Rising cost inflation has been a real headache for the retail sector this year, and it seems to be putting profits at high street baker Greggs (GRG) under pressure. As a result of higher wages, rates and other input costs, underlying operating margins fell from 6.4 per cent to 6.1 per cent year on year which, along with an £8.3m restructuring charge, explains the fall in statutory profits. At the operating level, however, excluding exceptional charges and gains, profits still rose 1.8 per cent to £27.6m.
Encouragingly, although many retailers are warning about a softer consumer environment and pressure on disposable incomes, the group still put in a good top-line performance at the half-way stage. Sales rose 7.3 per cent on a total basis, buoyed by 42 net new shops, while like-for-like sales at company-managed shops rose 3.4 per cent (albeit slower than the 3.8 per cent growth rate reported this time last year). Bosses said underlying sales growth was a testament to the brand’s increasingly popular coffee and breakfast options, its newer ‘balanced choice’ healthy eating range, as well as “traditional savoury favourites” like the classic sausage roll.
Analysts at Investec expect pre-tax profits of £81.5m for the year ending December 2017, giving EPS of 62.7p, compared to £80.3m and 60.8p in 2016.
| GREGGS (GRG) | ||||
| ORD PRICE: | 1,113p | MARKET VALUE: | £1.13bn | |
| TOUCH: | 1,110-1,113p | 12-MONTH HIGH: | 1,140p | LOW: 895p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 257p | NET CASH: | £19.9m | |
| Half-year to 1 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 422 | 25.4 | 19.7 | 9.5 |
| 2017 | 453 | 19.4 | 15.1 | 10.3 |
| % change | +7 | -24 | -23 | +8 |
| Ex-div: | 7 Sep | |||
| Payment: | 6 Oct |
