Last close As at 05/08/2026
GBP19.33
▲ −13.00 (−0.67%)
Market capitalisation
GBP1,977m
Research: Consumer
Greggs, the leading food-on-the-go retailer, has continued an impressive upwards trend in like-for-like (lfl) owned-store sales growth across Q4, and in the final five weeks of FY18e. The company is successfully drawing new customers into its stores with strategic product launches and efforts to reduce queues and improve product availability. We upgrade both our FY18 and FY19 PBT forecasts for the second time in six weeks, by 3%.
Written by
Greggs |
An exceptionally strong end to the year |
Q4 trading statement |
Retail |
9 January 2019 |
Share price performance
Business description
Next events
Analysts
Greggs is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
Greggs, the leading food-on-the-go retailer, has continued an impressive upwards trend in like-for-like (lfl) owned-store sales growth across Q4, and in the final five weeks of FY18e. The company is successfully drawing new customers into its stores with strategic product launches and efforts to reduce queues and improve product availability. We upgrade both our FY18 and FY19 PBT forecasts for the second time in six weeks, by 3%.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/16 |
894.2 |
80.3 |
62.0 |
31.0 |
22.1 |
2.3 |
12/17 |
960.0 |
81.8 |
64.5 |
32.3 |
21.2 |
2.4 |
12/18e |
1,029.3 |
89.2 |
70.2 |
34.7 |
19.5 |
2.5 |
12/19e |
1,107.4 |
95.2 |
74.9 |
37.5 |
18.3 |
2.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Lfl sales continued to strengthen across Q4
Q418 company-managed store lfl sales rose by 5.2%, implying growth of approximately 6.3% over the final five weeks compared with a reported increase of 4.5% over the first eight weeks of the quarter. This follows a solid Q318 increase of 3.2% and marks the 21st consecutive quarter of lfl sales growth for the company; an enviable record in the current climate. Although travel and work-related locations generally delivered the highest lfl sales growth, the strong performance was broad based, a testament to the ongoing transformation of the brand.
Leveraging the brand
Although Greggs does not invest in above-the-line advertising, it does use social media marketing and is very successful in generating waves of positive publicity around innovative new products to draw new customers into the stores – the recently launched vegan sausage roll to complement ‘Veganuary’ being an example. New IT systems, implemented in 2017, are starting to deliver marked improvements in replenishment and the speed at which customers are served.
A further upgrade to earnings forecasts
We upgrade both our FY18 and FY19 PBT by 3% to £89.2m and £95.2m, respectively. In FY19 we conservatively forecast 2% lfl sales growth, with a stronger H1 vs H2 against softer comparatives (assuming no repeat of the extreme weather patterns that dominated the first half of 2018), and 5.6% growth from new stores.
Valuation: Supported by quality of earnings and yield
As a result of the sector de-rating, our blended DCF and peer-group valuation remains broadly unchanged at 1,517p. This implies an FY19e P/E multiple of 20.3x, which does not appear stretched given the quality of earnings and dividend yield.
