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Greggs profits constrained by inflation at £55.8m

Greggs opened 40 new locations in the first half, including a high-profile store in Leicester Square

Greggs expects sales to grow 22% in a year, but earnings remain largely flat as fast-food companies face inflationary pressures

  • Pre-tax profit was largely flat at £55.8m for the first six months of this year
  • Revenue rose 22.4% to £694.5 million but business tax rates, VAT and CPI weighed on it

Greggs’ earnings were broadly flat in the first six months of 2022 year-over-year as rising costs offset solid top-line growth.

The high street chain, best known for its sausage rolls, posted a pre-tax profit of £55.8m for the half-year, up from £55.5m in the first six months of 2021, despite like-for-like sales rising 22, 4 percent to £694.5 million.

Greggs maintained his expectations of modest full-year material profit growth on his 2021 result of £145.6m, attributing the flat first-half growth to the “reintroduction of business tariffs, an increase in VAT and higher cost inflation”. return.

Greggs opened 40 new locations in the first half, including a high-profile store in Leicester Square

Greggs opened 40 new locations in the first half, including a high-profile store in Leicester Square

It comes at a time of record low UK consumer confidence, with consumer price inflation at a 40-year high and expectations that the figure will be well into double digits by the end of the year.

Nonetheless, Greggs’ balance sheet is strong with a net cash position of £145.7m after paying a special dividend of 40p per share in April at a total cost of £40.6m. Diluted earnings per share rose to 44.8 pence from 43.2 pence a year ago.

Meanwhile, Greggs opened 40 new locations in the first half, with 12 closures taking the company to a total of 2,239 stores. Another 150 new shops are expected next year.

Wealth Club equity chief Charlie Huggins said the cost of raw materials, energy and wages are all rising rapidly and “Greggs has significant exposure to all three,” although the company is “managing those pressures well so far.”

He added: “If Greggs can maintain its recent selling momentum it will help offset inflationary pressures. But the group’s near-term prospects still look rather unappetizing given the extremely unfavorable cost outlook.

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“Those headwinds are probably more or less burned into the stock price, but until inflation comes down, Greggs will have to run hard to stand still.

Greggs maintained its ordinary interim dividend at 15 pence per share.

Greggs shares rose 2.3 percent to 2,126 pence in early trade, leaving year-to-date losses at 36.5 percent.

Chief Executive Rosie Currie said: “Greggs has had an encouraging performance for the first half with sales ahead of 2019 levels. These results demonstrate the continued strength of the Greggs brand and the demand for our offering of great taste, quality and value for money.

“In a market where consumer incomes are under pressure, Greggs offers exceptional value for money to customers looking for food and drink on the go.

‘We are well positioned to meet the widespread challenges affecting the economy and continue to have a number of exciting growth opportunities ahead of us, with a clear expansion strategy.

‘We remain confident that Greggs will continue to be successful.’

Elsewhere, Domino’s Pizza Group saw first-half profit before tax fall 16.3 per cent to £50.9m on flat group revenue of £278.3m.

The fast-food group told investors it expects improved profitability in the second half as the benefit of passing on food cost inflation to its franchise is realized.

Despite rising inflation, the group also expects to meet previous guidance for full-year earnings.

Investors were less confident as shares in Domino’s Pizza Group fell 2.4 percent to 284.2 pence in early trade.

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