Greencore raises £90m in placing; FY profits slump

Convenience food producer Greencore said on Tuesday that it has raised £90m in a placing to help it weather the pandemic, after it reported an 81% slump in full-year pre-tax profit.

Announcing the placing late on Monday, Greencore said: "The board is in agreement that, given the near-term uncertainty, the group's balance sheet would now benefit from strengthening by way of additional financing and is therefore proposing to raise up to £90m of new equity as part of a suite of operational and financing measures to further strengthen liquidity and leverage, better position the group to rebound strongly from the pandemic and secure further growth opportunities."

Greencore placed 79.7 million shares - 18% of its issued share capital - at 112p each, which is a 5.7% discount to the closing share price on Monday.

In its full-year results, the company said adjusted pre-tax profit slid to £17.3m from £92.3m a year earlier, with revenue down 12.5% to £1.3bn. Greencore incurred Covid-19 related costs of £24.6m, comprising £10.7m of operating costs and £13.9m of exceptional charges.

The company, which makes sandwiches for Marks & Spencer, said its performance was broadly in line with plan for much of the first half of the year until the outbreak of the Covid-19 pandemic and the introduction of restrictions in the UK in March.

"The reduction in mobility caused by the UK national lockdown period during the second half of FY20 clearly had a material, albeit temporary, effect on the group's trading performance," it said.

Chief executive officer Patrick Coveney said it had been "an exceptionally challenging year".

"There is a direct correlation between the performance of food to go and the nation's ability to move around freely," he said. "As a result, that part of our business has been significantly impacted by the social restrictions that have been put in place as a result of Covid-19. However, we remain confident that demand for our food to go categories will recover strongly as the effect of Covid-19 recedes, and were encouraged by the uplift in demand that we saw in Q4 as the UK economy slowly reopened."

House broker Shore Capital said: "We welcome the ongoing steps Greencore is taking in the most challenging of trading contexts, times that require considerable agility and capability to adapt. With the above steps in tow, we believe Greencore has bolstered its liquidity and with the resources in place to prevent what could be damaging additional cost and capital control, the group can look forward to a post-vaccine CY2021 with confidence, returning to strong growth with enhanced operating capabilities (e.g. automation), strengthened market relevance and positions plus tools to broaden its reach by category and channel.

"After much challenge, we share Greencore’s confidence of an enhanced medium-term outlook in the face of current adversity; FY2019 trading activity levels could return in FY2022."