Tuesday, 6 August 2013

Greggs - Portfolio Sale

I started to become a little suspicious of management spin when, earlier this year, the seller of hot pies and pasties blamed poor sales on cold weather.

They have today issued their interim results for the 6m to end June 2013 and say trading in recent weeks has been affected by the heatwave!

Although total sales have increased, like-for-like sales declined by just under 3% and profits declined 28.7% from £16m in 2012 to £11.4m.

The management are looking to 'refocus' the business over the next 2 - 3 years - Chief Executive Roger Whiteside, who took up the reins in February said: "We will spend the next two to three years reshaping the business as we build the platform for long term sustainable profit growth for the benefit of shareholders, employees and the wider community."

Earning per share for the 6m period declined from 11.9p to 8.5p. They have held the interim dividend payment at 6.0p and cover falling from 2x to 1.4x.

They are proposing to open a further 20 to 30 new shops this year and I think this focus on the high street may be part of the problem as it seems less people are venturing out and the trend is for more and more shopping to be carried out online.

Greggs was a 'half' purchase in 2012 since when I am now sitting on a capital loss of 15% at the current price of 410p. I really cannot see much upside with the stated strategy for the immediate future so I have decided to cut my losses, accept the original purchase was possibly a mistake and to off-load this morning and look for better opportunities elsewhere.

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