The leading bakery retailer in the UK, with almost 1,700 retail shops throughout the country. I have a holding in my income portfolio (epic code: GRG).
Today Greggs issued a positive trading update - for the 2013 year total sales were up 3.8% and, although like-for-like (LFL) sales were down 0.8%, the fourth quarter showed an improving trend with LFL sales up 2.6%.
For the Christmas and New Year trading period (5 weeks to 4th January) total sales were up 4.8% and LFL sales up 3.1%.
Greggs continue to generate strong cash flow and they finished the year with a net cash balance of £24.6m, this compares to £12m at the interim stage and £19.4m at this time last year. It will be good to see the detail when they announce the full results on 26 February and also the decision on dividends; I would think that a continuation of their 28 year record of dividend increases is a strong possibility.
Management anticipate that full year results will be in line with their previous expectations.
For 2014 they have stated that due to the structural changes they are making, about 300 people may leave the business and that these changes would result in one-off redundancy costs and asset impairment charges amounting to £9.0m, of which £8.0m would be a cash cost. Management anticipate that the ongoing benefit of the cost reduction would be £6.0m per year from mid-2015 and that, excluding the one-off costs, there would be a benefit in 2014 of £2.0m.
As previously indicated by management the costs of these structural changes are likely to constrain profit growth over the next two years; however they are confident that they are building a platform for sustainable long-term profitable growth. See my previous post here for a full analysis.
Greggs is a highly cash generative business with a good dividend paying record, that will remain in my income portfolio.
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