrafts of £87.9m (H1 23:
£45.5m).
CONDENSED GROUP STATEMENT OF CHANGES IN
EQUITY
For the half year ended 29
March 2024
|
Share
capital
|
Share premium
|
Other reserves
|
Retained earnings
|
Total
Equity
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 29 September 2023
|
4.8
|
89.7
|
120.8
|
244.5
|
459.8
|
Total comprehensive income for the
period
|
|
|
|
|
|
Currency translation
adjustment
|
-
|
-
|
(0.1)
|
-
|
(0.1)
|
Cashflow hedge fair
value movement taken to equity
|
-
|
-
|
(0.9)
|
-
|
(0.9)
|
Cashflow hedge
transferred to Income Statement
|
-
|
-
|
(2.5)
|
-
|
(2.5)
|
Actuarial loss on
Group legacy defined benefit pension schemes
|
-
|
-
|
-
|
(8.2)
|
(8.2)
|
Deferred tax on Group
legacy defined benefit pension schemes
|
-
|
-
|
-
|
1.0
|
1.0
|
Profit for the
financial period
|
-
|
-
|
-
|
11.5
|
11.5
|
Total comprehensive income for the
financial period
|
-
|
-
|
(3.5)
|
4.3
|
0.8
|
Transactions with equity holders of the
Company
Contributions and
distributions
|
|
|
|
|
|
Employee share-based
payment expense
|
-
|
-
|
3.1
|
-
|
3.1
|
Exercise, lapse or
forfeit of share-based payments
|
-
|
-
|
(0.8)
|
0.8
|
-
|
Shares acquired by
Employee Benefit Trust
|
-
|
-
|
(0.2)
|
-
|
(0.2)
|
Transfer to Retained
Earnings on grant of shares to beneficiaries of the Employee
Benefit Trust
|
-
|
-
|
0.2
|
(0.2)
|
-
|
Capital return via
share buyback
|
(0.1)
|
-
|
0.1
|
(15.0)
|
(15.0)
|
Total transactions with equity holders
of the Company
|
(0.1)
|
-
|
2.4
|
(14.4)
|
(12.1)
|
At 29 March 2024
|
4.7
|
89.7
|
119.7
|
234.4
|
448.5
|
|
Share
capital
|
Share
premium
|
Other
reserves
|
Retained
earnings
|
Total
Equity
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 30 September 2022
|
5.2
|
89.7
|
127.8
|
242.9
|
465.6
|
Total comprehensive income for the
period
|
|
|
|
|
|
Currency translation
adjustment
|
-
|
-
|
0.1
|
-
|
0.1
|
Cash flow hedge fair
value movement taken to equity
|
-
|
-
|
(1.9)
|
-
|
(1.9)
|
Cash flow hedge
transferred to Income Statement
|
-
|
-
|
(1.4)
|
-
|
(1.4)
|
Actuarial loss on
Group legacy defined benefit pension schemes
|
-
|
-
|
-
|
(9.5)
|
(9.5)
|
Deferred tax on Group
legacy defined benefit pension schemes
|
-
|
-
|
-
|
1.2
|
1.2
|
Loss for the
financial period
|
-
|
-
|
-
|
(4.8)
|
(4.8)
|
Total comprehensive income for the
financial period
|
-
|
-
|
(3.2)
|
(13.1)
|
(16.3)
|
Transactions with equity holders of the
Company
Contributions and
distributions
|
|
|
|
|
|
Employee share-based
payment expense
|
-
|
-
|
1.7
|
-
|
1.7
|
Exercise, lapse or
forfeit of share-based payments
|
-
|
-
|
(2.2)
|
2.2
|
-
|
Shares acquired by
Employee Benefit Trust
|
-
|
-
|
(2.0)
|
-
|
(2.0)
|
Transfer to Retained
Earnings on transfer of shares to beneficiaries of the Employee
Benefit Trust
|
-
|
-
|
1.6
|
(1.6)
|
-
|
Capital return via
share buyback
|
(0.2)
|
-
|
0.2
|
(13.2)
|
(13.2)
|
Total transactions with equity holders
of the Company
|
(0.2)
|
-
|
(0.7)
|
(12.6)
|
(13.5)
|
At 31 March 2023
|
5.0
|
89.7
|
123.9
|
217.2
|
435.8
|
OTHER RESERVES
|
Share-based
payment
reserve
|
Own
Share reserve
|
Undenominated capital
reserve
|
Hedging reserve
|
Foreign currency translation
reserve
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 29 September 2023
|
4.1
|
(6.4)
|
120.9
|
3.5
|
(1.3)
|
120.8
|
Total comprehensive income for the
financial period
|
|
|
|
|
|
|
Currency translation
adjustment
|
-
|
-
|
-
|
-
|
(0.1)
|
(0.1)
|
Cash flow hedge fair
value movement taken to equity
|
-
|
-
|
-
|
(0.9)
|
-
|
(0.9)
|
Cash flow hedge
transferred to Income Statement
|
-
|
-
|
-
|
(2.5)
|
-
|
(2.5)
|
Total comprehensive income for the
financial period
|
-
|
-
|
-
|
(3.4)
|
(0.1)
|
(3.5)
|
Transactions with equity holders of the
Company
Contributions and
distributions
|
|
|
|
|
|
|
Employee share-based
payment expense
|
3.1
|
-
|
-
|
-
|
-
|
3.1
|
Exercise, lapse or
forfeit of share-based payments
|
(0.8)
|
-
|
-
|
-
|
-
|
(0.8)
|
Shares acquired by
Employee Benefit Trust
|
-
|
(0.2)
|
-
|
-
|
-
|
(0.2)
|
Transfer to retained
earnings on grant of shares to beneficiaries of the Employee
Benefit Trust
|
-
|
0.2
|
-
|
-
|
-
|
0.2
|
Capital return via
share buyback
|
-
|
-
|
0.1
|
-
|
-
|
0.1
|
Total transactions with equity holders
of the Company
|
2.3
|
-
|
0.1
|
-
|
-
|
2.4
|
At 29 March 2024
|
6.4
|
(6.4)
|
121.0
|
0.1
|
(1.4)
|
119.7
|
|
|
|
|
|
|
|
|
Share-based
payment
reserve
|
Own
Share
reserve
|
Undenominated
capital reserve
|
Hedging
reserve
|
Foreign currency
translation reserve
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
At 30 September
2022
|
3.8
|
(4.4)
|
120.5
|
8.1
|
(0.2)
|
127.8
|
Total comprehensive income for the
period
|
|
|
|
|
|
|
Currency translation
adjustment
|
-
|
-
|
-
|
-
|
0.1
|
0.1
|
Cash flow hedge taken
to equity
|
-
|
-
|
-
|
(1.9)
|
-
|
(1.9)
|
Cash flow hedge
transferred to Income Statement
|
-
|
-
|
-
|
(1.4)
|
-
|
(1.4)
|
Total comprehensive income for the
financial period
|
-
|
-
|
-
|
(3.3)
|
0.1
|
(3.2)
|
Transactions with equity holders of the
Company
Contributions and
distributions
|
|
|
|
|
|
|
Employee share-based
payment expense
|
1.7
|
-
|
-
|
-
|
-
|
1.7
|
Exercise, lapse or
forfeit of share-based payments
|
(2.2)
|
-
|
-
|
-
|
-
|
(2.2)
|
Share acquired by
Employee Benefit Trust
|
-
|
(2.0)
|
-
|
-
|
-
|
(2.0)
|
Transfer to Retained
Earnings on grant of shares to beneficiaries of the Employee
Benefit Trust
|
-
|
1.6
|
-
|
-
|
-
|
1.6
|
Capital return via
share buyback
|
-
|
-
|
0.2
|
-
|
-
|
0.2
|
Total transactions with equity holders
of the Company
|
(0.5)
|
(0.4)
|
0.2
|
-
|
-
|
(0.7)
|
At 31 March 2023
|
