Greencore Group H1 Earnings Call Highlights

Key Points

• Greencore’s first-half results improved after the Bakkavor UK acquisition, with pro forma revenue up 3.2% to GBP 1.3 billion and adjusted operating profit rising 15% to GBP 73.3 million. Management said service levels stayed above 99% and integration is proceeding without disruption.
• Cash flow was weak due to working capital outflows and acquisition-related costs, leading to negative free cash flow of GBP 76 million and net debt of GBP 818 million. Even so, leverage ended at 2.3x EBITDA, and the company still expects to delever to 1.5x or below within two years.
• Synergy and portfolio actions remain in focus, with Greencore keeping its target of at least GBP 80 million in annual Bakkavor-related savings and classifying its U.S. business as held for sale. Management also said it expects FY 2026 adjusted operating profit to be in line with current market expectations.

Greencore Group LON: GNC said its enlarged U.K. convenience foods business delivered higher first-half revenue and profit following the acquisition of Bakkavor UK, while management said integration work is progressing without disruption to service levels or customer relationships.

Presenting the company’s FY 2026 first-half results, Dalton said Greencore “has never been in a better place,” citing operating profit growth, stronger customer partnerships and early progress from the integration program. He said the company had completed a top-to-bottom organizational redesign, maintained food audit performance and kept service levels above 99%.

The results were presented on a pro forma basis that included six months of the legacy Greencore business and 10 weeks of Bakkavor UK in both the current and prior year, excluding Bristol, a legacy site sold in January 2026. Catherine said the pro forma view was intended to better reflect year-over-year performance of the combined U.K. business.

Revenue and Profit Rise on Pro Forma Basis

Catherine said Greencore delivered pro forma revenue of GBP 1.3 billion in the first half, up 3.2% year over year. Adjusted operating profit rose 15% to GBP 73.3 million, while the pro forma adjusted operating margin increased 60 basis points to 5.6%.

On a reported continuing operations basis, reflecting the U.K. businesses only, revenue rose 43% and adjusted operating profit increased 62%. The company reported a GBP 30 million loss before tax for the period, which Catherine said largely reflected acquisition-related exceptional costs incurred in line with expectations.

Adjusted earnings per share were GBP 0.08, up 31%. Return on invested capital, adjusted to exclude acquisition goodwill, was 10.8%. Catherine said the acquisition accounting resulted in acquired goodwill of GBP 734 million and a further GBP 937 million increase in intangible assets, reflecting acquired Bakkavor customer relationships.

Pro forma revenue growth was driven by a 0.8% contribution from volume and mix and 2.4% from inflation recovery and pricing. Food for Now revenue increased 5.3% to GBP 731 million, supported by sandwiches, sushi and direct-to-store distribution. Food for Later revenue rose slightly to GBP 587 million.

Cash Flow Pressured by Working Capital and Deal Costs

Greencore reported negative free cash flow of GBP 76 million from continuing operations, driven by working capital outflows and exceptional charges related to the Bakkavor acquisition. Catherine said underlying EBITDA was GBP 111 million, GBP 38 million higher than the prior year.

Net working capital was an outflow of about GBP 86 million, which Catherine attributed to timing around period-end and work to align management of debtors, creditors and facilities such as invoice discounting. She said Greencore expects the outflow to reverse and to end FY 2026 with a broadly flat working capital position.

Cash exceptional charges were about GBP 59 million, mostly related to acquisition, integration and the Making Business Easier transformation program. Group net debt ended the period at GBP 818 million, with leverage of 2.3 times net debt to EBITDA, below the 2.5 times post-acquisition level previously indicated.

Catherine said Greencore remains confident it can deleverage to at or below 1.5 times within two years of completing the Bakkavor deal. The company expects FY 2026 capital expenditure of about GBP 80 million on a reported basis and intends to maintain an annual dividend, subject to ongoing financial performance.

Synergy Program Remains on Track

Management reiterated its target of at least GBP 80 million in annual savings from the combination with Bakkavor. Catherine said the company remains unchanged in its estimate of one-off costs of about GBP 90 million to achieve those savings over the next three years.

The savings are expected across organization, operational excellence and distribution, site footprint, and direct and indirect procurement. Greencore said it still expects to reach 50% of the run-rate savings by January 2027, 85% by January 2028 and 100% by January 2029.

Dalton said the company has already delivered savings from organizational changes, consolidation of its Central London office footprint and removal of duplication in professional fees. He said the combined business is now operating with a single functional leadership structure and operating model.

Greencore also highlighted operational efficiency work across the enlarged network. Dalton said the combined U.K. business had 871 operational excellence projects live in the first half, including energy monitoring, automated vegetable preparation and a pasta depositor expected to generate GBP 140,000 of annualized savings.

U.S. Business Classified as Held for Sale

Catherine said Greencore’s U.S. business has been classified as an asset held for sale as the company evaluates the best course of action for the business and shareholders. She described Greencore U.S. as a strong business with growth prospects and relationships with major U.S. retailers.

Management said it is exploring a potential sale of the U.S. operations to the right long-term partner, though the process is at an early stage and no decision has been made. In response to an analyst question, Dalton said advisers have been selected and that the company “won’t be giving it away.”

Management Flags Tough Consumer Backdrop

Dalton said the U.K. grocery market remains subdued, with consumer confidence low and shoppers adopting more defensive behaviors such as using promotions, loyalty mechanics and value meal offers. He said demand has not collapsed, but the market is “tough.”

Greencore said legacy Greencore volumes grew 0.3% against a flat grocery market during the period, while Bakkavor volumes declined against a market down 0.2% since acquisition, partly due to prior business losses and wet weather affecting high street footfall. Dalton said new business wins that begin onboarding in the second half are expected to contribute about 100 basis points of annualized revenue growth.

Management also said Greencore continues to benefit from longer-term trends including convenience retail growth, premiumization and consumers eating more at home. Dalton said the company launched 308 new products in the first half and continues to see opportunities to grow with existing customers across its enlarged category portfolio.

Looking ahead, Catherine said Greencore expects to deliver FY 2026 adjusted operating profit in line with current market expectations, while noting that published consensus includes the U.S. business rather than treating it as an asset held for sale. She also said the company remains cautious about further inflationary pressures later this year and into next year, while noting Greencore has pass-through mechanisms and protections across 75% of raw ingredients and fully hedged gas and electricity costs for FY 2026.

About Greencore Group LON: GNC

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, Delivery Excellence, Lasting Partnerships and Sustainable Choices – The Greencore Way describes both who we are and how we will succeed. Greencore is the UK's leading convenience food manufacturer. We bring industry-leading innovation to create high-quality, fresh and convenient food to customers and consumers.

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