REG - Greencore Group PLC - FY23 Results Statement
28/11/2023 07:00
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RNS Number : 8259U Greencore Group PLC 28 November 2023
http://www.rns-pdf.londonstockexchange.com/rns/8259U_1-2023-11-27.pdf
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28 November
2023
Performance stabilised, business well positioned for the future
Greencore Group plc ('Greencore' or the 'Group'), a leading manufacturer of
convenience food in the UK, today issues its results for the 52 week period
ended 29 September 2023.
SUMMARY FINANCIAL PERFORMANCE
FY23 FY22 Change
£m £m
Group Revenue 1,913.7 1,739.6 +10.0%
Pro Forma Revenue Growth +13.5%
Adjusted EBITDA 132.8 126.9 +4.6%
Group Operating Profit 66.0 52.1 +26.7%
Adjusted Operating Profit 76.3 72.2 +5.7%
Adjusted Operating Margin 4.0% 4.2% -20 bps
Group Profit before taxation 45.2 39.8 +13.6%
Adjusted Profit Before Tax 58.1 59.8 -2.8%
Basic EPS (pence) 7.2 6.2 +16.1%
Adjusted EPS (pence) 9.3 9.2 +1.1%
Group Exceptional Items (after tax) (5.5) (13.5) +59.3%
Free Cash Flow 56.8 58.7 -£1.9m
Net Debt (excluding lease liabilities) 154.0 180.0
Net Debt: EBITDA as per financing agreements 1.2x 1.5x
Return on Invested Capital ("ROIC") 8.9% 8.4% +50bps
FINANCIAL HIGHLIGHTS(1,2)
· Volume growth ahead of the wider market(3), despite exiting low
margin business
· Strong second half, supporting delivery of Adjusted Operating Profit
of £76.3m in FY23, up 5.7%
· Recovery of inflation, supported by cost reductions and other
mitigations
· Net Debt (excluding leases) to Adjusted EBITDA reduced to 1.2x
· ROIC increased to 8.9%, up from 8.4% in FY22
· Continued share buyback programme will deliver on commitment of £50m
value return
STRATEGIC & OPERATIONAL HIGHLIGHTS(1)
· Stabilisation of business completed through delivery of "Horizon 1"
objectives, moving to "Horizon 2", rebuilding profitability and returns
· Proactive management of contract profitability and manufacturing
capacity utilisation
· Continued outstanding operational service levels of 98.5% achieved in
FY23
· Refocused sustainability agenda
· Disposal of Trilby Trading Limited, increasing our focus on the
convenience food market
· New five year £350m sustainability linked revolving credit facility
providing significant financial flexibility for future growth
· Appointment of Catherine Gubbins as Chief Financial Officer and
Executive Director
Commenting on the results, Dalton Philips, Chief Executive Officer, said
"In a challenging market environment, we have stabilised the business, and
made good strategic progress. The Group delivered above-market volume
growth(3), despite exiting a number of low margin contracts. We also
successfully mitigated and recovered the majority of our input cost inflation
through effective operational and commercial initiatives. We are encouraged by
our FY23 performance and the progress across the business. That performance is
testament to the strength of our relationships with our customers and
suppliers and, in particular, to the hard work and dedication of the entire
Greencore team.
The Group continues to focus on improving profitability and is investing in a
number of initiatives focused on both optimising our network and our IT
infrastructure, to give us the platform for future growth. Our stronger
balance sheet provides the financial flexibility to underpin this growth. We
are pleased with the start to the year and although it's early days, the Group
remains confident in delivering FY24 within the range of current market
expectations(4)."
____________________________________________________________________________________________________
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 Full Financial Year Results Statement.
2 The financial year is the 52-week period ended 29 September 2023 with
comparatives for the 53-week period ended 30 September 2022.
3 Kantar grocery market performance for the 52 weeks to 1(st) October
2023.
4 Market expectations as complied by Greencore from available analyst
estimates on 13 November 2023
(https://www.greencore.com/investor-relations/analyst-centre
(https://www.greencore.com/investor-relations/analyst-centre) )
Basis of preparation
The financial information included within this Results Statement is based on
the audited consolidated financial statements of Greencore Group plc. Details
of the basis of preparation can be found in Note 1 to the attached financial
information.
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. 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. 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.
Presentation & Conference Call
A presentation of the results for analysts and institutional investors will
take place at 9.30am on 28 November 2023 at etc. Venues, 8 Fenchurch Place,
London EC3M 4PB. The presentation slides will be available on the Investor
Relations section on www.greencore.com from 7.00am that morning.
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:
Dalton Philips Chief Executive Officer Tel: +353 (0) 1 486 3326
Jonathan Solesbury Interim Chief Financial Officer Tel: +353 (0) 1 605 1000
Curtis Armstrong Finance Director - FP&A and IR Tel: +44 (0) 1246 384649
David Marshall Head of Capital Markets Tel: +353 (0) 1 605 1000
Jonathan Neilan FTI Consulting Tel: +353 (0) 86 231 4135
Nick Hasell FTI Consulting Tel: +44 (0) 203 727 1340
About Greencore
We are a leading manufacturer of convenience food in the UK and our purpose is
to make every day taste better. To help us achieve this we have a model called
The Greencore Way, which is built on the differentiators of People at the
Core, Great Food, Excellence and Sustainability - The Greencore Way describes
both who we are and how we will succeed. 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 FY23 we manufactured 779m sandwiches and other food to go products, 132m
chilled ready meals, 45m chilled soups and sauces and 245m jars of cooking
sauces, pickles and condiments. We carry out more than 10,400 direct to store
deliveries each day. We have 16 world-class manufacturing sites and 17
distribution centres in the UK, with industry-leading technology and supply
chain capabilities. We generated revenues of £1.9bn in FY23 and employ 13,600
people. We are headquartered in Dublin, Ireland. For further information go
to www.greencore.com (http://www.greencore.com) or follow Greencore on social
media.
OPERATING REVIEW(1)
Strategic developments
The Group delivered good progress against its strategic priorities in FY23,
underpinned by close customer engagement in a highly inflationary and
difficult consumer spending environment. The Group delivered year-on-year
reported revenue growth of 10.0%, through a combination of underlying volume
growth, including net new business wins and also recovering significant levels
of inflation. Manufactured volume growth of 0.5% represents a strong volume
performance, relative to the wider market performance(3). The Group maintained
outstanding operational service levels during the financial year, working
closely with our customers and supply partners, with overall service levels at
98.5% in FY23 compared to 97.4% in FY22.
Management has remained focused on proactively managing contract returns and
capacity management across the Group. The Group has exited a number of
contracts, which were delivering sub-optimal returns with a focus on
maximising returns and optimising use of our manufacturing footprint.
The Group successfully delivered on its Better Greencore programme targets in
FY23, a change programme to drive efficiency and profit improvement, with a
focus on fixed cost and overhead inflation. The targeted £30m of annualised
benefits from this programme were realised during H2 FY23. In March 2023, the
Group accelerated a headcount reduction programme which resulted in the
reduction of approximately 250 salaried roles, in addition to this, a further
100 vacant salaried roles were removed from the organisational structure.
An exceptional charge of £8.9m was recognised in FY23 related to the Better
Greencore programme; bringing the cumulative cost of delivery of the programme
to £25.7m, including £0.7m of capital expenditure.
