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The Greencore share price tumbles as profits sink!

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A Greencore vegetable quiche
Image: Greencore

UK share prices continue to struggle for momentum in Tuesday business. Persistent fears over Covid-19 and mounting inflation are still weighing on investor confidence today. The Greencore Group (LSE: GNC) share price, meanwhile, is plummeting as investors charge for the exits on the latest financials.

Greencore — one of the country’s biggest operators in the ‘food-to-go’ arena — has toppled from the 12-month closing highs of 171.2p per share punched just yesterday. It’s down 12% in Tuesday business, following a negative reception to first-half trading numbers.

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At 149.8p the Greencore share price is now 17% higher than it was this time a year ago.

Greencore’s share price falls as profits plunge

Greencore has plunged after announcing that it had swung to a meaty loss during the 26 weeks to March 26. Revenues at the convenience food giant tumbled 19% year on year to £577.1m, it said.

It’s perhaps no surprise Covid-19 restrictions continued to damage demand for its edible goods though, with Greencore declaring that “the reduction in consumer mobility as a result of tiered restrictions and lockdowns in the UK” caused turnover to decline.

Greencore saw sales at its food-to-go portfolio (comprising sandwiches, salads, sushi and other chilled snack foods) tumble 26% between October and March, to £339.2m. Meanwhile, revenues at its other convenience categories (from chilled ready meals and soups to pre-made Yorkshire puddings) dropped 7% year-on-year to £237.9m.

As a result, the company recorded an adjusted pre-tax loss of £7.9bn for the first fiscal half. This compares with profits of £31.1m recorded for the same period a year earlier.

In better news, Greencore’s net debt dropped 11% to £332.1m as of March. This largely reflects the company’s £90m equity raise last November and the sale of its molasses business a month later.

On the rebound?

Greencore’s taken an enormous whack from the ongoing public health emergency. But today’s update suggests those fabled green shoots of recovery are taking root as coronavirus restrictions are steadily unwound.

Greencore said it has witnessed “encouraging revenue momentum” during the first seven weeks of the second fiscal half. It also said pro forma revenues in its food-to-go categories were up 123% in the period which, in turn, pushed turnover across the group 64% higher, on a pro forma basis.

Sales at group level were still 5% lower in those seven weeks versus the equivalent pre-pandemic levels in financial 2019. But Greencore said it expects to move back into profit if Covid-19 lockdowns are rolled back in the UK as planned.

It added: “A continued reopening of the UK in line with the current roadmap and a consequential rebuild of group revenue” would see adjusted operating profit in the year to September 2021 beat last year’s levels.

Greencore’s adjusted operating profit totalled £32.5m in fiscal 2020, down from £105.5m the year before.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Greencore. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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