Bakery and food to go chain Greggs has reported its first loss since it floated in 1984 as the coronavirus and resultant store closures hammered sales.
Greggs reported a pre-tax loss of £13.7m for the 53 weeks to 2 January, compared to a profit of £108.3m in the same period last year.
Total sales fell 30.5 per cent to £811.3m and like-for-like sales in company-managed shops declined by 36.2% amid the closure of its shop estate in March 2020 as a consequence of the Covid outbreak.
Greggs said its trading performance since reopening its shops in the middle of 2020 has been “strong” in the context of prevailing mobility restrictions, with delivery now making a significant contribution to company-managed shop sales.
However, the lower-than-normal sales levels Greggs made a loss despite government support for job retention and relief from business rates.
Greggs stressed that the actions taken during the crisis had secured its financial position and resulted in a £36.8m net cash at the end of 2020, despite seeing an overall net cash outflow of £54.5 million in the year. The addition of a new borrowing facility has left it with “a robust balance sheet able to withstand further shocks”.
The company also said it had seen a better-than-expected start to 2021 given the extent of lockdown conditions
Company-managed shop like-for-like sales down 28.8% year-on-year in the ten weeks to 13 March 2021 and outside of Scotland, where shops are closed to walk-in customers, company-managed shop like-for-like sales in the rest of the UK estate were down 22.4% year-on-year
Delivery sales particularly strong, at 9.6% of total company-managed shop sales in the first ten weeks of 2021.
CEO Roger Whiteside commented: “Greggs has made a better-than-expected start to 2021 given the extent of lockdown conditions and is well placed to participate in the recovery from the pandemic. It has a clear strategy to extend its digital capabilities and to grow further in new locations, channels and dayparts. These opportunities will benefit all of its stakeholders in the years to come.
“In a year like no other I believe that the Covid crisis has in many ways demonstrated the strength of Greggs. It has shown the resilience of our business model, but most of all the strength of our people who have worked hard throughout to maintain an essential service providing takeaway food to customers unable to work from home, many of whom were themselves key workers. I would like to take this opportunity to thank all of our people, who can be proud of the part we played in our nation’s time of need.”
Greggs said it has already reactivated its shop opening pipeline, with 84 new shops opened in 2020 and 56 closures (28 net openings).
The group had 2,078 shops as at 2 January 2021 and is planning circa 100 net new shops for 2021.
Greggs shares are up 4.8% to 2,316.8p this morning.
Bakkavor has posted a 4.9% decline in annual sales as a drop in UK food to go sales and revenues in China was mitigated by growth in the US.
For the year to 26 December, reported revenue decreased by £92.4m, or 4.9%, from £1.89bn in 2019 to £1.79bn in 2020.
Total like-for-like revenue was down 4.9%, from primarily due to the impact of COVID-19 restrictions on trading volumes across the business.
In the UK, which represents 87% of group sales, reported revenue decreased by 5.2% to £1.57bn.
Like-for-like UK revenues, which excludes Alresford Salads and Freshcook that were closed in October 2020 and April 2019 respectively and Blueberry Foods that was acquired in June 2019, decreased by 5.3%, to £1.49bn.
Bakkavor said that during the crisis promotional activity decreased, shoppers made fewer trips to stores and increasingly bought online, and more consumers chose to cook from scratch.
In its meals category, although initial lockdown measures had an adverse impact on sales, it saw a “solid performance” as it gained market share.
However, salads were heavily impacted due to its exposure to the food-to-go market, which represents around 40% of the total salads category. While warmer weather and the easing of lockdown restrictions subsequently supported the category in the summer, it experienced a significant decline in our salads business during the period.
Pizza and bread saw strong performance, while its desserts category also provide “resilient”.
In the US reported revenue increased by £15.9m or 12.2%, to £146.5m.
Whilst the business was impacted by COVID-19 from the end of March, year on year revenues were only down in April and May, with the rest of the year reporting strong growth as sales volumes increased at all of its new sites in Texas, North Carolina and California following the launch of a number of new products.
In China, reported revenue decreased 21.8%, to £80.4m, due to the impact of COVID-19 restrictions on volumes particularly in the first half of the year. Trading improved in the second half of the year but the recovery in China has been slower than initially expected and its business in Hong Kong continues to be adversely impacted through ongoing civil unrest.
Operating profit decreased by 10.7% to £62m with margins decreasing by 20 basis points to 3.5%, primarily due to the impact of lower year on year revenues across its UK and China businesses.