During the financial year the Group established a strategic framework for
recovery and growth, with goals set across a three horizon framework:
· The first objective was to stabilise the business through the
first horizon, which was achieved in FY23;
· The second horizon is focused on the rebuilding of profitability
and returns; and
· The focus of the third horizon is to further develop our strong
growth platform.
Our horizon framework will guide the prioritisation and sequencing of our
long-term strategic objectives.
The Group also initiated incremental activity on commercial and operational
efficiencies to support profitability and mitigate inflation in FY23. The
Group made good progress in implementing these in FY23 as outlined below.
· A commercial excellence programme combining profit enhancement
activities across volume, cost, pricing and product mix:
o a deep product innovation pipeline has enabled the Group to drive volume
and unlock value for both Greencore and customers;
o improvements in our NPD process have increased efficiency and allowed us
to better support customers;
o in FY23, the number of SKUs were reduced by 9% with volume per SKU
increasing 10%; while the Group continued to be a supplier of choice to our
chosen partners; and
o increased focus on returns has led to the resignation from contracts which
were delivering sub-optimal returns.
· A structured operational excellence programme has been rolled-out
across the business. This involves:
o detailed diagnostic benchmarking of the Group's manufacturing facilities;
o the selection of four pilot large sites for improvement activities, which
together account for c.50% of Group COGS; and
o implementation of improvement methodologies, with each of the four sites
focused on one of material waste, labour, planning, supply chain planning or
engineering.
Following on from this the Group will continue to focus on commercial
excellence, operational excellence and continued tight management of costs.
The Group announced the appointment of Catherine Gubbins as Executive Director
and Chief Financial Officer on 5September 2023. Catherine joins the business
on 6 February 2024 from daa plc, the global airports and travel retail group
where she has worked for nine years in various roles including as Group CFO
since March 2021.
In November 2023, John Amaechi and Sly Bailey advised the Board that they
would not be seeking re-election at the 2024 Annual General Meeting.
Trading Performance
FY23 FY22 Change Change
£m £m (As reported) (Pro Forma Basis)
Revenue 1,913.7 1,739.6 +10.0% +13.5%
Group Operating Profit 66.0 52.1 +£13.9m n/a
Adjusted Operating Profit 76.3 72.2 +£4.1m n/a
Group Profit Before Tax 45.2 39.8 +£5.4m n/a
Group reported revenue increased by 10.0% to £1.9bn in FY23. Reported revenue
growth was driven by an 11.3% benefit from recovery of cost inflation, a 0.7%
benefit from manufactured volume increases (a combination of underlying
growth, price mix and new business wins) and a (1.9%) decline related to
distribution of third-party goods, the Trilby Trading Limited business and
revenue contribution from the 53(rd) week in FY22. On a pro forma basis,
revenue increased 13.5% in FY23 as a result of adjusting for the impact of the
53(rd) week in FY22 and the disposal of the edible oils trading business,
Trilby Trading Limited.
Overall, Group Operating Profit in FY23 increased 26.7% to £66.0m and
Adjusted Operating Profit increased by 5.7% to £76.3m. The Adjusted Operating
Profit improvement was driven by the increased revenue performance underpinned
by the operational and commercial initiatives implemented during the financial
year. Group Profit Before Tax was £45.2m in FY23, compared to £39.8m in
FY22.
Substantial inflation in the Group's main cost components led to a low double
digit percentage rate of inflation in FY23. Inflation incurred was largely
recovered or mitigated in the period, through a number of mechanisms,
including pass-through of cost increases, cost reductions, product and range
reformulations, and alternative sourcing. Specifically, the Better Greencore
change programme alongside other efficiency initiatives also supported the
offsetting, recovery and mitigation of labour, fixed cost and other overhead
cost inflation.
The largest component of inflation was in commodities across raw materials and
packaging, some of which was recovered through pre-agreed recovery mechanisms
in place with a number of customers. The other elements of inflation were
largely recovered through a combination of close customer engagement and
operational efficiencies. Key initiatives on which the Group worked in
collaboration with customers, included range alterations, packaging redesigns
and product reformulations.
New business, net of business losses, contributed c.2% of the Group's revenue
growth in the period. The new business was largely driven by the annualisation
of the on-boarding of a strategic business win across multiple categories,
which was supported by a strategic capital investment.
The Group managed a very active commercial agenda with customers in FY23 and
launched approximately 400 new or reformulated products, within the Group's
total SKU range of more than 1,600 products. Examples of launches with key
customers during the financial year include Christmas ranges of sandwiches. In
January 2023, a series of new own label brands were launched in the vegan and
health category with major retailers. We also launched a new range of cooking
sauces, as well as creating summer twists on the nation's favourite quiche and
picnic ranges.
Revenue in the Group's Food to Go categories (comprising sandwiches, salads,
sushi and chilled snacking) totalled £1.25bn and accounted for approximately
65% of reported revenue. Reported revenue increased by 7.9% in these
categories, largely driven by inflation recovery, in addition to volume growth
in sandwiches and the contribution of new business wins. The Group also
experienced volume growth across the Food to Go Salads category, however there
were weaker performances in the Side of Plate category and a continued
challenging own label sushi market. Revenue from the distribution of
third-party products accounted for approximately 9% of Group revenue in FY23.
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 the Trilby
Trading Limited business. Reported revenue across these categories increased
by 14.3% to £661.1m in FY23. The increase was driven by inflation recovery,
in addition to volume increases across a number of categories. Revenue related
to volume growth was 0.4% higher than in FY22, excluding the impact of the
53(rd) week in FY22, due largely to the annualisation of new business wins
onboarded in the ready meals category in FY22. In addition to this the Group
also saw a strong volume performance in the cooking sauce and soup categories,
however much of the remainder of the grocery category saw a more challenging
performance.
Group Cash Flow and Returns
FY23 FY22 Change (as reported)
£m £m
Free Cash Flow 56.8 58.7 -£1.9m
Net Debt 199.0 228.0 -£29.0m
Net Debt (excluding lease liabilities) 154.0 180.0 -£26.0m
ROIC 8.9% 8.4% 50bps
The Group continued to carefully manage both Cash Flows and leverage in FY23.
The Group recorded a Free Cash inflow of £56.8m in FY23 a modest decrease on
the prior year as the higher profitability in FY23, was offset by increases in
financing and tax costs. Free Cash Flow conversion was 42.8% compared with
46.3% in FY22.
The Group's Net Debt at 29 September 2023 was £199.0m, a decrease of £29.0m
compared to 30 September 2022. Net Debt excluding lease liabilities was
£154.0m down 14% on the prior year due to increased profitability, reduction
in capital expenditure and disposal proceeds of Trilby Trading Limited. The
Group's Net Debt: EBITDA leverage covenant as measured under financing
agreements was 1.2x at period end, compared to 1.5x at 30 September 2022.
In January 2023, the Group further strengthened its balance sheet when it
extended the maturity on its £50.0m bilateral facility by two years to
January 2026. As at 29 September 2023, the Group had total committed debt
facilities of £482.8m, a weighted average maturity of 2.1 years and cash and
undrawn committed bank facilities of £327.8m. Subsequent to the year end, the
Group has refinanced its debt facilities with a new five year £350.0m
sustainability linked revolving credit facility.
