For best results when printing this announcement, please click on the link
below:
http://pdf.reuters.com/Regnews/regnews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20140730:nRSd6692Na
RNS Number : 6692N
Greggs PLC
30 July 2014
30 July 2014
INTERIM RESULTS FOR THE 26 WEEKS ENDED 28 JUNE 2014
Greggs is the leading bakery food-on-the-go retailer in the UK,
with almost 1,700 retail outlets throughout the country
GOOD TRADING YEAR TO DATE
CONTINUED PROGRESS AGAINST STRATEGIC PLAN
Financial highlights
· Total sales up 3.1% to £373m (2013: £362m)
· Own shop like-for-like sales up 3.2% (2013: 2.9% decline)
· Property gains on disposal of £1.4m (2013: £0.2m)
· Pre-tax profit £16.9m (2013: £11.4m) excluding exceptional items
· Continued strong cash generation
· Dividend per share maintained at 6.0p (2013: 6.0p)
Operational highlights
· Favourable trading conditions
· Encouraging results from sales initiatives:
- New coffee blend well received
- Improved sandwich range, including greater choice below 400 calories
· 131 refits completed
· 26 new shops opened, 36 closures
· 1,661 shops trading at 28 June
· Shop refurbishment programme progressing well
· Benefiting from efficiencies of change programme
"Whilst our year-on-year performance has benefited from comparison with a
period of weak trading in 2013, sales growth is also being driven by
initiatives that have further improved our products, availability, service and
value. Our new and improved coffee blend and sandwich range are great examples
of this.
"Although sales comparables strengthen in the second half the risk of input
cost inflation appears to be reducing. Overall, we expect to deliver an
improved financial result for the year and further progress against our
strategic plan."
- Roger Whiteside, Chief Executive
ENQUIRIES:Greggs plcRoger Whiteside, Chief ExecutiveRichard Hutton, Finance DirectorTel: 020 7796 4133 on 30 July only 0191 281 7721 thereafter Hudson SandlerWendy Baker / Alex BrennanTel: 020 7796 4133
An audio webcast of the analysts' presentation will be available to download
later today at http://corporate.greggs.co.uk/results-centre
CHIEF EXECUTIVE'S REPORT
Financial performance
We have continued to trade well through the first half of the year. Our total
sales for the 26 weeks to 28 June 2014 grew by 3.1 per cent. Like-for-like
sales in our own shops grew by 3.2 per cent over the same period and our
franchised estate has grown to 39 shops (29 June 2013: 21). Whilst our
year-on-year performance has benefited from comparison with a period of weak
trading in 2013, sales growth is also being driven by initiatives that have
further improved our products, availability, service and value.
In addition to improved like-for-like sales the first half result benefited
from good cost control and low input cost pressure. We also disposed of a
number of surplus freehold properties in the year to date realising property
profits of £1.4 million (2013: £0.2 million). Including these gains, operating
profit before exceptional items was £16.8 million in the first half of the
year (2013: £11.5 million).
After net finance income of £0.1 million (2013: £0.1 million charge) pre-tax
profit before exceptional items was £16.9 million (2013: £11.4 million). As
previously highlighted we are incurring exceptional costs in 2014 relating to
the restructuring of our in-store bakeries and support operations. This is
progressing to plan and we have recognised the current expected costs of £8.3
million in the first half of the year. Pre-tax profit including exceptional
items was £8.7 million (2013: £11.4 million).
Excluding the exceptional items, but including property profits, diluted
earnings per share were 12.5 pence (2013: 8.5 pence).
Dividend
The Board has declared an interim dividend of 6.0 pence per share (2013: 6.0
pence). This is in line with previous guidance that we will aim to maintain
the dividend until it is around two times covered by annual earnings, and then
resume a progressive dividend policy at this level of cover. The interim
dividend will be paid on 3 October 2014 to those shareholders on the register
at the close of business on 5 September 2014.
Financial position
Capital expenditure during the first half was £20.4 million (2013: £19.1
million). We have been pleased with the results of our shop refurbishment
programme and continue to expect capital expenditure in 2014 to be around £50
million as we invest in upgrading our shop estate and commence the programme
that will result in improved processes and systems.
The Group is cash generative and financially robust. Net cash inflow from
operating activities in the period was £30.5 million (2013: £24.7 million).
We ended the period with a cash balance of £16.8 million and £5.0 million
invested in a short term deposit (29 June 2013: cash balance of £12.0
million).
