Greggs, the high street bakery operator, has this morning reported a rise in sales for the first half of the year, but warned that that the second half may not bring any “alleviation of the tougher consumer spending environment” currently being experienced.
The company, which operates over 1,520 outlets in the UK, said sales were up 4.2% to £335m, while like-for-like sales were marginally ahead at 0.4%.
Operating profit excluding exceptional items was down £1.2m to £17.3m (2010: £18.5m), while underlying operating profit increased £0.8m to £19.3m, before the £2m impact of additional public holidays.
The company opened 45 new shops during the period and closed six, taking the total number of outlets to 1,526. It said that it was “well on track” to achieve its target of opening around 80 net new shops during the year as a whole.
It said that the construction of two new bakeries was completed on time and on budget.
The group said that total capital expenditure during the first half was £31.4m, up from £12.4m in 2010, with the increase reflecting its investment in the new bakeries as well as the faster pace of shop openings and refurbishments, plus the rollout of coffee-making and hot sandwich equipment. As part of its capital expenditure programme, the company invested £5m in shop refurbishment and additional equipment (2010: £3.5m), including the refitting of 17 shops to its new design.
It said it remained on track to complete its budgeted capital expenditure programme of approximately £60m over the year as a whole. Greggs said its the financial position remained robust, with net cash on its balance sheet of £8.8m at the end of the first half down from £24.6m the previous year.
Kennedy McMeikan, chief executive, said: "Trading conditions have proved to be more challenging than we had expected and we do not anticipate that the second half will bring any alleviation of the tougher consumer spending environment with disposable incomes remaining under pressure. We continue to experience substantial increases in commodity prices and are continuing to work hard to mitigate the impact on customers through business efficiencies and targeted promotional activity.
"Our total sales will benefit from our shop opening programme and we believe that marginally positive like-for-like sales growth over the year as a whole is achievable. Our performance to date in these difficult trading conditions confirms our confidence in Greggs' ability to deliver long term profitable growth for the benefit of shareholders, employees and the wider community.”
The company declared an increased interim dividend of 5.8p per share (2010: 5.5p), a rise of 5.5%. It said this reflected the “improvement in underlying profit, the continued financial strength of the business and the board’s confidence in its future prospects”.
