The torrid weather in the UK has been keeping consumers off the high street and away from Greggs, the UK's biggest baker. The overall 2.3 per cent drop in like-for-like sales in the first half reflected a 3.5 per cent decline in the second quarter. Despite this and heavy promotional activity, the company managed to limit the impact on underlying pre-tax profits to a £800,000 shortfall, thanks to cost controls and increased sales of its new "home baking" range through the Iceland supermarket chain.
The new wholesale "home baking" operation has been performing better than expected and is part of a sales drive focused on entering new markets and opening new shops. Indeed, despite the poor like-for-like performance, the extra revenue streams from wholesale and 33 net shop openings helped lift overall sales.
Greggs is also having success with its new shop formats, which include coffee shops and traditional-style bakers, and it is on target to open 90 new shops this year. And, following good results from its initial two outlets, there are plans to open 28 more franchise stores in Moto service stations. The company is also on track with its plan to refurbish 100 to 120 existing shops this year.
Food costs are rising again, but Greggs has most of its costs fixed for this year, and broker UBS forecasts 2012 adjusted EPS of 40.3p (38.9p in 2011).
| Greggs (GRG) | ||||
|---|---|---|---|---|
| ORD PRICE: | 496p | MARKET VALUE: | £501m | |
| TOUCH: | 495-496 | 12-MONTH HIGH: | 564p | LOW: 420p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 13 | |
| NET ASSET VALUE: | 195p | NET CASH: | £2m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 335 | 24.7 | 18.4 | 5.8 |
| 2012 | 350 | 16.5 | 12.4 | 6.0 |
| % change | +4 | -33 | -33 | +3 |
Ex-div: 5 Sep Payment: 5 Oct | ||||
