High-street baker Greggs has bounced back from the sales and profits slump reported in its interim results last year. It declared plans to increase pizza capacity with a new manufacturing line at its Enfield site, off the back of the development of its delivery and click and collect services and intended expansion of its pizza options.
The previous year saw the baker post pre-tax loss of £64.5m as it struggled with store closures in the initial waves of the COVID-19 pandemic. Greggs is now sitting on a pre-tax profit of £55.5m for the first half of 2021/22, up from the £40.7m reported in 2019.
Total sales of the business were down 9.2% compared with the same period two years ago, but were up 81.7% to £546.2m from £300.6m in the first half of 2020/21.
NPD restarted: vegan launches
Following a temporary suspension in 2020, Greggs reported new product development had been restarted. Recent launches included new vegan options, such as a Vegan Ham & Cheeze Baguette and a vegan-friendly breakfast sausage. Its latest line, the Vegan Sausage, Bean & Cheeze Melt is due in Greggs outlets from 5 August.
"We continue to develop our menu, adapting to offer greater choice in growth categories such as coffee and hot food, and reflecting consumer demand for dietary variety," said chief executive Roger Whiteside in the company's interim financial statement.
"Further progress has been made in developing the health credentials of our food and drink, reducing fat, salt and sugar wherever possible and offering more choices in low-calorie and vegan-friendly ranges."
Whiteside said Greggs had already begun operating from its new automated frozen distribution facility at Balliol Park in Newcastle upon Tyne.
Reflecting on the results, Third Bridge analyst Ross Hindle said Greggs had been able to punch above its weight, outpacing the 20% decline experienced by the market as a whole.
Passing on VAT rises
“From a pricing point of view, Greggs chose to pass on the Chancellor's VAT discount to their customers,” he added. “They now face the tricky challenge of putting their prices back up when VAT increases to 12.5% at the end of September, and 20% in 2022. This may mean short-term margin pressure for the Group.”
Patrick Higgins, food and beverage analyst at Goodbody, said Greggs had delivered an impressive set of results, significantly aided by the easing of COVID-19 restrictions.
“Looking forward, we predict that Greggs will continue to perform well, positioned as a sector leader among its peers, and today’s results are a sign of positive things to come for the rest of the food & beverage industry,” Higgins added.
This week also saw drinks firm AG Barr post an unscheduled trading update for the 27 weeks to 1 August 2021, in which it reported sales of £134m – up 18% compared with the same period last year.
Roger White, Chief Executive, commented: "We are pleased with the performance of the business in the year so far. There is good momentum behind our core brands and we have re-entered the growing big can energy category with our Rubicon RAW Energy range.
Increased investment at AG Barr
“We plan to increase our brand investment in the second half of the year, building on our progress to date. While uncertainty remains, we are confident in delivering our plans across the balance of the year and meeting our recently revised full year profit expectations.”
On-the-go consumption saw a rise in response to the easing of COVID-19 restrictions, while at home occasions remained strong for the business. Barr’s energy drinks sub category continued to outperform the market.
Commenting on the results, Shore Capital analyst Clive Black said: “AG Barr’s recent unscheduled trading update made for pleasing reading, leading to a 15% upgrade to our full-year 2022 forecasts.
“Barr has today provided a more detailed breakdown of the group’s H1 2022 outperformance, reflecting both robust underlying demand and some specific one-off events. Barr is a very high-quality business in our view, with a stable of valuable brands that underpin attractive margins and cash flow credentials”
Ornua posts growth
Meanwhile, cheese supplier Ornua Foods UK has posted pre-tax profit and sales growth in results for the year ended 26 December 2020.
Pre-tax profits grew by 26.8% to £5.2m, reflecting strong underlying business growth, the impact of the change in consumer behaviour in response to Covid-19 and favourable commodity price movements. Turnover for the year was up 16.1% to £411m.
The year was punctuation by investment in new cutting and packing equipment at its facility in Leek, including the installation of an additional high-speed cheese slicing line and further expansion of its cheese grating capabilities.
Bill Hunter, managing director of Ornua Foods UK, said: “The key fundamentals of our business, namely great people, products, and partners, came to the fore as we all worked together to keep high quality food on supermarket shelves across Britain.
“I’m pleased to be able to report that, thanks to the hard work and commitment of our staff, allied with the close collaboration and support of our customers and supply partners, we were able to meet the surge in demand in retail while maintaining our customer service, product quality, and availability levels throughout.”
Looking forward, Hunter said Ornua’s focus would be on building a strong own-label and branded portfolio and optimising experience in dairy commodities.
“This, together with ongoing investment in both our state-of-the-art packing facility in Leek and our Pilgrims Choice and Kerrygold brands, will continue to give the company a competitive advantage in the marketplace,” he added.