TIDMGNC
RNS Number : 5191M
Greencore Group PLC
24 May 2022
INTERIM FINANCIAL REPORT
For the half year ended 25 March 2022
24 May 2022
Significant improvement in year on year profitability; full year
guidance unchanged; intention to recommence value return of up to
GBP50m over next two years
Greencore Group plc ('Greencore' or the 'Group'), a leading
manufacturer of convenience food in the UK, today issues its
results for the 26 weeks ended 25 March 2022.
PERFORMANCE (1)
-- Group Revenue up 33.6% to GBP770.8m, driven by strong growth
in food to go and other convenience categories
-- Pro forma revenue in food to go categories increased by 48.0%
year on year and was approximately 8% above equivalent pre-COVID
levels in H1 19
-- Adjusted Operating Profit of GBP17.2m (H1 21: GBP0.2m), with
Adjusted Operating Margin of 2.2% (H1 21: 0.0%)
-- Adjusted EPS of 1.8p (H1 21: Adjusted Loss of 1.4p)
-- Net Debt (excluding lease liabilities) of GBP219.3m at 25
March 2022, with 12-month free cashflow conversion of 71%. Net
Debt: EBITDA of 2.1x as measured under financing agreements, in
line with end FY21 levels, with substantial undrawn headroom on
debt facilities
-- Group ROIC of 6.3%, compared to 4.5% at the end of FY21 and (0.6)% at H1 21
-- Intention to recommence value return of up to GBP50m over the
next two years, initially in the form of a share buyback programme
and consistent with the Group's capital management policy
STRATEGIC DEVELOPMENTS (1)
-- Continued to onboard new business wins effectively in H1 22,
expanding its product ranges and channel reach, with revenue from
these wins representing just over one-third of the Group's pro
forma revenue growth in the period
-- Strategic capital investment programme of approximately
GBP30m to support the delivery of previously announced business
wins has proceeded to plan and is expected to complete in Q4 22
-- Better Greencore, the Group's profit improvement programme, was launched in H1
-- Its first phase is targeted to deliver annual recurring
benefits of approximately GBP30m in FY24
-- The Group will invest a total of approximately GBP24m during
FY22 and FY23 to unlock these improvements, some GBP8m of which was
incurred as an exceptional cost in H1 22
-- Further phases of the Better Greencore programme are being
developed that will deliver additional benefits to the Group
-- Continued progress on sustainability agenda in H1, with an
ongoing focus on developing the necessary data and systems
framework to measure performance effectively. The Group also
introduced a new share ownership scheme for all colleagues
-- On 13 May 2022 the Group announced the appointment of Dalton
Philips as Chief Executive Officer and Executive Director. He will
join the Group and the Board on 26 September 2022
OUTLOOK (1,2)
-- The Group is encouraged by the momentum in revenue and profit
conversion in the first seven weeks of H2, in what continues to be
a challenging environment and as the Group enters its period of
peak seasonal trading
-- The Group has now substantially recovered the significant
input cost and other inflation incurred during Q1 and early Q2
through explicit price recovery mechanisms, constructive dialogue
with customers, and operational efficiencies. The Group is fully
committed to recovery of the additional inflationary challenges
that have materialised since March 2022, and is progressing well in
this regard. Profit conversion is also underpinned by its Better
Greencore programme
-- Though the inflationary environment remains volatile, the
Group expects to generate an FY22 outturn in line with current
market expectations
SUMMARY FINANCIAL PERFORMANCE (1)
H1 22 H1 21 Change
GBPm GBPm
Group Revenue 770.8 577.1 +33.6%
Pro Forma Revenue Growth +34.9%
Adjusted EBITDA 43.8 26.5 +65.3%
Group Operating Profit 7.2 3.9 +84.6%
Adjusted Operating Profit 17.2 0.2 +GBP17.0m
Adjusted Operating Margin 2.2% 0.0% +220bps
Group Profit/(Loss) Before
Tax 1.0 (1.8)
Adjusted Profit/(Loss) Before
Tax 11.7 (7.9)
Basic EPS (pence) 0.2 0.0
Group Exceptional Items (after
tax) (6.5) 9.9
Adjusted EPS (pence) 1.8 (1.4) +3.2p
Interim dividend per share -
(pence) -
Free Cash Flow (17.8) (23.6) GBP5.8m
Net Debt 272.3 332.1 GBP59.8m
Net Debt (excluding lease liabilities) 219.3 271.3 GBP52.0m
Net Debt:EBITDA as per financing
agreements 2.1x 7.2x
Return on Invested Capital
("ROIC") 6.3% (0.6)%
Commenting on the results, Gary Kennedy, Executive Chair,
said:
"We are very pleased to have delivered H1 revenues that are back
above pre-Covid levels, which is a great achievement against a
backdrop of mobility restrictions, supply challenges and emerging
inflation. There has been encouraging momentum in revenue and
profit conversion in the first seven weeks of H2, and we are
confident in our ability to navigate our way through the current
well-publicised macro challenges as we enter our peak seasonal
trading period. Our strong market positions, close customer
relationships and intense focus on efficiencies mean that we look
to the future with optimism, and we expect to deliver a full year
out-turn in line with market expectations."
____________________________________________________________________________________________________
(1) The Group uses Alternative Performance Measures ('APMs')
which are non-IFRS measures to monitor the performance of its
operations and of the Group as a whole. These APMs along with their
definitions are provided in the Appendix to the Interim Financial
Report.
(2) Consensus FY22 market expectations of mean Adjusted
Operating Profit of GBP77.7m, mean Adjusted EPS of 9.5p, and mean
Net Debt (excluding lease liabilities) of GBP204.2m, as compiled by
Greencore from available analyst estimates on 18 May 2022 and as
reported in the Investor Relations section of the Group
website.
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. Investors should read 'Principal
Risks and Uncertainties' as set out in the Appendix to the Interim
Financial Report and also the discussion of risk in the Group's
Annual Report and Financial Statements for the year ended 24
September 2021 issued on 30 November 2021. 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. None of the Company or any of its
associates or Directors, officers or advisers provides any
representation, assurance or guarantee that the occurrence of the
events expressed or implied in any forward-looking statements in
this document will actually occur. 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.
Conference Call
A webcast presentation of the results for analysts and
institutional investors will take place at 8.00am on 24 May 2022.
The presentation slides will be available on the Investor Relations
section on www.greencore.com from 7.00am on 24 May 2022.
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/
For further information, please contact:
Gary Kennedy Executive Chair Tel: +353 (0)
1 486 3313
Emma Hynes Chief Financial Officer Tel: +353 (0)
1 486 3307
Jack Gorman Head of Investor Tel: +353 (0)
Relations 1 486 3308
Rob Greening/ Nick Hayns/ Powerscourt Tel: +44 (0) 20
Sam Austrums 7250 1446
Billy Murphy/ Claire Rowley/ Drury Communications Tel: +353 (0)
Cian Doherty 1 260 5000
About Greencore
We are a leading manufacturer of convenience food in the UK and
our purpose is to make every day taste better. 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.
In FY21 we manufactured 645m sandwiches and other food to go
products, 117m chilled prepared meals, and 256m bottles of cooking
sauces, pickles and condiments. We carry out more than 10,500
direct to store deliveries each day. We have 21 world-class
manufacturing units across 16 locations in the UK, with
industry-leading technology and supply chain capabilities. We
generated revenues of GBP1.3bn in FY21 and employ approximately
13,000 people. We are headquartered in Dublin, Ireland.
For further information go to greencore.com or follow Greencore
on social media.
OPERATING REVIEW (1)
Strategic developments
The Group progressed well against its strategic objectives in H1
22, underpinned by close customer engagement in what remained a
very challenging trading environment for the food industry. The
Group improved output and service levels across all operational
areas during the period.
The onboarding of new business wins, across food to go and other
convenience categories and customers, progressed to plan. This is
supporting the diversification of the Group's product and channel
footprint. Revenue from these wins represented just over one-third
of the Group's pro forma revenue growth in the period.
As previously announced the Group is investing approximately
GBP30m, across three existing Greencore manufacturing sites, to
support the delivery of previously announced new business over the
course of FY22. This investment programme is on track and is
expected to complete in Q4 22.
The return to pre-COVID manufacturing volume levels has enabled
the Group to revitalise its Excellence cost efficiency programmes.
These programmes are executed across the business, most notably in
its manufacturing, purchasing, engineering and commercial
functions. They form a critical element of the Group's planned
recovery in profit conversion in H2 22 and future years. The Group
also advanced its automation initiatives in the period with further
progress anticipated in H2 22.
In H1 22 the Group launched its Better Greencore programme, that
will augment the revitalisation of its Excellence cost efficiency
initiatives. There are three areas of focus across multiple
workstreams - organisation model and overheads, output optimisation
and technology enabled efficiencies. The first phase of the
programme will deliver an annual recurring benefit of approximately
GBP30m in FY24. The Group will invest a total of approximately
GBP24m during FY22 and FY23, including capital spend of
approximately GBP8m, to unlock these improvements. An exceptional
cost of GBP8.0m was incurred in H1 22 in this regard.
Further phases of the Better Greencore programme are being
developed and further detail will be provided as these are
launched, with the expectation that these phases will deliver
additional benefits to the Group.
Trading Performance
H1 22 H1 21 Change Change
GBPm GBPm (As reported) (Pro Forma
basis)
Revenue 770.8 577.1 33.6% +34.9%
------ ------ --------------- ------------
Group Operating Profit 7.2 3.9 +84.6%
------ ------ --------------- ------------
Adjusted Operating
Profit 17.2 0.2 +GBP17.0m
------ ------ --------------- ------------
Adjusted Operating
Margin % 2.2% 0.0% +220bps
------ ------ --------------- ------------
Pro Forma Revenue Growth
(versus FY21)
Q1 22 Q2 22 H1 22
--------- -------- --------
Group +26% +45% +35%
--------- -------- --------
Food to go categories +35% +65% +48%
--------- -------- --------
Other convenience
food categories +13% +19% +16%
--------- -------- --------
Pro Forma Revenue Growth
(versus FY19)
Q1 22 Q2 22 H1 22
--------- -------- --------
Group +8% +12% +10%
--------- -------- --------
Food to go categories +6% +10% +8%
--------- -------- --------
Other convenience
food categories +10% +17% +14%
--------- -------- --------
Reported Group revenue increased by 33.6% to GBP770.8m in H1 22.
On a pro forma basis, revenue increased by 34.9%, after adjusting
for the disposal of the molasses businesses in Q1 21 and for
movements in foreign exchange. On a pro forma basis, Group revenue
was approximately 10% above the equivalent pre-COVID levels in H1
19.
Adjusted Operating Profit rose from GBP0.2m to GBP17.2m and
Adjusted Operating Margin advanced by 220bps to 2.2%. Group Profit
Before Tax was GBP1.0m in H1 22, compared to a Loss Before Tax of
GBP1.8m in H1 21.
