H1 FY21 PBT was £55.5m (LY adj. PBT: -£64.5m) with profits impacted by store closures in Q1 when two-year LfLs sales fell -21.5%, but helped by structural cost reductions and retail business rates relief, the latter worth circa £13m. Q2 two-year LfL sales improved to +2.8% following the re-opening of non-essential retail in April. Net cash was £118.3m (LY: £26.2m net debt) reflecting the recovery in trading and related working capital inflows. An interim dividend of 15p has been declared and management intends to maintain cover of 2x going forward. Delivery continues to contribute meaningfully to sales – representing as much as 8.5% of sales in H1, implying 7.8% of sales in Q2 – proving that the delivery channel is more than a lockdown phenomenon, in our view. Delivery is now available in 837 stores. In the meantime, following temporary suspension in 2020, the new product development pipeline has been restarted with recent launches in vegan-friendly ranges, while management also sees opportunities in pre-ordering – helping to improve availability and support the evening daypart menus, an area where Greggs under-indexes. Store opening pipeline remains intact with 48 new shops opened (37 net), with 70% of shop openings in car-accessed locations. Management continues to expect to open 100 net new stores this year, implying that store openings will be back-end weighted. Outlook and forecasts: 2-year LfLs have been tracking at +0.4% throughout July – despite weather causing some volatility. With the outlook improving across H2, we upgrade this year’s PBT forecast by +2.8% and continue to assume 2-year LfLs remain positive. However, we leave outer year forecasts broadly unchanged: Going forward, cost inflation is likely to become a headwind towards the end of H2 and we remain mindful that tailwinds from retail business rates relief are set to reverse. Still, valuation on 23.1x FY22E PE remains undemanding. BUY.