Last close As at 05/08/2026
GBP19.33
▲ −13.00 (−0.67%)
Market capitalisation
GBP1,977m
Research: Consumer
An unscheduled trading update confirming exceptional 11.1% like-for-like (l-f-l) sales growth in the first 19 weeks of FY19, and a fourth earnings upgrade in six months is testament to Greggs’ outstanding progress on the repositioning of the brand as a leading food-on-the go-format. We increase our FY19 and FY20 underlying PBT forecasts by 9%. The company is highly cash generative and likely to distribute part of the substantial cash balance (FY19e: £102.6m) with the H119 dividend.
Written by
Greggs |
Robust trading performance - earnings upgrade |
Trading update |
Retail |
14 May 2019 |
Share price performance
Business description
Next events
Analysts
Greggs is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
An unscheduled trading update confirming exceptional 11.1% like-for-like (l-f-l) sales growth in the first 19 weeks of FY19, and a fourth earnings upgrade in six months is testament to Greggs’ outstanding progress on the repositioning of the brand as a leading food-on-the go-format. We increase our FY19 and FY20 underlying PBT forecasts by 9%. The company is highly cash generative and likely to distribute part of the substantial cash balance (FY19e: £102.6m) with the H119 dividend.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
960.0 |
81.8 |
64.5 |
32.3 |
31.3 |
1.6 |
12/18 |
1,029.3 |
89.8 |
71.1 |
35.7 |
28.4 |
1.8 |
12/19e |
1,159.5 |
107.7 |
84.8 |
44.2 |
23.8 |
2.2 |
12/20e |
1,234.2 |
116.6 |
92.7 |
48.5 |
21.8 |
2.4 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Outstanding momentum in l-f-l sales growth
Greggs has delivered exceptional 11.1% like-for-like sales growth in the first 19 weeks of FY19, a further improvement on impressive growth of 9.6% in the first seven weeks of the year. This builds on a strong finish to FY18, which saw overall Q4 like-for-like sales growth of 5.2% strengthening to c 6–7% in the final weeks. Sales have been boosted by the phenomenal success of the vegan-friendly sausage roll, which has been made more widely available across all stores, and ongoing strong demand for hot drinks and breakfast ranges and the post-4pm pizza deal.
Accelerating plans to extend opening hours
Greggs remains on track with strategic investments in the supply chain and IT systems, and the vision for brand repositioning continues to evolve apace. Given the strength of trading, management intends to accelerate investment in strategic initiatives in H2, including a significant opportunity to extend opening hours beyond the traditional breakfast and lunchtime dayparts, into the early evening.
Fourth earnings upgrade since late November
We upgrade our FY19 and FY20 underlying PBT forecasts by 9%. Based on current trends, we raise our H1and H2 l-f-l sales growth assumptions to 9.5% and 5% (previously 6% and 1%) in the current year, offset in part by investment in strategic initiatives, including higher spending on labour and digital marketing, in H2. We make no changes to our FY20 underlying assumptions, including 2% l-f-l sales growth, at this stage.
Valuation: Cautious assumptions; cash distribution
Greggs’ shares trade marginally below our updated DCF valuation of 2,059p (previously 1,897p), which assumes revenue growth beyond FY21e of 6% cautiously fading to 2% and a perpetuity EBITDA margin of 16% (2021e:15.1%). The company is highly cash generative and is expected to distribute surplus cash in excess of £40m (FY19e: £102.6m) in the form of a special dividend in addition to the H119 dividend.
