Greggs’s pre-tax profits soar by +40%

By Michael Stones contact

- Last updated on GMT

Greggs' pre-tax profits have rocketed by 41%
Greggs' pre-tax profits have rocketed by 41%

Related tags: Strategic management

High street baker Greggs has claimed its full-year results show “an exceptional step up in performance”, as it reported total sales up 5.5% to £804M and own-shop like-for-like (LFL) sales up by 4.5%.

Pre-tax profit, before exceptional items, soared by 41.1% to £58.3M and dividend per share climbed by 12.8% to reach 22p.

Chief executive Roger Whiteside attributed the gains to improvements in its range. “2014 was a year of significant change and an exceptional step up in performance for Greggs, as we began to implement our new strategic plan centred on the growing food-on-the-go market,”​ said Whiteside.

“We have improved both our food offer and the shop experience for customers. Market conditions have been more favourable and like-for-like sales have grown throughout the year. This has resulted in record underlying profits for the financial year. Overall, we are confident of delivering a further year of good growth and progress against our strategic plan in 2015.”

The improving economy and benign weather conditions had contributed to LFL sales while the firm had benefited from low input cost inflation. The firm had simplifed its operations and made them more efficient.

Coffee sales reaching £1M a week

Greggs said its focus on food-on-the-go was delivering growth, with coffee sales reaching a new high of £1M a week before Christmas. The baker ranked number one in the market for savoury and sweet bakery snacks and number two for sandwiches and first in the fast-growing breakfast segment, it claimed.

The group operated 1,650 shops at the beginning of the year. During past year it had completed 213 shop refits, opened 50 new shops and closed 71.

City analyst N+1 Singer was equally upbeat about Gregg’s performance. “The strong H2-14​ [second half 2014] momentum has continued into Q1-15​ [the first quarter of 2015] prompting further mid-single digit upgrades,”​ said its analyst Sahill Shan.

“The shares have had a tremendous run in the past 12 months on the back of strong delivery,”​ he added. “While no longer in value territory, we firmly feel the self-help / improving earnings quality thesis has further to run, supported by an improving disposable income outlook.”

Improving market conditions

Conlumino agreed the latest results showed Greggs’s strategic plan, unveiled in 2013, was gaining momentum, driven by investment in products, stores and processes and improving market conditions.

Greggs at a glance

  • Total sales up 5.5% to £804M
  • Own shop LFL sales up 4.5%
  • Property gains on disposal of £1.5M
  • Pre-tax profit up 41.1% to £58.3M
  • Dividend per share up 12.8% to 22p

Its senior consultant George Scott described the LFL’s as “fairly impressive … albeit against soft comparatives”. ​The fast growing food-to-go sector was becoming fiercely competitive thanks to the expansion of meal deals offered by the grocery players through their expanding convenience estates, he added.

Big players in the market included sandwich shops EAT and Pret A Manger, coffee shops Costa and Starbucks as well as traditional fast food heavy weights such as McDonald’s and Subway. But Greggs had been savvy enough to develop a well-rounded point of difference within this tough market.

“Its bakery heritage around its pies and pasties still gives it a unique draw, while investment in new products has helped broaden its appeal,”​ said Scott. Notably, it had developed a higher quality coffee blend, which in conjunction with an evolving breakfast menu haf helped to increase its morning trade.

“Greggs has balanced strings to its bow around freshness, value and store format, which will help it grow its market share as it continues to spread its national coverage, especially in the south east,”​ he concluded.   

Greggs shares climbed more than 10%​ today (Wednesday March 4) to reach 958.5p at the end of trading; their highest ever closing price.

  • Additional reporting by Linda Groves. 

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