The UK trading environment, especially in food to go categories,
continued to recover in H1 22 notwithstanding some demand
volatility caused by mobility restrictions associated with the
emergence of the Omicron COVID-19 variant during December 2021 and
January 2022.
In addition to the underlying market recovery, the Group
benefitted from its strong market position in the grocery retail
channel, its expanded customer and format mix, and its portfolio
across food to go and other convenience categories. New business
contributed meaningfully to Group revenue performance, representing
just over one-third of pro forma growth in the period.
The Group managed a very active commercial agenda with customers
in H1 22 to drive recovery in its core food to go categories. It
worked closely with customers to optimise output through a
combination of careful range management and selective new product
development activity. In H1 22 the Group launched over 600 new or
reformulated products with our customers, within the Group's total
Stock Keeping Unit (SKU) range of approximately 2,000 products.
Examples of launches with key customers this year include fresh
meals in food to go categories, fresh noodle pots, new plant based
ready meals, and an extended range of 'dine-at-home' meal
boxes.
In H1 22, the Group also expanded its product offering and
extended its category reach with existing customers, in the salads
and fresh meals categories. Towards the end of the period, the
Group worked closely with one of its key food to go customers to
extend its offering into the store network of a leading UK coffee
shop retailer. The Group is encouraged by the early progress in
this initiative.
H1 22 revenue in the Group's food to go categories (comprising
sandwiches, salads, sushi and chilled snacking) totalled GBP502.1m
and accounted for approximately 65% of reported revenue. Reported
and pro forma revenues increased by 48.0% in these categories,
driven by a recovery in underlying demand as the year progressed
and by strong execution on new business wins. Revenue for the
distribution of third party products accounted for approximately 8%
of Group revenue in H1 22 (H1 21: 8%).
On a pro forma basis, revenue in food to go categories was
approximately 8% above the equivalent pre-COVID levels in H1 19.
Pro forma revenue growth accelerated during the period. In Q2 22,
pro forma revenue in food to go categories increased by
approximately 65% year on year and was approximately 10% above the
equivalent pre-COVID levels in Q2 19.
The Group's other convenience categories comprise activities in
the chilled ready meals, chilled soups and sauces, chilled quiche,
ambient sauces and pickles, and frozen Yorkshire Pudding
categories, as well as an Irish ingredient trading business.
Reported revenue across these businesses increased by 12.9% to
GBP268.7m in H1 22. Adjusting for movements in foreign exchange and
the disposal of the Irish molasses businesses in Q1 21, pro forma
revenue increased by 15.8%. This was driven by strong growth in the
Group's ready meals business through the period, and increased
revenue in the Group's Irish ingredients trading business. H1 22
revenue in the Group's cooking sauce business decreased modestly
against tough prior year comparatives.
Operationally, the Group has worked with its customers and
supply partners to manage effectively through a period of intensive
supply-side challenges across the industry, in particular tight
labour availability. Whilst the Group's ability to meet demand and
the pace of profit conversion were both impacted during the period
by the emergence of the Omicron COVID-19 variant, the Group worked
to tighten and manage its network use and configuration to maximise
output, with operational service levels improving across the
business as H1 22 progressed.
There was a substantial increase in inflation in the Group's
main cost components in H1 22, which led to a high single-digit
rate of inflation for the period.
In H1 22 the Group received no UK Government assistance under
the Coronavirus Job Retention Scheme (H1 21: GBP7.1m). In the prior
year the Group incurred GBP4.8m of operating costs relating to
COVID-19. In H1 22 the Group recognised net costs of GBP2.6m
incurred as a result of a cyber security incident that occurred in
December 2021. The Group responded rapidly and proactively to
restore IT systems and applications used by the business in this
incident and the relevant authorities have been notified in this
regard.
Overall, Group Operating Profit in H1 22 increased to GBP7.2m
(H1 21: GBP3.9m). Adjusted Operating Profit increased to GBP17.2m
(H1 21: GBP0.2m). The increase in Adjusted Operating Profit was
driven by a return to profitability in the Group's food to go
categories as profit conversion improved on an increased revenue
base. Underlying profitability in the Group's other convenience
categories was below H1 21 levels, impacted by the timing of
inflation recovery.
Group Cash Flow and Returns
H1 22 H1 21 Change
GBPm GBPm (as reported)
Free Cash Flow (17.8) (23.6) GBP5.8m
------- ------- ---------------
Net Debt 272.3 332.1 GBP59.8m
------- ------- ---------------
Net Debt (excluding lease
liabilities) 219.3 271.3 GBP52.0m
------- ------- ---------------
Net Debt:EBITDA as per financing
agreements 2.1x 7.2x
------- ------- ---------------
ROIC 6.3% (0.6)%
------- ------- ---------------
The Group continued to manage cashflows and leverage carefully
in H1 22 in the context of recovering profitability, seasonal
working capital outflows, and its capital investment programme to
support future growth in the business.
Free Cash Flow was an outflow of GBP17.8m in H1 22 compared to
an outflow of GBP23.6m in H1 21, the reduction primarily reflecting
improved profitability, partly offset by seasonally higher working
capital outflows. Several other factors also contributed to the net
cash outflow in H1 22, principally higher strategic capex. Free
cash flow conversion was 71.2% compared with (117.2)% in the 12
months to H1 21.
The Group's Net Debt at 25 March 2022 was GBP272.3m, a decrease
of GBP59.8m compared to 26 March 2021. Net Debt excluding lease
liabilities decreased to GBP219.3m from GBP271.3m at the end of H1
21. Net Debt excluding lease liabilities increased from GBP183.1m
at the end of FY21 due to seasonal working capital outflows. The
Group's Net Debt:EBITDA leverage as measured under financing
agreements was 2.1x at period end, compared to 7.2x at the end of
March 2021.
In November 2021, the Group further strengthened its balance
sheet when it extended the maturity on its GBP340m revolving credit
facility by one year to January 2026. As at 25 March 2022, the
Group had total committed debt facilities of GBP570.4m and a
weighted average maturity of 3.1 years. At 25 March 2022 the Group
had cash and undrawn committed bank facilities of GBP349.5m.
ROIC increased to 6.3% for the 12 months ended 25 March 2022,
compared to (0.6)% for the 12 months ended 26 March 2021 and 4.5%
for the 12 months ended 24 September 2021. The year on year
increase was driven primarily by increased profitability in the
period. Average invested capital decreased modestly year on year
from GBP758.6m to GBP743.5m.
Better Future Plan
Greencore's sustainability strategy, the 'Better Future Plan',
was launched in November 2021 and is built around three pillars and
aspirations:
-- Sourcing with Integrity: By 2030 we will source our priority
ingredients from a sustainable and fair supply chain
-- Making with Care: By 2040 we will operate with net zero emissions
-- Feeding with Pride: By 2030 we will have increased our
positive impact on society through our products
At the start of FY22 the Group set out several new commitments
and action points under its Better Future Plan. In FY22, the Group
will transparently share data on the health and sustainability
profile of its products with its stakeholders and will also ensure
all the Group's food surplus goes to feed those in need. By 2030
the Group also commits to reduce the average meat content across
the Group's product portfolio by 30%, in line with the
recommendations of the UK Government's National Food Strategy.
The Group advanced this sustainability agenda in H1 22, with an
ongoing focus on building the necessary data and systems framework
to measure performance effectively. The Group is building a
substantial body of data on the nutritional profile of its
portfolio and is working with a number of customers to develop
trials in product eco-footprinting. The Group's energy management
strategy is being enhanced at factory level, and work has commenced
on conducting climate change scenario analysis that will be used as
part of the Group's disclosures on the Taskforce on Climate-related
Financial Disclosures (TCFD) this year. In January 2022 the Group
also introduced a new share ownership scheme for all
colleagues.
Challenges in the Group's operating environment, including
supply chain disruption and labour availability, have continued to
have an impact on key performance measures and the Group is
mitigating these impacts through ongoing efficiency improvements
and other measures.
FINANCIAL REVIEW (1)
Revenue and Operating Profit
Reported revenue in the period was GBP 770.8 m, an increase of
33.6% compared to H1 21, primarily reflecting the recovery in
demand in food to go categories and the impact of new business
wins. Pro Forma Revenue increased by 34.9%.
Group Operating Profit increased from GBP3.9m to GBP7.2m as a
result of an improved revenue outturn in H1 22 and notwithstanding
the movement from a net exceptional gain to a net exceptional
charge in H1 22. Adjusted Operating Profit of GBP17.2m compared to
GBP0.2m in H1 21, driven by an improvement in profits in food to go
categories partly offset by a lower underlying performance in the
Group's other convenience categories. Adjusted Operating Margin was
2.2 %, 220 basis points higher than H1 21.
Net finance costs
The Group's net bank interest payable was GBP 4.9 m in H1 22, a
decrease of GBP2.5m versus H1 21. The decrease was driven by lower
debt levels during H1 22. The Group also recognised a GBP0.6m
interest charge relating to the interest payable on lease
liabilities in the period (H1 21: GBP0.7m).
The Group's non-cash finance charge in H1 22 was GBP0.7m (H1 21:
GBP1.6m). The change in the fair value of derivatives and related
debt adjustments including foreign exchange in the period was a
GBP0.1m charge (H1 21: GBP0.7m charge) and the non-cash pension
financing charge of GBP0.6m was GBP 0.3 m lower than the H1 21
charge of GBP0.9m.
Profit before taxation
The Group's Profit before taxation increased from a loss of
GBP1.8m in H1 21 to a profit of GBP1.0m in H1 22, driven by higher
Group Operating Profit and lower finance costs. Adjusted Profit
Before Tax in the period was GBP11.7m compared to an Adjusted Loss
Before Tax of GBP7.9m in H1 21, primarily driven by an improvement
in Adjusted Operating Profit.
Taxation
The Group's effective tax rate in H1 22 (adjusting
pre-exceptional profit for the change in fair value of derivatives)
was 19 % (H1 21: 18%). In March 2021, the UK Government announced
an increase in the UK rate of corporation tax from 19% to 25%, to
be effective from 1 April 2023.
Exceptional items
The Group had a pre--tax exceptional charge of GBP8.0m in H1 22,
and an after-tax charge of GBP6.5m, comprised as follows:
Exceptional Items GBPm
Reorganisation costs (8.0)
------
Exceptional items (before tax) (8.0)
------
Tax on exceptional items 1.5
------
Exceptional items (after tax) (6.5)
------
In H1 22 the Group commenced a Better Greencore programme to
support the revitalisation of its Excellence cost efficiency
programmes and to unlock further cost efficiencies by reducing
organisational complexity. The Group recognised a charge of GBP8.0m
in respect of work carried out in the period.
