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Greggs has reported a 27.1% jump in first half sales, but profits remained stagnant due to the reintroduction of business rates, VAT and mounting costs.

The baker chain reported first half total sales up 27.1% to £694.5m, with like-for-like growth of 22.4% after first quarter like-for-like growth of 36.9% moderated to growth of 11.2% in the second quarter.

Greggs said trading in the second quarter “remained encouraging” as it passed the anniversary of restrictions being lifted in 2021.

Performance in the first quarter was flattered by comparison with restricted trading conditions in the same period of 2021. Comparing with the pre-pandemic level, first half like-for-like sales in company-managed shops were 12.3% per cent higher than the equivalent period of 2019 despite footfall remaining below 2019 levels.

In the first half of 2022 we opened 70 new shops (including 26 franchised units) as it continues to focus on openings away from traditional shopping areas, and closed 12 shops, giving a total of 2,239 shops (of which 401 are franchised) trading at 2 July 2022.

Pre-tax profit was £55.8m in the first half, largely unchanged from £55.5m in the prior year.

Greggs said the previous year had benefitted from temporary relief from business rates and reduced rates of VAT, with the contribution from sales “significantly stronger” in the most recent period.

It also said it has worked hard to mitigate the impact of cost inflation on customers but some further price increases have been necessary, which appear not to have impacted transaction numbers.

The rate of cost inflation increased significantly in the first half of the year, driven by food, packaging and energy commodities. It said it has continued to extend forward its purchasing cover and have fixed input prices for an average of around five months of future requirements across these areas.

Across all cost areas it estimates that the overall level of cost inflation in 2022 will be around 9%, although some uncertainty remains.

Looking forward, Greggs said: “Clearly there are considerable uncertainties in the economy as a whole, but we continue to trade in line with our plan and are making good progress against our strategic objective to become a larger, multi-channel business. As such, the board’s expectations for the full year outcome remain unchanged.”

Chief exec Roisin Currie commented: “Greggs delivered an encouraging performance in the first half of the year with sales ahead of 2019 levels. These results demonstrate the continued strength of the Greggs brand and demand for our great tasting, quality and value for money offering.

“During the period we continued to make good progress with our strategic priorities, including expanding our shop estate and making Greggs more accessible to customers through extended trading hours and digital channels.

“In a market where consumer incomes are under pressure Greggs offers exceptional value for customers looking for food and drink on-the-go. We are well positioned to navigate the widely publicised challenges affecting the economy and continue to have a number of exciting growth opportunities ahead, with a clear strategy for expansion. We remain confident in Greggs’ ability to deliver continued success.”

Meanwhile, Greggs has announced the appointment of Matt Davies as an independent non-executive director and chair designate with immediate effect.

Davies has held CEO positions at Tesco UK & Ireland, Pets at Home, and Halfords and will succeed Ian Durant as chair of the board of Greggs on 1st November 2022, when Durant steps down from the board.

Morning update

Scottish soft drinks player AG Barr has announced a double-digit rise in first half revenues to £157m.

This represents growth of 19% on a like-for-like basis, excluding both the 27 week in prior year and the revenue contribution from its MOMA Foods acquisition.

On a reported basis, revenues are up 16%.

This strong revenue performance reflects the continued positive momentum across all business units - Barr Soft Drinks, Funkin and MOMA.

Growth has been driven by ongoing brand investment and the successful execution of pricing and promotional activity.

Trading performance further benefited from the year on year Covid recovery across the market, particularly in the on-trade and out of home sectors, as well as the exceptional British summer weather in recent weeks.

For the rest of its financial year, AG Barr said it anticipates that the UK’s current high level of inflation will continue across the balance of the year, with economic conditions becoming increasingly challenging for consumers and industry alike.

Across the second half of the financial year it said it will continue to invest behind its brands and support growth, while taking appropriate mitigating action to limit the full year impact of cost inflation.

CEO Roger White commented: “Our brands are performing well and our business has continued to demonstrate both its resilience and flexibility. While not immune to the current cost inflationary pressures experienced across the UK, looking forward into the second half of the financial year, we remain confident of delivering a full-year profit performance ahead of the prior year and in line with board expectations.”

Domino’s Pizza Group said it continued to gain market share in “challenging conditions” in the first half of its financial year as it maintained sales despite lapping Covid lockdowns in the prior year.

Group revenue for the half was up 0.2% to £278.3m driven by increased supply chain revenue.

Like-for-like system sales (excluding the change in the VAT rate) grew by 2.4%, driven by order count which increased by 2.1%.

