Greggs PLC: abandons Belgium loss-making operation

Newcastle upon Tyne / UK. (gplc) Greggs PLC is the leading bakery retailer in the United Kingdom with over 1’400 retail outlets throughout the country. The bakery chain said in a «Review and Trading Update» it posted a 6,6 percent growth in total sales for 25 weeks to December 06, including an increase of 3,8 percent in like-for-like sales, despite difficult trading conditions.

Summary

For the first 16 weeks of second half, the company had reported a 6,7 percent rise in total sales, with 3,9 percent growth in its like-for-like sales. In October the Group had lowered its expectations of operating profit for the current financial year by some three million GBP and promised a more positive outlook for operating margins in the final twelve weeks of the year.

Following the review completed by the company´s recently appointed CEO, Ken McMeikan, the group has decided to move to a single Greggs fascia throughout the United Kingdom, with its Bakers Oven shops being re-branded as Greggs. In Belgium, the Group said it would begin consultation with employees in its ten shops with the plan to withdraw the small loss-making operation there. Subsequently, the group anticipates one-time costs of about 3,5 million GBP, which will be classified under exceptional item in the year 2008.

Chief Executive´s Review and Trading Update

Over the past few months CEO Ken McMeikan has completed a review of the business which has confirmed its considerable potential for future growth. The immediate priority will be to simplify the business to prepare for accelerated expansion.

There are significant opportunities for additional Greggs shops across the whole of the UK, and particularly in the South of England and the North West. Greggs will continue to move into more locations away from high streets and shopping malls where it can serve its customers at work and as they travel, though it will also continue to open new shops on high streets throughout the country.

The review included extensive customer research, which has highlighted that there are also many opportunities for Greggs to develop and broaden its product ranges.

The Group will move to a single Greggs fascia throughout the UK, with its Bakers Oven shops being re-branded as Greggs. This will enable Greggs customers to enjoy instore bakeries and cafes as well as allowing the former Bakers Oven shops to leverage the full benefits of national advertising and buying.

Consultations will also begin with employees in Greggs´ ten shops in Belgium with the intention of withdrawing from the Company´s small loss-making operation there. The one-off costs arising from this decision will be shown as an exceptional item in the 2008 accounts and are expected to be in the region of 3,5 million GBP.

Greggs will propose a share split at the next Annual General Meeting in May 2009 in order to enhance the appeal and accessibility of shares to small shareholders and staff.

McMeikan: «My initial review has confirmed the strengths of the Greggs business, its employees and the many opportunities for growth. The Greggs brand inspires great loyalty based on its reputation for value, taste, freshness, quality and friendly service. Over the coming year our priority will be to simplify the business and strengthen its capabilities to ensure that we are ready for accelerated growth and expansion».

Trading update

Total sales in the 25 weeks to 06 December 2008 have increased by 6,6 percent including like-for-like sales growth of 3,8 percent. This compares with total sales growth in the first 16 weeks of the period of 6,7 percent including like-for-like sales growth of 3,9 percent, as reported in the interim management statement issued on 09 October 2008. McMeikan: «I am pleased with the progress we have achieved given the difficult trading conditions. As ever, the final outturn for the year remains dependent on the important Christmas trading period. Our customers will not be immune to the effects of the economic downturn; however I believe that our value positioning and great quality products give us a competitive advantage in the current trading climate. As a cash generative business with no debt we are in a strong position not only to weather the current downturn but also to exploit the opportunities for future growth».