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(Alliance News) - High street bakery chain Greggs said Tuesday it does not expect "material profit progression" in 2022 as it faces cost pressures "more significant" than initial expectations.
Greggs shares were down 7.9% early Tuesday.
"Despite these near-term pressures, we continue to believe that the opportunities for Greggs have never been more exciting. Our investment over recent years has left the business well-placed to move quickly as the economy recovers and we drive our ambitious plans to become a larger, multi-channel business," Chief Executive Roger Whiteside said.
For 2021, Greggs swung to a pretax profit of GBP145.6 million compared to the GBP13.7 million loss seen in 2020.
Revenue surged to GBP1.23 billion from GBP811.3 million in 2020 and were up from 2019's revenue of GBP1.17 billion, which was pre-pandemic.
Greggs declared a total dividend of 57.0p, after withholding its shareholder payout in 2020.
In first nine weeks of 2022, like-for-like sales in company-managed shops are up 3.7% compared to the same period in 2020, and up a sharp 44% against the lockdown-affected period in 2021.
Whiteside added: "In a second year dominated by disruption due to Covid, our teams once again coped magnificently with unprecedented and rapidly-changing conditions. We set out at the beginning of the year to show that we could not only cope with Covid, but emerge from this crisis both stronger and better as a business. Our results and achievements in 2021 show that we achieved both those ambitions."
Commenting on the results, Ross Hindle, an analyst at research house Third Bridge, said: "Overall, the UK food-to-go market remains depressed with commuter footfall stubbornly below pre-Covid levels. Despite difficult trading conditions, Greggs has been able to punch above its weight thanks to a recipe of competitive pricing, clever location strategy, and their JustEat delivery partnership."
He added: "Investors will be studying how Greggs manages its cost increases, which could turn out to be double-digit, in order to protect its margins in the months ahead."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: up 0.3% at 6,981.05
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Hang Seng: down 1.5% at 20,741.04
Nikkei 225: closed down 1.7% at 24,790.95
S&P/ASX 200: closed down 0.8% at 6,980.30
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DJIA: closed down 797.42 points, or 2.4%, at 32,817.38
S&P 500: closed down 127.78 points, or 3.0%, at 4,201.09
Nasdaq Composite: closed down 482.48 points, or 3.6%, at 12,830.96
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EUR: unchanged at USD1.0859 (USD1.0860)
GBP: down at USD1.3089 (USD1.3128)
USD: unchanged at JPY115.46 (JPY115.45)
Gold: up at USD2,017.40 per ounce (USD1,978.34)
Oil (Brent): up at USD126.06 a barrel (USD123.22)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Tuesday's key economic events still to come
1100 GMT Ireland industrial production
1100 CET EU gross domestic product
1100 CET EU employment
0830 EST US international trade in goods & services
0855 EST US Johnson Redbook retail sales index
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Members of Parliament will hear from Ukraine President Volodymyr Zelensky about the Ukrainian plight as UK Prime Minister Boris Johnson continues his diplomatic offensive to encourage Western leaders to punish Russia for the invasion. Zelensky will address the House of Commons at 1700 on Tuesday by video link after Speaker Lindsay Hoyle approved a request for a "historic address" from the Ukrainian president who, according to reports, is at risk of assassination by pro-Russian groups in Kyiv. He gave an address to the European Parliament last week and imparted a virtual message to the US Senate on Saturday, with the embattled leader expected on Tuesday to renew messages from those speeches to MPs, including pushing for the West to install a no-fly zone over Ukraine and for more arms to be delivered. The prime minister, who speaks with Zelensky on a regular basis, has consistently ruled out the UK policing Ukrainian skies, arguing it would mean shooting down Russian planes. On Monday evening, Johnson spoke with US President Joe Biden, French President Emmanuel Macron and German Chancellor Olaf Scholz, with the four leaders vowing to "continue to apply pressure on Russia to isolate Putin diplomatically and economically".
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German industrial production in January was significantly ahead of market consensus, data from the Federal Statistical Office showed. Industrial production was up 2.7% in January on the previous month, coming in sharply ahead of the 0.5% growth predicted by the market, according to FXStreet, and accelerating from December's 1.1% rise from November.
