Greencore swings to H1 loss as Covid restrictions dent revenues

Convenience food group Greencore said on Tuesday that it swung to a loss in the first half as Covid-related restrictions and lockdowns dented revenues, but struck a more optimistic note on the outlook.

In the 26 weeks to 26 March, the company swung to a pre-tax loss of £1.8m from a profit of £27.3m in the same period a year ago, as revenue fell 19% to £577.1m. Greencore attributed the revenue drop to a "reduction in consumer mobility as a result of tiered restrictions and lockdowns in the UK".

Still, the company said revenue momentum in the first seven weeks of the second half has been "encouraging", with pro forma revenue in food-to-go categories running at around 123% above prior year levels and 14% below the equivalent pre-Covid levels in FY19.

In addition, Greencore said that a continued reopening of the UK in line with the current roadmap would be expected to generate a FY21 adjusted operating profit outturn above FY20 levels.

Chief executive officer Patrick Coveney said: "This has been a challenging period for Greencore, but the consistent build in our revenues since early March as lockdown measures have eased and Covid-19 cases have fallen give us real cause for optimism.

"Our focus now is on rebuilding revenue, profitability and cash flow momentum as the UK economy reopens. Our recent business wins are a great endorsement of our continuing relevance in the UK convenience food landscape. Underpinned by the quality of our people, our new sustainability strategy and the strength of our long-standing customer relationships, we are confident of being able to build back the business rapidly and profitably, and are optimistic about the medium-term prospects for Greencore."

At 0905 BST, the shares were down 13% at 148.91p.

Neil Wilson, chief market analyst at Markets.com, said: "Certainly, shares have enjoyed a good run so a bit of profit-booking on the results can be expected, but the reaction in the share price looks overdone - this is very much backward-looking data.

"Indeed, these results kind of underscore what we already know - anything up to the end of March was incredibly tough, but since then things are improving quickly."