ROIC increased to 8.9% for the year ended 29 September 2023, compared to 8.4%
for the prior year. The year-on-year increase was driven primarily by
increased profitability in the 12-month period to 29 September 2023. Average
invested capital decreased year-on-year from £695.0m to £678.1m.
Better Future Plan
During FY23, we focused on assigning ownership of action and refined topic
priorities to help us to reach our targets.
Our FY23 key sustainability strategy progress included the implementation of a
new plan ownership model which sees plan owners within relevant business
functions take responsibility for each element of our Better Future Plan and
defined the strategic focus to four priorities; Energy, Food Waste,
Communities and Healthy and Sustainable Diets.
Progress across the Better Future Plan was made as outlined below:
· reported on deforestation-free soy for the first time, providing
visibility of the total soy footprint;
· embedded human rights as an agenda item for discussion in key
supplier performance meetings;
· launched scope 3 carbon engagement with key suppliers, for
collaboration with suppliers;
· completed energy savings opportunity scheme (ESOS) audits across 80%
of our total group energy usage; andon-boarded the Mondra environmental
footprinting tool.
FINANCIAL REVIEW(1)
Revenue and Operating Profit
Reported revenue in the period was £1,913.7m, an increase of 10.0% compared
to FY22, due to increased volume in the financial year including new business
wins, as well as recovery of inflation. Pro Forma Revenue increased by 13.5%.
Pro Forma Revenue adjusts for the disposal of the Trilby Trading Limited in
both financial years and has adjusted FY22 revenue for the additional week of
trading.
Group Operating Profit increased from £52.1m in FY22 to £66.0m in FY23 as a
result of the increased revenue performance underpinned by the operational and
commercial initiatives implemented during the financial year. Adjusted
Operating Profit was £76.3m compared to £72.2m in FY22. Adjusted Operating
Margin was 4.0%, 20bps lower than FY22.
Net finance costs
The Group's net bank interest cost was £16.9m in FY23, an increase of £5.8m
versus FY22. The increase was driven by higher cost of debt during FY23. The
Group also recognised a £1.2m interest charge relating to the interest
payable on lease liabilities in the period (FY22: £1.2m).
The Group's non-cash finance charge in FY23 was a net £2.7m (FY22: £Nil).
The change in the fair value of derivatives and related debt adjustments
including foreign exchange in the financial year was a £1.4m charge (FY22:
£1.2m credit) and the non-cash pension financing charge of £1.2m was £0.1m
higher than the FY22 charge of £1.1m.
Profit before taxation
The Group's Profit before taxation increased from £39.8m in FY22 to £45.2m
in FY23, driven by higher Group Operating Profit and lower exceptional items
offset by higher finance costs. Adjusted Profit Before Tax in the period was
£58.1m compared to £59.8m in FY22, the decrease primarily driven by a higher
effective tax rate.
Taxation
The Group's effective tax rate in FY23 was 21% (FY22: 19%). The increase in
the effective tax rate reflects the increase in the UK corporation tax rate.
Exceptional items
The Group had a pre‐tax exceptional charge of £6.7m in FY23, and an after
tax charge of £5.5m, comprised as follows:
Exceptional Items £m
Reorganisation costs (8.9)
Pension restructuring (0.4)
Profit on disposal of trading business 0.1
Release of legacy business liability 1.7
Reversal of Impairment 0.6
Non-core property related income 0.2
Exceptional items (before tax) (6.7)
Tax on exceptional items 1.2
Exceptional items (after tax) (5.5)
In FY23, the Group continued the Better Greencore programme to support the
Group's excellence cost efficiency programmes and to unlock further cost
efficiencies by reducing organisational complexity. The Group recognised a
charge of £8.9m in respect of work carried out in the period (FY22: £16.1m).
These exceptional costs were offset by a number of exceptional credits which
included the profit on disposal of Trilby Trading Limited of £0.1m and the
release of a legacy business liability of £1.7m.
Earnings per share
The Group's basic earnings per share for FY23 was 7.2 pence compared to 6.2
pence in FY22. This was driven by a £3.6m increase in profit attributable to
equity holders and a decrease in the weighted average number of shares in
issue in FY23 to 495.4m (FY22: 523.4m) due to the impact of the share buyback
programme.
Adjusted Earnings were £46.2m in the period, £1.9m behind FY22 largely due
to an increase in Adjusted Operating Profit offset by an increase in interest
and tax costs. Adjusted Earnings Per Share of 9.3 pence compared to adjusted
earnings per share of 9.2 pence in FY22.
Cash Flow and Net Debt
Adjusted EBITDA was £5.9m higher in FY23 at £132.8m. The Group recognised a
net working capital inflow of £2.2m (FY22: working capital inflow of £2.0m).
Maintenance Capital Expenditure of £26.6m was recorded in the financial year
(FY22: £16.9m). The cash outflow in respect of exceptional charges was
£10.9m (FY22: £13.6m).
Interest paid in the period was £17.6m (FY22: £16.7m), including interest of
£1.2m on lease liabilities, an increase on FY22 reflecting higher interest
costs on borrowings in FY23. The Group recognised tax paid of £2.7m (FY22:
£2.2m tax receipt) in the period. The cash tax payable by the Group will
remain low due to the availability of full expensing relief for capital
expenditure. The Group's effective tax rate will be higher than the cash tax
rate in the medium term as deferred tax liabilities will arise on assets where
full expensing relief has been claimed. The deferred tax liabilities will
release over the useful life of the assets. Cash repayments on lease
liabilities decreased to £15.6m (FY22: £17.3m). The Group's cash funding for
defined benefit pension schemes was £11.1m (FY22: £11.5m).
In FY23, the Group recorded Strategic Capital Expenditure of £10.8m (FY22:
£33.1m).
The Group did not make any equity dividend cash payments in either period. The
Group made net share purchases of £30.1m in FY23 reflecting the continuation
of the Group's share buyback programme in FY23 with £26.2m of shares bought
back in FY23 and the purchase of shares for the Group's employee share
ownership scheme of £3.9m. This compared to net share purchases of £11.8m in
FY22.
In September 2023, the Group completed the sale of its interests in its edible
oils business, Trilby Trading Limited for a final net cash consideration of
£6.1m.
The Group's Net Debt excluding lease liabilities at 29 September 2023 was
£154.0m, a decrease of £26.0m compared to the end of FY22.
Financing
As at 29 September 2023, the Group had total committed debt facilities of
£482.8m and a weighted average maturity of 2.1 years. These facilities
comprised:
· a £340.0m revolving credit bank facility with a maturity date of
January 2026;
· a £50.0m bilateral bank facility with a maturity date of January
2026;
· a £45.0m bank term loan facility with a maturity date of June
2024; and
· £13.5m and $41.9m of outstanding Private Placement Notes with
maturities ranging between June 2024 and June 2026
At 29 September 2023 the Group had cash and undrawn committed bank facilities
of £327.8m (FY22: £398.0m).
Subsequent to the financial year end, the Group has refinanced its debt
facilities with a new five year £350.0m sustainability linked revolving
credit facility ('RCF'), maturing in November 2028 with the option to extend
for up to a further two years. The facility also includes a £100 million
accordion option which provides additional potential financing facilities.