Operational highlights
Trading conditions in the first half of 2014 were more favourable than last
year; the weather has been more settled and general economic indicators have
been positive. In addition low commodity price inflation has been helpful in
supporting margin. The food-on-the-go market continues to grow; however we are
also seeing ongoing expansion by existing and new operators and so the
marketplace remains very competitive.
We are making good progress in delivering our plans in line with the revised
strategy outlined last year:
1. Great tasting fresh food
We have continued to see improved sales as a result of the product changes
made last year and, in addition, are now starting to see encouraging results
from our 2014 initiatives. Our new and improved coffee blend has been well
received and sales are continuing to grow strongly. Our reputation for value
for money is growing as we extend our popular meal deals to include hot
drinks, cakes, pastries and a wider range of sandwiches.
Most recently we have successfully launched our new and improved sandwich
range including new 'Balanced Choice' products offering great tasting options
with fewer than 400 calories. The new range presentation emphasises that all
of our sandwiches are made fresh in shops every day, setting us apart from
many competitors including the supermarkets.
2. A great shopping experience
As well as improvements to our product offer we have continued to benefit from
the changes we have made to service levels in our shops, including improved
availability and extended trading hours. Our new customer loyalty scheme,
Greggs Rewards, has been launched successfully and we are now planning to
build on this as we develop our capability to engage with customers and better
meet their needs.
Our investment programme to improve the quality of our estate is progressing
well. During the first 26 weeks we completed 131 shop refurbishments, in line
with our plan to refit around 200 shops during 2014.
Our plan to reshape the estate, rebalancing it towards more sustainable
long-term locations, is also on track. We opened 26 new shops (including 14
franchise units) and closed 36 shops, giving a total of 1,661 shops (of which
39 are franchise units) trading at 28 June 2014. We expect shop numbers for
the year as a whole to be broadly flat. Almost all of our new shops were
opened in locations away from high streets.
3. Simple and efficient operations
Alongside our focus on driving like-for-like sales from our existing estate of
shops we continue to concentrate on developing simpler and more efficient
operations in our supply chain and support areas. We have completed the
restructure of our support areas and are making good progress with our plan to
consolidate our in-store bakeries into our regional bakery network. We now
anticipate that the majority of these in-store bakery transfers will be
completed by the end of this year. The combined financial benefits from these
changes remain on track to deliver savings of £2.5 million in 2014 and £6.0
million per year from 2015 onwards.
4. Improvement through change
In August 2013 we announced a five year change programme whereby we will
invest in process and systems platforms that will enable us to compete more
effectively in the fast-moving food-on-the-go market. We are on track to
deliver the first two elements of this programme, relating to workforce
management and supplier relationship management, in 2014. We have selected
SAP as our core ERP software supplier and are moving forward to the next phase
of the programme.
Keeping our people, communities and values at the heart of our business
The scale of change involved in our new strategic plan has inevitably had an
impact on our people. It is at times like these that our values as a business
are put to the test and I am immensely proud of our teams for the
professionalism and fortitude they have displayed as we move forward with our
plan.
While business pressures have been unrelenting our people have remained
committed to making a difference to our local communities. This is evident
through their support of the Greggs Foundation which recently celebrated the
launch of its 250th Breakfast Club. We are also proud of the public
recognition we have received for our 'work inclusion' and 'employee
volunteering' programmes.
Outlook
Our first half performance has been good but has benefited from comparison
with a period of weak trading last year and earlier phasing of property
profits. Sales growth in July has continued to be strong as we have not
experienced the widespread heatwave conditions that depressed sales last year,
but this is expected to fall back in the months ahead as we compare with
better trading in the remainder of the year.
Input cost inflation has been lower than we expected, driven by ingredients
and energy and we expect this to continue through the rest of the year.
We have a strong pipeline of activity in the second half including further
investment in product changes and improved customer service alongside our
programme of investment in new systems and processes.
Overall, we expect to deliver an improved financial result for the year and
further progress against our strategic plan.
