Greggs: Healthy H116 Trading Performance
Edison | Aug 04, 2016 01:58AM ET
Greggs (LON:GRG) delivered a strong H116 trading performance and expressed confidence in the outlook for the year. The various elements of its strategy appear to be on track and have so far delivered the expected benefits. This reinforces confidence in the longer-term potential for the brand. Meanwhile it remains strongly financed and highly cash-generative. Our DCF valuation has increased by 2% to 1,179p.
A strong H116
Within total H1 sales growth of 6.0%, Greggs delivered like-for-like (LFL) sales growth of 3.8%, which is impressive against 5.8% LFL growth in H115. Continuing deflation in ingredient and packaging costs saw the H1 gross margin improve by 40bps. The introduction of the National Living Wage in Q2 led to some pressure on operating costs but Greggs maintained its operating margin before property and exceptional charges. Despite a small net cash outflow, Greggs ended H1 with net cash of £35m.
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