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BROKER RATING CHANGES
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Berenberg starts Essentra with 'buy' - price target 360 pence
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Jefferies cuts Travis Perkins to 'hold' ('buy') - target 1416 (2189) pence
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COMPANIES - FTSE 100
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M&G said it has delivered on all its demerger commitments, allowing it to unveil a new GBP500 million share buyback. The wealth manager said the buyback will begin shortly. M&G ended 2021 with GBP370.0 billion in assets under management & administration versus GBP367.2 billion at the same point the year prior. Its Asset Management unit booked GBP2.0 billion in net inflows, resulting in AuMA to rise to GBP156.7 billion from GBP144.4 billion. Its Retail & Savings unit, however, recorded GBP8.3 billion in new outflows following a GBP9.6 billion asset transfer to Rothesay Life PLC as part of the firm's Heritage business run-off. Retail & Savings AuMA fell to GBP211.1 billion from GBP221.6 billion. Excluding its Heritage sell-off, net client inflows were GBP600 million in 2021. M&G declared total dividends of 18.3 pence in 2021, up slightly from 18.2p in 2020.
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Mexican precious metals miner Fresnillo said it was able to produce silver just below guidance in 2021, but gold production was ahead. That, together with higher prices, resulted in a rise in annual revenue. For 2021, pretax profit improved 11% to USD611.5 million from USD551.3 million, as revenue grew to USD2.70 billion from USD2.43 billion. Silver production was flat on the year before at 53,095 ounces, while gold production slipped 2.4% to 751,203 ounces. Fresnillo declared total dividends for 2021 of 33.9 US cents, up 31% from 25.8 cents in 2020. Chief Executive Octavio Alvidrez said: "Looking ahead we remain alert to potential on-going challenges that are outside our control, not least possible further regulatory reform, inflationary pressures and of course the threat of new Covid variants. Lower production and recovery rates at Herradura and the continuing workforce shortages at Saucito caused by the new labour reform - as well as the impact of recent geotechnical instability in the Saucito area - are also likely to add to the pressures we may face in 2022. In addition, the extension to the timeline for the tie-in to the national grid of both the Juanicipio plant and the Pyrites plant mean that we now expect lower contributions than previously anticipated from these operations during 2022."
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British Land said it has formed a new joint venture with Melbourne-based pension fund AustralianSuper, by selling 50% of its share in the 'Canada Water Masterplan' in London. British Land sold its stake in the Canada Water development for GBP290 million, and has formed a new 50-50 JV with AustralianSuper to "accelerate the delivery" of the project. Phase 1 of the project is expected to complete in the third quarter of 2024.
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Equipment rental firm Ashtead reported a 38% rise in pretax profit in the three months that ended January 31, the third quarter of its financial year, amid surging revenue. Pretax profit was USD393 million, up from USD284 million a year before, as revenue grew by 23% to USD2.00 billion from USD1.62 billion. Ashtead said it now expects full-year results to be slightly ahead of its previous expectations. It said the business is performing strongly despite "supply chain constraints, inflation and labour scarcity".
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COMPANIES - FTSE 250
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Motor and home insurer Direct Line lifted its final dividend by 2.7% to 15.1 pence from 14.7p a year before - for an annual total of 22.7p, up from 22.1p - and said it will conduct a share buyback worth GBP100 million, the same as last year. The returns announcement came despite Direct Line revealing pretax profit slipped by 1.2% to GBP446.0 million in 2021 from GBP451.4 million in 2020. It said 2021 was "a year of significant strategic progress".
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Domino's Pizza notched up a hike in annual profit and said it expects sales growth to ramp up in 2022 despite inflation and recruitment woes. The takeaway chain reported pretax profit of GBP109.7 million for the year that ended December 26, up from GBP98.9 million the previous year. On an underlying basis, profit rose 13% to GBP113.9 million as like-for-like sales rose 11%, excluding so-called split territories. It announced plans to hand back a further GBP46 million to shareholders, on top of the GBP80 million share buyback in 2021.
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Howden Joinery announced plans for a share buyback worth up to GBP250 million, engaging UBS to conduct a GBP125 million first tranche starting Tuesday and running to July 29.
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Tuesday's shareholder meetings
Anglesey Mining PLC - GM re delisting
Caretech Holdings PLC - AGM
Driver Group PLC - AGM
Redx Pharma PLC - AGM
Schroder European Real Estate Investment Trust PLC - AGM
Shoe Zone PLC - AGM
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By Tom Waite; thomaslwaite@alliancenews.com
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