Roger Whiteside
Chief Executive
30 July 2014
Greggs plc
Consolidated income statement
For the 26 weeks ended 28 June 2014
26 weeks ended 28 June 2014 26 weeks ended 29 June 2013 52 weeks ended 28 December 2013
Excluding exceptional items Exceptional items (see note 5) Total Total Excluding exceptional items Exceptional items (see note 5) Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue 372,791 - 372,791 361,678 762,379 - 762,379
Cost of sales (146,442) (5,952) (152,394) (148,231) (305,914) (1,684) (307,598)
Gross profit 226,349 (5,952) 220,397 213,447 456,465 (1,684) 454,781
Distribution and selling costs (190,775) - (190,775) (184,403) (378,047) (6,453) (384,500)
Administrative expenses (18,733) (2,302) (21,035) (17,531) (36,923) - (36,923)
Operating profit 16,841 (8,254) 8,587 11,513 41,495 (8,137) 33,358
Finance income / (expense) 77 - 77 (136) (206) - (206)
Profit before tax 16,918 (8,254) 8,664 11,377 41,289 (8,137) 33,152
Income tax (4,229) 1,756 (2,473) (2,704) (10,346) 1,383 (8,963)
Profit for the period attributable to equity holders of the parent 12,689 (6,498) 6,191 8,673 30,943 (6,754) 24,189
Basic earnings per share 12.6p (6.4p) 6.2p 8.6p 30.8p (6.7p) 24.1p
Diluted earnings per share 12.5p (6.4p) 6.1p 8.5p 30.6p (6.7p) 23.9p
Greggs plc
Consolidated statement of comprehensive income
For the 26 weeks ended 28 June 2014
26 weeks ended 28 June 2014 26 weeks ended 29 June 2013 52 weeks ended 28 December 2013
£'000 £'000 £'000
Profit for the period 6,191 8,673 24,189
Other comprehensive income
Items that will not be recycled to profit or loss:
Re-measurements on defined benefit pension plans (3,097) 2,207 4,293
Tax on items taken directly to equity 619 (508) (859)
Other comprehensive income for the period, net of income tax (2,478) 1,699 3,434
Total comprehensive income for the period 3,713 10,372 27,623
Greggs plc
Consolidated balance sheet
as at 28 June 2014
28 June 2014 29 June 2013 28 December 2013
£'000 £'000 £'000
ASSETS
Non-current assets
Intangible assets 1,467 72 1,012
Property, plant and equipment 260,468 265,110 267,797
Defined benefit pension asset - - 55
261,935 265,182 268,864
Current assets
Inventories 15,334 15,672 15,405
Trade and other receivables 25,427 25,457 25,012
Cash and cash equivalents 16,780 11,983 21,572
Asset held for sale 7,000 - -
Other investments 5,000 - 3,000
69,541 53,112 64,989
Total assets 331,476 318,294 333,853
LIABILITIES
Current liabilities
Trade and other payables (78,819) (70,561) (72,203)
Current tax liabilities (2,725) (2,714) (5,564)
Provisions (4,378) (295) (2,949)
(85,922) (73,570) (80,716)
Non-current liabilities
Other payables (6,815) (7,511) (7,040)
Defined benefit pension liability (3,041) (1,940) -
Deferred tax liability (7,599) (9,684) (7,508)
Long term provisions (2,381) (1,176) (2,412)
(19,836) (20,311) (16,960)
Total liabilities (105,758) (93,881) (97,676)
Net assets 225,718 224,413 236,177
EQUITY
Capital and reserves
Issued capital 2,023 2,023 2,023
Share premium account 13,533 13,533 13,533
Capital redemption reserve 416 416 416
Retained earnings 209,746 208,441 220,205
Total equity attributable to equity holders of the parent 225,718 224,413 236,177
Greggs plc
Consolidated statement of changes in equity
For the 26 weeks ended 28 June 2014
26 weeks ended 29 June 2013
Issued capital Share premium Capital redemption reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000
At 30 December 2012 2,023 13,533 416 210,818 226,790
Profit for the period - - - 8,673 8,673
Other comprehensive income - - - 1,699 1,699
Total comprehensive income for the period - - - 10,372 10,372
Transactions with owners, recorded directly in equity
Sale of own shares - - - 622 622
Share-based payments - - - 184 184
Dividends to equity holders - - - (13,555) (13,555)
Total transactions with owners - - - (12,749) (12,749)
Balance at 29 June 2013 2,023 13,533 416 208,441 224,413
52 weeks ended 28 December 2013
Issued capital Share premium Capital redemption reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000
At 30 December 2012 2,023 13,533 416 210,818 226,790
Profit for the financial year - - - 24,189 24,189
Other comprehensive income - - - 3,434 3,434
Total comprehensive income for the year - - - 27,623 27,623
Transactions with owners, recorded directly in equity
Sale of own shares - - - 860 860
Share-based payments - - - 592 592
Dividends to equity holders - - - (19,582) (19,582)
Tax items taken directly to reserves - - - (106) (106)
Total transactions with owners - - - (18,236) (18,236)
At 28 December 2013 2,023 13,533 416 220,205 236,177
26 weeks ended 28 June 2014
Issued capital Share premium Capital redemption reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000
At 29 December 2013 2,023 13,533 416 220,205 236,177