3.3
|
(4.8)
|
120.7
|
4.8
|
(0.1)
|
123.9
|
|
|
|
|
|
|
|
NOTES TO THE CONDENSED GROUP FINANCIAL
STATEMENTS
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, 29 March 2024,
and have been prepared in accordance with the Disclosure Guidance
and Transparency Rules of the Financial Conduct Authority ('FCA')
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. These Condensed Group
Financial Statements for the six-month period ended 29 March 2024
and the comparative amounts for the six-months ended 31 March 2023
are unaudited and have not been reviewed by the Group's auditor.
The condensed financial information for the year ended 29 September
2023 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.
Going concern
The Directors, after making enquiries and
having considered the business activities of the Group as set out
on pages 1 to 9 and the principal risks and uncertainties as set
out on page 31, have a reasonable expectation that the Group has
adequate resources to continue operating as a going concern for the
foreseeable future.
In the current period, the Group's performance
has continued to improve and this is further supported by the
Group's access to liquidity which is underpinned by the successful
refinancing of its debt facilities with a new five
year £350.0m sustainability linked revolving credit facility
('RCF') obtained in November 2023 replacing the existing £340.0m
RCF that had been due to mature in January 2026. The new facility
matures in November 2028 and includes an option two additional one
year extensions. The Group therefore has retained financial
strength and flexibility, together with strong trading
relationships with its customers and suppliers. Consequently, the
Directors believe that the Group is well placed to manage its
business risks successfully.
For the purpose of the going concern
assessment, the Group has used the latest internally approved
forecasts and strategic plan as a base case which takes into
account the Group's current position and future prospects. The
Group has used this to produce downside and severe downside
scenarios which consider the potential impact of commercial risks
materialising which would result in a decrease in volume along with
under delivery of targets set out under the Group's commercial and
operational initiatives. The impact on revenue; profit; and
cashflow are modelled, including the consequential impact on
working capital and bank covenants. Based on the forecast
cashflows, throughout the 18-month period to September 2025, the
Group is satisfied that it has sufficient resources available and
has adequate headroom to meet covenant requirements and if needed,
the Group could employ mitigants within its control, which would
include a reduction in non-business critical capital projects and
other discretionary cash flow items.
As a result, the Directors believe the Group
has sufficient liquidity to manage through a range of different
cashflow scenarios over the next 18 months from the half year end
date. Accordingly, the Directors adopt the going concern basis in
preparing these Condensed Group Financial Statements.
Accounting
Policies
The accounting policies 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 29 September 2023 and
are as set out in those financial statements.
The following changes to IFRS
became effective for the Group during the financial period but did
not result in material changes to the Condensed Group Financial
Statements:
· IFRS
17 Insurance
Contracts
· Amendments to IAS 1 and IFRS Practice Statement 2 Disclosures of Accounting
Policies
· Amendments to IAS 8 Definition of Accounting
Estimates
· Amendments to IAS 12 Deferred tax relating to assets and
liabilities arising from a single transaction
The Group has not applied new
standards, amendments and interpretations to existing standards
that have been issued but are not yet effective. The Group is
currently in the process of reviewing the potential impact of those
amendments.
Significant 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 material 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 29 September
2023.
2.
Segment Information
Convenience Foods 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 Board of Directors.
The segment incorporates many 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.
Up to 29 September 2023, the segment included
an Irish ingredients trading business, Trilby Trading Limited,
which was disposed of by the Group on that date. The Irish
ingredients trading business is therefore included in the prior
period segment information and contributed revenue of £40.9m and
profit of £0.9m for the six- month period to 31 March 2023.
|
Convenience
Foods
|
|
Half year
2024
|
Half year
2023
|
|
£m
|
£m
|
Revenue
|
866.1
|
925.8
|
Group operating profit before
exceptional items and amortisation of
acquisition related intangible
assets
|
28.3
|
11.8
|
Amortisation of
acquisition related intangibles
|
(1.5)
|
(1.8)
|
Group operating profit before
exceptional items
|
26.8
|
10.0
|
Finance
income
|
0.5
|
0.4
|
Finance
costs
|
(11.1)
|
(10.2)
|
Exceptional
items
|
(1.5)
|
(6.4)
|
Taxation
|
(3.2)
|
1.4
|
Profit/(loss) for the
period
|
11.5
|
(4.8)
|
The following table disaggregates revenue by
product categories in the Convenience Foods reporting
segment:
|
Half year 2024
|
Half year
2023
|
|
£m
|
£m
|
Revenue
|
|
|
Food to Go
categories
|
578.9
|
580.4
|
Other Convenience
categories
|
287.2
|
345.4
|
Total revenue for Convenience
Foods
|
866.1
|
925.8
|
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.
3.