This new facility replaces the existing £340.0m RCF that was due to mature in
January 2026. A £45.0m term loan due to mature in June 2024 was also repaid
in full as part of this debt restructuring.
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 29 September 2023 was £20.1m, £0.2m lower
than the position at 30 September 2022. The net pension deficit after related
deferred tax was £12.8m (FY22: £10.4m), comprising a net deficit on UK
schemes of £28.3m (FY22: £44.5m) and a net surplus on Irish schemes of
£15.5m (FY22: £34.1m).
In November 2022, the trustees of the Irish legacy defined benefit scheme
entered into an annuity buy-in transaction to purchase an insurance policy for
the pensioner liabilities, representing approximately 80% of the liabilities
of the scheme. This has the benefit of de-risking the future of the scheme.
The insurance policy is treated as a plan asset and the fair value of the
policy is determined to be the present value of the related obligations. At
the completion of the buy-in of the insurance policy, the Group recognised an
actuarial loss in equity reflecting the change in the value of the plan assets
to match the related obligation.
The decrease in the Group's net pension deficit was driven principally by net
actuarial losses particularly on the Irish scheme offset by contributions paid
by the Group. The movement in the discount rate is driven by the corporate
bond rate. The UK scheme is 75% hedged for movements in gilt yields.
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. A full actuarial
valuation was carried out on the Irish scheme at 31 March 2022 and a full
actuarial valuation is ongoing with reference to 31 March 2023 for the UK
defined benefit scheme. The Group expects the annual cash funding requirement
for all schemes to be approximately £12m - £15m.
Return of value to shareholders
In May 2022, a £50m return of value to shareholders over the next two years
was announced. The Group completed £35.0m of share buyback programme to 29
September 2023, of which the total cash returned in FY23 was £26.2m. On 10
October 2023, the continuation of the Group's share buyback programme was
announced up to a maximum of £15.0m to 30 March 2024. Between 10 October 2023
and 24 November 2023, the Company purchased a total of 4,907,006 ordinary
shares under the Buyback Programme, returning a total of £4.5m in cash to
shareholders.
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 risks and
uncertainties are described in detail in the section Risks and risk management
in the Annual Report and Financial Statements for the financial year ended 29
September 2023 issued on 28 November 2023.
Dalton Philips
Chief Executive Officer
Date: 27 November 2023
GROUP INCOME STATEMENT
For financial year ended 29 September 2023
2023* 2022
Notes Pre- exceptional Exceptional Total Pre- exceptional Exceptional Total
(Note 3)
(Note 3)
£m £m £m £m £m £m
Revenue 2 1,913.7 - 1,913.7 1,739.6 - 1,739.6
Cost of sales (1,344.9) - (1,344.9) (1,216.6) - (1,216.6)
Gross profit 568.8 - 568.8 523.0 - 523.0
Operating costs before acquisition related amortisation (491.4) (6.7) (498.1)
(449.6) (16.5) (466.1)
Impairment of trade receivables (1.1) - (1.1) (1.2) - (1.2)
Group operating profit before acquisition related amortisation 72.2 (16.5) 55.7
76.3 (6.7) 69.6
Amortisation of acquisition related intangibles (3.6) - (3.6)
(3.6) - (3.6)
Group operating profit/(loss) 72.7 (6.7) 66.0 68.6 (16.5) 52.1
Finance income 4 0.7 - 0.7 0.2 - 0.2
Finance costs 4 (21.5) - (21.5) (12.5) - (12.5)
Profit/(loss) before taxation 51.9 (6.7) 45.2 56.3 (16.5) 39.8
Taxation (10.5) 1.2 (9.3) (10.5) 3.0 (7.5)
Profit/(loss) for the financial year attributable to the equity shareholders 41.4 (5.5) 35.9 45.8 (13.5) 32.3
Earnings per share (pence)
Basic earnings per share 5 7.2 6.2
Diluted earnings per share 5 7.2 6.1
* The financial year is the 52 week period ended 29 September 2023 with
comparatives for the 53 week period ended 30 September 2022.
GROUP STATEMENT OF COMPREHENSIVE INCOME
for financial year ended 29 September 2023
Notes 2023* 2022
£m
£m
Total comprehensive income for the financial year
Items that will not be reclassified to profit or loss:
Actuarial (loss)/gain on Group legacy defined benefit pension schemes (9.2) 14.4
Tax charge on Group legacy defined benefit pension schemes (0.6) (4.1)
(9.8) 10.3
Items that may subsequently be reclassified to profit or loss:
Currency translation adjustment (0.5) 1.8
Translation reserve transferred to Income Statement on disposal of subsidiary 9 (0.6) -
Cash flow hedges:
fair value movement taken to equity (3.1) 8.5
transferred to Income Statement for the financial year (1.5) (1.6)
(5.7) 8.7
Other comprehensive income for the financial year (15.5) 19.0
Profit for the financial year 35.9 32.3
Total comprehensive income for the financial year attributable to the equity 20.4 51.3
holders
* The financial year is the 52 week period ended 29 September 2023 with
comparatives for the 53 week period ended 30 September 2022.
GROUP STATEMENT OF FINANCIAL POSITION
at 29 September 2023
Notes 2023 2022
£m
£m
ASSETS
Non-current assets
Goodwill and intangible assets 6 461.1 468.1
Property, plant and equipment 6 315.5 319.4
Right-of-use assets 41.0 44.4
Investment property 4.6 3.1
Retirement benefit assets 8 18.4 39.8
Derivative financial instruments 3.7 12.4
Deferred tax assets 28.8 37.1
Trade and other receivables 0.1 0.3
Total non-current assets 873.2 924.6
Current assets
Inventories 72.9 63.3
Trade and other receivables 234.2 248.7
Cash and cash equivalents 116.5 99.6
Derivative financial instruments 0.9 2.5
Total current assets 424.5 414.1
Total assets 1,297.7 1,338.7
EQUITY
Capital and reserves attributable to equity holders of the Company
Share capital 4.8 5.2
Share premium 89.7 89.7
Other reserves 120.8 127.8
Retained earnings 244.5 242.9
Total equity 459.8 465.6
LIABILITIES
Non-current liabilities
Borrowings 7 125.8 209.8
Lease liabilities 30.7 33.6
Other payables 2.4 2.7
Provisions 6.9 5.2
Retirement benefit obligations 8 38.5 60.1
Deferred tax liabilities 15.2 18.9
Total non-current liabilities 219.5 330.3
Current liabilities
Borrowings 7 144.7 69.8
Trade and other payables 446.0 445.1
Lease liabilities 14.3 14.4
Derivative financial instruments - 0.1
Provisions 3.0 4.7
Current tax payable 10.4 8.7
Total current liabilities 618.4 542.8
Total liabilities 837.9 873.1
Total equity and liabilities 1,297.7 1,338.7
GROUP STATEMENT OF CASH FLOWS
for the financial year ended 29 September 2023
Notes 2023* 2022
£m
£m
Profit before taxation 45.2 39.8
Finance income 4 (0.7) (0.2)
Finance costs 4 21.5 12.5
Exceptional items 3 6.7 16.5
Group operating profit before exceptional items 72.7 68.6
Depreciation and impairment of property, plant and equipment and right-of-use 56.8 52.5
assets
Amortisation of intangible assets 6.3 6.7
Employee share-based payment expense 3.3 2.7
Contributions to Group legacy defined benefit pension scheme 8 (11.1) (11.5)
Working capital movement 2.2 2.0
Net cash inflow from operating activities before exceptional items 130.2 121.0
Cash outflow related to exceptional items (10.9) (13.6)
Interest paid (including lease liability interest) (17.6) (16.7)
Tax (paid)/ received (2.7) 2.2
Net cash inflow from operating activities 99.0 92.9
Cash flow from investing activities
Purchase of property, plant and equipment (36.0) (48.6)
Purchase of intangible assets (1.4) (1.4)
Disposal of undertakings 9 6.1 -
Net cash outflow from investing activities (31.3) (50.0)
Cash flow from financing activities
Ordinary shares purchased - own shares (3.9) (3.0)
Capital return via share buyback (26.2) (8.8)
(Repayment)/drawdown of bank borrowings (20.2) 9.6
Repayment of Private Placement Notes (15.5) (47.3)
Settlement of swaps on maturity of Private Placement Notes (0.1) (2.6)
Repayment of lease liabilities (15.6) (17.3)
Net cash outflow from financing activities (81.5) (69.4)
Net decrease in cash and cash equivalents and bank overdrafts (13.8) (26.5)
Reconciliation of opening to closing cash and cash equivalents and bank
overdrafts
Cash and cash equivalents and bank overdrafts at beginning of the financial 46.7 73.6
year
Translation adjustment (0.1) (0.4)
Net decrease in cash and cash equivalents and bank overdrafts (13.8) (26.5)
Cash and cash equivalents and bank overdrafts at end of the financial year** 32.8 46.7
* The financial year is the 52 week period ended 29 September 2023 with
comparatives for the 53 week period ended 30 September 2022.
