Greggs is still facing a tough challenge

Tough trading looks set to continue at Newcastle sausage roll and pasty maker Greggs after its shock profits warning earlier this year

Greggs have continued to open new stores across the UK
A Greggs shop in Newcastle

Tough trading looks set to continue at Newcastle sausage roll and pasty maker Greggs after its shock profits warning earlier this year.

The baker was hurt by the freezing start to the year, while the tough economy and squeezed consumer spending have also hurt trading.

Underlying sales were down 4.4% in the first 17 weeks of the year, and while the slide eased slightly to 1.5% in April, the chain continues to battle tough underlying trends.

Promotions have hit profit margins, while the company is also struggling against a tide of rising ingredient and utility prices.

Greggs has been battling this by shifting its new store openings to areas less hit by falling footfall, such as workplaces, travel and leisure destinations.

It is also revamping existing stores and opening sites in motorway service stations, as well as developing new products and has plans to sell products wholesale to retailers such as Iceland.

All of this is likely to prove a further challenge for new chief executive Roger Whiteside, who quit as boss of pubs giant Punch Taverns to join the chain of almost 1,700 shops across the UK.

For the full-year, analysts on average expect underlying pre-tax profits to fall to £45.2m from £51.9m, although new stores mean revenues are expected to grow to £758.3m from £735m in 2012.

Insurance giant Aviva will deliver another blow to investors on Thursday when it slashes its interim dividend, in line with the mammoth cut to its full-year pay-out earlier this year.

Recently appointed boss Mark Wilson stunned the City in March when he cut the group’s divi by 44% following a long period of under-performance and a fall in underlying profits to £1.78bn in 2012, from £1.86bn a year earlier.

He warned at the time that the interim payout would suffer the same fate, which will be confirmed alongside the half-year results.

But Mr Wilson, who joined the company in January after predecessor Andrew Moss quit following a shareholder rebellion over pay and performance, offered a glimmer of hope to beleaguered investors in May when he unveiled an 18% rise in new life and pensions business to £191 million.

The figures showed the value of UK life and pensions business jumped by a third to £108m, although the performance in several other markets was disappointing, with the value of new business in Spain and Italy down by £3m and £4m respectively.

Most analysts are expecting Aviva to post operating profits of £933m for the half year.

Aviva’s share price has almost recovered to its position before the March divi cut, but experts at Goldman Sachs recently said it was unlikely to deliver any substantial increase to payouts before 2016.

The insurer is working through a turnaround strategy that will see it cut costs and focus on core operations.

Banking giant HSBC looks set to continue its profits march when it posts half-year results today.

Emerging markets growth, the housing market recovery in the US and the UK and the improving global economy should help the lender build on a 34% year-on-year rise in first-quarter underlying profits.

HSBC, the last of the major UK high street banks to report on first-half trading, said first quarter profits rose to 7.6bn US dollars (£4.9bn) from 5.7bn US dollars (£3.7bn).

Falling charges for soured loans and compensation helped drive the profits rise, while chief executive Stuart Gulliver said the industry was moving into “calmer waters” in the wake of the credit crunch and the payment protection insurance (PPI) mis-selling scandal.

Shrinking costs have helped the bank improve earnings, including selling or closing more than 50 businesses.

Worldwide, the bank has lost about 40,000 of its 300,000 employees as a result of restructuring and sell-offs since Mr Gulliver took over at the start of 2011.


David Whetstone
Culture Editor
Graeme Whitfield
Business Editor
Mark Douglas
Newcastle United Editor
Stuart Rayner
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