Seasonality
The Group's convenience foods
portfolio is seasonal in nature with the Group's business being
weighted towards the second half of the year. This weighting is
primarily driven by weather and seasonal buying
patterns.
4.
Exceptional Items
|
|
Half Year 2024
|
Half Year
2023
|
|
|
£m
|
£m
|
Transformation costs
|
(A)
|
(1.5)
|
-
|
Reorganisation costs
|
(B)
|
-
|
(7.7)
|
Defined benefit
pension schemes restructuring
|
(C)
|
-
|
(0.4)
|
Release of legacy
business liability
|
(D)
|
-
|
1.7
|
Total exceptional items before
taxation
|
|
(1.5)
|
(6.4)
|
Tax credit on
exceptional items
|
|
0.2
|
1.6
|
Total exceptional
items
|
|
(1.3)
|
(4.8)
|
(A) Transformation
costs
The Group has commenced a
multi-year transformation programme during the current period which
is focused on transforming the Group's technology infrastructure
and end-to-end processes to drive efficiencies in the way the
entire Group operates. In the period, the Group recognised a charge
of £1.5m in relation to this (FY23: £nil).
(B) Reorganisation
costs
In the prior year, the Group
recognised a reorganisation charge of £7.7m in relation to its
Better Greencore programme which was focused on the revitalisation
of its excellence cost efficiency programmes. The Better Greencore
programme concluded in FY23 and therefore there is no cost relating
to that programme in H1 24.
(C) Defined benefit pension
schemes restructuring
The Group incurred a charge of
£0.4m in the prior period in relation to restructuring costs
associated with its legacy defined benefit pension schemes in
Ireland.
(D) Release of legacy business
liability
In the prior period, the Group
released £1.7m of a liability relating to legacy business disposals
which the Group was satisfied was not probable to be
paid.
Cash Flow on Exceptional Items
The total net cash outflow during the period
in respect of operating activities exceptional items was £2.9m (H1
23: £2.3m), of which £1.4m was in respect
of prior year exceptional charges.
5.
Finance income and finance costs
|
Half year
2024
|
Half year
2023
|
|
£m
|
£m
|
Finance income
|
|
|
Interest on bank
deposits
|
0.5
|
0.4
|
Total finance income
|
0.5
|
0.4
|
|
|
|
Finance costs
|
|
|
Finance costs on
interest bearing cash and cash equivalents, borrowings and other
financing costs
|
(11.2)
|
(8.2)
|
Interest on lease
obligations
|
(0.7)
|
(0.6)
|
Net pension financing
charge
|
(0.6)
|
(0.6)
|
Change in fair value
of derivative financial instruments and related debt
adjustments
|
1.5
|
(0.5)
|
Foreign exchange on
inter-company and external balances where hedge accounting is not
applied
|
(0.1)
|
(0.3)
|
Total finance costs
|
(11.1)
|
(10.2)
|
6.
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 based on tax rates that
were enacted or substantively enacted for the period ended 29 March
2024.
The effective tax rate applicable
for the period ended 29 March 2024 is 24% (H1 23: 21%) when
adjusted for the change in fair value of derivative financial
instruments and related debt instruments and exceptional items
included in the half year period. The Group expects the annual ETR
to be in line with the guidance rate of c.25%.
The increase in the effective tax
rate reflects the impact of the increasing corporation tax rate in
the UK which increased from 19% to 25% on 1 April 2023.
Factors that may impact future tax charges
The Group is within the scope of
the OECD Pillar Two model rules. Pillar Two legislation was enacted
in Ireland on 18 December 2023 and the Income Inclusion Rule
applies to accounting periods beginning on or after 1 January 2024.
The Group will fall within the scope of Pillar Two legislation for
the year ended September 2025.
Under the new legislation, groups
will be liable to assess their effective tax rate (according to
complex new rules) in each jurisdiction that they operate. If the
effective tax rate in any jurisdiction is less than the 15% minimum
rate top up taxes will be payable. The Group are not expecting to
pay top up taxes in the period ending in September 2024.
The IASB issued amendments to IAS
12 in "International Tax Reform - Pillar Two Model Rules" in May
2023, providing an exception to recognising and disclosing
information about deferred tax assets and liabilities related to
Pillar Two income taxes. The Group continues to apply the exception
to recognising and disclosing information about deferred tax assets
and liabilities related to Pillar Two income taxes.
7.
Dividends Paid and Proposed
There were no dividends paid in
the current or prior period and there are no dividends proposed in
the current period.
In the current financial period, the
value return to shareholders concluded with a further £15m value
returned up to 29 March 2024 (FY23: £26.2m) in the form of share
buyback, concluding the £50m commitment made in a prior
period.
The Group has announced on 21 May
2024 additional shareholder distributions totalling £50.0m
anticipated across the next 12 months, commencing with a share
buyback of up to £30.0m and if the Group continues to trade as
expected, the Board also intends to declare a dividend for the year
to September 2024.
8.
Earnings per Ordinary Share
In the current period, the Group
repurchased 15,438,604 Ordinary Shares in the Company, by way of a
share buyback, costing £15.0m. These shares were immediately
cancelled. The effect of this on the weighted average number of
ordinary shares was a decrease of 7,869,846 shares.
Numerator for earnings per share
calculations
|
Half year
2024
|
Half year
2023
|
|
£m
|
£m
|
Profit/(loss) attributable to equity
holders of the Company
|
11.5
|
(4.8)
|
Denominator
for earnings per share calculations
|
Half year
2024
|
Half year
2023
|
|
'000
|
'000
|
Shares in issue at
the beginning of the period
|
483,454
|
516,837
|
Effect of shares held
by Employee Benefit Trust
|
(6,937)
|
(4,347)
|
Effect of share
buyback and cancellation in the period
|
(7,870)
|
(6,602)
|
Effect of shares
issued in the period
|
2
|
-
|
Weighted average number of Ordinary
Shares in issue during the period
|
468,649
|
505,888
|
Dilutive effect of
share options
|
6,010
|
5,328
|
Weighted average number of Ordinary
Shares for diluted earnings per share
|
474,659
|
511,216
|
|
|
|
A total of 15,002,468 (H1 23:
21,746,624) unvested shares were excluded from the diluted earnings
per share calculation as they were either antidilutive or
contingently issuable Ordinary Shares which had not satisfied the
performance conditions attaching at 29 March 2024.