** Cash and cash equivalents and bank overdrafts is made up of cash at bank
and in hand of £116.5m (2022: £99.6m) and bank overdrafts of £83.7m (2022:
£52.9m).
Notes to the financial information for the financial year ended 29 September
2023
1. Basis of preparation
The financial information presented in this full year results statement
represents financial information that has been prepared in accordance with the
recognition and measurement principles of International Financial Reporting
Standards (IFRS) and IFRS Interpretations Committee interpretations adopted by
the European Union (EU). The financial information does not include all the
information required for a complete set of financial statements prepared in
accordance with EU IFRS, however selected explanatory notes are included to
explain events and transactions that are significant to an understanding of
the changes in the Group's financial position and performance during the
financial year ended 29 September 2023.
The financial information is based on the information included in the audited
Consolidated Financial Statements of Greencore Group plc for the financial
year ended 29 September 2023, to which an unqualified audit opinion is
provided. Full details of the basis of preparation of the Group Financial
Statements for the financial year ended 29 September 2023 are included in Note
1 of the FY23 Annual Report.
The financial information is presented in GBP, which is the functional
currency of the Company and presentation currency of the Group, rounded to the
nearest million.
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 continue to operate in a complex trading
environment linked to ongoing challenges with inflation.
Accordingly, the Directors have considered a number of scenarios for the next
18 months from the commencement of FY24. These scenarios consider the
potential impact of inflation on consumer spending, along with consideration
of under recovery of targets set out under the Group's commercial and
operational initiatives. The impact on revenue, profit and cashflow are
modelled, including the consequential impact on working capital.
The scenarios assumed by the Group are as follows:
· A base case assuming internally approved budget and strategic
plans, which includes amounts for near term climate change related
expenditure;
· A downside scenario which assesses the potential impact of inflation
on consumer spending and corresponding impact on volume, along with under
recovery of targets set out under the Group's commercial and operational
initiatives; and
· A severe downside scenario which includes further potential impacts
on volume due to the inflationary environment and further under recovery of
targets set out under the Group's commercial and operational initiatives.
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.
While the Group is in a net current liability position of £193.9m (2022:
£128.7m) at 29 September 2023, the Group has retained financial strength and
flexibility, with cash and undrawn committed bank facilities of £327.8m at 29
September 2023 (September 2022: £398.0m).
Subsequent to the year end, the Group has refinanced its debt facilities with
a new five year £350.0m sustainability linked revolving credit facility
('RCF'), maturing in November 2028 with the option to extend for up to a
further two years. This new facility replaces the existing £340.0m RCF that
was due to mature in January 2026. A £45.0m term loan due to mature in June
2024 was also repaid in full as part of this debt restructuring.
The Group is satisfied that there is sufficient headroom in the financial
covenants under facilities for each scenario.
Based on these scenarios and the resources available to the Group, including
the post year end re-financing, the Directors believe the Group has sufficient
liquidity to manage through a range of different cashflow scenarios over the
next 18 months from the year end date. Accordingly, the Directors adopt the
going concern basis in preparing these Group Financial Statements.
2. Segment Information
Convenience Foods UK & Ireland is the Group's operating segment, which
represents its reporting segment. 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, frozen Yorkshire Puddings, as well as the Irish Ingredients trading
business. On 29 September 2023, the Group disposed the Irish Ingredients
trading business, Trilby trading Limited.
Revenue earned individually from three customers in Convenience Foods UK &
Ireland of £348.3m, £280.7m and, £274.8m respectively represents more than
10% of the Group's revenue (2022: Revenue earned individually from three
customers in Convenience Foods UK & Ireland of £316.0m, £261.0m and
£196.3m, each respectively represents more than 10% of the Group's revenue).
The following table disaggregates revenue by product categories in the
Convenience Foods UK and Ireland reporting segment. All income in the Group
has been recognised at a point in time and not over time.
2023 2022
£m
£m
Revenue
Food to go categories 1,252.6 1,161.3
Other convenience categories 661.1 578.3
Total revenue for Convenience Foods UK and Ireland 1,913.7 1,739.6
Food to go categories includes sandwiches, salads, sushi and chilled snacking
while other convenience categories include chilled ready meals, chilled soups
and sauces, chilled quiche, ambient sauces and pickles, frozen Yorkshire
Puddings, as well as the Irish Ingredients trading business, which was
disposed of on 29 September 2023.
3. Exceptional Items
Exceptional items are those which, as set out in our accounting policy, are
disclosed separately by virtue of their nature or amount. Such items
are included within the Group Income Statement caption to which they relate.
The Group reports the following exceptional items:
2023 2022
£m
£m
Reorganisation costs (A) (8.9) (16.1)
Defined benefit pension schemes restructuring (B) (0.4) (0.4)
Profit on disposal of trading business (C) 0.1 -
Release of legacy business liability (D) 1.7 -
Reversal of impairment (E) 0.6 -
Non-core property related income (F) 0.2 -
Total exceptional items before taxation (6.7) (16.5)
Tax credit on exceptional items 1.2 3.0
Total exceptional items (5.5) (13.5)
(A) Reorganisation costs
The Group continued with its change programme 'Better Greencore', which
commenced in the prior year. This 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 £8.9m in the current financial year (2022: £16.1m) of which £6.2m
related to people costs and £2.7m related to professional fees.
(B) Defined benefit pension schemes restructuring
In the current financial year, the Group incurred a charge of £0.4m (2022:
£0.4m) in relation to restructuring costs associated with its legacy defined
benefit schemes in Ireland. In FY23, the trustees of the scheme completed the
buy-in of an annuity insurance policy. See note 8 for further details.
