Much has been made of the success of Greggs’ (GRG) vegan sausage roll, but management argues the surprise hit was merely a tipping point in perceptions of the group, cementing its transformation from bakery to food-on-the-go retailer. Indeed, its recent run of strong performance arguably began when management issued improved profit guidance in November last year, months before the vegan roll was released, and even following its launch the pork roll is having its best year ever so far. Now, with like-for-like sales growth in company managed shops of 10.5 per cent in the first six months of the year, the question has become how long the momentum can last.
Chief executive Roger Whiteside said he expects growth to start to slow in the second half of the year, as comparators become stiffer and food input costs rise. While the underlying operating margin rose to 7.5 per cent, from 5.4 per cent, that could come under pressure at the full year. However, that has not quelled management's expansion plans, it expects to open its 2,000th store shortly – against a target network size of 2,500 – and both the click-and-collect and delivery trials have been expanded to explore new ways of reaching customers.
Cash generation remains enviable. Even after increasing capital expenditure forecasts to between £90 and £100m for the year, to invest in manufacturing capacity and Brexit preparations, the group has announced a special dividend of 35p.
Broker Peel Hunt is forecasting £110m in adjusted pre-tax profits for the full year, giving adjusted EPS of 84.6p, up from £89.8m and 70.3p in 2018.
| GREGGS (GRG) | ||||
| ORD PRICE: | 2,342p | MARKET VALUE: | £2.4bn | |
| TOUCH: | 2,336-2,342p | 12-MONTH HIGH: | 2,496p | LOW: 945p |
| DIVIDEND YIELD: | 1.6% | PE RATIO: | 31 | |
| NET ASSET VALUE: | 332p | NET CASH: | £86m | |
| Half-year to 29 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018* | 476 | 24.1 | 18.9 | 10.7 |
| 2019 | 546 | 36.7 | 28.9 | 11.9** |
| % change | +15 | +53 | +53 | +11 |
| Ex-div: | 5 Sep | |||
| Payment: | 3 Oct | |||
| *Prior period ended 30 June 2018 **Does not include 35p special dividend to be paid on 3 October | ||||
