Greggs pledges to return cash to shareholders after boosting profits

4th Mar 2015 08:10

British baker Greggs on Wednesday grew its pre-tax profit last year by 50%, allowing it to return up to £10m to shareholders in the first half of 2015 by resuming its share buyback programme.Greggs, which has 1,650 retail outlets throughout the UK, reported a pre-tax profit of £49.7m in 2014 up from £33.2m in the previous year on a revenue of £804m in 2014 versus £762.4m in 2013.Encouragingly, like-for-like (LFL) sales in its UK shops rose by 4.5% compared to a 0.8% decline in 2013 while in first eight weeks of 2015, LFL sales increased further by 6.3% on the same period a year ago thanks to deflation, which is reducing the cost of key ingredients."The strong momentum in the second half of 2014 has continued into first quarter of 2015, prompting further mid-single digit upgrades - our full year 2015 earnings per share growth estimate is +12%," said N+1 Singer, a London-based brokerage.As a result of the strong earnings, Greggs is paying a final dividend of 22p, an increase of 12.8% and pledged to return up to £10m to shareholders by resuming its share buyback programme. The company also revamped 213 shops in the past year and added its own coffee range to compete with high street chains, which is now taking £1m a week in coffee sales.The company's chief executive, Roger Whiteside noted that 2014 was a year of significant change and an exceptional step up in performance as the company began to implement its new strategic plan centred on the growing food-on-the-go market."We have improved both our food offer and the shop experience for customers. Market conditions have been more favourable and like-for-like sales have grown throughout the year. This has resulted in record underlying profits for the financial year," said Whiteside.N+1 added that the shares have had a tremendous run in the past 12 months. "Whilst no longer in value territory, we firmly feel the self-help and improving earnings quality thesis has further to run, supported by an improving disposable income outlook," said the broker.