Earnings per Share Calculations
|
Half year
2024
|
Half year
2023
|
|
pence
|
pence
|
Basic earnings per Ordinary
Share
|
2.5
|
(0.9)
|
Diluted earnings per Ordinary
Share
|
2.4
|
(0.9)
|
9.
Goodwill and Intangible Assets, Property, Plant and Equipment,
Right-of-use assets and Capital Expenditure Commitments
During the six-month period to 29
March 2024, the Group made £13.0m of additions to property, plant
and equipment and intangible assets through ongoing capital
expenditure (cash outflow £12.6m), while £0.3m of assets were
impaired. In addition, the Group made £9.6m of additions to
right-of-use assets while £0.1m were disposed of. A total
depreciation and amortisation charge was recognised in the period
of £29.1m including £2.4m on intangible assets (including
amortisation of acquisition related intangible assets), £19.1m on
property, plant and equipment and £7.6m on right-of-use
assets.
During the six-month period to 31
March 2023, the Group made £14.5m of additions to property, plant
and equipment and intangible assets through ongoing capital
expenditure (cash outflow £13.0m), while £1.0m of assets were
impaired. In addition, the Group made £9.8m of additions to
right-of-use assets while £0.2m were disposed of. A total
depreciation and amortisation charge was recognised in the period
of £29.9m including £3.1m on intangible assets (including
amortisation of acquisition related intangible assets), £18.8m on
property, plant and equipment and £8.0m on right-of-use
assets.
At 29 March 2024, the Group had
capital expenditure commitments that had been contracted but not
yet provided for amounting to £8.9m (H1 23:
£9.0m).
10.
Cash and
cash equivalents and bank overdrafts
For the purposes of the Condensed
Group Statement of Cash Flows, cash and cash equivalents and bank
overdrafts are presented net as follows:
|
March
2024
|
September
2023
|
March
2023
|
|
£m
|
£m
|
£m
|
Cash at bank and in
hand
|
108.9
|
116.5
|
68.3
|
Bank overdraft (Note
11)
|
(87.9)
|
(83.7)
|
(45.5)
|
Total cash and cash equivalents and bank
overdrafts
|
21.0
|
32.8
|
22.8
|
11.
Borrowings and Derivative Financial Instruments
|
March
2024
|
September
2023
|
March
2023
|
|
£m
|
£m
|
£m
|
Current
|
|
|
|
Bank
overdrafts
|
(87.9)
|
(83.7)
|
(45.5)
|
Bank
borrowings
|
-
|
(45.0)
|
-
|
Private Placement
Notes
|
(15.5)
|
(16.0)
|
(15.8)
|
Total current
borrowings
|
(103.4)
|
(144.7)
|
(61.3)
|
Non-current
|
|
|
|
Bank
borrowings
|
(172.4)
|
(94.0)
|
(178.9)
|
Private Placement
Notes
|
(31.1)
|
(31.8)
|
(47.5)
|
Total non-current
borrowings
|
(203.5)
|
(125.8)
|
(226.4)
|
Total borrowings
|
(306.9)
|
(270.5)
|
(287.7)
|
The maturity profile of the Group's borrowings
is as follows:
|
March
2024
|
September
2023
|
March
2023
|
|
£m
|
£m
|
£m
|
Less than 1
year
|
(103.4)
|
(144.7)
|
(61.3)
|
Between 1 and 2
years
|
(65.4)
|
(16.0)
|
(60.8)
|
Between 2 and 5
years
|
(138.1)
|
(109.8)
|
(165.6)
|
|
(306.9)
|
(270.5)
|
(287.7)
|
Bank
Borrowings
The Group's bank borrowings net of
finance fees comprised of £172.4m at 29 March 2024 (FY23: £139.0m)
with maturities ranging from January 2026 to November 2028. The
Group had £225.0m (FY23: £295.0m) of undrawn committed bank
facilities in respect of which all conditions precedent had been
met.
On 20 November 2023, the Group
refinanced its debt facilities with a new five-year £350.0m
sustainability-linked revolving credit facility ('RCF'), maturing
in November 2028 with the option of two additional one year
extensions. This new facility replaces the previous £340.0m RCF
that was due to mature in January 2026. A £45.0m term loan due to
mature in June 2024 was also repaid in full as part of this
refinancing. Uncommitted facilities undrawn at 29 March 2024
amounted to £5.0m (FY23: £5.0m).
Private Placement Notes
The Group's outstanding Private
Placement Notes net of finance fees comprised of £46.6m
(denominated as $41.9m and £13.5m) at 29 March 2024 (FY23: £47.8m,
denominated as $41.9m and £13.5m). These were issued as fixed rate
debt in June 2016 ($55.9m and £18.0m) with maturities ranging
between June 2023 and June 2026. The Group repaid $14.0m and £4.5m
Private Placement Notes in June 2023.
The Group has swapped the $41.9m 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.