Earnings per share
The Group's basic earnings per share for H1 22 was 0.2 pence
compared to 0.0 pence in H1 21. This was driven by a GBP0.7m
increase in profit attributable to equity holders in H1 22,
partially offset by an increase in the weighted average number of
shares in issue in H1 22 to 524.8m (H1 21: 498.0m).
Adjusted Earnings were GBP9.4m in the period, GBP16.2m ahead of
prior year levels largely due to an increase in Adjusted Operating
Profit. Adjusted earnings per share of 1.8 pence compared to an
adjusted loss per share of 1.4 pence in H1 21.
Cash Flow and Net Debt
Adjusted EBITDA was GBP17.3m higher in H1 22 at GBP43.8m. The
Group incurred a seasonal net working capital outflow of GBP34.8m.
Maintenance capital expenditure of GBP6.0m was incurred in the
period (H1 21: GBP7.9m). The cash outflow in respect of exceptional
charges was GBP0.3m (H1 21: GBP2.4m), all of which related to prior
year exceptional charges.
Interest paid in the period was GBP9.6m (H1 21: GBP9.2m),
including interest of GBP0.6m on lease liabilities, an increase on
FY21 primarily reflecting the impact of higher debt costs
associated with higher leverage during the year. The Group
recognised a cash tax credit of GBP1.9m reflecting a refund
received in the period. The cash tax rate for the Group is expected
to rise towards the Group's effective rate in the medium term as a
result of increased profitability and a reduction in the degree to
which UK losses may be utilised in any one year. Cash repayments on
lease liabilities increased to GBP8.7m (H1 21: GBP7.9m). The
Group's cash funding for defined benefit pension schemes was
GBP5.8m (H1 21: GBP3.0m), reflecting the restoration of cash
contributions after an agreement with Trustees to defer cash
contributions for a period in FY21.
These movements resulted in a free cash outflow of GBP17.8m
compared to an outflow of GBP23.6m in H1 21, the improvement driven
primarily by higher profitability.
In H1 22, the Group incurred strategic capital expenditure of
GBP12.6m (H1 21: GBP8.6m).
The Group did not make any equity dividend cash payments in
either period. The Group made net share purchases of GBP3.0m as
part of the new employee share ownership scheme introduced in the
period. This compared to net equity proceeds of GBP87.1m in H1 21
when the Group completed an equity placing. In December 2020, the
Group also completed the sale of its interests in its molasses
trading businesses for a final cash consideration of GBP16.3m.
The Group's Net Debt excluding lease liabilities at 25 March
2022 was GBP219.3m, a decrease of GBP52.0m compared to the end of
H1 21 but an increase of GBP36.2m since the end of FY21. This
increase on FY21 levels was driven primarily by the seasonal free
cash outflows as described previously and higher strategic capex
spending.
Financing
In November 2021 the Group further strengthened its balance
sheet when it extended the maturity on its GBP340m revolving credit
facility by one year to January 2026. As at 25 March 2022, the
Group had total committed debt facilities of GBP570.4m and a
weighted average maturity of 3.1 years. These facilities
comprised:
-- A GBP340m revolving credit bank facility with a maturity date of January 2026
-- A GBP75m revolving credit bank facility with a maturity date of March 2023
-- A GBP50m bilateral bank facility with a maturity date of January 2024
-- A GBP45m bank term loan facility with a maturity date of June 2024
-- GBP18m and $55.9m of outstanding Private Placement Notes with
maturities ranging between June 2023 and June 2026
At 25 March 2022 the Group had cash and undrawn committed bank
facilities of GBP349.5m.
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 25
March 2022 was GBP18.2m, GBP27.8m lower than the position at 24
September 2021. The net pension deficit after related deferred tax
was GBP8.7m (FY21: GBP29.3m), comprising a net deficit on UK
schemes of GBP43.3m (H1 21: GBP65.3m) and a net surplus on Irish
schemes of GBP34.6m (H1 21: GBP36.0m). The decrease in the Group's
net pension deficit was driven principally by an actuarial gain on
UK scheme liabilities arising from an increase in the discount
rates used to value these liabilities. The movement in the discount
rate is driven by the corporate bond rate.
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. During H2 21 the Group concluded the latest
assessment of the valuation and funding plan for its principal UK
legacy defined benefit pension scheme. The Group expects the annual
cash funding requirement for all schemes to be modestly below
previously guided levels of GBP15m.
Dividends
The Group did not pay dividends to shareholders in the period
(H1 21: GBP0.0m).
The Group intends to recommence value return to shareholders of
up to GBP50m over the next two years, initially in the form of a
share buyback programme and consistent with the Group's capital
management policy.
Principal risks and uncertainties
There are a number of potential risks and uncertainties which
could have a material impact on future Group performance and could
cause actual results to differ materially from expected and
historical results. The Board considers the risks and uncertainties
as described in detail in the Risks and Risk Management section in
the Annual Report and Financial Statements for the year ended 24
September 2021 issued on 30 November 2021, to remain applicable in
the second half of the year.
A description of the risks and uncertainties, including any
updates since the issuance of the Annual Report and Financial
Statements for the year ended 24 September 2021, are 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 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.
G. Kennedy E. Hynes
Executive Chair Chief Financial Officer
Date: 23 May 2022 Date: 23 May 2022
CONDENSED GROUP INCOME STATEMENT
for the half year ended 25 March 2022
Half year ended 25 Half year ended 26 March
March 2022 2021
(Unaudited) (Unaudited)
Exceptional Exceptional
(Note (Note
Notes Pre- exceptional 5) Total Pre- exceptional 5) Total
GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------------- ----------------- ------------ -------- ----------------- ------------ --------
Revenue 2 770.8 - 770.8 577.1 - 577.1
Cost of sales (540.3) - (540.3) (393.0) - (393.0)
---------------------------- ----------------- ------------ -------- ----------------- ------------ --------
Gross profit 230.5 - 230.5 184.1 - 184.1
Operating costs, net 4 (212.4) (8.0) (220.4) (183.9) 5.7 (178.2)
Impairment of trade
receivables (0.9) - (0.9) - - -
---------------------------- ----------------- ------------ -------- ----------------- ------------ --------
Group operating profit
before acquisition related
amortisation 2 17.2 (8.0) 9.2 0.2 5.7 5.9
Amortisation of acquisition
related intangibles (2.0) - (2.0) (2.0) - (2.0)
---------------------------- ----------------- ------------ -------- ----------------- ------------ --------
Group Operating
Profit/Loss) 15.2 (8.0) 7.2 (1.8) 5.7 3.9
Finance income 6 - - - 0.4 - 0.4
Finance costs 6 (6.2) - (6.2) (10.1) - (10.1)
Profit on disposal of
associates - - - - 4.0 4.0
---------------------------- ----------------- ------------ -------- ----------------- ------------ --------
Profit/(loss) before
taxation 9.0 (8.0) 1.0 (11.5) 9.7 (1.8)
Taxation 7 (1.7) 1.5 (0.2) 2.0 0.2 2.2
---------------------------- ----------------- ------------ -------- ----------------- ------------ --------
Profit/(loss) for the
financial
period 7.3 (6.5) 0.8 (9.5) 9.9 0.4
---------------------------- ----------------- ------------ -------- ----------------- ------------ --------
Attributable to:
Equity shareholders 7.3 (6.5) 0.8 (9.8) 9.9 0.1
Non-controlling interests - - - 0.3 - 0.3
---------------------------- ----------------- ------------ -------- ----------------- ------------ --------
7.3 (6.5) 0.8 (9.5) 9.9 0.4
---------------------------- ----------------- ------------ -------- ----------------- ------------ --------
Earnings per share (pence)
Basic earnings per share 9 0.2 0.0
Diluted earnings per share 9 0.2 0.0
---------------------------- ----------------- ------------ -------- ----------------- ------------ --------
CONDENSED GROUP INCOME STATEMENT
for the half year ended 25 March 2022
Half year Half year
ended ended
25 March 26 March
2022 2021
(Unaudited) (Unaudited)
GBPm GBPm
----------------------------------------------------- ------------ ------------
Items of income and expense taken directly to
equity
Items that will not be reclassified to profit
or loss:
Actuarial gain on Group legacy defined benefit
pension schemes 23.6 12.6
Deferred tax on Group legacy defined benefit
pension schemes (6.0) (2.3)
----------------------------------------------------- ------------ ------------
17.6 10.3
----------------------------------------------------- ------------ ------------
Items that may subsequently be reclassified to
profit or loss:
Currency translation adjustment (0.9) (3.4)
Translation reserve transferred to Income Statement
on disposal of subsidiary - (1.0)
Non-controlling interest transferred to Income
Statement on disposal of subsidiary - (5.8)
Cash flow hedges:
fair value movement taken to equity 2.5 (0.8)
transfer to Income Statement for the period (0.9) 0.6
----------------------------------------------------- ------------ ------------
0.7 (10.4)
----------------------------------------------------- ------------ ------------
Net income recognised directly within equity 18.3 (0.1)
Profit for the financial period 0.8 0.4
----------------------------------------------------- ------------ ------------
Total comprehensive income for the financial
period 19.1 0.3
----------------------------------------------------- ------------ ------------
Attributable to:
Equity Shareholders 19.1 6.0
Non-controlling interests - (5.7)
----------------------------------------------------- ------------ ------------
Total comprehensive income for the financial
period 19.1 0.3
----------------------------------------------------- ------------ ------------
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
as at 25 March 2022
March September
2022 2021
(Unaudited) (Audited)
Notes GBPm GBPm
--------------------------------------------- ------ ------------- -----------
ASSETS
Non-current assets
Goodwill and intangible assets 10 470.5 473.3
Property, plant and equipment 10 309.8 307.4
Right-of-use assets 10 48.5 54.1
Investment property 10 3.0 3.0
Retirement benefit assets 14 40.4 42.1
Derivative financial instruments 12 2.5 -
Deferred tax assets 39.3 48.1
Trade and other receivables 0.4 0.4
--------------------------------------------- ------ ------------- -----------
Total non-current assets 914.4 928.4
--------------------------------------------- ------ ------------- -----------
Current assets
Inventories 52.5 47.7
Trade and other receivables 220.9 196.3
Cash and cash equivalents 11 82.3 119.1
Total current assets 355.7 363.1
--------------------------------------------- ------ ------------- -----------
Total assets 1,270.1 1,291.5
--------------------------------------------- ------ ------------- -----------
EQUITY
Capital and reserves attributable to equity
holders of the Company
Share capital 5.3 5.3
Share premium 89.7 89.7
Reserves 345.6 328.2
--------------------------------------------- ------ ------------- -----------
Total equity 440.6 423.2
--------------------------------------------- ------ ------------- -----------
LIABILITIES
Non-current liabilities
Borrowings 12 268.8 209.1
Lease liabilities 38.2 42.0
Other payables 3.8 3.7
Derivative financial instruments 12 1.8 2.7