(C) Profit on disposal of trading business
On 29 September 2023, the Group completed the disposal of its interest in its
Irish trading business, Trilby Trading Limited, recognising a profit
on disposal of £0.1m (2022: £Nil). For more detail on the disposal, see Note
9.
(D) Release of legacy business liability
In the current financial year, the Group released £1.7m of a liability
relating to legacy business disposals which the Group is satisfied are not
probable to be paid.
(E) Reversal of impairment
As volumes have continued to build back since the impact of COVID-19, the Group reopened a facility and brought its related assets back into use in the financial year which had been impaired in a prior period. The Group reviewed the assets in line with the requirements of IAS 36 Impairment of assets and determined it appropriate to recognise a reversal of impairment of £0.6m relating to these assets.
(F) Non-core property related income
At 29 September 2023, the Group reviewed the fair value of the Irish
investment properties portfolio in line with the requirements of IAS 36, with
consideration given to bids received from third parties during the financial
year for the purchase of parts of the land and have determined it appropriate
to recognise a reversal of an impairment of £1.6m. The Group also recognised
a provision of £1.2m (2022: £Nil) of remediation costs in relation to
investment properties.
Cash flow on exceptional items
The total net cash outflow during the financial year in respect of exceptional
charges was £10.9m (2022: £13.6m), of which £2.7m was in respect of prior
year exceptional charges. The net proceeds from the disposal of Trilby Trading
Limited of £6.1m has been recognised separately on the Group Statement of
Cash Flows within investing activities.
4. Finance income and finance costs
2023 2022
£m £m
Finance income
Interest on bank deposits 0.7 0.2
Total finance income 0.7 0.2
Finance costs
Finance costs on interest bearing cash and cash equivalents, borrowings and (17.6) (11.3)
other financing costs
Interest on lease obligations (1.2) (1.2)
Net pension financing charge (1.2) (1.1)
Unwind of discount on liabilities (0.1) (0.1)
Change in fair value of derivatives and related debt adjustment (1.2) 1.9
Foreign exchange on inter-company and external balances where hedge accounting (0.2) (0.7)
is not applied
Total finance costs (21.5) (12.5)
5. Earnings per Ordinary Share
In the current financial year, the Group repurchased 33,382,718 Ordinary
Shares (2022: 9,728,677) in the Company, by way of a share buyback, costing
£26.2m (2022: £8.8m). These shares were immediately cancelled. The effect of
this on the weighted average number of ordinary shares was a decrease of
16,134,894 shares (2022: 774,827).
Numerator for Earnings per Share Calculations 2023 2022
£m
£m
Profit attributable to equity holders of the Company 35.9 32.3
Denominator for Basic Earnings Per Share Calculations 2023 2022
'000
'000
Shares in issue at the beginning of the financial year 516,837 526,547
Effect of share buyback and cancellation in the financial year (16,135) (775)
Effect of shares held by Employee Benefit Trust (5,330) (2,403)
Effect of shares issued during the financial year - 13
Weighted average number of Ordinary Shares in issue during the financial year 495,372 523,382
Dilutive effect of share options 1,165 2,123
Weighted average number of Ordinary Shares for diluted earnings per share 496,537 525,505
2023 2022
pence
pence
Basic earnings per Ordinary Share 7.2 6.2
Diluted earnings per Ordinary Share 7.2 6.1
6. Impairment of goodwill, intangible assets and property, plant and equipment
At 29 September 2023, the Group's market capitalisation was lower than the
Group's net assets which is an indicator of impairment and therefore an
impairment review was performed. The Group performed an impairment test on the
carrying value of goodwill of £447.3m (2022: £449.4m) at 29 September 2023
using a value in use model to determine the recoverable amount. The
recoverable amount had significant headroom above the carrying value and
therefore, no impairment was recorded (2022: £Nil). The reduction in goodwill
value of £2.1m year-on-year relates to the disposal of the Group's interest
in Trilby Trading Limited (£2.0m) and a reduction in relation to foreign
exchange of £0.1m. There were no impairments of intangible assets (2022:
£Nil).
The Group keeps all assets under review on an ongoing basis to identify any
impairments to be recognised as a result of obsolescence due to either a
change in production methods rendering certain assets idle or a replacement of
assets to align with the Group's net zero. There was an impairment of £3.0m
recorded on property, plant and equipment following such reviews in the
current financial year (2022: £0.9m). No assets were impaired in the current
financial year due to climate related strategy (2022: £Nil).
7. Borrowings and cash and cash equivalents
2023 2022
£m £m
Bank overdrafts (83.7) (52.9)
Bank borrowings (139.0) (158.8)
Private placement notes (47.8) (67.9)
Total borrowings (270.5) (279.6)
Cash and cash equivalents 116.5 99.6
Total borrowings and cash and cash equivalents (154.0) (180.0)
Total borrowings and cash and cash equivalents is used by the Group for the
purpose of calculating leverage under the Group's financing agreements.
Private Placement Notes
The Group's outstanding Private Placement Notes net of finance fees amounted
to £47.8m (denominated as $41.9m and £13.5m) at 29 September 2023 (2022:
£67.9m, denominated as $55.9m and £18.0m). These were issued as fixed rate
debt in June 2016 ($55.9m and £18m) with maturities ranging between June 2024
and June 2026. The Group repaid $14.0m and £4.5m Private Placement Notes in
June 2023 (2022: $65m repaid in October 2021).
In December 2018, the Group entered into cross-currency swap arrangements for
the $55.9m Private Placement Notes to swap from fixed rate US dollar to fixed
rate sterling. The fixed rate US dollar to fixed rate sterling swaps are
designated as cash flow hedges.
8. Retirement Benefit Obligations
The Group operates one legacy defined benefit pension scheme and one legacy
defined benefit commitment in Ireland (the 'Irish schemes') and one legacy
defined benefit pension scheme and one legacy defined benefit commitment in
the UK (the 'UK schemes') (collectively the "schemes"). These are all closed
to future accrual. 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 November 2022, the Trustees of the Irish legacy defined benefit scheme
entered into an annuity buy-in transaction to purchase an insurance policy for
the pensioner liabilities, representing approximately 80% of the liabilities
of the scheme. This has the benefit of de-risking the future of the scheme.
The insurance policy is treated as a plan asset and the fair value of the
policy is determined to be the present value of the related obligations. At
the completion of the buy-in of the insurance policy, the Group recognised an
actuarial loss in equity reflecting the change in the value of the plan assets
to match the related obligation.
In consultation with the independent actuaries to the schemes, the valuation
of pension obligations has 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
£20.3m at 30 September 2022 to a net liability of £20.1m at 29 September
2023. This reduction in the net liability position is mainly driven by
actuarial losses of £9.2m and the completion of the annuity buy-in offset by
contributions paid by the group. During the financial year, the Group paid
£12.4m (2022: £12.6m) in contributions to the pension schemes.
Where a funding valuation reveals a deficit in a scheme, the Group will
generally agree a schedule of contributions with the Trustees designed to
address the deficit over an agreed future time horizon. A full actuarial
valuation was carried out on the Irish scheme at 31 March 2022 and a full
actuarial valuation is ongoing with reference to 31 March 2023 for the UK
scheme. All of the schemes are operating under the terms of current funding
proposals agreed with relevant pension authorities. Based on current
discussions with the Trustees of the scheme cash contributions are expected to
be in the range of £12m-£15m in FY24.
