Member Article

Greggs off to a strong 2015 start as sales drive growth

Greggs have reported a strong trading performance for the first four months of the year, as the company continues to perform in the same positive vein as 2014.

The bakery food-on-the-go retailer’s total sales grew by 5%, with like-for-like shop sales grew by 5.9% over the same period. This surpasses last year’s growth rate of 3.8%.

The strong start to 2015 has been supported by rising consumer disposable incomes and low input cost inflation.

Whilst the company closed 18 shops, 24 new shops were opened and 69 refits were completed meaning Greggs now boasts 1,650 retail outlets throughout the country.

On 30 April a new test site is set to open with the Irish motorway service operator Applegreen, at a service area located on the M2 near Belfast.

Product and service initiatives continue to drive growth as Greggs’ popular ‘Balanced Choice’ range proved popular. This menu will grow in the coming weeks through the introduction of upgraded salads, a summer berry fruit pot and a new own-label drinks range, developed with no added sugar.

Moreover, breakfast has continued to be an important driver of growth as Greggs has added new options to its range.

Now, the Greggs board has completed a capital structure review, considering the views of shareholders and advisers. It has been decided that the company will prioritise investment in the business and maintain a net cash position.

Greggs will aim to maintain a year end net cash position of around £40m to allow for seasonality in its working capital cycle. Moreover, the board expects to return capital to shareholders, likely by way of a special dividend.

As a result of the board review, the company will not carry out the proposed share buyback announced at the time of the group’s preliminary results.

Rather, given the current strong cash position and expected cash requirements for the year ahead, the board has declared a special dividend of 20 pence per share, a distribution of £20m. This dividend will be paid on 17 July 2015 to shareholders on the register on 19 June 2015.

Greggs now expects market conditions to remain favourable and support a good first half performance, allowing the company to make further progress against its strategic plan.

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