Provisions 13 5.3 5.5
Retirement benefit obligations 14 58.6 88.1
Deferred tax liabilities 17.1 18.2
--------------------------------------------- ------ ------------- -----------
Total non-current liabilities 393.6 369.3
--------------------------------------------- ------ ------------- -----------
Current liabilities
Borrowings 12 32.8 93.1
Trade and other payables 374.7 375.8
Lease liabilities 14.8 17.6
Derivative financial instruments 12 0.5 2.9
Provisions 13 5.1 2.1
Current tax payable 8.0 7.5
Total current liabilities 435.9 499.0
--------------------------------------------- ------ ------------- -----------
Total liabilities 829.5 868.3
--------------------------------------------- ------ ------------- -----------
Total equity and liabilities 1,270.1 1,291.5
--------------------------------------------- ------ ------------- -----------
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the half year ended 25 March 2022
Half year Half year
ended ended
25 March 26 March
2022 2021
Notes (Unaudited) (Unaudited)
GBPm GBPm
---------------------------------------------------- ------ ------------ ------------
Profit/(loss) before taxation 1.0 (1.8)
Finance income 6 - (0.4)
Finance costs 6 6.2 10.1
Exceptional items 5 8.0 (9.7)
---------------------------------------------------- ------ ------------ ------------
Operating profit/(loss) (pre-exceptional) 15.2 (1.8)
Depreciation of property, plant and equipment
and right-of use assets 10 25.1 24.8
Amortisation of intangible assets 10 3.5 3.5
Employee share-based payment expense 1.3 1.0
Contributions to Group legacy defined benefit
pension schemes (5.8) (3.0)
Working capital movement (34.8) (21.1)
Other movements 0.4 0.4
---------------------------------------------------- ------ ------------ ------------
Net cash inflow from operating activities before
exceptional items 4.9 3.8
Cash outflow related to exceptional items 5 (0.3) (2.4)
Interest paid (including lease liability interest) (9.6) (9.2)
Tax repaid 1.9 -
---------------------------------------------------- ------ ------------ ------------
Net cash outflow from operating activities (3.1) (7.8)
---------------------------------------------------- ------ ------------ ------------
Cash flow from investing activities
Purchase of property, plant and equipment (17.8) (15.0)
Purchase of intangible assets (0.8) (1.5)
Disposal of undertakings - 16.3
---------------------------------------------------- ------ ------------ ------------
Net cash outflow from investing activities (18.6) (0.2)
---------------------------------------------------- ------ ------------ ------------
Cash flow from financing activities
Proceeds from issue of shares - 87.1
Ordinary shares purchased - own shares (3.0) -
Drawdown/(repayment) of bank borrowings 12 59.6 (100.9)
Repayment of Private Placement Notes 12 (47.3) -
Settlement of swaps on maturity of Private
Placement Notes 12 (2.6) -
Repayment of lease liabilities (8.7) (7.9)
Net cash outflow from financing activities (2.0) (21.7)
---------------------------------------------------- ------ ------------ ------------
Net decrease in cash and cash equivalents and
bank overdrafts (23.7) (29.7)
---------------------------------------------------- ------ ------------ ------------
Reconciliation of opening to closing cash and
cash equivalents and bank overdrafts
Cash and cash equivalents and bank overdrafts
at beginning of period 11 73.6 47.0
Translation adjustment (0.4) (0.3)
Decrease in cash and cash equivalents and bank
overdrafts (23.7) (29.7)
---------------------------------------------------- ------ ------------ ------------
Cash and cash equivalents and bank overdrafts
at end of period 11 49.5 17.0
---------------------------------------------------- ------ ------------ ------------
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the half year ended 25 March 2022
Share Share Other Retained Total
capital premium reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
------------------------------------------- --------- --------- ---------- ---------- --------
At 24 September 2021 5.3 89.7 121.4 206.8 423.2
------------------------------------------- --------- --------- ---------- ---------- --------
Items of income and expense taken
directly to equity
Currency translation adjustment - - (0.9) - (0.9)
Cash flow hedge fair value movement
taken to equity - - 2.5 - 2.5
Cash flow hedge transferred to
Income Statement - - (0.9) - (0.9)
Actuarial gain on Group legacy
defined benefit pension schemes - - - 23.6 23.6
Deferred tax on Group legacy defined
benefit pension schemes - - - (6.0) (6.0)
Profit for the financial period - - - 0.8 0.8
------------------------------------------- --------- --------- ---------- ---------- --------
Total comprehensive income for
the financial period - - 0.7 18.4 19.1
------------------------------------------- --------- --------- ---------- ---------- --------
Employee share-based payment expense - - 1.3 - 1.3
Exercise, lapse or forfeit of share-based
payments - - (1.5) 1.5 -
Shares acquired by Employee Benefit
Trust - - (3.0) - (3.0)
Transfer to Retained Earnings on
transfer of shares to beneficiaries
of the Employee Benefit Trust - - 0.2 (0.2) -
At 25 March 2022 5.3 89.7 119.1 226.5 440.6
------------------------------------------- --------- --------- ---------- ---------- --------
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------ --------- --------- ---------- ---------- ------ ---------------- --------
At 25 September 2020 4.5 0.4 123.9 147.7 276.5 5.7 282.2
------------------------------------ --------- --------- ---------- ---------- ------ ---------------- --------
Items of income and expense
taken directly to equity
Currency translation adjustment - - (3.2) - (3.2) (0.2) (3.4)
Translation reserve transferred
to Income Statement on disposal
of subsidiary - - (1.0) - (1.0) - (1.0)
Non-controlling interest
transferred
to Income Statement on disposal
of subsidiary - - - - - (5.8) (5.8)
Cash flow hedge fair value
movement taken to equity - - (0.8) - (0.8) - (0.8)
Cash flow hedge transferred
to Income Statement - - 0.6 - 0.6 - 0.6
Actuarial gain on Group legacy
defined benefit pension schemes - - - 12.6 12.6 - 12.6
Deferred tax on Group legacy
defined benefit pension schemes - - - (2.3) (2.3) - (2.3)
Profit for the financial period - - - 0.1 0.1 0.3 0.4
------------------------------------ --------- --------- ---------- ---------- ------ ---------------- --------
Total comprehensive income
for the financial period - - (4.4) 10.4 6.0 (5.7) 0.3
------------------------------------ --------- --------- ---------- ---------- ------ ---------------- --------
Employee share-based payment
expense - - 1.0 - 1.0 - 1.0
Exercise, lapse or forfeit
of share-based payments - - (2.1) 2.1 - - -
Transfer to Retained Earnings
on transfer of shares to
beneficiaries
of the Employee Benefit Trust - - 1.1 (1.1) - - -
Shares issued in the period 0.8 89.2 - - 90.0 - 90.0
Transaction costs of share
issue - - - (3.0) (3.0) - (3.0)
------------------------------------ --------- --------- ---------- ---------- ------ ---------------- --------
At 26 March 2021 5.3 89.6 119.5 156.1 370.5 - 370.5
------------------------------------ --------- --------- ---------- ---------- ------ ---------------- --------
OTHER RESERVES
Foreign
Undenominated currency
Share Own capital Hedging translation
options shares reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- --------- -------- -------------- --------- ------------- ------
At 24 September 2021 3.6 (1.8) 120.4 1.2 (2.0) 121.4
----------------------------------------- --------- -------- -------------- --------- ------------- ------
Items of income and expense
taken directly to equity
Currency translation adjustment - - - - (0.9) (0.9)
Cash flow hedge fair value
movement taken to equity - - - 2.5 - 2.5
Cash flow hedge transferred
to Income Statement - - - (0.9) - (0.9)
----------------------------------------- --------- -------- -------------- --------- ------------- ------
Total comprehensive income
for the financial period - - - 1.6 (0.9) 0.7
----------------------------------------- --------- -------- -------------- --------- ------------- ------
Employee share-based payment
expense 1.3 - - - - 1.3
Exercise, lapse or forfeit
of share-based payments (1.5) - - - - (1.5)
Shares acquired by Employee
Benefit Trust - (3.0) - - - (3.0)
Transfer to Retained Earnings
on transfer of shares to beneficiaries
of the Employee Benefit Trust - 0.2 - - - 0.2
----------------------------------------- --------- -------- -------------- --------- ------------- ------
At 25 March 2022 3.4 (4.6) 120.4 2.8 (2.9) 119.1
----------------------------------------- --------- -------- -------------- --------- ------------- ------
Foreign
Undenominated currency
Share Own capital Hedging translation
options shares reserve reserve reserve Total
GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------------- --------- -------- -------------- --------- ------------- ------
At 25 September 2020 3.9 (2.9) 120.4 0.5 2.0 123.9
----------------------------------------- --------- -------- -------------- --------- ------------- ------
Items of income and expense
taken directly to equity
Currency translation adjustment - - - - (3.2) (3.2)
Translation reserve transferred
to Income Statement on disposal
of subsidiary - - - - (1.0) (1.0)
Cash flow hedge fair value
movement taken to equity - - - (0.8) - (0.8)
Cash flow hedge transferred
to Income Statement - - - 0.6 - 0.6
----------------------------------------- --------- -------- -------------- --------- ------------- ------
Total comprehensive income
for the financial period - - - (0.2) (4.2) (4.4)
----------------------------------------- --------- -------- -------------- --------- ------------- ------
Employee share-based payment
expense 1.0 - - - - 1.0
Exercise, lapse or forfeit
of share-based payments (2.1) - - - - (2.1)
Transfer to Retained Earnings
on transfer of shares to beneficiaries
of the Employee Benefit Trust - 1.1 - - - 1.1
----------------------------------------- --------- -------- -------------- --------- ------------- ------
At 26 March 2021 2.8 (1.8) 120.4 0.3 (2.2) 119.5
----------------------------------------- --------- -------- -------------- --------- ------------- ------
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 25 March 2022, 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. The Condensed Group Financial Statement for the
year ended 24 September 2021 represents an abbreviated version of
the Group Financial Statements for that year. Those financial
statements, upon which the auditor issued an unqualified audit
report and did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying the
report, have been filed with the Registrar of Companies.
Going concern
The Directors, after making enquiries, have a reasonable
expectation that the Group has adequate resources to continue
operating as a going concern for the foreseeable future.
In the current period, the Group's performance continued to be
impacted by COVID-19. This was particularly evident during the
winter with restrictions in place and additional absenteeism
through colleagues contracting the Omicron COVID-19 variant. As the
UK began to ease restrictions in Q2 FY22, consumer demand has
continued to respond positively versus FY21. Although we expect to
see continued recovery, the Group continues to operate in a complex
trading environment linked to ongoing challenges with inflation,
disruption within the supply chain and economic factors linked to
the ongoing conflict in Ukraine.
