REG - Greencore Group PLC - H1 FY24 Interim Results Statement
21/05/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240521:nRSU1840Pa&default-theme=true
RNS Number : 1840P Greencore Group PLC 21 May 2024
http://www.rns-pdf.londonstockexchange.com/rns/1840P_1-2024-5-20.pdf
(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 expectations(1)
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 HIGHLIGHTS(2,3, 4)
· Volume growth ahead of the wider market(3) 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") basis(4), 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 expectations(1)
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 expectations(1)."
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 (http://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/
(http://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
(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
1(st) 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 (http://www.greencore.com) or follow Greencore on social
media.
OPERATING REVIEW(2)
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 performance(3). 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 H1 23 Change Change
£m £m (As reported) (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 market(3), 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 market(3). 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 H1 23 Change (as reported)
£m £m
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 REVIEW(1)
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 Total Pre- exceptional Exceptional Total
(Note 4)
(Note 4)
£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 Half year ended
29 March 2024 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 0.8 (16.3)
shareholders
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
As at 29 March 2024
March September
2024 2023
(Unaudited) (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 Half year ended
29 March 2024 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 9.2 4.7
and tax
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 10 32.8 46.7
period
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 Share premium Other reserves Retained earnings Total
capital 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 - - 0.2 (0.2) -
Employee Benefit Trust
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 Share premium Other reserves Retained earnings Total
capital 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 - - 1.6 (1.6) -
Employee Benefit Trust
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 Own Undenominated capital reserve Hedging reserve Foreign currency translation reserve Total
payment Share reserve
reserve
£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 - 0.2 - - - 0.2
Employee Benefit Trust
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 Own Undenominated capital reserve Hedging reserve Foreign currency translation reserve Total
payment Share reserve
reserve
£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 - 1.6 - - - 1.6
Employee Benefit Trust
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 Half year
2024 2023
£m £m
Revenue 866.1 925.8
Group operating profit before exceptional items and amortisation of 28.3 11.8
acquisition related intangible assets
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 Half year
2024
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 (11.2) (8.2)
other financing costs
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 1.5 (0.5)
adjustments
Foreign exchange on inter-company and external balances where hedge accounting (0.1) (0.3)
is not applied
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 Half year
2024
2023
£m £m
Profit/(loss) attributable to equity holders of the Company 11.5 (4.8)
Denominator for earnings per share calculations
Half year Half year
2024
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 Half year
2024
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 September 2023 March
2024
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 September 2023 March
2024
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 September 2023 March
2024
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 Carrying amount Fair Carrying amount Fair
Value Value 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 September
2024 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 September
2024
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 Irish Schemes Total UK Irish Schemes Total
Schemes
Schemes
£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 Irish Total
Schemes Schemes 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 Irish Total
Schemes Schemes
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 Other convenience
categories
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 2023
Half Year
2024
£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
2023
Half year
2024
£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
2023
Half year
2024
£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 0.1 0.3
applied
Movement in fair value of derivative financial instruments and related debt (1.5) 0.5
adjustments
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 Half year
2024
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 2023
Half year 2024
£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 12 months to
March 2024
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
2023
Half year
2024
£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 12 months to
March 2024
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 Half year
2024
2023
£m
£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.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR QKKBQFBKDAPBRecent news on Greencore
See all newsREG - Barclays PLC Greencore Group PLC - Form 8.3 GREENCORE GROUP PLC
AnnouncementREG - BlackRock Group Greencore Group PLC - Form 8.3 - Greencore Group plc
AnnouncementREG-Qube Research & Technologies LTD Form 8.3 - Greencore Group PLC
AnnouncementREG - State Street Global Bakkavor Group PLC Greencore Group PLC - Form 8.3 - Greencore Group PLC
AnnouncementREG - BNP Paribas London Greencore Group PLC - Form 8.3 - Greencore Group plc
Announcement