Thursday 7 March 2019 7:37 am

Sweetening the deal: Greggs' profits rise as bakery chain hails record breaking year

Greggs’ baked goods weren’t the only thing rising in 2018, as revenues broke the £1bn mark for the first time ever in a record-breaking year for the pastry-making giant.

The firm, which recently drew headlines for the launch a vegan version of its flagship sausage roll, said it had recovered from a “very challenging first half” to deliver an increase in profit.

Read more: On a roll: Vegan sausage roll sales help Greggs seek higher profits

The figures

Pre-tax profit rose to £82.6m in the year ending 31 December, up 14.9 per cent on £71.9m the year before, while sales grew to £1.02bn, up 7.2 per cent on £920m in 2017.

But the company was still hit by a number of exceptional items which came to £7.2m over the year, as a major supply chain restructuring programme commenced in 2016 continued apace.

Pension liabilities for the firm’s internal scheme increased to £8.4m from £7.5m the previous year, while net cash inflow from operating activities was £136.2m, up from £116.9m in 2017.

Why it’s interesting

Greggs’ success over the year flies in the face of yet another 12 months of heartache for high street retailers. Chairman Ian Durant admitted the company had battled a “challenging retail environment” throughout 2018, but said the firm had shown its “resilience”.

The firm’s 23,000 employees also saw a raft of internal changes as the firm undertook a reorganisation of its manufacturing operations in a bid to facilitate opening yet more stores in future.

But Greggs still had to see out a difficult summer in which sweltering conditions caused sales to crumble in the first half of the year, before returning to full strength as Autumn set in.

Emma-Lou Montgomery, associate director at Fidelity Personal Investing, said: “Greggs initially launched the vegan sausage roll in 950 stores to cash in on the 'Veganuary' trend.

"Following what it described as an 'overwhelming response from the public' and not forgetting the lively social media debate that ensued, it began rolling it out to a further 250 stores a week. It now sells the product in all of its 1,950 outlets."

Laith Khalaf, analyst at Hargreaves Lansdown, added: "Greggs is one of those businesses which has shrugged off the doom and gloom currently engulfing the UK high street.

"We don’t know how many of the vegan rolls the baker is actually selling, but the publicity is getting customers through the door one way or the other."

Fiona Cincotta, analyst at City Index, said: "It doesn't get much better for investors than this. Profits at Greggs are rising and the dividends are flowing, even during a time of heavy spending on the business that will support growth well into the future."

What Greggs said:

Roger Whiteside, chief executive, said: “2018 was a year that tested the resilience of Greggs' business model and demonstrated the benefits of our strategic investment programme.

Read more: Cherry on the cake: Greggs shares climb as baker lifts profit outlook

“The first half was significantly impacted by extreme weather but once this returned to normal our underlying strengths helped us recover the lost ground and deliver results for the year that exceeded our expectations.

“Whilst there are significant uncertainties in the months ahead, Greggs has started 2019 in great form, helped in part by the publicity surrounding the launch of our vegan-friendly sausage roll.”