Accordingly, the Directors have considered a number of scenarios
for the next 18 months from the half year end date. These scenarios
consider the potential impact of inflation on consumer spending,
along with consideration of inflation under recovery, supply chain
disruption and further restrictions arising from COVID-19. The
impact on revenue, profit and cashflow are modelled, including the
consequential impact on working capital.
The Group is satisfied that there is sufficient headroom in the
financial covenants under current facilities under each
scenario.
The scenarios assumed by the Group are as follows:
-- A base case assuming internally approved forecast and strategic plans;
-- A downside scenario which assesses the potential impact of inflation on consumer spending and corresponding impact on revenue with a 5% reduction in total sales, along with inflation under recovery of 15%, supply chain disruption and further restrictions arising from COVID-19; and
-- A severe downside scenario which includes the further impact
of inflation under recovery by 25%, along with a further reduction
in sales by 12.5% to reflect the impact of supply chain disruption
and further labour challenges.
In each scenario, the Group would employ mitigants within its
control, which would include a reduction in non-business critical
capital projects and other discretionary cash flow items.
The Group retained financial strength and flexibility at H1
FY22, with cash and undrawn committed bank facilities of GBP349.5m
at 25 March 2022 (March 2021: GBP302.0m).
Based on these scenarios and the resources available to the
Group, 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. If the Group were not
to achieve these scenarios, the Group would consider further
engagement with lenders. 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 24 September 2021 and are as set out in those
financial statements.
The following amendments to IFRS became effective during the
period but did not result in material changes to the Condensed
Group Financial Statements:
-- Interest Rate Benchmark Reform - Phase 2 (amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IAS 16)
The Group has not yet applied certain new standards, amendments
and interpretations to existing standards that have been issued but
are not yet effective. They are either not expected to have a
material impact on the Condensed Group Financial Statements or they
are currently not relevant for the Group.
Critical Accounting Estimates and Judgements
The preparation of the Condensed Group Financial Statements
requires management to make certain estimates, assumptions and
judgements that affect the application of accounting policies and
the reported amount of assets, liabilities, income and expenses.
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.
Estimates, underlying assumptions and judgements are reviewed on an
ongoing basis.
2. Segment Information
Convenience Foods UK and Ireland is the Group's operating
segment, which represents its reporting segment. This reflects the
Group's organisational structure and the nature of the financial
information reported to and assessed by the Chief Operating
Decision Maker ('CODM') as defined by IFRS 8 Operating Segments.
The CODM has been identified as the Group's Executive Chair, Deputy
Chief Executive Officer and Chief Financial Officer. The segment
incorporates many UK convenience food categories including
sandwiches, salads, sushi, chilled snacking, chilled ready meals,
chilled soups and sauces, chilled quiche, ambient sauces and
pickles and frozen Yorkshire Puddings as well as the Irish
ingredients trading business.
Convenience Foods
UK and Ireland
Half
Half year year
2022 2021
GBPm GBPm
--------------------------------------------------- ----------- -------
Revenue 770.8 577.1
--------------------------------------------------- ----------- -------
Group operating profit before acquisition related
amortisation and exceptional items 17.2 0.2
Amortisation of acquisition related intangible
assets (2.0) (2.0)
--------------------------------------------------- ----------- -------
Group operating profit/(loss) (pre-exceptional) 15.2 (1.8)
Finance income - 0.4
Finance costs (6.2) (10.1)
Exceptional items (pre-taxation) (8.0) 9.7
Taxation (0.2) 2.2
--------------------------------------------------- ----------- -------
Profit for the period 0.8 0.4
--------------------------------------------------- ----------- -------
The following table disaggregates revenue by product categories
in the Convenience Foods UK and Ireland reporting segment.
Half Half
year year
2022 2021
GBPm GBPm
---------------------------------------------------- ------ ------
Revenue
Food to go categories 502.1 339.2
Other convenience categories 268.7 237.9
---------------------------------------------------- ------ ------
Total revenue for Convenience Foods UK and Ireland 770.8 577.1
---------------------------------------------------- ------ ------
Food to go categories include sandwiches, salads, sushi and
chilled snacking while the other convenience categories include
chilled ready meals, chilled soups and sauces, chilled quiche,
ambient sauces and pickles, and frozen Yorkshire Puddings as well
as the Irish ingredients trading business.
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 and this is in line with the Group's expectation for FY22.
This weighting is primarily driven by weather and seasonal buying
patterns. In the prior year, the weighting of revenue towards the
second half of the year was accentuated by the easing of lockdown
restrictions relating to COVID-19.
4. Operating costs, net
Half Half
Year Year
2022 2021
GBPm GBPm
-------------------------------------------- -------- --------
Administrative expenses (179.8) (155.1)
Distribution costs (31.2) (23.7)
Other operating costs (1.4) (5.1)
Total operating costs pre-exceptional, net (212.4) (183.9)
Exceptional items (Note 5) (8.0) 5.7
--------------------------------------------- -------- --------
Total operating costs, net (220.4) (178.2)
--------------------------------------------- -------- --------
During H1 22, the Group experienced a cyber security incident
which resulted in business disruption. The Group responded
proactively, following a robust governance process for restoring
the IT systems and applications used by the business in a secure
manner. All systems were fully and securely restored and all
relevant authorities in each principal jurisdiction, being the UK
and Ireland, were notified in relation to the incident. The Group
has recognised net costs of GBP2.6m in connection with the incident
at H1 FY22 (H1 FY21: GBPnil).
In the current period, the Group has recognised costs relating
to research and development of GBP3.4m (H1 21: GBP3.6m).
In the prior period, the Group furloughed a number of employees
across the its sites for varying periods of time, availing of the
Coronavirus Job Retention Scheme and received amounts of GBP8.7m,
part of which had been recognised within operating costs above.
There was no similar claim made or recognised in the current
period.
5. Exceptional Items
Half Half
Year Year
2022 2021
GBPm GBPm
--------------------------------------------------- ----- ------ ------
Reorganisation costs (a) (8.0) -
Profit on disposal of Molasses trading businesses (b) - 11.3
Defined benefit pension schemes restructuring (c) - (2.6)
Legacy businesses provisions (d) - 1.0
(8.0) 9.7
Tax credit on exceptional items 1.5 0.2
---------------------------------------------------------- ------ ------
Total exceptional items (6.5) 9.9
---------------------------------------------------------- ------ ------
(a) Reorganisation costs
In the current period, the Group commenced a Better Greencore
programme which is to support revitalisation of its Excellence cost
efficiency programmes and unlock further cost efficiencies by
reducing organisational complexity. The Group recognised a charge
of GBP8.0m in respect of work carried out to H1 22.
(b) Profit on disposal of Molasses trading businesses
In the prior period, the Group completed the disposal of its
interest in the Molasses trading businesses recognising a profit on
disposal of GBP7.3m for Premier Molasses Company Limited within
operating profit, and GBP4.0m for United Molasses (Ireland)
Limited, which has been recognised within profit on disposal of
associates.
(c) Defined benefit pension schemes restructuring
During the prior period, the Group reached an agreement with the
Trustees of its three Irish legacy defined benefit pension schemes
to wind up the two smaller schemes and transfer deferred
beneficiaries to the larger scheme. The Group recognised a charge
of GBP2.6m for the settlement charge and costs associated with the
restructure.
(d) Legacy businesses provisions
In the prior period, the Group recognised a net credit of
GBP1.0m relating to legacy provisions on discontinued
operations.
Cash Flow on Exceptional Items
The total net cash outflow during the period in respect of
operating activities exceptional items was GBP0.3m (H1 FY21:
GBP2.4m), all of which was in respect of prior year exceptional
charges.
6. Finance income and finance costs
Half Half
year year
2022 2021
GBPm GBPm
--------------------------------------------------------- ------- -------
Finance income
Foreign exchange on inter-company and external balances
where hedge accounting is not applied - 0.4
--------------------------------------------------------- ------- -------
Total finance income - 0.4
--------------------------------------------------------- ------- -------
Finance costs
Net finance costs on interest bearing cash and cash
equivalents, borrowings and other financing costs (4.9) (7.4)
Interest on lease obligations (0.6) (0.7)
Net pension financing charge (0.6) (0.9)
Change in fair value of derivatives and related debt
adjustments 0.4 (1.1)
Foreign exchange on inter-company and external balances
where hedge accounting is not applied (0.5) -
--------------------------------------------------------- ------- -------
Total finance expense (6.2) (10.1)
--------------------------------------------------------- ------- -------
7. Taxation
Interim period tax is accrued using the tax rate that is
estimated to be applicable to expected total annual earnings in the
financial year based on tax rates that were enacted or
substantively enacted for the period ended 25 March 2022.
The effective tax rate applicable for the period ended 25 March
2022 is 19%, which reflects the impact of the increasing
corporation tax rates in the UK.
8. Dividends Paid and Proposed
There were no dividends paid in the current or prior period.
The Group intends to recommence value return to shareholders of
up to GBP50m over the next two years, initially in the form of a
share buyback programme and consistent with the Group's capital
management policy.
9. Earnings per Ordinary Share
During the period, the Group introduced a new share ownership
scheme for all colleagues which resulted in a purchase of own
shares from the market of 2,180,216 Ordinary Shares at a total cost
of GBP3.0m, which have been put into an Employee Benefit Trust. The
effect of the purchase of own shares on the weighted average number
of Ordinary Shares was a reduction of 893,531 shares, which forms
part of the 1.8m shares included within the denominator calculation
below.
Numerator for earnings per share calculations
Half Half
year year
2022 2021
GBPm GBPm
------------------------------------------------------ ------ ------
Profit attributable to equity holders of the Company 0.8 0.1
------------------------------------------------------ ------ ------
Denominator for earnings per share calculations
Half Half
year year
2022 2021
'000 '000
--------------------------------------------------------- -------- --------
Shares in issue at the beginning of the period 526,547 446,157
Effect of shares held by Employee Benefit Trust (1,797) (1,243)
Effect of shares issued in equity raising in the period - 53,132
Effect of shares issued in the period 6 2
--------------------------------------------------------- -------- --------
Weighted average number of Ordinary Shares in issue
during the period 524,756 498,048
--------------------------------------------------------- -------- --------
Dilutive effect of share schemes 782 152
--------------------------------------------------------- -------- --------
Weighted average number of Ordinary Shares for diluted
earnings per share 525,538 498,200
--------------------------------------------------------- -------- --------
A total of 14,414,349 (2021: 19,394,264) 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 25
March 2022.