Drawn and
undrawn borrowings facilities
The table below sets out the split between
drawn and undrawn borrowings amounts as at 29 March
2024:
|
Maturity dates
|
Net borrowings Mar-23
|
Undrawn committed bank
facilities
|
Total facilities
available
|
|
£m
|
£m
|
£m
|
Cash and cash
equivalents and bank overdrafts
|
-
|
21.0
|
(21.0)
|
-
|
Bank
Borrowings*
|
Jan-26 - Nov-28
|
(175.0)
|
(225.0)
|
(400.0)
|
Private Placement
Notes*
|
Jun-24 - Jun-26
|
(46.7)
|
-
|
(46.7)
|
Total
|
|
(200.7)
|
(246.0)
|
(446.7)
|
*excludes
capitalised finance fees
|
Fair Value of
financial instruments at amortised cost
Except as set out below, it is considered that
the carrying amounts of financial assets and financial liabilities
recognised at amortised cost in the condensed consolidated interim
financial statements approximate their fair values:
|
March
2024
|
September 2023
|
March 2023
|
|
Carrying amount
|
Fair
Value
|
Carrying
amount
|
Fair
Value
|
Carrying
amount
|
Fair
Value
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Bank
borrowings**
|
(172.4)
|
(173.2)
|
(139.0)
|
(138.9)
|
(178.9)
|
(174.2)
|
Private Placement
Notes
|
(46.6)
|
(45.9)
|
(47.8)
|
(45.9)
|
(63.3)
|
(63.1)
|
**excludes bank overdrafts
|
|
|
|
|
|
|
Derivative
financial instruments fair value hierarchy - IFRS 13 (level 2
inputs)***
|
March 2024
|
September
2023
|
March
2023
|
|
Level 2***
|
Level
2***
|
Level
2***
|
|
£m
|
£m
|
£m
|
Non-current
|
|
|
|
Assets carried at fair
value
|
|
|
|
Interest rate swaps -
cash flow hedges
|
-
|
2.5
|
2.7
|
Cross currency
interest rate swaps - cash flow hedges
|
0.2
|
1.2
|
1.5
|
|
0.2
|
3.7
|
4.2
|
Current
|
|
|
|
Assets carried at fair
value
|
|
|
|
Interest rate swaps -
cash flow hedges
|
-
|
0.5
|
1.3
|
Interest rate swaps -
not designated as cash flow hedges
|
1.5
|
-
|
-
|
Cross currency
interest rate swaps - cash flow hedges
|
-
|
0.4
|
0.2
|
Forward foreign
exchange contracts - not designated as hedges
|
-
|
-
|
0.6
|
|
1.5
|
0.9
|
2.1
|
Non-current
|
|
|
|
Liabilities carried at fair
value
|
|
|
|
Interest rate swaps -
cash flow hedges
|
(0.3)
|
-
|
-
|
|
(0.3)
|
-
|
-
|
|
|
|
|
Total
|
1.4
|
4.6
|
6.3
|
*** For
definition of level 2 inputs please refer to the 2023 Annual
Report.
|
12.
Provisions
|
|
|
Half year
March 2024
|
|
|
|
£m
|
At beginning of
financial period
|
|
|
(9.9)
|
Provided in the
financial period
|
|
|
(0.5)
|
Utilised in financial
period
|
|
|
0.7
|
Released in the
financial period
|
|
|
0.5
|
Unwind of discount to
present value in the financial period
|
|
|
-
|
At end of period
|
|
|
(9.2)
|
|
|
|
|
|
|
March
2024
|
September
2023
|
|
|
£m
|
£m
|
Analysed as:
|
|
|
|
Non-current
liabilities
|
|
(6.7)
|
(6.9)
|
Current
liabilities
|
|
(2.5)
|
(3.0)
|
|
|
(9.2)
|
(9.9)
|
13.
Retirement Benefit Obligations
The Group operates defined contribution
pension schemes in all of its main operating locations. The Group
also has legacy defined benefit contribution schemes, which were
closed to future accrual on 31 December 2009.
Legacy
defined benefit pension schemes
The Group operates one legacy
defined benefit pension scheme and one legacy defined benefit
commitment in Ireland (the 'Irish schemes') and one legacy defined
benefit pension scheme and one legacy defined benefit commitment in
the UK (the 'UK schemes'). The Projected Unit Credit actuarial cost
method has been employed in determining the present value of the
defined benefit pension obligation, the related current service
cost and, where applicable, past service cost.
Scheme assets are held in separate
Trustee administered funds. These plans have broadly similar
regulatory frameworks. 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.
The Group's retirement benefit
obligations moved from a net liability of £12.8m at 29 September
2023 to a net liability of £15.2m at 29 March 2024. This movement
was primarily driven by an actuarial loss as a result of a change
in financial assumptions, particularly on the Irish schemes, offset
by contributions paid to the UK schemes.
The UK legacy defined benefit
pension scheme is expected to achieve a fully funded position on a
triennial funding valuation basis by the end of September 2025.
Following discussions with the UK scheme's trustees, it has been
agreed that £9.8m of annual pension contributions from the Group
will cease when the fully funded position is achieved.
The principal actuarial assumptions are as
follows:
|
March
2024
|
September
2023
|
|
UK
|
Ireland
|
UK
|
Ireland
|
Rate of increase in
pension payments *
|
3.00%
|
1.50%
|
3.05%
|
1.50%
|
Discount
rate
|
4.90%
|
3.55%
|
5.60%
|
4.50%
|
Inflation rate
**
|
3.20%
|
2.25%
|
3.30%
|
2.50%
|
* The
pension increase in pension payments applies to the majority of the
liability base, however there are certain categories within the
Group's Irish schemes that have an entitlement to pension
indexation.
** The
assumptions for Retail Price Index ('RPI') and Consumer Price Index
('CPI') are derived from the Harmonised Index of Consumer Prices
('HICP') and relative yields of index-linked and fixed interest
government
|
The financial position of the schemes was as
follows:
|
March
2024
|
September 2023
|
|
UK
Schemes
|
Irish Schemes
|
Total
|
UK
Schemes
|
Irish
Schemes
|
Total
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
Fair value of plan
assets
|
181.5
|
147.5
|
329.0
|
159.4
|
145.4
|
304.8
|
Present value of
scheme liabilities
|
(214.1)
|
(137.0)
|
(351.1)
|
(197.2)
|
(127.7)
|
(324.9)
|
(Deficit)/surplus in
schemes
|
(32.6)
|
10.5
|
(22.1)
|
(37.8)
|
17.7
|
(20.1)
|
Deferred tax
asset/(liability)
|
8.2
|
(1.3)
|
6.9
|
9.5
|
(2.2)
|
7.3
|
Net (liability)/asset at end of the
period
|
(24.4)
|
9.2
|
(15.2)
|
(28.3)
|
15.5
|
(12.8)
|
|
|
|
|
|
|
|
Presented as:
|
|
|
|
|
|
|
Retirement benefit
asset***
|
-
|
11.2
|
11.2
|
-
|
18.4
|
18.4
|
Retirement benefit
obligation
|
(32.6)
|
(0.7)
|
(33.3)
|
(37.8)
|
(0.7)
|
(38.5)
|
*** The
value of a net pension benefit asset is the value of any amount the
Group reasonably expects to recover by way of refund of surplus
from the remaining assets of a plan at the end of the plan's
life.
|
Sensitivity
of pension liability to judgemental assumptions
|
|
Increase/(decrease)
in Scheme
Liabilities
|
Assumption
|
Change in assumption
|
UK
Schemes
|
Irish
Schemes
|
Total
Half Year
2023
|
Discount
rate
|
Decrease by
0.5%
|
15.4
|
6.8
|
22.2
|
Increase by
0.5%
|
(13.8)
|
(6.3)
|
(20.1)
|
Rate of
inflation
|
Decrease by
0.5%
|
12.2
|
2.1
|
14.3
|
Increase by
0.5%
|
(11.3)
|
(1.9)
|
(13.2)
|
Rate of
mortality
|
Members assumed to
live 1 year longer
|
5.4
|
6.0
|
11.4
|
Sensitivity of pension scheme
assets to yield movements
|
|
|
|
|
|
Increase in
Scheme Assets
|
Assumption
|
Change in assumption
|
UK
Schemes
|
Irish
Schemes
|
Total
|
Change in bond
yields
|
Decrease by
0.5%
|
10.9
|
6.6
|
17.5
|
14.
