29th Apr 2015 07:20
LONDON (Alliance News) - Greggs PLC Wednesday announced a GBP20 million special dividend but cancelled a GBP10 million share buyback after it completed a review of its capital structure, and said it now expects its results in the first half of its financial year to be ahead of its previous expectations after a strong first quarter.
The bakery and food-to-go chain has been reviewing its "appropriate" capital structure for the medium-term, and said it has decided that it will prioritise investment in the business and maintaining a net cash position. However, it also intends to maintain a progressive dividend policy, targeting an ordinary dividend that's covered by earnings two times, while it will return any "material surplus" capital to shareholder, likely through a special dividend.
Greggs said it wants to maintain a year-end net cash position of about GBP40 million to allow for the seasonality of its working capital cycle, but may retain cash above this level if it thinks this would be "in the interests of shareholders".
It also said it doesn't think it would be appropriate to take on any structural debt given most of its shops are leaseholds.
Greggs said that as a result of its review it will cancel the resumption of its share buyback that it had announced in March, instead returning GBP20 million to shareholders through a 20 pence special dividend that will be paid on July 17 to shareholders on its register on June 19.
The share buyback it had announced in March was aimed at returning up to GBP10 million to shareholders in the first half of 2015.
The news came as Greggs reported a strong start to its current financial year, with own shop like-for-like sales up 5.9% in the first 16 weeks to April 25, compared with 3.8% growth a year earlier, beating its own expectations. Total sales were up 5.0%, as it opened 24 new shops, but closed 18, and completed 69 refits.
"Customers are clearly enjoying our improved range of freshly-made sandwiches, including Balanced Choice products offering healthier options with fewer than 400 calories," it said. "Breakfast has continued to be an important driver of growth and we have added new options to our range".
"The strong start to 2015 has been supported by rising consumer disposable incomes and low input cost inflation. We expect market conditions to remain favourable and support a good first half performance, ahead of our previous expectations. In the second half of the year we will come up against stronger sales comparables and a less certain cost outlook. However we expect to deliver good growth for the year as a whole and further progress against our strategic plan," it said in an outlook statement.
The company has been bolstering its range, which used to be focused on bread products and pastries like sausage rolls. It has added breakfasts to take away, including flavoured porridge and oat cookies, as well as healthy options to its broader offering.
On Wednesday, it said it will add to its "Balanced Choice" offering by adding upgraded salads, a summer berry fruit pot, and a new own-label drinks range which has no added sugar and will include a 'Juicy Water' option that claims to contain one of the 'five-a-day' fruit and vegetables that health experts recommend.
Greggs shares were up 1.4% at 1,091.00 pence Wednesday morning.
By Steve McGrath; [email protected]; @stevemcgrath1
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