Earnings per Share Calculations
Half Half
year year
2022 2021
pence pence
------------------------------------- ------ ------
Basic earnings per Ordinary Share 0.2 0.0
------------------------------------- ------ ------
Diluted earnings per Ordinary Share 0.2 0.0
------------------------------------- ------ ------
10. Goodwill and Intangible Assets, Property, Plant and
Equipment, Right-of-use assets, Investment Property and Capital
Expenditure Commitments
During the six-month period to 25 March 2022, the Group made
GBP21.0m of additions to property, plant and equipment and
intangible assets through ongoing capital expenditure. A total
depreciation and amortisation charge of GBP20.9m was recognised,
GBP0.4m of assets were impaired and an FX loss of GBP0.1m was
incurred. In addition, the Group made GBP2.7m of additions to
right-of-use assets while GBP0.6m were disposed of. A depreciation
charge of GBP7.7m was recognised on right-of-use assets in the
period.
During the prior six-month period to 26 March 2021, the Group
made GBP15.8m of additions to property, plant and equipment and
intangible assets through ongoing capital expenditure. A total
depreciation and amortisation charge of GBP21.1m was recognised,
GBP0.1m of assets were disposed of, GBP0.4m of assets were impaired
and an FX loss of GBP0.4m was incurred, including GBP0.2m FX loss
on investment property. In addition, the Group made GBP8.8m of
additions to right-of-use assets and GBP0.6m of assets were
disposed of. A depreciation charge of GBP7.2m was recognised on
right-of-use assets in the period.
At 25 March 2022, the Group had capital expenditure commitments
that had been contracted but not yet provided for amounting to
GBP20.0m (H1 21: GBP13.8m).
11. Cash and cash equivalents and bank overdrafts
For the purposes of the Condensed Group Cash Flow Statement,
cash and cash equivalents and bank overdrafts are presented net as
follows:
March September March
2022 2021 2021
GBPm GBPm GBPm
----------------------------------------------------- ------- ---------- -------
Cash at bank and in hand 82.3 119.1 48.4
Bank overdraft (Note 12) (32.8) (45.5) (31.4)
----------------------------------------------------- ------- ---------- -------
Total cash and cash equivalents and bank overdrafts 49.5 73.6 17.0
----------------------------------------------------- ------- ---------- -------
12. Borrowings and Derivatives
March September March
2022 2021 2021
GBPm GBPm GBPm
------------------------------ -------- ---------- --------
Current
Bank overdrafts (32.8) (45.5) (31.4)
Private Placement Notes - (47.6) (47.6)
------------------------------ -------- ---------- --------
Total current borrowings (32.8) (93.1) (79.0)
------------------------------ -------- ---------- --------
Non-current
Bank borrowings (208.4) (150.1) (181.7)
Private Placement Notes (60.4) (59.0) (59.0)
------------------------------ -------- ---------- --------
Total non-current borrowings (268.8) (209.1) (240.7)
------------------------------ -------- ---------- --------
Total borrowings (301.6) (302.2) (319.7)
------------------------------ -------- ---------- --------
The maturity profile of the Group's borrowings is as
follows:
March September March
2022 2021 2021
GBPm GBPm GBPm
-------------------------------------- -------- ---------- --------
Borrowings
Less than one year - (47.6) (47.6)
Between one and two years (64.9) (64.6) -
Between two and five years (203.9) (144.5) (226.1)
Over five years - - (14.6)
-------------------------------------- -------- ---------- --------
Total borrowings (268.8) (256.7) (288.3)
-------------------------------------- -------- ---------- --------
Bank overdrafts
Less than one year (32.8) (45.5) (31.4)
-------------------------------------- -------- ---------- --------
Total bank overdrafts (32.8) (45.5) (31.4)
-------------------------------------- -------- ---------- --------
Total borrowings and bank overdrafts (301.6) (302.2) (319.7)
-------------------------------------- -------- ---------- --------
Bank overdrafts
Uncommitted facilities undrawn at 25 March 2022 amounted to
GBP10.4m (September 2021: GBP6.7m).
Bank Borrowings
The Group's bank borrowings net of finance fees comprised of
GBP208.4m at 25 March 2022 (September 2021: GBP150.1m) with
maturities on drawn borrowings ranging from January 2024 to January
2026. The Group has in place a revolving credit facility of GBP75m
which has not been drawn down and which is scheduled to mature in
March 2023. The Group had GBP300m (September 2021: GBP360.0m) of
undrawn committed bank facilities in respect of which all
conditions precedent had been met. In October 2021, the Group drew
down on a new GBP45m term loan which matures in June 2024.
Private Placement Notes
The Group's outstanding Private Placement Notes net of finance
fees comprised of GBP60.4m (denominated as $55.9m and GBP18m) at 25
March 2022 (September 2021: GBP106.6m, denominated as $120.9m and
GBP18m). These were issued as fixed rate debt in June 2016 ($55.9m
and GBP18m) with maturities ranging from June 2023 to June 2026.
The Group repaid the $65m Private Placement Note in full in October
2021.
The Group has swapped the $55.9m 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 25 March 2022:
Total
Net borrowings Undrawn facilities
Mar-22 & available available
----------
Maturity
dates GBPm GBPm GBPm
------------------------------- ---------- --------------- ------------- ------------
Cash and cash equivalents and
bank overdrafts - 49.5 (49.5) -
Mar-23 -
Bank Borrowings* Jan-26 (210.0) (300.0) (510.0)
Jun-23 -
Private Placement Notes* Jun-26 (60.4) - (60.4)
Total (220.9) (349.5) (570.4)
------------------------------------------- --------------- ------------- ------------
*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 Group Financial Statements
approximate their fair values:
March 2022 September 2021 March 2021
Carrying Fair Carrying Fair Carrying Fair
amount Value amount Value amount Value
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- --------- -------- --------- -------- --------- --------
Bank borrowings* (208.4) (203.4) (150.1) (146.6) (181.7) (183.9)
Private Placement Notes (60.4) (60.6) (106.6) (107.7) (106.6) (111.2)
---------------------------- --------- -------- --------- -------- --------- --------
*excludes bank overdrafts
Derivatives Fair value hierarchy - IFRS 13 (level 2
inputs)**
March September March
2022 2021 2021
Level Level Level
2** 2** 2**
GBPm GBPm GBPm
----------------------------------------------------- ------ ---------- ------
Non-current
Assets carried at fair value
Interest rate swaps - cash flow hedges 2.5 - -
----------------------------------------------------- ------ ---------- ------
2.5 - -
----------------------------------------------------- ------ ---------- ------
Non-current
Liabilities carried at fair value
Interest rate swaps - cash flow hedges - (0.1) -
Cross-currency interest rate swaps - cash flow
hedges (1.8) (2.6) (3.1)
----------------------------------------------------- ------ ---------- ------
(1.8) (2.7) (3.1)
----------------------------------------------------- ------ ---------- ------
Current
Liabilities carried at fair value
Interest rate swaps - cash flow hedges - (0.5) (1.5)
Cross-currency interest rate swaps - cash flow
hedges - (2.1) (2.3)
Forward foreign exchange contracts - not designated
as hedges (0.5) (0.3) (0.4)
----------------------------------------------------- ------ ---------- ------
(0.5) (2.9) (4.2)
----------------------------------------------------- ------ ---------- ------
Total 0.2 (5.6) (7.3)
----------------------------------------------------- ------ ---------- ------
** For definition of level 2 inputs please refer to the 2021 Annual
Report.
13. Provisions
Half year
March
2022
GBPm
---------------------------------- ----------
At beginning of period 7.6
Provided in period 3.0
Utilised in period (0.2)
At end of period 10.4
---------------------------------- ----------
March September
2022 2021
GBPm GBPm
------------------------- ------ ----------
Analysed as:
Non-current liabilities 5.3 5.5
Current liabilities 5.1 2.1
-------------------------- ------ ----------
10.4 7.6
------------------------- ------ ----------
14. Retirement Benefit Obligations
The Group operates three legacy defined benefit pension schemes
in the Republic of Ireland (the Irish schemes) and one legacy
defined benefit pension scheme and one legacy defined benefit
commitment in the UK (the UK schemes). These are all closed to
future accrual and there is an assumption applied in the valuation
of the schemes that there will be no discretionary increases in
pension payments. The scheme assets are held in separate Trustee
administered funds. The Group continues to seek ways to reduce its
liabilities through various restructuring initiatives in
co-operation with the respective schemes.
In consultation with the independent actuaries to the scheme,
the valuation of pension obligations have been updated to reflect
current market discount rates, rates of increase in salaries,
pension payments and inflation, current market values of
investments and actual investment returns.
The Group's retirement benefit obligations moved from a net
liability of GBP46.0m at 25 September 2021 to a net liability of
GBP18.2m at 25 March 2022. This movement was primarily driven by an
actuarial gain on liabilities arising from an increase in the
discount rates used to value these liabilities. The movement in the
discount rate is driven by the corporate bond rate.
The principal actuarial assumptions are as follows:
March September
2022 2021
UK Ireland UK Ireland
----------------------------------------- ------ -------- ------ --------
Rate of increase in pension payments * 3.30% 0.00% 3.35% 0.00%
Discount rate 2.85% 2.00% 1.90% 1.13%
Inflation rate 3.65% 2.60% 3.45% 1.80%
----------------------------------------- ------ -------- ------ --------
* The pension increase rate shown above applies to the majority
of the liability base. However there are certain categories within
the Group that have an entitlement to pension indexation and this
is allowed for in the calculation.
The financial position of the schemes was as follows:
March 2022 September 2021
UK Irish UK Irish
Schemes Schemes Total Schemes Schemes Total
GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------------- --------- --------- -------- --------- --------- --------
Fair value of plan assets 234.0 195.4 429.4 260.6 220.7 481.3
Present value of scheme liabilities (291.8) (155.8) (447.6) (347.7) (179.6) (527.3)
------------------------------------- --------- --------- -------- --------- --------- --------
(Deficit)/surplus in schemes (57.8) 39.6 (18.2) (87.1) 41.1 (46.0)
Deferred tax asset/(liability) 14.5 (5.0) 9.5 21.8 (5.1) 16.7
------------------------------------- --------- --------- -------- --------- --------- --------
Net (liability)/asset at end
of the period (43.3) 34.6 (8.7) (65.3) 36.0 (29.3)
------------------------------------- --------- --------- -------- --------- --------- --------
Presented as:
Retirement benefit asset** 40.4 42.1
Retirement benefit obligation (58.6) (88.1)
------------------------------------- --------- --------- -------- --------- --------- --------
** The value of a net pension benefit asset is the value of any
amount the Group reasonably expects to recover by way of a refund
of a surplus from the remaining assets of a plan at the end of
the plan's life.