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 treats these
guarantee contracts as contingent liabilities until such time as it
becomes probable that a payment will be required under such
guarantees.
Greencore have two letters of
credit ('LoCs') in place to satisfy our insurers' collateral
requirements for Employers Liability and Motor Self-Insured
Programs for an amount of £4.9m (FY23: £5.5m). The insurers are
responsible for paying out on these claims but recovers quarterly
from Greencore. The LoCs reduce the insurers credit exposure during
the period between the claim payout and subsequent recovery from
Greencore.
15.
Related party transactions
There have been no related party
transactions or changes in the nature and scale of the related
party transactions described in the FY23 Annual Report that could
have a material impact on the financial position or performance of
the Group in the period ended 29 March 2024.
16.
Subsequent Events
Closure of Soup production unit in H2 24:
In April 2024, the Group announced
the consolidation of two soup manufacturing sites with the closure
of the production facility at Kiveton. This is expected to result
in a number roles being made redundant and there will be expected
costs associated with the closure including impairment of plant and
machinery located at the site.
Recommencement of share buyback
The Group has announced on 21 May
2024, additional shareholder distributions totalling £50.0m
anticipated across the next 12 months, commencing with a share
buyback of up to £30.0m. If the business continues to trade as
expected the Board intends to declare a dividend for the year to
September 2024.
17.
Information
Copies of the Interim Financial
Report are available for download from the Group's website at
www.greencore.com.
APPENDIX: 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: Like-for-Like Revenue 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'). The APMs used
provide a fair review of the development and performance of the
business and of the position regarding the financial position, cash
flows and financial performance.
Changes to APMs in the period
The Group has introduced a new APM
for FY24, Like-for-Like Revenue Growth. This is calculated by
adjusting reported revenue for the impact of net business wins and
losses, acquisitions, divestments and other non-recurring items.
The Group considers Like-for-Like Revenue Growth provides greater
understanding of the underlying performance of the Group's revenue.
Therefore, the Group has now removed Pro-Forma Revenue as an APM as
Like-for-Like Revenue Growth APM provides greater clarity on the
revenue performance of the Group, following the disposal of Trilby
Trading Limited in September 2023.
The Group has updated the wording
for the definition of Maintenance and Strategic Capital Expenditure
to provide further clarity on the classification of sustainability
related capital expenditure and automation related capital
expenditure which are planned to be incurred by the Group going
forward. There was no impact on the H1 23 classification of
Maintenance and Strategic Capital Expenditure as a result of the
update to the definitions.
LIKE-FOR-LIKE
REVENUE GROWTH
Like-for-Like Revenue Growth is a new APM used
by the Group to measure the underlying performance of its revenue.
Like-for-Like Revenue Growth is defined by the Group as reported
revenue adjusted for the impact of net business wins and losses,
acquisitions, divestments and other non-recurring items in each
reporting period.
The following table sets forth a reconciliation
of the information used to calculate Like-for-Like Revenue Growth
for the Group:
|
|
|
Half year 2024
|
|
|
|
Convenience Foods
|
|
|
|
%
|
Reported
revenue
|
|
|
(6.4%)
|
Impact of
disposals
|
|
|
4.6%
|
Impact of net
business wins and losses
|
|
|
5.9%
|
Like-for-Like Revenue Growth
(%)
|
|
|
4.1%
|
The table below shows the Like-for-Like Revenue
Growth split by Food to Go categories and Other Convenience
categories:
|
|
Half year
2024
|
|
|
Food to go
categories
|
Other convenience
categories
|
|
|
%
|
%
|
Reported
revenue
|
|
(0.3%)
|
(16.9%)
|
Impact of
disposals
|
|
-
|
12.2%
|
Impact of net
business wins and losses
|
|
4.9%
|
7.8%
|
Like-for-Like Revenue Growth
(%)
|
|
4.6%
|
3.1%
|
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 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 period to
Adjusted Operating Profit, Adjusted EBITDA and Adjusted Operating
Margin:
|
|
|
|
|
Half Year
2024
|
Half year
2023
|
|
|
|
|
|
£m
|
£m
|
Profit/(loss) for the financial
period
|
|
|
|
|
11.5
|
(4.8)
|
Taxation(A)
|
|
|
|
|
3.2
|
(1.4)
|
Net finance
costs(B)
|
|
|
|
|
10.6
|
9.8
|
Group Operating Profit
|
|
|
|
|
25.3
|
3.6
|
Exceptional
items
|
|
|
|
|
1.5
|
6.4
|
Amortisation of
acquisition related intangibles
|
|
|
|
|
1.5
|
1.8
|
Adjusted Operating
Profit
|
|
|
|
|
28.3
|
11.8
|
Depreciation and
amortisation (C)
|
|
|
|
|
27.6
|
28.1
|
Adjusted EBITDA
|
|
|
|
|
55.9
|
39.9
|
Adjusted Operating Margin
(%)
|
|
|
|
|
3.3%
|
1.3%
|
(A) Includes tax credit on exceptional items of £0.2m (H1 23:
£1.6m)
(B) Finance costs less finance income
(C) Excludes amortisation of acquisition related
intangibles
ADJUSTED
PROFIT BEFORE TAX ('PBT')
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 year
2024
|
Half year
2023
|
|
£m
|
£m
|
Profit/(loss) before
taxation
|
14.7
|
(6.2)
|
Exceptional
items
|
1.5
|
6.4
|
Pension finance
items
|
0.6
|
0.6
|
Amortisation of
acquisition-related intangibles
|
1.5
|
1.8
|
FX and fair value
movements(A)
|
(1.4)
|
0.8
|
Adjusted Profit Before
Tax
|
16.9
|
3.4
|
(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
period, excluding Ordinary Shares purchased by Greencore and held
in trust in respect of the Annual Bonus Plan, Performance Share
Plan, Employee Share Incentive Plan and Restricted 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 periods
indicated.
