30th Jul 2014 07:51
LONDON (Alliance News) - Bakery chain Greggs PLC Wednesday reported a lower pretax profit for the first half of the year as it was hit mainly by the costs of closing in-store bakeries, but its shares rose as its continued product offering revamp showed further signs of paying off.
The company did well during the financial crisis and economic downturn as sales of hot, inexpensive items like sausage rolls and pasties did well, but it ran into trouble last year and it issued profit warnings as sales slid in the first half of the year and investments in its shops weighed on results. It has decided to build a bigger food-on-the-go business to try and capitalise on growing consumer demand for that sort of product, rather then its take-home bakery products.
The revamp continues to pay off, as pretax profit excluding exceptional items rose to GBP16.9 million in the 26 weeks to June 28, from GBP11.4 million a year earlier, driven by the 3.1% sales growth it reported earlier this month and a GBP1.4 million gain on property disposals, up from GBP0.2 million a year earlier.
Including the exceptional items, made up of the costs of closing in-store bakeries and restructuring of support functions, pretax profit dropped to GBP8.7 million. It had booked any equivalent exceptional items in the first half of 2013.
The company had already reported first half sales growth of 3.1% and own shop like-for-like sales growth of 3.2%, a turnaround from a 2.9% like-for-like decline a year earlier. Revenue was GBP372.8 million, up from GBP361.7 million.
Chief Executive Roger Whiteside admitted the company was facing tougher comparables in the second half of the year, but said the risks of input inflation were waning.
"Whilst our year-on-year performance has benefited from comparison with a period of weak trading in 2013, sales growth is also being driven by initiatives that have further improved our products, availability, service and value. Our new and improved coffee blend and sandwich range are great examples of this," he said in a statement.
"Although sales comparables strengthen in the second half the risk of input cost inflation appears to be reducing. Overall, we expect to deliver an improved financial result for the year and further progress against our strategic plan," he added.
The company said sales had been strong in July after last year was hit by a heatwave in the UK, but it expects the growth to fall back in coming months as the comparable figures improve.
Greggs opened 26 new shops in the half, but also closed 36, leaving it with 1,661 shops on June 28. It said its hop refurbishment plan is progressing well, with 131 refits completed in the first half.
Greggs maintained its interim dividend at 6.0 pence.
The company's shares were up 4.5% at 522.50 pence early Wednesday.
By Steve McGrath; [email protected]; @stevemcgrath1
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