Sensitivity of pension liability to judgemental assumptions
Increase/(decrease)
in Scheme Liabilities
UK Irish
Assumption Change in assumption Schemes Schemes Total
------------------- -------------------------------- ---------- --------- -------
Discount rate Increase by 0.5% (24.4) (9.5) (33.9)
-------------------
Decrease by 0.5% 27.6 10.1 37.7
---------------------------------------------------- ---------- --------- -------
Rate of inflation Increase by 0.5% 18.7 3.7 22.4
-------------------
Decrease by 0.5% (19.3) (3.6) (22.9)
---------------------------------------------------- ---------- --------- -------
Members assumed to live 1 year
Rate of mortality longer 9.9 4.3 14.2
------------------- -------------------------------- ---------- --------- -------
Sensitivity of pension scheme assets to yield
movements
Increase in Scheme Assets
UK Irish
Assumption Change in assumption Schemes Schemes Total
------------------- -------------------------------- ---------- --------- -------
Change in
bond yields Decrease by 0.5% 23.0 8.8 31.8
------------------- -------------------------------- ---------- --------- -------
15. Contingencies
The Company and certain subsidiaries have given guarantees in
respect of borrowings and other obligations arising in the ordinary
course of business of the Company and other Group undertakings. The
Company and other Group undertakings consider these guarantees to
be insurance contracts and account for them as such. The Company
treats these guarantee contracts as contingent liabilities until
such time as it becomes probable that a payment will be required
under such guarantees.
The Group and certain of its subsidiaries continue to be subject
to various legal proceedings relating to its current and former
activities. Provisions for anticipated settlement costs and
associated expenses arising from legal and other disputes are made
where a reliable estimate can be made of the probable outcome of
the proceedings.
The Group has provided bank guarantees to the Group's insurance
providers for an amount of GBP4.6m (September 2021: GBP5.8m).
16. 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
FY21 Annual Report that could have a material impact on the
financial position or performance of the Group in the period ended
25 March 2022.
17. Subsequent Events
Appointment of Chief Executive Officer
On 30 March 2022, Patrick Coveney officially stepped down from
his role of Director and Chief Executive Officer. On 13 May 2022 it
was announced that Dalton Phillips will take up the position of
Chief Executive Officer of the Group on 26 September 2022. Until
that time Gary Kennedy and Kevin Moore will continue in their roles
as Executive Chairman and Deputy Chief Executive Officer of the
Group.
18. Information
Copies of the Interim Financial Report are available for
download from the Group's website at www.greencore.com .
APPIX: ALTERNATIVE PERFORMANCE MEASURES
The Group uses the following Alternative Performance Measures
('APMs') which are non-IFRS measures to monitor the performance of
its operations and of the Group as a whole: Pro Forma Sales Growth,
Adjusted EBITDA, Adjusted Operating Profit, Adjusted Operating
Margin, Adjusted Profit before Tax ('PBT'), Adjusted Earnings,
Adjusted Earnings per Share, Maintenance and Strategic Capital
Expenditure, Free Cash Flow, Free Cash Flow Conversion, Net Debt,
Net Debt excluding lease liabilities and Return on Invested Capital
('ROIC'). There have been no adjustments made to existing APMs
being reported. Free Cashflow Conversion in prior periods has been
measured and reported on an annual basis at year end only however
the below APMs have now included this on a rolling cash flow basis.
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.
PRO FORMA REVENUE GROWTH
Pro Forma Revenue Growth (versus FY21)
The Group uses Pro Forma Revenue Growth as a supplemental
measure of its performance. The Group believes that Pro Forma
Revenue Growth provides a more accurate guide to underlying revenue
performance.
Pro Forma Revenue Growth adjusts reported revenue to reflect the
disposal of Premier Molasses Company Limited for the period in FY21
up to the date of disposal. It also presents the revenue on a
constant currency basis utilising FY21 FX rates on FY22 reported
revenue.
Half year 2022
Convenience
Foods
UK & Ireland
%
------------------------------ ---------------
Reported revenue 33.6%
Impact of disposals 1.0%
Impact of currency 0.3%
-------------------------------- ---------------
Pro Forma Revenue Growth (%) 34.9%
-------------------------------- ---------------
The table below shows the Pro Forma Revenue split by food to go
categories and other convenience categories. This is in line with
the disclosure requirements in IFRS 15 Revenue from Contracts with
Customers requiring revenue to be disaggregated.
Half year 2022
Food to
go Other convenience
categories categories
% %
------------------------------ ------------ ------------------
Reported revenue 48.0% 12.9%
Impact of disposals - 2.0%
Impact of currency - 0.9%
------------------------------- ------------ ------------------
Pro Forma Revenue Growth (%) 48.0% 15.8%
------------------------------- ------------ ------------------
Pro Forma Revenue Growth (versus FY19)
Pro Forma Revenue Growth adjusts reported revenue (+9.9%) to
reflect the impact of disposals and exits of manufacturing lines
(+2.6%), and the acquisition of Freshtime UK Limited in FY19
(-2.9%). It also presents the revenue on a constant currency basis
utilising FY19 FX rates on FY22 reported revenue (+0.2%). Total Pro
Forma Revenue Growth versus FY19 is 9.8%.
ADJUSTED EBITDA, ADJUSTED OPERATING PROFIT AND ADJUSTED
OPERATING MARGIN
Adjusted EBITDA, Adjusted Operating Profit and Adjusted
Operating Margin are used by the Group to measure the underlying
and ongoing operating performance of each business and of the Group
as a whole.
The Group calculates Adjusted Operating Profit as operating
profit before acquisition related amortisation and exceptional
charges. Adjusted EBITDA is calculated as Adjusted Operating Profit
plus depreciation and amortisation of intangible assets. Adjusted
Operating Margin is calculated as Adjusted Operating Profit divided
by reported revenue.
The following table sets forth a reconciliation from the Group's
profit for the financial year to Adjusted Operating Profit,
Adjusted EBITDA and Adjusted Operating Margin:
Half Year Half year
2022 2021
GBPm GBPm
------------------------------------- ------------ ----------
Profit for the financial period 0.8 0.4
----------------------------------------- ------------ ----------
Taxation(A) 0.2 (2.2)
Net finance costs(B) 6.2 9.7
Profit on disposal of associates
(exceptional) - (4.0)
----------------------------------------- ------------ ----------
Group Operating Profit 7.2 3.9
Exceptional items 8.0 (5.7)
Amortisation of acquisition related
intangibles 2.0 2.0
----------------------------------------- ------------ ----------
Adjusted Operating Profit 17.2 0.2
Depreciation and amortisation (C) 26.6 26.3
----------------------------------------- ------------ ----------
Adjusted EBITDA 43.8 26.5
----------------------------------------- ------------ ----------
Adjusted Operating Margin (%) 2.2% 0.0%
----------------------------------------- ------------ ----------
(A) Includes tax credit on exceptional items of GBP1.5m (2021: GBP0.2m)
(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 Half year
2022 2021
GBPm GBPm
--------------------------------------------------------- -------------- ------------
Profit/(loss) before taxation 1.0 (1.8)
Exceptional items 8.0 (9.7)
Pension finance items 0.6 0.9
Amortisation of acquisition related intangibles 2.0 2.0
FX and fair value movements(A) 0.1 0.7
--------------------------------------------------------- -------------- ------------
Adjusted Profit/(Loss) Before Tax 11.7 (7.9)
--------------------------------------------------------- -------------- ------------
(A) FX on inter-company and certain external balances and the movement
in the fair value of all derivative financial instruments and related
debt adjustments
ADJUSTED EARNINGS PER SHARE ('EPS')
The Group uses Adjusted Earnings and Adjusted EPS as key
measures of the overall underlying performance of the Group and
returns generated for each share.
Adjusted Earnings is calculated as Profit attributable to equity
holders (as shown on the Group's Income Statement) adjusted to
exclude exceptional items (net of tax), the effect of foreign
exchange (FX) on inter-company and external balances where hedge
accounting is not applied, the movement in the fair value of all
derivative financial instruments and related debt adjustments, the
amortisation of acquisition related intangible assets (net of tax)
and the interest expense relating to legacy defined benefit pension
liabilities (net of tax). Adjusted EPS is calculated by dividing
Adjusted Earnings by the weighted average number of Ordinary Shares
in issue during the year, excluding Ordinary Shares purchased by
Greencore and held in trust in respect of the Annual Bonus Plan and
the Performance Share Plan. Adjusted EPS described as an APM here
is Adjusted Basic EPS.
The following table sets forth a reconciliation of the Group's
Profit attributable to equity holders of the Company to its
Adjusted Earnings for the financial years indicated.
Half
Half year year
2022 2021
GBPm GBPm
----------------------------------------------------------------------------------------- ------------ --------
Profit attributable to equity holders of the Company 0.8 0.1
Exceptional items (net of tax) 6.5 (9.9)
FX effect on inter-company and external balances where hedge accounting is not applied 0.5 (0.4)
Movement in fair value of derivative financial instruments and related debt adjustments (0.4) 1.1
Amortisation of acquisition related intangible assets (net of tax) 1.5 1.6
Pension financing (net of tax) 0.5 0.7
----------------------------------------------------------------------------------------- ------------ --------
Adjusted Earnings/(Loss) 9.4 (6.8)
----------------------------------------------------------------------------------------- ------------ --------
Half
Half year year
2022 2021
'000 '000
----------------------------------------------------------------------------------------- ------------ --------
Weighted average number of ordinary shares in issue during the year 524,756 498,048
----------------------------------------------------------------------------------------- ------------ --------
Pence Pence
----------------------------------------------------------------------------------------- ------------ --------
Adjusted Earnings/(Loss) Per Share 1.8 (1.4)
----------------------------------------------------------------------------------------- ------------ --------
CAPITAL EXPITURE
MAINTENANCE CAPITAL EXPITURE
The Group defines Maintenance Capital Expenditure as the
expenditure required for the purpose of sustaining the operating
capacity and asset base of the Group, and to comply with applicable
laws and regulations. It includes continuous improvement projects
of less than GBP1m that will generate additional returns for the
Group.
STRATEGIC CAPITAL EXPITURE
The Group defines Strategic Capital Expenditure as the
expenditure required for the purpose of facilitating growth and
developing and enhancing relationships with existing and new
customers. It includes continuous improvement projects of greater
than GBP1m that will generate additional returns for the Group.
Strategic Capital Expenditure is generally expansionary expenditure
creating additional capacity beyond what is necessary to maintain
the Group's current competitive position and enables the Group to
service new customers and/or contracts or to enter into new
categories and/or new manufacturing competencies.
