Over the next five years, Greggs (GRG) will pump £25m into overhauling its business so that it can better compete in the food-on-the-go market, the bakery chain announced alongside full-year results. The investment will dampen profits by roughly £2m this year and next, after which management expects a net annual benefit of £6m.
Chief executive Roger Whiteside said the changes would help protect future profits should like-for-like sales come under pressure - as they did last year, declining 0.8 per cent after a tough first half. The second half saw an improvement, but increased promotional activity and higher costs piled pressure on margins, leaving the underlying operating profit 19 per cent lower at £41.5m.
As part of the restructuring programme, high-street shops are being closed and new ones unveiled in places like motorway service stations, with plans for 60 to 80 openings this year. The 216 stores refurbished into the bakery food-on-the-go format last year delivered encouraging returns, prompting management to refit a further 200 this year. So far this year, underlying sales are tracking 2.1 per cent higher, albeit against extremely weak comparatives.
Panmure Gordon expects pre-tax profit of £41m for 2014, giving EPS of 31.1p.
| GREGGS (GRG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 485p | MARKET VALUE: | £491m | |
| TOUCH: | 484-486p | 12-MONTH HIGH: | 538p | LOW: 388p |
| DIVIDEND YIELD: | 4% | PE RATIO: | 20 | |
| NET ASSET VALUE: | 233p | NET CASH: | £21.6m | |
| Year to 28 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 658 | 48.8 | 34.1 | 16.6 |
| 2010 | 662 | 52.5 | 37.8 | 18.2 |
| 2011 | 701 | 60.5 | 45.0 | 19.3 |
| 2012 | 735 | 52.4 | 40.0 | 19.5 |
| 2013 | 762 | 33.2 | 24.1 | 19.5 |
| % change | +4 | -37 | -40 | - |
Ex-div: 9 Apr Payment: 9 May | ||||
