Greggs holds on to business rates relief

·4 min read
Greggs store
Greggs store

The boss of Greggs has rejected pressure to repay business rates relief, saying such a move would be "illogical" even as profits rebound to surpass pre-pandemic levels.

Roger Whiteside said the company had "nothing to repay", arguing that the relief had simply allowed it to pay a lower level of tax rather than the company being handed cash.

Greggs was among those to benefit from business rates relief, which the Government brought in during the pandemic in an attempt to protect high street retailers.

The bakery chain received £13m of rates relief in the past six months and £18.8m during the prior year. Others including Sainsbury's, Tesco, Asda and Aldi have paid back the relief after sales and profits came in stronger than expected.

Mr Whiteside said Greggs would not be following their lead. "We repaid what we claimed. We claimed furlough this year so we paid back around £5m or £6m. We're giving back any money that was given to us, but tax relief, that's not money that's been given to us.

"It's just a temporary lower tax rate that we have paid. It doesn't make any sense that you would choose to pay any more than it - it's just an illogical argument. We've got no plans to volunteer to pay a higher tax rate than the going rate."

The comments came as Greggs said it had experienced a boost from home deliveries in its first half, with hundreds of its stores now offering the option.

It said home delivery made up 8.5pc of sales from company-managed shops in the first six months of the year. Delivery is now available from almost 850 stores through Just Eat.

Greggs said customers were also becoming more used to pre-ordering food, either for delivery or to guarantee availability when collecting in store. It hoped that both pre-ordering and delivery will help boost sales in the evening, where it underperforms compared with rival food-to-go chains.

It has also started introducing new lines following a temporary suspension during the pandemic last year. Recent launches include new options in its vegan range such as the "ham and cheeze baguette" and a breakfast sausage, while the "vegan sausage, bean and cheeze melt" goes on sale this week.

Greggs opened 48 new stores in the first six months of the year and closed 11 others to take its estate to 2,115 shops. Most of the new outlets were in locations where people could drive to, such as retail parks and petrol stations.

It expected to open 100 net new shops this year, half with franchise partners, as it was "emerging from the lockdown months in a strong position".

The chain posted pre-tax profit of £55.5m for the six months to July 3, bouncing back from a £65.2m loss last year and better than the £36.7m profit for the same period in 2019.

The improvement came despite total sales coming in marginally lower than pre-pandemic levels at £546.2m, with like-for-like sales down 9.2pc on the same period in 2019.

Like-for-like sales had improved in the second quarter, when lockdowns had eased. Although Greggs stores stayed open during the pandemic, the company relies on large numbers of people visiting its stores.

It said the reopening of non-essential retail had made a significant difference to footfall. While walk-in customer sales were still below 2019 levels, customers were spending more when they go to Greggs.

Profits were boosted by efforts to cut overheads and reduce logistics costs. Greggs will resume paying a dividend of 15p a share after suspending shareholder payouts last year. The FTSE 250 company last paid a dividend in October 2019.

Shares fell 1.9pc to £27.51.

The company said it was now expecting its profits for the full year to come in ahead of its earlier guidance, despite "general uncertainties in the market".

These include more inflationary pressure, which Mr Whiteside said he was expecting to feed through later in the year as Greggs does not trade for ingredients on a day-to-day basis, but instead agreed longer-term contracts.

"We think it's likely that when we're signing the contract for next year, there'll be more pressure on prices than there was this year."

Rising inflation is something that many across the food industry have been reporting, with pizza chain Domino's saying on Tuesday that it was seeing "general inflationary pressure".

Dominic Paul, chief executive, said: "Large swathes of the country have been operating at low capacity and now demand is coming back, so it takes a while for supply and demand to equalise."

He said Domino's could not rule out price rises but said it was "very committed to the value proposition".

Pre-tax profits for Domino's more than doubled in the first half to £41.3m on revenue 12.5pc higher, buoyed by a spike in deliveries during the Euros football tournament.

Domino's said it would return a further £35m to shareholders on top of the £45m it had already announced under its share buyback programme.

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