Shares in convenience food group Greencore dropped by 15.7% today after it reported a 19% decline in group revenue for the six months to March 26 - due to a reduction in consumer mobility as a result of tiered restrictions and lockdowns.
Greencore is the UK's biggest sandwich maker, but fewer people in offices and train stations in the past year has had a significant impact on its operations.
It said its revenue fell to £577.1m from £712.7m the same time last year, while ts group operating profits for the six month period slumped by 89% to £3.9m from £35.6m.
It reported an adjusted loss before tax of £7.9m compared to a profit before tax of £31.1m the same time last year.
Speaking on Morning Ireland, Patrick Coveney, CEO of Greencore said it was seeing "encouraging" revenue momentum in the first seven weeks of the second half of its fiscal year.
"In the UK since March, there has been a very significant reopening of society and we have seen a very strong rebound in 'food to go' sales since then.
"So although our revenue was down 19% in the six months to the end of March - for April and May that decline has improved and was down just 5% for that seven week period," he said.
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'Food to go' market
Despite the large numbers of people continuing to work from home, Mr Coveney said he is not concerned about the overall outlook for the so-called 'food to go' market, such as pre-packed sandwiches and salads.
However, he said he thinks the market will be different post-Covid than it was before the pandemic.
"There will be changes in channels and locations - but overall we think the market is going to be pretty good," he said.
He said they are seeing more people buying 'food to go' products in suburbs and market towns, and less in cities and big travel locations.
"People feel much more comfortable coming out during the day and popping out for a coffee and sandwich - but close to where they live.
"That is why we are seeing sales in the suburbs much stronger than they were pre-Covid and there is a substitution effect, with sales in city centres being a bit less," he said.
Greencore said that pro-forma revenue in food to go categories is running at about 123% above the previous year's levels and approximately 14% below the equivalent pre-Covid levels in FY19.
Brexit
In terms of Brexit, Mr Coveney said the operational and financial impact on the group in the six month period was "minimal" and is anticipated to remain so in the second half of the year.
Mr Coveney said overall there hasn't been much disruption to their supply chains.
"It has been challenging when it comes to products that have only two or three days product life on them, because the extra checks have made that more difficult - where we were making products in Britain and our customers have been shipping them to Northern Ireland," he said.
He said the whole industry is working to try to get the Northern Ireland protocol to "work better" when it comes to fresh foods.
"However, the impact for Greencore on that is pretty modest, because it is only 1-2% of our sales that go there, so it is disruptive but we can manage it," he said.
Full year outlook
Greencore said that the ongoing uncertainty regarding the duration and impact of Covid-19 on its trading environment continues to make full year forecasting difficult, with limited visibility of Q4 demand patterns.
But it added it anticipates that a continued reopening of the UK in line with the current roadmap and a consequential rebuild of group revenue would be expected to generate a full year adjusted operating profit result above FY20 levels.
Greencore said that during the six month period it continued to expand its product offering and to drive category extensions with existing customers, in particular in the salads and fresh meals categories.
It is also working with key customers to renew and extend commercial relationships.
It said this will result in near term investment in capabilities, capital, and terms that secure and support growth in key categories and open up growth opportunities with these customers in additional categories and formats.
The group also said that it is renewing its focus on its Greencore Excellence agenda across its commercial, purchasing and operational capabilities.
"The full benefits of these programmes will only begin to materialise as volume rebuilds across the network and will help to mitigate some of the current lower levels of overhead absorption and operating efficiency," it added.
Mr Coveney said that the first half of the year had been a challenging period for Greencore.
"But the consistent build in our revenues since early March as lockdown measures have eased and Covid-19 cases have fallen give us real cause for optimism," Mr Coveney added.
"Our focus now is on rebuilding revenue, profitability and cash flow momentum as the UK economy reopens," he said.
"Underpinned by the quality of our people, our new sustainability strategy and the strength of our long-standing customer relationships, we are confident of being able to build back the business rapidly and profitably, and are optimistic about the medium-term prospects for Greencore," he added.