The following table sets forth the breakdown of the Group's
purchase of property, plant and equipment and purchase of
intangible assets between Strategic Capital Expenditure and
Maintenance Capital Expenditure:
Half year Half year
2022 2021
GBPm GBPm
--------------------------------- ---------- ----------
Purchase of property, plant
and equipment 17.8 15.0
Purchase of intangible assets 0.8 1.5
------------------------------------- ---------- ----------
Net cash outflow from capital
expenditure 18.6 16.5
------------------------------------- ---------- ----------
Strategic Capital Expenditure 12.6 8.6
Maintenance Capital Expenditure 6.0 7.9
------------------------------------- ---------- ----------
Net cash outflow from capital
expenditure 18.6 16.5
------------------------------------- ---------- ----------
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 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 Half year
2022 2021
GBPm GBPm
-------------------------------------------- ------------ ----------
Net cash outflow from operating activities (3.1) (7.8)
Net cash outflow from investing activities (18.6) (0.2)
------------------------------------------------ ------------ ----------
Net cash outflow from operating and
investing activities (21.7) (8.0)
Strategic Capital Expenditure 12.6 8.6
Disposal of undertakings - (16.3)
Repayment of lease liabilities (8.7) (7.9)
Free Cash Flow (17.8) (23.6)
------------------------------------------------ ------------ ----------
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
12 months to
to March
March 2022 2021
GBPm GBPm
----------------------------------- ------------- -----------
Free Cash Flow (A) 78.0 (55.9)
Adjusted EBITDA (B) 109.6 47.7
Free Cash Flow Conversion (%) (C) 71.2% (117.2%)
----------------------------------- ------------- -----------
(A) Free Cash flow for H2 21 and H2 20 was GBP95.8m inflow and GBP32.3m outflow respectively
(B) Adjusted EBITDA for H2 21 and H2 20 was GBP65.8m and GBP21.2m respectively
(C) Free Cash Conversion at 24 September 2021 was 78.2%
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 Half
year year
2022 2021
GBPm GBPm
----------------------------------------------- -------- --------
Cash and cash equivalents and bank overdrafts 49.5 17.0
Bank borrowings (208.4) (181.7)
Private Placement Notes (60.4) (106.6)
Net debt excluding lease liabilities (219.3) (271.3)
----------------------------------------------- -------- --------
Lease Liabilities (53.0) (60.8)
----------------------------------------------- -------- --------
Net Debt (272.3) (332.1)
----------------------------------------------- -------- --------
RETURN ON INVESTED CAPITAL ('ROIC')
The Group uses ROIC as a key measure to determine returns from
each business unit, along with the measurements of potential new
investments.
The Group uses invested capital as a basis for this calculation
as it reflects the tangible and intangible assets the Group has
added through its capital investment programme, the intangible
assets the Group has added through acquisition, as well as the
working capital requirements of the business. Invested Capital is
calculated as net assets (total assets less total liabilities)
excluding Net Debt and the carrying value of derivatives not
designated as fair value hedges, it also excludes retirement
benefit obligations (net of deferred tax assets). Average Invested
Capital is calculated by adding together the invested capital from
the opening and closing balance sheet and dividing by two.
The Group calculates ROIC as Net Adjusted Operating Profit After
Tax ('NOPAT') divided by average Invested Capital. NOPAT is
calculated as Adjusted Operating Profit plus share of profit of
associates before tax, less tax at the effective rate in the Income
Statement.
The following table sets forth the calculation of Net Operating
Profit After Tax ('NOPAT') and invested capital used in the
calculation of ROIC for the financial years.
12 months
12 months to
to March
March 2022 2021
GBPm GBPm
------------------------------------------ ------------- -----------
Adjusted Operating Profit/(Loss) 56.0 (5.6)
Share of profit of associates before tax - 0.3
Taxation at the effective tax rate(A) (9.1) 0.7
------------------------------------------ ------------- -----------
Group NOPAT 46.9 (4.6)
------------------------------------------ ------------- -----------
Half year Half year
2022 2021
GBPm GBPm
Invested Capital
Total assets 1,270.1 1,184.7
Total liabilities (829.5) (814.2)
Net Debt 272.3 332.1
Derivatives not designated as fair value hedges (0.2) 7.3
Retirement benefit obligation (net of deferred
tax asset) 8.7 55.7
Invested Capital for the Group (B) 721.4 765.6
------------------------------------------------- ---------- ----------
Average Invested Capital for ROIC calculation
for the Group 743.5 758.6
------------------------------------------------- ---------- ----------
ROIC (%) for the Group (C) 6.3% (0.6%)
------------------------------------------------- ---------- ----------
(A) The effective tax rates for the financial period ended 25
March 2022 and 24 September 2021, were 19% and 15% respectively
(B) The invested capital for the Group in March 2020 was GBP751.6m
(C) ROIC at 24 September 2021 was 4.5%
APPIX: PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks and uncertainties faced by the Group are
reported annually within the Annual Report and Financial Statements
and are summarised below. Continuing consideration of Brexit and
COVID risks has been incorporated into the Group's principal risks
as appropriate.
The war in the Ukraine is having an impact on principal risks
and uncertainties. In particular by increasing pressure in some
operational areas, for example impact on the supply of raw
material, Ukraine supplies approximately 40% of wheat globally and
80% of sunflower oil. The war is also increasing the cost of raw
materials further compounding the Inflationary risk currently being
managed by the company. The Group have updated the principal risks
and uncertainties below to take account of the economic environment
with a summary by risk area provided below.
Strategic
Competitor activity: The Group operates in highly competitive
markets. Significant product innovations, technical advances and/or
the intensification of price competition by competitors, both
direct manufacturing competitors and competitors of our customers,
could adversely affect the Group's results.
Growth and change: The Group is pursuing a strategy of growth
and expansion in the UK. Delivery of this strategy will necessitate
material investment of organisational resource and capital, to
deliver both organic growth projects and M&A. Major organic
growth projects typically involve significant time investment from
key individuals across the business to scope, plan, negotiate and
execute new business. They may also involve material capital
investment in capacity or capability. These investments are
typically made on the basis of projected future projections of
performance, which are by their nature, uncertain. Likewise, they
are based on projected rather than actual capital investment
costings. Similarly, corporate development by its nature involves a
level of uncertainty, as the business case for an acquisition is
typically based on projected future performance of the target
business, as well as projected commercial, operational and other
synergies, which carry some uncertainty until fully delivered under
Greencore's ownership.
Commercial
Changes in consumer behaviour and demand: In common with other
food manufacturers, changes in food consumption patterns may impact
the Group. These changes may relate to consumer attitudes to health
and more recently ethics and sustainability. Demand for a number of
the Group's products can also be adversely affected by fluctuations
in the economy. This risk has been heightened by the impact of
inflation and the UK economy, more recently associated with the war
in the Ukraine.
Key customer relationships and grocery industry structure: The
Group benefits from close commercial relationships with a number of
key customers. The loss of any of these key customers, or
tightening of commercial terms, or brand or reputational damage
associated with such supply could result in a material impact on
the Group's results. The Group is also exposed to poor performance
and execution by the customers in the categories it supplies. There
is a further risk that our key customers may seek to dilute their
own risk, by moving to a multi-supplier base.
Raw material and input cost inflation: The Group's cost base and
margin can be affected by fluctuating raw material and energy
prices and changes in cost and price profile. The Group may also be
impacted by the loss of a key supplier. The Group relies on a
concentrated number of key suppliers. A loss of, or interruption of
supply from a key supplier could cause short-term disruption to the
operational ability of the Group and adversely affect its results.
The current economic environment has seen inflation in the UK rise
at unprecedented levels, while the Group is working to mitigate the
impact of inflation by maintaining a strong commercial focus on
purchasing, process and cost improvement, there is a risk that the
Group may not be able to fully mitigate this risk.
Operational
Food industry and environmental regulations: As a producer of
convenience food and ingredients, Greencore is subject to rigorous
and constantly evolving laws and regulations, particularly in the
areas of food safety and environmental protection. Failure to
comply with such regulations may lead to serious financial,
reputational and/or legal risk.
Product contamination: The Group produces a large volume of food
annually and there are risks of product contamination at a
Greencore manufacturing facility or one of our approved suppliers,
through either accidental or deliberate means. This may lead to the
potential harm to consumers and result in products being withdrawn
or recalled. As well as being a significant draw on resources,
product contamination could result in a financial, reputational
and/or legal impact on the Group.
IT systems and cyber risk: The Group relies heavily on
information technology and requires continuous investment in
systems to support our business. In common with most large
organisations, the Group carries risk related to cyber-events
threatening the availability or integrity of our systems and the
data which they hold. Losses caused by accidental or malicious
actions, including those resulting from a cyber security attack,
could result in a significant impact on the Group. The Group has
already seen this risk materialise in the form of a recent cyber
incident. The Group responded proactively following a robust
governance process for restoring IT systems and applications used
by the business in a secure manner in line with the Group Recovery
Policy. The risk of a further cyber incident remains and is being
further heightened by the Russian-Ukraine war, as it is believed
that those member states seeking sanctions against Russia are felt
to be at greater risk of attack either directly or indirectly.
Management are continuing to take further action and remediation to
mitigate this increased risk.
People
Health and safety: In addition to the obvious human cost, a
serious workplace injury or fatality could inevitably carry serious
financial, reputational and/or legal risk.
Labour recruitment and retention of key personnel: The ongoing
success of the Group is dependent on attracting and retaining high
quality senior management who can effectively implement the Group's
strategy which includes the implementation of the group wide
transformation and reorganisation programme, "Better Greencore" to
increase operational efficiencies and reduce organisational
complexity.
Labour cost, availability and compliance with employment
legislation: Due to political, economic and legislative uncertainty
and change, labour cost and availability has been impacted. The
Group has already seen this risk materialise in H1 22 and continue
to be affected by these external factors. The Group has to also
ensure it is compliant with any ethical legislation such as minimum
wage legislation as well as working time directives and eligibility
to work regulations in the UK. Failure to comply with employment
legislation could result in heavy fines as well as reputational
damage.
Financial
Interest rates, foreign exchange rates, liquidity and credit:
There are inherent risks associated with fluctuations in both
foreign exchange rates and interest rates. In addition, in the
current economic climate, the Group's credit rating and its related
ability to obtain funding for future development and expansion are
specific risks.
Employee retirement obligations: The Group's defined benefit
pension schemes are exposed to the risk of changes in interest
rates and the market values of investments, as well as inflation
and the increasing longevity of scheme members. Volatility in
worldwide equity and bond markets can impact the risk of employee
retirement obligations.
Pandemic: The COVID-19 pandemic has led to unprecedented
challenges and issues. Whilst COVID-19 vaccines have been developed
and rolled out with significant coverage in our core UK market,
there remains a risk of emerging variants disrupting the
effectiveness of the vaccine programme which could adversely impact
Group operations. Failure to adapt to changes brought about by the
impact of the COVID-19 pandemic and any future pandemics may
adversely affect our competitiveness and financial results.
Environmental/ Climate risk: Climate change has the potential to
dramatically change the world in which we live and operate.
Tackling climate change, by taking measures to limit its impact to
manageable levels, has become a key priority for governments,
businesses and citizens around the world. Even if manageable, the
effect of climate change will be quite profound. There is also a
risk that the Group may fail to uphold its environmental
responsibilities and commitments, which in addition to carrying a
reputational impact for the Group, may also result in breaches of
laws or regulations and may have a financial and/or legal impact
for the Group.
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END
IR EAESDAFXAEAA
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