|
Half year
2024
|
Half year
2023
|
|
£m
|
£m
|
Profit/(loss) attributable to equity
holders of the Company
|
11.5
|
(4.8)
|
Exceptional items
(net of tax)
|
1.3
|
4.8
|
FX effect on
inter-company and external balances where hedge accounting is not
applied
|
0.1
|
0.3
|
Movement in fair
value of derivative financial instruments and related debt
adjustments
|
(1.5)
|
0.5
|
Amortisation of
acquisition related intangible assets (net of tax)
|
1.1
|
1.4
|
Pension financing
(net of tax)
|
0.5
|
0.5
|
Adjusted Earnings
|
13.0
|
2.7
|
|
|
|
|
Half year
2024
|
Half year
2023
|
|
'000
|
'000
|
Weighted average number of ordinary
shares in issue during the period
|
468,649
|
505,888
|
|
|
|
|
Pence
|
Pence
|
Adjusted Earnings Per
Share
|
2.8
|
0.5
|
CAPITAL
EXPENDITURE
MAINTENANCE
CAPITAL EXPENDITURE
The Group defines Maintenance
Capital Expenditure as the expenditure required to maintain/
replace existing assets with a high proportion of expired useful
life. This expenditure does not attract new customers or create the
capacity for a bigger business. It enables the Group to keep
operating at current throughput rates but also keep pace with
regulatory and environmental changes as well as complying with new
requirements from existing customers. This includes expenditure on
sustainability related initiatives which replace existing
assets.
STRATEGIC
CAPITAL EXPENDITURE
The Group defines Strategic
Capital Expenditure as the expenditure required to facilitate
growth and generate additional returns for the Group. This is
generally expansionary expenditure 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 or manufacturing competencies including automation
related capital expenditure.
The following table sets forth the
breakdown of the Group's cash outflow for the purchase of property,
plant and equipment and purchase of intangible assets between
Strategic Capital Expenditure and Maintenance Capital
Expenditure:
|
|
|
|
|
Half year 2024
|
Half year
2023
|
|
|
|
|
|
£m
|
£m
|
Purchase of property,
plant and equipment
|
|
|
|
|
12.0
|
12.0
|
Purchase of
intangible assets
|
|
|
|
|
0.6
|
1.0
|
Net cash outflow from capital
expenditure
|
|
|
|
|
12.6
|
13.0
|
|
|
|
|
|
|
|
Strategic Capital
Expenditure
|
|
|
|
|
2.5
|
4.2
|
Maintenance Capital
Expenditure
|
|
|
|
|
10.1
|
8.8
|
Net cash outflow from capital
expenditure
|
|
|
|
|
12.6
|
13.0
|
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 outflow from operating and
investing activities to Free Cash Flow:
|
|
|
|
|
Half year 2024
|
Half year
2023
|
|
|
|
|
|
£m
|
£m
|
Net cash outflow from
operating activities
|
|
|
|
|
(8.0)
|
(7.2)
|
Net cash outflow from
investing activities
|
|
|
|
|
(12.6)
|
(13.0)
|
Net cash outflow from operating and
investing activities
|
|
|
|
|
(20.6)
|
(20.2)
|
Strategic Capital
Expenditure
|
|
|
|
|
2.5
|
4.2
|
Repayment of lease
liabilities
|
|
|
|
|
(8.4)
|
(8.3)
|
Free Cash Flow
|
|
|
|
|
(26.5)
|
(24.3)
|
FREE CASH FLOW
CONVERSION
The Group uses Free Cash Flow
Conversion to measure the Group's ability to convert operating
profits into free cash flow.
The Group calculates Free Cash
Flow Conversion as Free Cash Flow divided by Adjusted EBITDA. This
is calculated on a 12- month basis. The following table sets out
the calculation of Free Cash Flow Conversion:
|
12 months to
March 2024
|
12 months to
March 2023
|
|
£m
|
£m
|
Free Cash Flow
(A)
|
54.6
|
52.2
|
Adjusted EBITDA
(B)
|
148.8
|
123.0
|
Free Cash Flow Conversion (%)
(C)
|
36.7%
|
42.4%
|
(A)
Free Cash Flow inflow for H2 23 and H2 22 was £81.1m and £76.5m
respectively
(B) Adjusted EBITDA for H2
23 and H2 22 was £92.9m and £83.1m respectively
(C) Free Cash Flow
Conversion at 29 September 2023 was 42.8%
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 Group's financing
agreements.
The following table sets out the calculation
of Net Debt and Net Debt excluding lease liabilities:
|
Half year
2024
|
Half year
2023
|
|
£m
|
£m
|
Cash and cash
equivalents and bank overdrafts
|
21.0
|
22.8
|
Bank
borrowings
|
(172.4)
|
(178.9)
|
Private Placement
Notes
|
(46.6)
|
(63.3)
|
Net debt excluding lease
liabilities
|
(198.0)
|
(219.4)
|
Lease
Liabilities
|
(45.9)
|
(49.4)
|
Net Debt
|
(243.9)
|
(268.8)
|
RETURN ON
INVESTED CAPITAL ('ROIC')
The Group uses ROIC as a key measure to
determine returns for the Group and as a key measure to determine
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, the carrying value of derivative
financial instruments not designated as fair value hedges, and
retirement benefit obligations (net of deferred tax assets).
Average invested capital is calculated by adding the invested
capital from the opening and closing Statement of Financial
Position and dividing by two.
The Group calculates ROIC as Net Adjusted
Operating Profit After Tax ('NOPAT') divided by average invested
capital. NOPAT is calculated as Adjusted Operating Profit plus
share of profit of associates before tax, less tax at the effective
rate in the Group Income Statement which is adjusted for the change
in fair value of derivative financial instruments and related debt
instruments and exceptional items included in the half year
period.