The financial position of the schemes was as follows:
UK Irish schemes 2023 UK Irish schemes 2022
£m
£m
schemes Total schemes Total
£m
£m
£m
£m
Fair value of plan assets 159.4 145.4 304.8 168.7 170.3 339.0
Present value of scheme liabilities (197.2) (127.7) (324.9) (228.0) (131.3) (359.3)
(Deficit)/surplus in schemes (37.8) 17.7 (20.1) (59.3) 39.0 (20.3)
Deferred tax asset 9.5 (2.2) 7.3 14.8 (4.9) 9.9
Net (liability)/asset at end of financial year (28.3) 15.5 (12.8) (44.5) 34.1 (10.4)
Presented as:
Retirement benefit asset* - 18.4 18.4 - 39.8 39.8
Retirement benefit obligation (37.8) (0.7) (38.5) (59.3) (0.8) (60.1)
*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 surplus from the remaining
assets of a plan at the end of the plan's life.
The principal actuarial assumptions are as follows:
UK schemes Irish schemes
2023 2022 2023 2022
Rate of increase in pension payments* 3.05% 3.35% 1.50% 0.00%
Discount rate 5.60% 5.00% 4.50% 4.00%
Inflation rate** 3.30% 3.55% 2.50% 2.40%
* The rate of increase in pension payments applies to the majority of the
liability base, however there are certain categories within the Group's Irish
Schemes that have an entitlement to pension indexation.
** The assumption for Retail Price Index ('RPI') and Consumer Price Index
('CPI') are derived from the Harmonised Index of Consumer Prices ('HICP') and
relative yields of index-linked and fixed interest government bonds.
9. Disposal of Undertakings
On 29 September 2023, the Group completed the sale of the entire share capital of Trilby Trading Limited ('Trilby') to K.T.C. (Edibles) Limited, a majority owned subsidiary of funds managed by Endless LLP. Trilby is an importer and distributor of edible oils and fats for the food processing industry, operating out of Ireland. From a sustainability perspective, the Group's disposal of Trilby is expected to result in the removal of circa 280,000 tonnes of carbon dioxide equivalents (CO(2)e) from the Group's FY24 Scope 3 footprint. This accounts for 20% of our total Scope 3 footprint in FY23 and a 32% reduction in the base year.
The business is not considered to be a separate major line of business or geographical area of operation and therefore does not constitute a discontinued operation as defined in IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations. Trilby is included within the Convenience Foods UK and Ireland reporting segment.
Effect of disposal on the financial statements
2023
£m
Goodwill and intangibles (2.0)
Property, plant and equipment (0.4)
Trade and other receivables (11.5)
Cash and cash equivalents (5.1)
Trade and other payables 8.1
Financial Instruments 0.1
Total assets and liabilities disposed of (10.8)
Disposal consideration
Purchase consideration 8.5
Working capital settlement 2.8
Total net consideration 11.3
Disposal-related costs (1.0)
Translation reserve transferred to Income Statement on disposal of subsidiary 0.6
Profit on disposal 0.1
Reconciliation of consideration to cash received
2023
£m
Purchase consideration 8.5
Cash received in respect of working capital settlement 2.8
Transaction costs paid (0.1)
Net consideration received on completion 11.2
Cash and cash equivalents disposed of (5.1)
Net cash inflow arising on disposal 6.1
10. Dividends Paid and Proposed
There were no dividends paid in the current or prior year and there are no
dividends proposed to be paid.
In the current financial year, the next phase of the value return to
shareholders completed with a further £26.2m value (2022: £8.8m) returned up
to 29 September 2023 in the form of a share buyback. The Group launched the
fourth share buyback programme which commenced on 10 October 2023 and will end
no later than 30 March 2024 and will conclude the £50m commitment.
11. Subsequent Events
Bank Refinancing
Subsequent to the year end, the Group has refinanced its debt facilities with a new five year £350m sustainability linked revolving credit facility ('RCF'), maturing in November 2028 with the option to extend for up to a further two years. This new facility replaces the existing £340m RCF that was due to mature in January 2026. A £45m term loan due to mature in June 2024 was also repaid in full as part of this debt restructuring.
12. Information
Copies of the Annual Report and Group Financial Statements are available for
download from the Group's website at www.greencore.com.
(http://www.greencore.com/)
APPENDIX: 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 Revenue 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 and no new APMs have been
included in this report.
The Group views these APMs as useful for providing historical information to
help investors evaluate the performance of the underlying
business and are measures commonly used by certain investors and security
analysts for evaluating the performance of the Group. In
addition, the Group uses certain APMs which reflect the underlying performance
on the basis that this provides a focus on the core business
performance of the Group. The APMs are not part of the IFRS financial
statements and are accordingly are not
audited.
Pro Forma Revenue Growth
The Group uses Pro Forma Revenue Growth as a supplemental measure of its
performance. The Group views Pro Forma Revenue Growth as
providing a guide to underlying revenue performance and is calculated by
adjusting reported revenue for the impact of acquisitions, disposals and
foreign currency.
Pro Forma Revenue Growth FY23
Pro Forma Revenue Growth adjusts reported revenue in FY23 and FY22 to reflect
the disposal of Trilby Trading Limited, which completed in
FY23. In addition, FY22 revenue has been adjusted for the additional trading
week which was included in H2.
2023
Convenience Foods
UK & Ireland
Reported revenue - % increase from FY22 to FY23 10.0%
Impact of disposals 1.0%
Impact of additional trading week 2.5%
Pro Forma Revenue Growth FY23 13.5%
The table below shows the Pro Forma Revenue Growth split by food to go
categories and other convenience categories.
Food to go Other convenience
categories categories
H1 FY23 H2 FY23 Full year H1 FY23 H2 FY23 Full year
Reported revenue- % increase from FY22 to FY23 15.6 2.0% 7.9% 28.5% 2.0% 14.3%
Impact of disposals - - - 2.8% 6.8% 4.2%
Impact of additional trading week - 3.7% 2.2% - 3.7% 3.1%
Pro Forma Revenue Growth FY23 15.6% 5.7% 10.1% 31.3% 12.5% 21.6%
Pro Forma Revenue Growth FY22
While Pro Forma Revenue Growth is not comparable year-on-year, we have
included the prior year disclosure for completeness. This has been
calculated to reflect the disposal of Premier Molasses Company Limited for the
period in FY21 up to the date of disposal. FY22 was
a 53 week period, Pro Forma Revenue adjusts the FY22 reported revenue to
exclude the additional revenue. It also presents the revenue on a
constant currency basis utilising FY21 FX rates on FY22 reported revenue.
2022
Convenience Foods
UK & Ireland
Reported revenue - % increase from FY21 to FY22 31.3%
Impact of disposals 0.4%
Impact of currency 0.2%
Impact of additional trading week (2.5%)
Pro Forma Revenue Growth FY22 (%) 29.4%
The table below shows the Pro Forma Revenue Growth split by food to go
categories and other convenience categories.
