Greggs posts growth as it consolidates manufacturing
The baker’s operating profit, excluding exceptional items, grew 4.6% to £81.7M last year. Total sales for the company were up 7.7% to £960M, compared with £894.2M in 2017.
Exceptional items worth £9.9M meant Greggs’ pre-tax profit fell 4.3% to £71.9M. This was the result of a number of investments by the company to improve its internal supply chain.
Chief executive Roger Whiteside said: “In 2017 we delivered another strong performance in challenging economic circumstances as rising inflation impacted both our own costs and customers’ disposable income.
“While the UK consumer outlook remains challenging, we are encouraged by the start to the year. 2018 will be the peak year for investment in our supply chain as we create the platforms for further growth.”
£45 million investment
This year will see Greggs continue investing in expanding its logistics capacity, while it consolidates its manufacturing operations.
This would result in the creation of thousands of new roles in the baker’s retail and distribution operation, but would result in fewer jobs in manufacturing.
Last year already saw Greggs transfer its Edinburgh operations to its Glasgow bakery and extending its Leeds bakery to focus on the production of cakes and muffins.
A total investment of £45M has been planned by the baker to support these consolidation, including the creation of a “centre for excellence” for doughnuts at the firm’s Gosforth Park Bakery in Newcastle.
Commenting on Greggs’ results, Paul Hickman, analyst at Edison Investment Research, said the baker’s profits had beaten expectations.
“Despite consumer pressures, the brand was able to grow its top line successfully. It supports our view that Greggs, with its combination of value and convenience and a refreshed store and product offer, is well-placed in a tightening consumer market,” he said.
‘Tightening consumer market’
“The brand should do well against higher priced competition on the High Street and the company is increasingly exploring non-traditional locations such as petrol stations and drive-thrus.”
However, Clive Black, head of food at market analyst Shore Capital, said Greggs’ profit were behind what they had forecasted.
“Newcastle’s finest major sausage roll maker, now also swimming in the world of cranberries, falafel and porridge, has reported another year of profit progress albeit a tad behind our forecasts,” added Black.
“In its current observations on the market, Greggs reports that it is ‘encouraged’ by recent trading with like-for-like sales up by 3.2% in the 8W to the 24th February – a little behind our 3.5% full-year expectation.”
Meanwhile, last month, Greggs delivered its 17th quarter of consecutive like-for-like sales growth in its fourth-quarter trading update, as it planned “record investment” in its supply chain in 2018.
