Greencore lifts profit outlook as Bakkavor integration eases concerns
Greencore has raised its annual profit forecast after better-than-expected volume growth, a move that analysts say should calm investor concerns about the performance of its newly acquired Bakkavor business.
Greencore shares jumped 11.6% to 247.6p in morning trading after the UK convenience-food manufacturer told investors it now expects full-year adjusted operating profit for continuing operations to reach between £234m and £242m. The upgraded guidance surpasses current market consensus, representing roughly a 6% increase at the midpoint.
The upgrade was driven by third-quarter pro-forma revenue of £1.02bn, a 3.2% year-on-year increase that kept nine-month sales growth at an identical pace. For investors monitoring the consumer staples sector, the composition of this growth is critical.
The expansion was primarily led by volume and product mix, which contributed 2.3 percentage points. Price increases and inflation recovery added a further 0.9 points. This indicates the manufacturer is gaining retail shelf space rather than relying purely on passing costs onto consumers.
The performance was led by "food-for-now" products, which saw sales grow 4.7% in the period. "Food-for-later" items recorded a more modest 1.8% increase. Greencore supplies these private-label convenience goods to major UK supermarkets including Tesco, Sainsbury's, Asda, Waitrose and Marks & Spencer.
Bakkavor concerns ease
The sharp share price reaction reflects a broader market relief regarding the Bakkavor acquisition. The deal created a combined private-label food business with roughly £4bn in revenue, but it had also raised questions about integration risks and cash flow management.
Analysts at RBC noted the latest figures should calm specific concerns regarding Bakkavor's underlying performance and working capital. RBC analyst Ross Broadfoot described the announcement as "an impressive update". He highlighted that the underlying profit momentum at both the legacy Greencore and Bakkavor divisions is running ahead of expectations, supported by improved margins and strict cost control.
CEO Dalton Philips said the enlarged group's integration was "fully on track". "The Greencore team has delivered another strong performance in Q3, with volume growing ahead of the market and excellent underlying profit growth, even against a robust Q3 last year," Philips said. He added that major retail customers wanted "to grow their business with us".
Looking ahead, Greencore said fourth-quarter trading had started "positively". The company pointed to continued volume momentum and early progress on cross-selling opportunities between the two businesses as evidence the integration is delivering immediate financial benefits.