Profit for the period - - - 6,191 6,191
Other comprehensive income - - - (2,478) (2,478)
Total comprehensive income for the period - - - 3,713 3,713
Transactions with owners, recorded directly in equity
Sale of own shares - - - 4,354 4,354
Purchase of own shares - - - (5,137) (5,137)
Share-based payments - - - 267 267
Dividends to equity holders - - - (13,656) (13,656)
Total transactions with owners - - - (14,172) (14,172)
Balance at 28 June 2014 2,023 13,533 416 209,746 225,718
Greggs plc
Consolidated statement of cash flows
For the 26 weeks ended 28 June 2014
26 weeks ended 28 June 2014 26 weeks ended 29 June 2013 52 weeks ended 28 December 2013
£'000 £'000 £'000
Operating activities
Cash generated from operating activities (see page 10) 35,133 31,774 82,493
Income tax paid (4,603) (7,114) (13,157)
Net cash inflow from operating activities 30,530 24,660 69,336
Cash flows from investing activities
Acquisition of property, plant and equipment (20,471) (20,649) (47,808)
Acquisition of intangible assets (455) - (785)
Proceeds from sale of property, plant and equipment 1,966 1,569 3,194
Interest received / (paid) 77 (45) (24)
Acquisition of other investments (2,000) - (3,000)
Net cash outflow from investing activities (20,883) (19,125) (48,423)
Cash flows from financing activities
Sale of own shares 4,354 622 860
Purchase of own shares (5,137) - -
Dividends paid (13,656) (13,555) (19,582)
Net cash outflow from financing activities (14,439) (12,933) (18,722)
Net (decrease) / increase in cash and cash equivalents (4,792) (7,398) 2,191
Cash and cash equivalents at the start of the period 21,572 19,381 19,381
Cash and cash equivalents at the end of the period 16,780 11,983 21,572
Greggs plc
Consolidated statement of cash flows (continued)
For the 26 weeks ended 28 June 2014
Cash flow statement - cash generated from operations
26 weeks ended 28 June 2014 26 weeks ended 29 June 2013 52 weeks ended 28 December 2013
£'000 £'000 £'000
Profit for the period 6,191 8,673 24,189
Amortisation - 72 161
Depreciation 18,221 15,947 33,225
Impairment 55 554 5,252
Loss on sale of property, plant and equipment 482 186 1,390
Release of government grants (233) (235) (470)
Share based payment expenses 267 184 592
Finance (income) / expense (77) 136 206
Income tax expense 2,473 2,704 8,963
Decrease in inventories 71 1,986 2,253
(Increase) / decrease in debtors (415) 1,460 1,905
Increase in creditors 6,700 390 1,220
Increase / (decrease) in provisions 1,398 (283) 3,607
Cash generated from operating activities 35,133 31,774 82,493
Notes
1. Basis of preparation and accounting policies
The condensed accounts have been prepared for the 26 weeks ended 28 June 2014.
Comparative figures are presented for the 26 weeks ended 29 June 2013. These
condensed accounts have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the EU. They do not include all the
information required for full annual accounts, and should be read in
conjunction with the Group accounts for the 52 weeks ended 28 December 2013.
These condensed accounts are unaudited and were approved by the Board of
Directors on 30 July 2014.
The comparative figures for the 52 weeks ended 28 December 2013 are not the
Company's statutory accounts for that financial year. Those accounts have
been reported on by the Company's auditor and delivered to the Registrar of
Companies. The report of the auditors was (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report; and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act 2006.
The Group continues to have strong operational cashflows and the Directors are
of the view that the Group has sufficient funds available to meet its
foreseeable working capital requirements. The Directors have concluded
therefore that the going concern basis remains appropriate.
The accounting policies applied by the Group in these condensed accounts are
the same as those applied by the Group in its consolidated accounts for the 52
weeks ended 28 December 2013 other than those disclosed in note 2.
2. Changes in accounting policies
From 29 December 2013 the following standards, amendments and interpretations
were adopted by the Group:
· Transition guidance: Amendments to IFRS 10, IFRS 11 and IFRS 12;
· IFRS 10 'Consolidated Financial Statements';
· IFRS 11 'Joint Arrangements';
· IFRS 12 'Disclosure of Interests in Other Entities';
· IAS 27 'Separate Financial Statements (2011)';
· IAS 28 'Investments in Associates and Joint Ventures (2011)';
· Amendment to IAS 39 'Novation of Derivatives and Continuation of Hedge
Accounting;
· IFRIC 21 'Levies';
· 'Offsetting Financial Assets and Financial Liabilities' - Amendments to
IAS 32; and
· 'Recoverable amount disclosures for non-financial assets' - Amendments
to IAS 36.