Exhibit 1: Financial summary
£m |
2017 |
2018 |
2019e |
2020e |
||
Dec |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
960.0 |
1,029.3 |
1,159.5 |
1,234.2 |
Cost of Sales |
(348.1) |
(373.4) |
(419.5) |
(444.0) |
||
Gross Profit |
611.9 |
655.9 |
740.0 |
790.1 |
||
EBITDA |
|
|
135.7 |
145.7 |
223.5 |
240.8 |
Operating Profit (before amort. and except.) |
82.2 |
89.8 |
114.5 |
124.5 |
||
Intangible Amortisation |
0.0 |
0.0 |
0.0 |
0.0 |
||
Exceptionals |
(9.9) |
(7.2) |
(4.3) |
(2.2) |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Operating Profit |
72.3 |
82.6 |
110.2 |
122.3 |
||
Net Interest |
(0.4) |
(0.0) |
(6.8) |
(7.9) |
||
Profit Before Tax (norm) |
|
|
81.8 |
89.8 |
107.7 |
116.6 |
Profit Before Tax (FRS 3) |
|
|
71.9 |
82.6 |
103.4 |
114.4 |
Tax |
(16.9) |
(18.2) |
(22.6) |
(23.6) |
||
Profit After Tax (norm) |
64.9 |
71.6 |
85.1 |
93.0 |
||
Profit After Tax (FRS 3) |
56.9 |
65.7 |
81.7 |
91.3 |
||
Average Number of Shares Outstanding (m) |
100.6 |
100.7 |
100.7 |
100.7 |
||
EPS - normalised (p) |
|
|
64.5 |
71.1 |
84.8 |
92.7 |
EPS - (IFRS) (p) |
|
|
56.5 |
65.3 |
81.1 |
90.6 |
Dividend per share (p) |
32.3 |
35.7 |
44.2 |
48.5 |
||
Gross Margin (%) |
63.7 |
63.7 |
63.8 |
64.0 |
||
EBITDA Margin (%) |
14.1 |
14.2 |
19.3 |
19.5 |
||
Operating Margin (before GW and except.) (%) |
8.6 |
8.7 |
9.9 |
10.1 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
334.7 |
347.5 |
654.7 |
700.2 |
Intangible Assets |
14.7 |
16.9 |
18.2 |
18.8 |
||
Tangible Assets |
319.2 |
330.5 |
636.3 |
681.2 |
||
Investments |
0.8 |
0.2 |
0.2 |
0.2 |
||
Current Assets |
|
|
106.6 |
140.6 |
164.0 |
186.1 |
Stocks |
18.7 |
20.8 |
23.3 |
25.4 |
||
Debtors |
33.4 |
31.6 |
38.1 |
42.3 |
||
Cash |
54.5 |
88.2 |
102.6 |
118.4 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Current Liabilities |
|
|
(127.9) |
(145.1) |
(204.9) |
(206.9) |
Creditors |
(127.9) |
(145.1) |
(204.9) |
(206.9) |
||
Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
||
Long Term Liabilities |
|
|
(14.0) |
(13.8) |
(237.8) |
(257.3) |
Long term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other long term liabilities |
(14.0) |
(13.8) |
(237.8) |
(257.3) |
||
Net Assets |
|
|
299.4 |
329.2 |
376.0 |
422.1 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
134.5 |
152.2 |
163.2 |
174.3 |
Net Interest |
0.2 |
0.2 |
0.0 |
0.0 |
||
Tax |
(17.6) |
(16.1) |
(21.7) |
(23.2) |
||
Capex |
(72.6) |
(66.6) |
(90.0) |
(88.0) |
||
Acquisitions/disposals |
2.2 |
1.7 |
0.0 |
0.0 |
||
Financing |
(6.0) |
(4.7) |
0.0 |
0.0 |
||
Dividends |
(32.2) |
(33.1) |
(37.1) |
(47.3) |
||
Net Cash Flow |
8.5 |
33.7 |
14.4 |
15.8 |
||
Opening net debt/(cash) |
|
|
(46.0) |
(54.5) |
(88.2) |
(102.6) |
HP finance leases initiated |
0.0 |
0.0 |
0.0 |
0.0 |
||
Other |
0.0 |
0.0 |
0.0 |
0.0 |
||
Closing net debt/(cash) |
|
|
(54.5) |
(88.2) |
(102.6) |
(118.4) |
Source: Greggs accounts, Edison Investment Research
|
|
Research: Healthcare
VolitionRx released its Q119 financial results last week and provided an operational update at the capital markets day on 9 April at the NYSE. Among other areas, VolitionRx highlighted the assay upgrade progress, which was one of the main operational goals in 2018. Although this caused delays to original commercial product development timelines, VolitionRx emphasises the current product-grade Nu.QTM assays excel when it comes reliability and reproducibility. The first batch of proof-of-concept data with the new assays in detection of colorectal and lung cancers was released in March 2019 and larger trials should follow. The other CMD highlights include detailed presentations by the invited KOLs on the newer R&D areas Nu.QTM Capture and Nu.Q Vet. Our valuation is $215m or $5.46/share.