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 periods ending 29
March 2024 and 31 March 2023.
|
12 months to
March 2024
|
12 months to
March 2023
|
|
£m
|
£m
|
Adjusted Operating
Profit
|
92.8
|
66.8
|
Taxation at the
effective tax rate(A)
|
(20.3)
|
(13.0)
|
Group NOPAT
|
72.5
|
53.8
|
|
Half year
2024
£m
|
Half year
2023
£m
|
Invested Capital
|
|
|
Total
assets
|
1,269.5
|
1,307.5
|
Total
liabilities
|
(821.0)
|
(871.7)
|
Net Debt
|
243.9
|
268.8
|
Derivative financial
instruments not designated as fair value hedges
|
(1.4)
|
(6.3)
|
Retirement benefit
obligation (net of deferred tax asset)
|
15.2
|
15.0
|
Invested Capital for the Group
(B)
|
706.2
|
713.3
|
|
|
|
Average Invested Capital for ROIC
calculation for the Group
|
709.8
|
717.4
|
|
|
|
ROIC (%) for the Group
(C)
|
10.2%
|
7.5%
|
(A)
The effective tax rates for the financial period ended 29 March
2024 and 29 September 2023, were 24% and 21%
respectively
(B) The invested capital for the Group in March 2022 was
£721.4m
(C) ROIC at 29 September 2023 was 8.9%
APPENDIX: PRINCIPAL RISKS AND UNCERTAINTIES
The Group's Enterprise Risk
Management (ERM) framework is continuing to embed across the
business, with a comprehensive risk strategy, process, and
governance structure enhancing the Group's risk culture, delivering
value-add insights, and enabling risk-informed
decision-making.
The Group's risks and
uncertainties continue to be dynamic, reflecting both the changing
internal context as the Group makes progress in rebuilding
profitability, and the nature of the external environment which
remains uncertain and volatile. The Group monitors such factors
closely and is confident that robust and agile commercial and
operational arrangements enable effective response. As the Group
moves from stabilising the business to rebuilding, additional
commercial and strategic risks are being tracked and managed.
Principal risks and uncertainties faced by the Group are reported
annually within the Annual Report and Financial Statements and are
summarised below.
Strategic
Strategic Change: The Group
has a refreshed multi-year strategy and are executing plans to
rebuild profitability (Horizon 2), and secure long-term growth
(Horizon 3). Failing to suitably deliver an ambitious strategic
change agenda may reduce long-term Group performance.
Sustainability: The Group's
'Better Future Plan' provides a roadmap for making a meaningful
contribution to a sustainable, more equitable food system. This
plan is a fundamental enabler of the Group's broader strategy
framework and is important to stakeholders. Successful delivery of
these commitments requires ongoing significant investment in
resources and the prioritisation of these ambitions. Failing to
deliver could impact the future success of the Group and cause
reputational damage.
Organisational Resilience: The external environment is increasingly volatile and
uncertain, and like all large, complex businesses, the Group is
exposed to a range of potentially disruptive influences, from
geopolitics to climate change and rapid advancements in technology.
A failure to effectively build resilience into Group strategy and
operations may result in it being less equipped to survive,
innovate and thrive, in the face of future risk.
People
High reliance on labour: The
Group is reliant on high volumes of labour in its production
processes. An uncertain political, economic and social external
context, and the fast-paced and dynamic labour needs of the Group,
could increase the costs of this labour in unsustainable ways and
impact labour relations. This could have operational, commercial,
and financial impacts across the Group.
Health and Safety: The nature
of the Group's operations exposes our colleagues to inherent risks,
with the workforce encountering potential hazards on a daily basis.
Ensuring the health and safety of our colleagues is of paramount
importance at Greencore, but without effective management, these
risks could result in accidents leading to harm to individuals as
well as reputational and potential financial damage.
Commercial
Competitor activity: The
Group operates in highly competitive markets. Failure to identify
and respond to significant product innovations, technical advances
and/or the intensification of competition in our markets and those
of our customers, could adversely affect the Group's
results.
Key Customer Relationships:
Although the Group maintains a diverse customer portfolio, any
failure in price competitiveness, customer service levels, or
product quality, could result in deterioration in key
relationships, the possible loss of key customers and significant
volumes, which could adversely affect the Group's financial
performance.
Commercial Growth: The Group
has an ambition to significantly strengthen its growth trajectory
in the coming years. Our core categories may not recover to
historic levels of growth, whilst our leading position in
convenience food may limit the potential for significant growth
through share gain. As such, the Group recognises the need to
evolve our portfolio over time to include higher growth markets. A
failure to innovate, diversify, or pursue suitable growth
opportunities may impede the Group's financial performance and
ability to achieve its growth ambitions.
Supply Chain Disruption: The
Group has established a broad supply chain and maintains strong
supplier relationships. Nonetheless, external factors ranging from
crop failures, extreme weather, natural disasters, and geopolitical
conflict may disrupt supply of some raw materials, resulting in the
potential for significant shortages or increased costs, affecting
the ability to satisfy customer demand and affective the Group's
financial performance.
Operational
IT Systems: The Group relies
heavily on information technology to support the business, which
requires continuous investment and innovation. Failure to
successfully modernise and standardise the IT estate may lead to
inefficient operations, ineffective decision making, and an
inability to build and maintain competitive advantage, impacting
Group performance.
Cyber Security: The cyber
threat landscape is complex and constantly evolving. In common with
all large organisations, the Group is exposed to the risk of a
cyber-attack that could threaten the availability and integrity of
its systems, and the confidentiality of data. Such attacks could
cause significant business disruption and cause financial and
reputational damage to the Group.
Environmental Impact: The
Group has significant manufacturing operations and an obligation to
minimise the impact of these activities on the environment. Failure
to sufficiently monitor and manage operational activities to
minimise the environmental impacts could lead to business
disruption and cause financial and reputational damage to the
Group.
Operational Excellence: Operational Excellence underpins
the Group's strategy and future success. Failing to continue
delivering this across all operational and supporting activities
could impede delivery of the Group's strategic ambitions and impact
future performance.
Product Contamination: The
Group produces a significant volume of food annually and there are
risks of product contamination at a Greencore manufacturing
facility or one of our approved suppliers, through either
accidental or deliberate means. This may lead to potential harm to
consumers and result in significant financial, reputational, and /
or legal impacts on the Group. In addition, product recalls and
withdrawals would require significant resource
investment.
Legal and Compliance
Regulatory Compliance: The
Group's activities are subject to a complex and constantly evolving
regulatory landscape, particularly in the areas of food safety and
environmental protection. Failure to comply with such regulations
and to enforce an effective internal control environment, may lead
to serious operational, financial, reputational and/or legal
risk.