Supply chain restructuring cost the baker £1.68m in the 26 weeks to 30 June 2018, mainly driven by the expense of transferring operations. However, the process has proved less costly than the same period last year, which entailed spend of £8.3m, largely from £7.4m of redundancy costs.
Greggs announced earlier this year that it was streamlining production by closing smaller factories and concentrating operations in larger ‘centres of excellence’, entailing more investment in automation.
The changes include a new doughnut line at its Newcastle site, internal relocation of its pizza production to its Manchester site and the adaptation of its distribution capability to handle the transfer of products around the network.
The company also reported that it was making progress on the plans for an additional distribution centre that it planned to build at Amesbury in Wiltshire in 2019.
‘Extremes of weather’
Total sales for the company were up 5.2% to £476m for the six weeks to 30 June 2018, with like-for-like sales in company-managed shops up by 1.5% in a period that was “significantly affected by extremes of weather and increased consumer caution”.
Greggs reported pre-tax profit – including property profits and exceptional charges – of £24.1m, up 19.5% compared with the same period last year (£19.4m). However, underlying operating profit took a slight dip, down 6.9% to £25.7m.
Operational highlights stated in the results included continued growth in several categories – hot drinks, breakfast, healthier choices and hit food options.
Chief executive Roger Whiteside said the baker had delivered a resilient performance despite challenging market conditions and had continued to make good progress with its strategic investment programme.
“While we remain cautious in respect of the outlook for sales in the balance of the year given the consumer backdrop, we are confident in the medium and long-term growth potential for the business – supported by customers’ response to our initiatives, our strong cash generation and the ongoing strategic investments that we are making,” added Whiteside.
“Over the year as a whole we continue to believe that underlying profits (before exceptional costs) are likely to be at a similar level to 2017.”
Greggs’ latest results followed a chain of sales growth for the company. In January this year, the manufacturer reported its 17th quarter of consecutive sales growth, while its full-year results for 2017 saw a £3.6m boost in operating profit as it consolidated manufacturing operations and expanded its logistic capability.