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Greggs pushes on with investment plan

The bakery chain is spending big on distribution and manufacturing improvements
February 27, 2018

Much of the sales acceleration at baker Greggs (GRG) isn’t showing up at the bottom line. That’s because the company is in an investment-heavy phase, spending big to consolidate manufacturing operations and expand logistics capacity. A new shop replenishment system was also rolled out last year, and a new supply chain solution was also piloted. Adjusted operating profits – which exclude property profits and one-off expenses – rose 4.6 per cent to £81.7m.

IC TIP: Hold at 1,323p

Despite the challenging consumer backdrop, Greggs is pushing ahead with plans to invest £100m by 2020. This year marks a 'peak' for supply chain investment, while the company also plans to open a record number of new shops. Last year Greggs opened 131 new sites, closed 41 and had 1,854 trading shops by the year-end. So far, the new year is off to a good start: during the eight weeks ended 24 February, like-for-like sales are 3.2 per cent ahead of last year.

Analysts at Shore Capital had forecast adjusted pre-tax profit of £88.2m and EPS of 68.2p (from £82.6m and 63.6p in 2017) for the year ending December 2018, but note that these numbers are likely to be revised down.  

GREGGS (GRG)   
ORD PRICE:1,323pMARKET VALUE:£1.34bn
TOUCH:1,322-1,324p12-MONTH HIGH:1,400pLOW: 957p
DIVIDEND YIELD:2.4%PE RATIO:23
NET ASSET VALUE:296pNET CASH:£54.5m
Year to 30 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201376233.224.119.5
201480649.737.422.0
201583673.057.328.6
201689475.157.831.0
201796071.956.632.3
% change+7-4-2+4
Ex-div:19 Apr   
Payment:18 May