Greggs’ substantial progress with its brand transformation into a leading food-on-the-go format, backed by smart use of social media marketing, helped it to deliver a strong finish to the year ended 31st December 2018. This is after an initial disruption from extreme weather, and an outstanding start to the current financial year. As a result, consensus earnings forecasts have been upgraded three times since the end of November, most recently just two weeks ago.
FY18 like-for-like and total sales grew 2.9% (H1: 1.5%, H2: 4.2%) and 7.2%, respectively, and underlying pre-tax profit increased by 10% to £89.8m. In the first 7 weeks of the current financial year, widespread publicity surrounding the launch of the now-famous vegan sausage roll contributed to an impressive like-for-like sale performance of 9.6%.
The ongoing growth-oriented investment programme is supported by strong cash generation, driving a significant £33.7m increase in net cash to £88m at year end and the potential for a special dividend, which the Board expects to declare with the interim results in July. It views c. £40m as an appropriate year end cash balance. The ordinary dividend for FY18 increased by 10.5% to 35.7p.
Greggs has evolved its product ranges to appeal to new classes of customers, while also retaining some traditional baked products. The phenomenal success of the vegan sausage roll is likely to shift the company’s emphasis for new product launches towards those that appeal to customers making a range of dietary choices, be it meat-free, sugar-free, low fat.
It is also trialling new ways for customers to access the brand, with the introduction of click & collect and click & deliver in partnership with Uber Eats and Deliveroo. Approximately 37% of shops are now in travel and workplace locations, up from 20% in 2012, and with a medium-term objective of 50%