Greggs profits surge to £55m after pandemic losses

Earnings at Greggs have climbed to file ranges because the bakery chain shrugged off the woes of the pandemic and benefited from enterprise charges reduction, value reductions and recovering gross sales.

The corporate posted pre-tax earnings of £55.5 million for the six months to July 3 in contrast with the £65.2 million loss recorded final yr, and even greater than the £36.7 million posted in 2019.

In January the enterprise warned that it was bracing for its first ever half-year loss and believed earnings wouldn’t get better till subsequent yr. Nevertheless by Might it was extra upbeat about its prospects, forecasting a return to the black this yr.

Greggs mentioned that given the latest sustained gross sales rebound as restrictions have eased and consumers have returned for sausage rolls, it additionally anticipated full-year earnings to be barely forward of expectations. Because of this, the enterprise is paying a 15p dividend, its first since October 2019 after the ultimate payout was cancelled to protect money through the early levels of the disaster.

First-half gross sales of £546.2 million are 81 per cent greater than final yr, when lockdown battered its excessive road enterprise, and flat on a two-year foundation because it has been boosted by rising supply demand by way of its Simply Eat partnership. Like-for-like gross sales are 9.2 per cent decrease than the £546.3 million in 2019.

Roger Whiteside, 63, chief govt, mentioned “Greggs as soon as once more confirmed its resilience in a difficult first half, rising from the lockdown months in a robust place and rebuilding gross sales as social restrictions have been progressively relaxed.”

Regardless of the decrease gross sales, Greggs has managed to report file earnings after taking actions to scale back logistics and overhead prices final yr, and enterprise charges reduction. The bakery chain acquired £13 million in charges reduction through the previous six months however mentioned it will repay about £5 million of furlough assist after reversing a £2 million impairment cost on its retailers.

Final yr Greggs benefited from £18.8 million in charges reduction and £87 million of furlough assist whereas its retailers have been shut.

The large supermarkets, B&M and Pets at Dwelling have all repaid enterprise charges reduction after experiencing a gross sales surge, however so-called non-essential chains together with JD Sports activities and Dunelm have lately paid out dividends whereas retaining the federal government’s charges reduction, declaring that their retailers had been shut through the disaster.

Regardless of warnings from different giant meals producers and retailers about inflation, Greggs mentioned that through the first half of the yr it had seen “comparatively low ranges of meals enter inflation” and whereas commodity value stress was growing it nonetheless anticipated “modest” value will increase as a result of it had ahead buying cowl.

Analysts at Investec mentioned: “Value inflation is more likely to turn out to be a headwind in direction of the tip of the second half and we stay aware that tailwinds from retail enterprise charges reduction are set to reverse.”

Greggs was based as a supply enterprise on Tyneside by John Gregg, who opened his first store in Gosforth in 1951. The enterprise has now grown to 2,115 retailers and it nonetheless plans to open one other 100 retailers this yr, with 70 per cent of the brand new openings in car-accessible areas to replicate altering shopper calls for.

In the course of the pandemic Greggs briefly suspended its new product growth pipeline to concentrate on its bestselling gadgets. Nevertheless it would now concentrate on constructing on the success of its vegan sausage roll, with additions together with a vegan sausage, bean and cheese soften. It’s also planning new merchandise particularly for its Simply Eat supply provide together with sharing-box combos and totally different pizza toppings.

Greggs shares rose 1.7 per cent, or 48p, to £28.52 in early buying and selling.

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