Currency in GBP
Last close As at 17/03/2023
GBP25.76
▲ −84.00 (−3.16%)
Market capitalisation
GBP2,716m
Research: Consumer
Greggs reported a strong acceleration in revenue growth in Q422 as revenue from new initiatives, digital and evening trading complemented anticipated space growth and underlying growth. Value leadership continues to support volume growth and the company’s ability to pass on inflationary cost pressures. As Greggs enters the second full year of its five-year strategy, FY23 profit growth is expected to improve as newer initiatives mature, and following the suppression of FY22 profit by internal investment, cost inflation and the return of some costs to the income statement post the initial COVID outbreak. We trim our FY23 and FY24 estimates by 3%, primarily due to higher-than-expected cost inflation.
Greggs |
Eye-catching revenue growth |
FY22 trading update |
Retail |
5 January 2023 |
Share price performance
Business description
Next events
Analysts
Greggs is a research client of Edison Investment Research Limited |
Greggs reported a strong acceleration in revenue growth in Q422 as revenue from new initiatives, digital and evening trading complemented anticipated space growth and underlying growth. Value leadership continues to support volume growth and the company’s ability to pass on inflationary cost pressures. As Greggs enters the second full year of its five-year strategy, FY23 profit growth is expected to improve as newer initiatives mature, and following the suppression of FY22 profit by internal investment, cost inflation and the return of some costs to the income statement post the initial COVID outbreak. We trim our FY23 and FY24 estimates by 3%, primarily due to higher-than-expected cost inflation.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/20 |
811.3 |
(12.9) |
(12.1) |
0.0 |
N/A |
0.0 |
12/21 |
1,229.7 |
145.6 |
114.3 |
97.0 |
21.4 |
4.0 |
12/22e |
1,513.0** |
146.9 |
118.0 |
59.0 |
20.7 |
2.4 |
12/23e |
1,654.0 |
160.2 |
118.2 |
59.1 |
20.7 |
2.4 |
12/24e |
1.900.8 |
182.4 |
131.1 |
65.5 |
18.6 |
2.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Reported.
Strong acceleration in Q422
A strong acceleration in revenue growth in Q422 took Greggs’ FY22 reported revenue to £1,513m, c 4% ahead of our estimate of £1,451m and consensus estimates (source: Refinitiv median) of £1,460m. Q422 like-for-like sales growth in company-managed stores of 18.2% (FY22: 17.8%), benefited from a strong exit rate from Q322, a price increase flagged at the start of the period and an easier comparative with Q421, which was negatively affected by the outbreak of the Omicron strain of COVID and other supply chain disruption to the tune of 3%. Management estimates that rail strikes and adverse weather negatively affected revenue by £2–3m in the period. Greggs continues to enjoy volume growth and price inflation (low double-digit in Q422), with new initiatives, digital sales and evening trading contributing well, albeit unquantified at this stage. FY22 profit is in line with management’s expectations. The year-end cash position of £191m was in line with our expectations and remains elevated ahead of peak capital investment in FY23–24.
FY23: Looking forward to better profit growth
Management points to ‘another year of good progress’ in FY23 despite higher expected like-for-like cost inflation of 10% versus guided and met FY22 inflation of 9%, due to staff cost inflation. We trim our profit estimates to reflect higher cost inflation and the phasing of revenues from new revenue initiatives in FY24.
Valuation: Recent re-rating
The share price has performed strongly as the wider market has rebounded following the weakness through September 2022. On our new estimates, the FY23e P/E multiple has returned to 20.7x, a premium to the post-FY13 average of 17.9x, but below recent annual peak multiples in the 20s.
