Greggs Making Good Progress as Sales Recover
Greggs, the UK retail bakery group, has increased sales by 3.1% to £373 million for the 26 weeks ended June 2014 as it continues to make progress against its strategic plan. Like-for-like sales in Greggs’ own shops grew by 3.2% over the same period and its franchised estate has grown to 39 shops from 21 in June 2013. Greggs operates almost 1,700 retail outlets throughout the UK.
“Trading conditions in the first half of 2014 were more favourable than last year; the weather has been more settled and general economic indicators have been positive. In addition low commodity price inflation has been helpful in supporting margin,” explains Roger Whiteside, chief executive of Greggs. “The food on-the-go market continues to grow; however we are also seeing ongoing expansion by existing and new operators and so the marketplace remains very competitive.”
Whilst the year-on-year performance has benefited from comparison with a period of weak trading in 2013, when own shop like-for-like sales declined by 2.9%, sales growth is also being driven by initiatives that have further improved the group’s products, availability, service and value.
In addition to improved like-for-like sales the first half result benefited from good cost control and low input cost pressure.
Greggs also disposed of a number of surplus freehold properties in the year to date realising property profits of £1.4 million. Including these gains, operating profit before exceptional items was £16.8 million in the first half of the year – up from £11.5 million in the corresponding period last year. Pre-tax profit before exceptional items was £16.9 million – up from £11.4 million in 2013.
Greggs is incurring exceptional costs in 2014 relating to the restructuring of its in-store bakeries and support operations. This is progressing to plan and Greggs has recognised the current expected costs of £8.3 million in the first half of the year. Pre-tax profit including exceptional items was £8.7 million compared to £11.4 million in 2013.
Capital expenditure during the first half was £20.4 million as Greggs continued with its shop refurbishment programme and expects capital expenditure in 2014 to be around £50 million.
Roger Whiteside continues: “Alongside our focus on driving like-for-like sales from our existing estate of shops we continue to concentrate on developing simpler and more efficient operations in our supply chain and support areas. We have completed the restructure of our support areas and are making good progress with our plan to consolidate our in-store bakeries into our regional bakery network. We now anticipate that the majority of these in-store bakery transfers will be completed by the end of this year. The combined financial benefits from these changes remain on track to deliver savings of £2.5 million in 2014 and £6.0 million per year from 2015 onwards.”