Food to go Other convenience
categories categories
H1 FY22 H2 FY22 Full Year H1 FY22 H2 FY22 Full Year
Reported revenue - % increase from FY21 to FY22 48.0% 31.1% 37.9% 12.9% 26.5% 19.8%
Impact of disposals - - - 2.0% - 1.0%
Impact of currency - - - 0.9% 0.2% 0.6%
Impact of additional trading week - (4.6%) (2.7%) - (4.2%) (2.2%)
Pro Forma Revenue Growth FY22 48.0% 26.5% 35.2% 15.8% 22.5% 19.2%
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 the Group.
The Group calculates Adjusted Operating Profit as operating profit before
amortisation of acquisition related intangibles and exceptional
items. Adjusted EBITDA is calculated as Adjusted Operating Profit plus
deprecation and amortisation of intangibles 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:
2023 2022
£m
£m
Profit for the financial year 35.9 32.3
Taxation ((A)) 9.3 7.5
Exceptional items 6.7 16.5
Net finance costs ((B)) 20.8 12.3
Amortisation of acquisition related intangibles 3.6 3.6
Adjusted Operating Profit 76.3 72.2
Depreciation and amortisation ((c)) 56.5 54.7
Adjusted EBITDA 132.8 126.9
Adjusted Operating Margin (%) 4.0% 4.2%
((A) ) Includes tax credit on exceptional items of £1.2m (2022:
£3.0m).
((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 other specific items.
The Group calculates Adjusted PBT as profit before taxation, excluding tax on
share of profit of associate and before exceptional items, pension finance
items, amortisation of acquisition related intangibles, FX on inter-company
and certain external balances and the movement in the fair value of all
derivative financial instruments and related debt adjustments.
The following table sets out the calculation of Adjusted PBT:
2023 2022
£m
£m
Profit before taxation 45.2 39.8
Exceptional items 6.7 16.5
Pension finance items 1.2 1.1
Amortisation of acquisition related intangibles 3.6 3.6
FX and fair value movements((A)) 1.4 (1.2)
Adjusted Profit Before Tax 58.1 59.8
((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 BASIC 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 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 financial year, excluding Ordinary Shares
purchased by Greencore and held in trust in respect of the Annual Bonus Plan,
Performance Share Plan, Employee Share Incentive Plan and Restricted 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 Group to its Adjusted Earnings for the
financial years indicated:
2023 2022
£m
£m
Profit attributable to equity holders 35.9 32.3
Exceptional items (net of tax) 5.5 13.5
FX effect on inter-company and external balances where hedge accounting is not 0.2 0.7
applied
Movement in fair value of derivative financial instruments and related debt 1.2 (1.9)
adjustments
Amortisation of acquisition related intangible assets (net of tax) 2.7 2.7
Pension financing (net of tax) 0.7 0.8
Adjusted Earnings 46.2 48.1
2023 2022
'000 '000
Weighted average number of ordinary shares in issue during the financial year 495,372 523,382
2023 2022
pence
pence
Adjusted Basic Earnings Per Share 9.3 9.2
CAPITAL EXPENDITURE
Maintenance Capital Expenditure
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 of complying with applicable laws and regulations. It includes
continuous improvement projects of less than £1.0m that will generate
additional returns for the Group.
Strategic Capital Expenditure
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 £1.0m 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:
2023 2022
£m
£m
Purchase of property, plant, and equipment 36.0 48.6
Purchase of intangible assets 1.4 1.4
Net cash outflow from capital expenditure 37.4 50.0
Strategic Capital Expenditure 10.8 33.1
Maintenance Capital Expenditure 26.6 16.9
Net cash outflow from capital expenditure 37.4 50.0
FREE CASH FLOW AND FREE CASH FLOW CONVERSION
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 the Free Cash Flow as the net cash inflow/outflow from
operating and investing activities before Strategic Capital Expenditure,
acquisition and disposal of undertakings, disposal of investment property and
adjusting for dividends paid to non-controlling interests.
The Group calculates Free Cash Flow Conversion as Free Cash Flow divided by
Adjusted EBITDA.
The following table sets forth a reconciliation from the Group's net cash
inflow from operating activities and net cash outflow from investing
activities to Free Cash Flow and Free Cash Flow Conversion:
2023 2022
£m
£m
Net cash inflow from operating activities 99.0 92.9
Net cash outflow from investing activities (31.3) (50.0)
Net cash inflow from operating and investing activities 67.7 42.9
Strategic Capital Expenditure 10.8 33.1
Repayment of lease liabilities (15.6) (17.3)
Disposal of undertakings (6.1) -
Free Cash Flow 56.8 58.7
Adjusted EBITDA 132.8 126.9
Free Cash Flow Conversion (%) 42.8% 46.3%
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 reconciliation of opening to closing Net Debt for the year ended 29
September 2023 is as follows:
At Cash Translation and non-cash adjustments At
30 September 2022 flow 29 September 2023
£m £m £m £m
Cash and cash equivalents and bank overdrafts 46.7 (13.8) (0.1) 32.8
Bank borrowings (158.8) 20.2 (0.4) (139.0)
Private Placement Notes (67.9) 15.5 4.6 (47.8)
Net debt excluding lease liabilities (180.0) 21.9 4.1 (154.0)
Lease liabilities (48.0) 16.8 (13.8) (45.0)
Net Debt (228.0) 38.7 (9.7) (199.0)
The reconciliation of opening to closing Net Debt for the year ended 30
September 2022 is as follows:
At Cash Translation and non-cash adjustments At
24 September 2021 flow 30 September 2022
£m £m £m £m
Cash and cash equivalents and bank overdrafts 73.6 (26.5) (0.4) 46.7
Bank borrowings (150.1) (9.6) 0.9 (158.8)
Private Placement Notes (106.6) 47.3 (8.6) (67.9)
Net debt excluding lease liabilities (183.1) 11.2 (8.1) (180.0)
Lease liabilities (59.6) 18.5 (6.9) (48.0)
Net Debt (242.7) 29.7 (15.0) (228.0)
RETURN ON INVESTED CAPITAL ('ROIC')
The Group uses ROIC as a key measure to determine returns for the Group and as
a key measure to determine 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, the carrying value of derivatives not
designated as fair value hedges, and retirement benefit obligations (net of
deferred tax assets). Average invested capital is calculated by adding the
invested capital from the opening and closing Statement of Financial Position
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 Group Income Statement.
The following table sets forth the calculation of NOPAT and invested capital
used in the calculation of ROIC for the financial years;
2023 2022
£m
£m
Adjusted Operating Profit 76.3 72.2
Taxation at the effective tax rate ((A)) (16.0) (13.7)
Group NOPAT 60.3 58.5
2023 2022
£m
£m
Invested Capital
Total assets 1,297.7 1,338.7
Total liabilities (837.9) (873.1)
Net Debt 199.0 228.0
Derivatives not designated as fair value hedges (4.6) (14.8)
Retirement benefit obligation (net of deferred tax asset) 12.8 10.4
Invested Capital for the Group((B)) 667.0 689.2
Average Invested Capital for ROIC calculation for the Group 678.1 695.0
ROIC (%) for the Group 8.9% 8.4%
((A) ) The effective tax rates for the Group for the financial
year ended 29 September 2023 and 30 September 2022 were 21% and 19%
respectively.
((B) ) The invested capital for the Group in 2021 was £700.8m.
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