Exhibit 1: Financial summary
£m |
2020 |
2021 |
2022e |
2023e |
2024e |
||
Year-end December GBP millions |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
811.3 |
1,229.7 |
1,513.0 |
1,654.0 |
1,900.8 |
Cost of Sales |
(299.6) |
(447.7) |
(566.7) |
(623.1) |
(721.8) |
||
Gross Profit |
511.7 |
782.0 |
946.3 |
1,030.9 |
1,179.0 |
||
EBITDA |
|
|
115.4 |
259.0 |
267.1 |
302.4 |
349.6 |
Operating profit (before amort. and excepts.) |
|
|
(6.2) |
153.2 |
154.4 |
167.9 |
190.6 |
Intangible Amortisation |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(0.8) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit |
(7.0) |
153.2 |
154.4 |
167.9 |
190.6 |
||
Net Interest |
(6.7) |
(7.6) |
(7.5) |
(7.6) |
(8.1) |
||
Profit Before Tax (norm) |
|
|
(12.9) |
145.6 |
146.9 |
160.2 |
182.4 |
Profit Before Tax (FRS 3) |
|
|
(13.7) |
145.6 |
146.9 |
160.2 |
182.4 |
Tax |
0.7 |
(28.1) |
(25.7) |
(38.5) |
(47.4) |
||
Profit After Tax (norm) |
(12.2) |
117.5 |
121.2 |
121.8 |
135.0 |
||
Profit After Tax (FRS 3) |
(13.0) |
117.5 |
121.2 |
121.8 |
135.0 |
||
Average Number of Shares Outstanding (m) |
101.0 |
101.5 |
101.8 |
102.1 |
102.1 |
||
EPS - normalised fully diluted (p) |
|
|
(12.1) |
114.3 |
118.0 |
118.2 |
131.1 |
EPS - (IFRS) (p) |
|
|
(12.9) |
115.7 |
119.1 |
119.2 |
132.2 |
Dividend per share (p) |
0.0 |
97.0 |
59.0 |
59.1 |
65.5 |
||
Gross Margin (%) |
63.1 |
63.6 |
62.5 |
62.3 |
62.0 |
||
EBITDA Margin (%) |
14.2 |
21.1 |
17.7 |
18.3 |
18.4 |
||
Operating Margin (before GW and except.) (%) |
(0.8) |
12.5 |
10.2 |
10.1 |
10.0 |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
631.0 |
622.3 |
694.5 |
883.6 |
1,010.0 |
Intangible Assets |
15.6 |
14.9 |
26.1 |
34.6 |
41.1 |
||
Tangible Assets |
345.3 |
343.8 |
390.2 |
556.2 |
661.5 |
||
Right-of-Use Assets |
270.1 |
263.6 |
278.2 |
292.8 |
307.4 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Assets |
|
|
98.7 |
264.1 |
272.8 |
187.6 |
186.4 |
Stocks |
22.5 |
27.9 |
35.3 |
38.8 |
45.0 |
||
Debtors |
39.4 |
37.6 |
46.3 |
50.6 |
58.1 |
||
Cash |
36.8 |
198.6 |
191.2 |
98.2 |
83.2 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(144.1) |
(206.9) |
(247.7) |
(267.0) |
(300.8) |
Creditors |
(91.1) |
(153.4) |
(194.2) |
(213.5) |
(247.3) |
||
Leases |
(48.6) |
(49.3) |
(49.3) |
(49.3) |
(49.3) |
||
Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
(4.4) |
(4.2) |
(4.2) |
(4.2) |
(4.2) |
||
Long Term Liabilities |
|
|
(264.0) |
(252.3) |
(266.9) |
(281.5) |
(296.1) |
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Leases |
(243.1) |
(233.9) |
(248.5) |
(263.1) |
(277.7) |
||
Other long term liabilities |
(20.9) |
(18.4) |
(18.4) |
(18.4) |
(18.4) |
||
Net Assets |
|
|
321.6 |
427.2 |
452.7 |
522.7 |
599.4 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
61.6 |
312.1 |
291.9 |
318.0 |
373.7 |
Net Interest |
(6.7) |
(7.4) |
(6.9) |
(7.6) |
(8.1) |
||
Tax |
(10.7) |
(19.2) |
(25.7) |
(38.5) |
(47.4) |
||
Capex |
(59.8) |
(54.0) |
(119.0) |
(255.0) |
(214.0) |
||
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Equity financing |
3.7 |
4.6 |
4.6 |
4.6 |
4.6 |
||
Dividends |
0.0 |
(15.3) |
(100.9) |
(60.3) |
(66.9) |
||
Borrowings and lease liabilities |
(42.1) |
(49.0) |
(51.4) |
(54.1) |
(56.8) |
||
Other |
(0.5) |
(10.0) |
0.0 |
0.0 |
0.0 |
||
Net Cash Flow |
(54.5) |
161.8 |
(7.4) |
(93.0) |
(15.0) |
||
Opening net debt/(cash) |
|
|
91.3 |
36.8 |
198.6 |
191.2 |
98.2 |
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
36.8 |
198.6 |
191.2 |
98.2 |
83.2 |
Closing net debt/(cash) excluding leases |
|
|
(36.8) |
(198.6) |
(191.2) |
(98.2) |
(83.2) |
Closing net debt/(cash) including leases |
|
|
254.9 |
84.6 |
106.6 |
214.2 |
243.7 |
Source: Company accounts, Edison Investment Research
|
|
Research: TMT
Checkit has made further progress with its US growth strategy, recently signing three new material contracts in the US with a total minimum value over three years of $1m. The company has also signed a contract renewal with a major UK customer, worth £2.1m over four years. These wins confirm Checkit’s ability to win new customers in the US and retain existing customers. We maintain our forecasts.
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