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Greggs closes three bakeries as part of five-year plan

There will be consequences as Greggs tries to overhaul its manufacturing and distribution operations
March 1, 2016

Bosses at high-street pasty vendor Greggs (GRG) will be forced to shut down three of its centralised bakeries as part of a £100m investment programme to create what it calls 'manufacturing centres of excellence'. Greggs currently operates 12 large-scale bakeries, but a trio have been deemed "unsuitable" for long-term investment. This means staff redundancies in the region of 355 people - a decision chief executive Roger Whiteside says wasn't taken lightly.

IC TIP: Hold at 1,196p

The announcement was made alongside the group's annual results, which came in just ahead of analysts' expectations. Like-for-like sales grew by a steady 4.7 per cent, driven by improvements to the product range and the growing popularity of Greggs' breakfast and healthy option menus. This momentum has clearly continued into the new financial year too: like-for-like sales are tracking 4.2 per cent ahead during the first eight weeks of trading.

Peel Hunt is reviewing its forecasts. Previously, its analysts were projecting pre-tax profits of £76m this year, leading to adjusted EPS of 57.9p, compared with £73m and 55.8p in 2015.

GREGGS (GRG)
ORD PRICE:1,196pMARKET VALUE:£1.21bn
TOUCH:1,196-1,198p12-MONTH HIGH:1,369pLOW: 856p
DIVIDEND YIELD:2.4%*PE RATIO:21
NET ASSET VALUE:263pNET CASH:£43m

Year to 2 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201270160.545.019.3
201373552.440.019.5
201476233.224.119.5
2015 (restated)80649.737.422.0
201683673.057.328.6
% change+4+47+53+30

Ex-div: 21 Apr

Payment: 20 May

*Does not include special dividend worth 20p a share, paid in July 2015