Profit rise for Greggs

Posted on 31 Jul 2014 by The Manufacturer

Shares in bakery chain Greggs rose 4% after restructuring efforts and new lines helped underlying profits jump by almost half.

The Newcastle-based company, which has 1,661 stores, said first-half profits jumped 48% to £16.9 million on an underlying basis during the 26 weeks to June 28, as it refitted 131 shops and introduced low-fat sandwiches and a new blend of coffee.

Like-for-like sales, which strip out the effect of new store openings, climbed 3.2% on the same period last year — an improvement on the 2.9% decline of 12 months ago.

The firm, best known for its pasties and sausage rolls, has been making efforts to crack the competitive ‘food-on-the-go’ market by challenging the dominance of convenience stores, coffee shops and fast-food operators in traditional shopping centre locations.

Greggs, which posted overall revenues of £373m, said it had seen “encouraging results” from its healthier range of produce and a new loyalty scheme.

The company, led by chief executive Roger Whiteside, will invest in future product launches in the second half of the year and also plans to refit a total of 200 stores by the end of the year.

A total of 131 have already been revamped.

Capital spending hit £20.4m in the six months, and is expected to reach £50m by December as IT and operations also face significant upgrades.

Margins were also helped by food costs and the energy bill being lower than expected — a pattern Greggs expects to continue for the rest of the year.

“Overall, we expect to deliver an improved financial result for the year and further progress against our strategic plan,” Mr Whiteside said.

Shore Capital analyst Darren Shirley said he was “encouraged by the momentum increasingly evident across Greggs”, as he upped his full-year profits forecast by 6% to £46.4m.