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Coronavirus rolls Greggs into loss

Plans for store openings have decelerated
Coronavirus rolls Greggs into loss

A few weeks before lockdown hit the UK high street, Greggs (GRG) shareholders were celebrating a 26 per cent dividend increase following a year of healthy profit growth. The final dividend was subsequently scrapped alongside a share purchase programme, and Greggs’ half-year results have brought more misery with a slide into loss that included a £9m write off for unused stock and a further £1.3m impairment on 14 stores that are unlikely to recover their full value.

IC TIP: Sell at 1,432p

Greggs has slashed the net number of stores it intends to open this year from around 100 to approximately 10, while its capital expenditure for the year will fall by just over a third to £55m. The company has made extensive use of government support, drawing £150m via Bank of England financing, and expects to benefit from business rates relief to the tune of £25m. It did not follow other retailers in reneging on rental commitments and paid its March quarter rent in full, but it has switched to monthly rental payments from June. 

Investec forecasts 2020 pre-tax losses and losses per share of £78m and 61p respectively, before rising to pre-tax profits and earnings per share of £61.7m and 48.8p in 2021.

GREGGS (GRG)    
ORD PRICE:1,432pMARKET VALUE:£ 1.45bn
TOUCH:1,430-1,434p12-MONTH HIGH:2,550pLOW: 1,277p
DIVIDEND YIELD:2.4%PE RATIO:367
NET ASSET VALUE:280pNET DEBT:133%
Half-year to 27 JunTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201954636.728.911.9
2020301-65.2-53.40.00
% change-45---
Ex-div:na   
Payment:na