DAVY VIEW

Greencore’s Q1 performance was enervated by the impact of ongoing UK industrial actions and persistent inflation headwinds, with profit conversion coming in below expectation. Volumes in the key food-to-go (FtG) category were modestly down, reflecting lower demand for sushi and salads, allied with weakness in its distribution business. While there has been some easing of cost headwinds, energy and labour costs remain elevated. Greencore now anticipates FY23 profitability to come in at the lower end of expectations (estimate: c.£70m). As such, we now forecast a c.10% cut in our FY23 adjusted operating profit. While the impact on FY24 adjusted operating profit remains uncertain, we expect a more meaningful cut in percentage terms.