Exhibit 1: Financial summary
December |
£m |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
|
PROFIT & LOSS |
2016 |
2017 |
2018e |
2019e |
2020e |
||
Revenue |
|
|
894.2 |
960.0 |
1,029.3 |
1,107.4 |
1,178.7 |
Cost of Sales |
(324.3) |
(348.1) |
(375.2) |
(401.4) |
(424.8) |
||
Gross Profit |
569.9 |
611.9 |
654.1 |
706.1 |
753.9 |
||
EBITDA |
|
|
125.9 |
135.7 |
144.6 |
157.4 |
170.1 |
Operating Profit (before amort. and except.) |
80.3 |
82.2 |
89.3 |
95.0 |
103.6 |
||
Intangible Amortisation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(5.2) |
(9.9) |
(6.0) |
(4.0) |
(3.0) |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit |
75.2 |
72.3 |
83.3 |
91.0 |
100.6 |
||
Net Interest |
(0.0) |
(0.4) |
(0.1) |
0.2 |
0.2 |
||
Profit Before Tax (norm) |
|
|
80.3 |
81.8 |
89.2 |
95.2 |
103.8 |
Profit Before Tax (FRS 3) |
|
|
75.1 |
71.9 |
83.2 |
91.2 |
100.8 |
Tax |
(18.1) |
(16.9) |
(18.4) |
(20.0) |
(21.0) |
||
Profit After Tax (norm) |
62.3 |
64.9 |
70.7 |
75.2 |
82.8 |
||
Profit After Tax (FRS 3) |
58.0 |
56.9 |
65.8 |
72.0 |
80.4 |
||
Average Number of Shares Outstanding (m) |
100.4 |
100.6 |
100.7 |
100.4 |
100.4 |
||
EPS - normalised (p) |
|
|
62.0 |
64.5 |
70.2 |
74.9 |
82.5 |
EPS - (IFRS) (p) |
|
|
57.7 |
56.5 |
65.3 |
71.7 |
80.1 |
Dividend per share (p) |
31.0 |
32.3 |
34.7 |
37.5 |
41.3 |
||
Gross Margin (%) |
63.7 |
63.7 |
63.5 |
63.8 |
64.0 |
||
EBITDA Margin (%) |
14.1 |
14.1 |
14.0 |
14.2 |
14.4 |
||
Operating Margin (before GW and except.) (%) |
9.0 |
8.6 |
8.7 |
8.6 |
8.8 |
||
|
|||||||
BALANCE SHEET |
|
||||||
Fixed Assets |
|
|
323.4 |
334.7 |
376.0 |
408.5 |
427.1 |
Intangible Assets |
14.3 |
14.7 |
18.3 |
20.7 |
20.7 |
||
Tangible Assets |
307.4 |
319.2 |
354.2 |
384.3 |
402.8 |
||
Investments |
1.8 |
0.8 |
3.6 |
3.6 |
3.6 |
||
Current Assets |
|
|
92.6 |
106.6 |
104.9 |
116.5 |
140.8 |
Stocks |
15.9 |
18.7 |
19.9 |
21.3 |
23.7 |
||
Debtors |
30.7 |
33.4 |
36.2 |
38.4 |
40.9 |
||
Cash |
46.0 |
54.5 |
48.8 |
56.8 |
76.2 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(121.4) |
(127.9) |
(137.2) |
(144.4) |
(141.1) |
Creditors |
(121.4) |
(127.9) |
(137.2) |
(144.4) |
(141.1) |
||
Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(29.9) |
(14.0) |
(8.1) |
(7.0) |
(6.6) |
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(29.9) |
(14.0) |
(8.1) |
(7.0) |
(6.6) |
||
Net Assets |
|
|
264.7 |
299.4 |
335.6 |
373.5 |
420.3 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
133.8 |
134.5 |
142.7 |
158.5 |
161.0 |
Net Interest |
0.1 |
0.2 |
(0.1) |
0.2 |
0.2 |
||
Tax |
(16.2) |
(17.6) |
(19.9) |
(19.2) |
(20.4) |
||
Capex |
(80.1) |
(72.6) |
(90.0) |
(95.0) |
(85.0) |
||
Acquisitions/disposals |
4.7 |
2.2 |
(4.1) |
(1.0) |
0.0 |
||
Financing |
(8.3) |
(6.0) |
(1.2) |
(0.0) |
0.0 |
||
Dividends |
(30.9) |
(32.2) |
(33.1) |
(35.6) |
(36.3) |
||
Net Cash Flow |
3.0 |
8.5 |
(5.7) |
8.0 |
19.5 |
||
Opening net debt/(cash) |
|
|
(42.9) |
(46.0) |
(54.5) |
(48.8) |
(56.8) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(46.0) |
(54.5) |
(48.8) |
(56.8) |
(76.2) |
|
Source: Company data, Edison Investment Research |
|||||||
|
|
Research: Real Estate
With its balanced portfolio of regional UK commercial real estate, Custodian REIT (CREI) continued to produce good returns through H119 while selectively growing the portfolio. The company says that barring unforeseen circumstances, it is well placed to meet its target of paying a fully covered aggregate DPS of 6.55p for the year, and targets further sustainable growth through accretive acquisitions and active management of the existing portfolio.