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Greencore, the UK’s largest sandwich maker, has been able to raise its annual profit forecast as the popularity of “food-to-go” endures despite inflation and increasingly cost-conscious consumers.
The upgrade sent the Dublin-based group’s shares surging as much as 25 per cent to 86.25p on Tuesday following the unscheduled trading update.
Greencore expects operating profit for the year to September 29 to be in the range of £74mn to £76mn, ahead of the current market consensus of £70.1mn. The company, which supplies sandwiches, salads and sushi to supermarkets and cafés, said it expected revenues in the year to have risen 10 per cent.
The revised forecast follows a 4 per cent year on year pro forma revenue growth in the fourth quarter, driven by a 3 per cent growth in the company’s food-to-go division and 6 per cent in other convenience categories.
Greencore’s chief executive Dalton Philips said it had been “a strong second half performance in what was a difficult seasonal comparative period and against the backdrop of inflation and a challenging consumer environment.”
“While macroeconomic uncertainty remains, we are pleased with the expected FY23 outcome and are committed to driving an improved financial performance in the period ahead,” he added.
The performance follows a difficult period for Greencore during the pandemic when it sank to a loss as demand for prepared lunch items plummeted during successive lockdowns. In 2020 Greencore was forced to suspend its dividend, adopt cost-cutting measures and hold an £87mn equity placing to help offset some of the impact of the pandemic.
Greencore on Tuesday announced a fourth share buyback programme as part of the £50mn return of capital to shareholders announced last year.
Philips said the company’s “strong balance sheet and continued optimism” meant that Greencore could continue to “return value in the form of buyback, dividends or both and will continue to assess our capital returns policy at the time of year end results”.
Darren Shirley, research analyst at Shore Capital, said the update was “encouraging” as it showed customers were still willing to buy products even if they were cash-strapped. “Talking about positive volumes within sandwiches being manufactured and other convenience showed that even though there is quite a bit of inflation still in the system, the consumer is still happy to purchase food on the go,” he said.
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