Greggs boss praised by City analysts
Like-for-like sales rose by 3.2%, contributing – alongside £1.4M gained from property disposals – to operating profit before exceptional items of £16.8M. That compares with £11.5M in the same period of last year.
Shore Capital detected in the results “self improvement and rising company confidence”.
Its analysts Clive Black and Darren Shirley said: “Mr Whiteside has exceeded our expectations. Greggs is engaged in a period of focus and self-improvement under ceo Roger Whiteside that has beaten our expectations and impressed us …”
‘Mr Whiteside has exceeded our expectations’
While Greggs’s attributed the results partly to more favourable trading conditions and relatively easy comparatives, Shore Capital believed Whiteside’s direction had played a key role. “It is also true to point out that the group has positioned itself better to reap the rewards from these evolving market conditions.”
Greggs pointed out it was taking £8.3M of exceptional costs, including £6M relating to the closure of in-store bakeries and £2.3M from the restructure of support functions. In the first half, Greggs refitted 131 stores, opening 26 new outlets and closing 36 under-performing units, taking the total to 1,661 stores.
Shore Capital predicted Greggs’s second half results will benefit from lower input costs resulting from a good northern cereal harvest and lower cream and protein prices. It forecast full year pre tax profit of £46.4M.
“Greggs’s shares are expected to yield 4%, which is attractive to our minds and a little more secure as earnings rise again,” said Black and Shirley. “All in all, following an encouraging update, from which we reiterate our credit to management for its delivery …”, they added.
Greggs's stock
Shore Capital repeated its hold advice on Greggs’s stock.
Roger Whiteside, chief executive, said: “Sales growth is also being driven by initiatives that have further improved our products, availability, service and value. Our new and improved coffee blend and sandwich range are great examples of this.
“Although sales comparables strengthen in the second half, the risk of input cost inflation appears to be reducing. Overall, we expect to deliver an improved financial result for the year and further progress against our strategic plan.”
N+1 Singer judged Greggs had reported better than expected results. Acknowledging the twin effects of good weather and favourable comparatives, its analyst Sahill Shan said new management had put the business “on a much firmer footing”.
While there was still a long way to go, we do believe that the new strategy offers further growth opportunity, added Shan. “Overall, as far as the first 12 months of the new strategy under the new ceo is concerned, today’s results are a huge tick in the box, given we are no longer talking about profit stability but rather positive forecast momentum.”