In line with prior years, the UK business continued to incur significant labour inflation driven by further increases in the National Living Wage.
In addition, all regions incurred significant costs amounting to £9.3m as the business responded to the COVID-19 outbreak, with enhanced health and safety, and hygiene protocols.
CEO Agust Gudmundsson commented: “In what was a year like no other, the external environment was the most challenging it has ever been. I am extremely proud of the resilience our business has shown and I would like to thank all our colleagues for their hard work and dedication.
“Despite the UK Government’s roadmap, with lockdown restrictions in the UK continuing into the spring, the short-term trading environment remains uncertain, but we are encouraged by the way consumers have returned to our fresher, healthier and more convenient foods each time these restrictions have lifted. Our unique position of scale, expertise and strong customer relationships have served us well during this extraordinary period, and they remain key as we continue to grow our market share and further strengthen our leadership position.
“The actions taken in 2020 to preserve cash and protect profitability across the business, combined with the successful turnaround of our US business, and the strength of our financial position, leave the Group well placed to deliver further growth. The way that Bakkavor has been able to rapidly adapt, find new ways of working, and drive the business forward through the COVID-19 crisis provides us with additional confidence for the future.
“We will continue to play an essential role in supporting our customers and communities and we are in great shape to deliver for all stakeholders in 2021 and beyond.”
Cider and beer brewer and distributer C&C Group has posted a trading update for the 12 months to 28 February.
It said its off-trade volume share in its three core brands have grown over the past twelve months, with Tennent’s Scottish lager volume share of 26.6% representing growth of 1.2 percentage points, Bulmers volume share of Irish cider increased to 3.3%pts to 50.2% and Magners volume share of apple cider in the UK increased by 0.3%pts to 9.6%.
Going forward, C&C Group said the objective is to continue to position itself as the preeminent brand-led drinks distribution business in the core markets of the UK and Ireland.
During the year it divested non-core asset Tipperary Coolers in Ireland for a consideration of €7m and this morning announced the sale of its wholly-owned US subsidiary, Vermont Hard Cider Company, to Northeast Kingdom Drink Group for a total consideration of US$20m
The total net proceeds from these divestments will be applied to reducing net debt.
C&C said it looks to the next financial year with “increased optimism” as continuing progress with COVID-19 vaccine programme is expected to see an eventual easing of on-trade restrictions as laid out by the respective governments across the UK and Ireland.
“The strength of the Group’s business model together with reduced operating costs will support a stronger return to trading cash flows and profitability as and when restrictions ease and the hospitality industry reopens,” it stated.
CEO David Forde commented: “C&C has an inherently strong business model, with admired brands that embody provenance and have a real affinity with their markets, coupled with a leading distribution infrastructure in terms of scale and reach.
“These are supported by the quality of our people who are dedicated, agile and passionate about our brands. While our ability to trade has been severely restricted in hospitality, our brands have performed strongly in the off-trade. The Group has been working hard to ensure that we are primed and ready to serve our on-trade customers as and when the hospitality sector is allowed to reopen, from a more streamlined base and with new brand partners, in the post pandemic market.”
On the markets this morning, the FTSE 100 is up 0.5% to 6,782.5pts.
Along with Greggs, early risers include Domino’s Pizza Group, up 2.9% to 365p, Finsbury Food Group, up 2.5% to 82.5p and Naked Wines, up 2.3% to 699p.
Fallers include Bakkavor, down 6% to 99.2p, McBride, down 4.8% to 80.2p and Nichols, down 2.7% to 1,180p.
Yesterday in the City
The FTSE 100 started the week by edging down 0.2% to 6,749.7pts.
The day’s risers included Bakkavor, up 8.8% to 105.6p ahead of its annual results this morning, Science in Sport, up 8% to 54p, SSP Group, up 4% to 351p, McBride, up 3.2% to 84.2p, Devro, up 2.5% to 192p, FeverTree, up 2.4% to 2,499p, and Imperial Brands, up 1.7% to 1,420.5p.
Fallers included Hotel Chocolat, down 3.1% to 397.5p, C&C Group, down, down 1.8% to 294.5p, DS Smith, down 1.8% to 400.2p, Morrisons, down 1.7% to 173.5p and PZ Cussons, down 1.3% to 260p.
In France, Danone gained 2.9% to 59.80 after the news of the exit of chairman and current CEO Emmanuel Faber.