However, reported system sales of £710.5m, down 5.6% due to the change in the VAT rate

Underlying profit before tax declined £9.9m to £50.9m from the prior half year. This decrease was largely driven by the timing lag in passing through higher costs to franchisees.

Domino’s said this timing lag is “typical in our business” and a “function of our franchisee agreements”.

Underlying EBITDA was £63.5m, down £8.2m compared to the same period last year.

However, statutory profit after tax in the first half was £42.1m, up £0.8m on last year as a result of reduced costs and charges from its discontinued international operations offsetting the reduction in underlying profitability.

It said profitability is expected to be second half weighted, despite second half marketing spend expected to be “significantly higher” than in the first half.

CEO Dominic Paul commented: “I’m proud that in the first half Domino’s grew order count, attracted more customers, and increased underlying sales despite unusually challenging market conditions. This is testament to the hard work of our world-class franchisees and all our colleagues across the system, and I’d like to thank them all.

“The system is now fully aligned following the franchisee resolution in December. This enabled us to restart national price campaigns offering customers compelling value and to accelerate market share growth. We have worked really constructively with our franchisees to learn from the first half campaigns.

“We will be increasing our media spend in the second half compared to the first half, amplifying our value message to customers as we head into key events such as the men’s football World Cup. We are also continuing to acquire new customers by expanding our trial with Just Eat following positive initial results.

“Domino’s scale and integrated supply chain are always key to our success. As inflation accelerates and consumer budgets tighten, these differentiators are more important than ever.

“Historically, Domino’s has performed well in challenging environments, which demonstrates the resilience of our business. We remain focused on working with our franchisees to accelerate the sustainable growth of the system and delivering an improved second half profit performance.”

Finally, sausage casing manufacturer Devro has reported an 8.3% rise in first half group sales to £129.8m as it grew market share and passed on costs.

Group revenue was up 8.8% on a constant currency basis, primarily driven by growth in mature markets as it took market share and the initial benefits of pricing actions

Volumem of edible collagen casings were up 4.5% in the period.

Mature markets saw volumes up 7.6% driven by strong growth in continental Europe and West, North America and UK & Ireland, offset by weaker market conditions in Japan and Australia

Emerging market volumes were down 0.9%, against a strong comparator and due to temporary manufacturing constraints, mainly affecting China and Latin America

The group’s underlying operating profit fell back 8.4% to £18.6m, with constant currency at £20.4m, up 0.5%.

Underlying operating margin decreased to 14.3% from 16.9%, but on a constant currency basis was 15.6%.

The bottom line result reflects “good operating leverage”, but offset by inflationary pressure, which that were only partially mitigated by higher selling prices, as well as higher costs to drive growth including new product development.

CEO Rutger Helbing commented: “The group performed well in the first half, building upon the track record of recent years, and reflecting our strong and improving growth platform. The results are particularly pleasing given the challenging macroeconomic backdrop with the group continuing to ably respond.

“Whilst we remain alert to global supply chain challenges and inflation, the board’s expectations for the full year are unchanged. The group’s robust first half performance, solid order books, pricing action and ongoing momentum gives us confidence in the full year outturn. Current foreign exchange rates could provide upside if they prevail throughout the second half.”

On the markets this morning, the FTSE 100 is up 0.1% to 7,417.8pts today.

Risers include McBride, up 4% to 17p, Haleon, up 3.4% to 307.8p and Bakkavor, up 2.9% to 94.7p.

Fallers include Just Eat Takeaway.com, down 4.3% to 1,543.6p, FeverTree, down 4.3% to 1,034p and Domino’s Pizza Group, down 3.2% to 281.4p.

Yesterday in the City

The FTSE 100 opened the week edging down 0.1% yesterday to 7,413.4pts.

Cranswick fell 2.4% to 3,260p despite first quarter revenues increasing 7.6% year-on-year, as strong growth in the UK was offset by slower trading overseas.

Other fallers included DS Smith, down 1% to 288.3p, Coca-Cola HBC, down 0.8% to 1,995.5p, Britvic, down 0.7% to 845.5p and Premier Foods, down 0.5% to 115.8p.

Risers yesterday including Just Eat Takeaway.com, up 7.6% to 1,612.8p, Bakkavor, up 5.3% to 92p, Naked Wines, up 5% to 156.4p, Ocado, up 4.4% to 876p, Nichols, up 3.3% to 1,245p, Deliveroo, up 2.6^ 5ot 93p, SSP Group, up 2.4% to 260.3p and Haleon, up 2% to 297.6p.

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