Greencore expects strong growth after tasty start to 2018

The FTSE 250-listed group reported revenue of £640.5m in the 13 weeks to 29 December, up 53.6% compared to the same period last year, or 7.2% higher on a pro forma basis.

Management anticipated delivering strong growth in 2018 and said the group was "well positioned to drive improved profitability, cash flow and returns over the medium term". Greencore supplies chilled, frozen and ambient foods from sandwiches and sushi to ready meals like lasagne and meat pies to retail and food service customers in the UK and US.

The UK and Irish convenience foods arm grew sales 9.2% to £385.4m, including pro-forma growth of 8.7%. Food to Go was the key growth driver, with total sales up 12.2% and pro-forma sales ahead by 11.4% benefiting from new business and positive growth in the underlying market.

Outside Food to Go, UK sales increased 5.7%, including 5.5% pro-forma growth, with the refurbishment and extension of Greencore's largest ready meal facility in Warrington "progressing well" for completion in second quarter.

The previously announced restructuring of the UK business was said to be "on track", with Monday seeing Greencore announce an agreement to sell its cakes and desserts business, which, together with the announced closure of the desserts facility in Evercreech, marks its exit from the UK cakes and desserts sector.

UK investment activity eased during the quarter after a phase of substantial spending in the past two years.

Over in the USA, convenience foods sales increased 297% to £255.1m, though on a pro-forma basis sales increased by 5.1% with pro-forma volume up 7%, in line with targets.

Commercial activity with consumer packaged goods customers was said to have been “encouraging”, with "strong underlying trading" from category growth and previous new business wins, and the broader commercial pipeline “proceeding well”.

Management said they were focusing more on efficiencies, particularly within some parts of the group's original network where capacity utilisation remains low.

President Donald Trump's tax reforms, including a reduction in the corporate tax rate to 21% is expected to reflect a one-off, non-cash, credit of approximately $28m in this year's interim results and Greencore expects to benefit from the lower rate of corporate income tax on future taxable earnings in its US business.

Greencore shares rose 1.2% to 204.6p on Tuesday morning.

Analyst Darren Shirley at Shore Capital said at this still early stage in the financial he was leaving his forecasts unchanged.

He applauded the exit from cakes & desserts "as a strategically sensible move", even though the business generated flat profits, the sale was more about "removing a potential distraction/headwind than any impact on the underlying P&L or cash flow".