Greggs, the leading bakery food-on-the-go retailer in the UK with almost 1,700 retail outlets throughout the country, has reported interim results for the 26 weeks ended 28 June 2014.
Roger Whiteside, Chief Executive commented:
“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.
“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.”
Financial highlights
- Total sales up 3.1% to £373m (2013: £362m)
- Own shop like-for-like sales up 3.2% (2013: 2.9% decline)
- Property gains on disposal of £1.4m (2013: £0.2m)
- Pre-tax profit £16.9m (2013: £11.4m) excluding exceptional items
- Continued strong cash generation
- Dividend per share maintained at 6.0p (2013: 6.0p)
Operational highlights
- Favourable trading conditions
- Encouraging results from sales initiatives:
- New coffee blend well received
- Improved sandwich range, including greater choice below 400 calories
- 131 refits completed
- 26 new shops opened, 36 closures
- 1,661 shops trading at 28 June
- Shop refurbishment programme progressing well
Progress on revised strategy
Roger Whiteside also reported in more detail on the delivery of plans in line with the revised strategy outlined last year, as follows:
1. Great tasting fresh food
We have continued to see improved sales as a result of the product changes made last year and, in addition, are now starting to see encouraging results from our 2014 initiatives. Our new and improved coffee blend has been well received and sales are continuing to grow strongly. Our reputation for value for money is growing as we extend our popular meal deals to include hot drinks, cakes, pastries and a wider range of sandwiches.
Most recently we have successfully launched our new and improved sandwich range including new ‘Balanced Choice’ products offering great tasting options with fewer than 400 calories. The new range presentation emphasises that all of our sandwiches are made fresh in shops every day, setting us apart from many competitors including the supermarkets.
2. A great shopping experience
As well as improvements to our product offer we have continued to benefit from the changes we have made to service levels in our shops, including improved availability and extended trading hours. Our new customer loyalty scheme, Greggs Rewards, has been launched successfully and we are now planning to build on this as we develop our capability to engage with customers and better meet their needs.
Our investment programme to improve the quality of our estate is progressing well. During the first 26 weeks we completed 131 shop refurbishments, in line with our plan to refit around 200 shops during 2014.
Our plan to reshape the estate, rebalancing it towards more sustainable long-term locations, is also on track. We opened 26 new shops (including 14 franchise units) and closed 36 shops, giving a total of 1,661 shops (of which 39 are franchise units) trading at 28 June 2014. We expect shop numbers for the year as a whole to be broadly flat. Almost all of our new shops were opened in locations away from high streets.
3. Simple and efficient operations
Alongside our focus on driving like-for-like sales from our existing estate of shops we continue to concentrate on developing simpler and more efficient operations in our supply chain and support areas. We have completed the restructure of our support areas and are making good progress with our plan to consolidate our in-store bakeries into our regional bakery network. We now anticipate that the majority of these in-store bakery transfers will be completed by the end of this year. The combined financial benefits from these changes remain on track to deliver savings of £2.5 million in 2014 and £6.0 million per year from 2015 onwards.
4. Improvement through change
In August 2013 we announced a five year change programme whereby we will invest in process and systems platforms that will enable us to compete more effectively in the fast-moving food-on-the-go market. We are on track to deliver the first two elements of this programme, relating to workforce management and supplier relationship management, in 2014. We have selected SAP as our core ERP software supplier and are moving forward to the next phase of the programme.