The adoption of the above has not had a significant impact on the Group's
profit for the period or equity.
3. Principal risks and uncertainties
The Directors consider that the principal risks and uncertainties which could
have a material impact on the Group's performance in the remaining 26 weeks of
the financial year remain substantially the same as those stated on pages 24
and 25 of our Annual Report and Accounts for the 52 weeks ended 28 December
2013, which are available on our website www.greggs.co.uk
4. Operating segment
The Board has considered the requirements of IFRS 8: Operating Segments, and
concluded that, as there is still only one reportable segment whose revenue,
profits, assets and liabilities are measured and reported on a consistent
basis with the Group accounts, no additional numerical disclosures are
necessary.
5. Exceptional items
26 weeks ended 28 June 2014 26 weeks ended 29 June 2013 52 weeks ended 28 December 2013
£'000 £'000 £'000
Cost of sales
Supply sites - asset impairment - - 1,221
- loss on disposal of assets - - 463
Closure of in-store bakeries 5,952 - -
________ ________ ________
5,952 - 1,684
Distribution and selling
Shop asset impairment - - 1,790
Loss on disposal of assets - - 1,529
Onerous leases - - 3,134
________ ________ ________
- - 6,453
Administrative expenses
Restructuring of support functions 2,302 - -
________ ________ ________
Total exceptional items 8,254 - 8,137
======= ======= =======
Supply sites
The impairment arises following the decision that additional capacity in the
supply chain is not required in the medium term.
Shop impairment and onerous leases
The charges for impairment and onerous leases arise from the decision to focus
on reshaping the Group's existing estate through closure and re-site of shops
and withdrawal from the Greggs moment brand.
Closure of in-store bakeries
The charge arises from the decision to consolidate the Company's in-store
bakeries into its regional bakery network and comprise of redundancy costs,
asset write-offs and the costs of making good the shops as bakery equipment is
removed.
Restructuring of support functions
The charge relates to the redundancy costs incurred in respect of the
restructuring.
6. Defined benefit pension scheme
The valuation of the defined benefit pension scheme for the purposes of IAS 19
(Revised) as at 28 December 2013 has been updated as at 28 June 2014 and the
movements have been reflected in these condensed accounts.
7. Taxation
The taxation charge for the 26 weeks ended 28 June 2014 and 29 June 2013 is
calculated by applying the Directors' best estimate of the annual effective
tax rate to the profit for the period.
8. Earnings per share
26 weeks ended 28 June 2014 26 weeks ended 29 June 2013 52 weeks ended 28 December 2013
Excluding exceptional items Exceptional items Total Total Excluding exceptional items Exceptional items Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Profit for the period attributable to equity holders of the parent 12,689 (6,498) 6,191 8,673 30,943 (6,754) 24,189
Basic earnings per share 12.6p (6.4p) 6.2p 8.6p 30.8p (6.7p) 24.1p
Diluted earnings per share 12.5p (6.4p) 6.1p 8.5p 30.8p (6.7p) 23.9p
Weighted average number of ordinary shares
26 weeks ended 28 June 2014 26 weeks ended 29 June 2013 52 weeks ended 28 December 2013
Number Number Number
Issued ordinary shares at start of period 101,155,901 101,155,901 101,155,901
Effect of own shares held (700,263) (834,646) (762,222)
Weighted average number of ordinary shares during the period 100,455,638 100,321,255 100,393,679
Effect of share options on issue 1,163,700 1,373,768 912,387
Weighted average number of ordinary shares (diluted) during the period 101,619,338 101,695,023 101,306,066
Issued ordinary shares at end of period 101,155,901 101,155,901 101,155,901
9. Dividends
The following tables analyse dividends when paid and the year to which they
relate:
Dividend declared 26 weeks ended 28 June 2014 26 weeks ended 29 June 2013 52 weeks ended 28 December 2013
Pence per share Pence per share Pence per share
2012 final dividend - 13.5p 13.5p
2013 interim dividend - - 6.0p
2013 final dividend 13.5p - -
13.5p 13.5p 19.5p
26 weeks ended 28 June 2014 26 weeks ended 29 June 2013 52 weeks ended 28 December 2013
£'000 £'000 £'000
Total dividend payable
2012 final dividend - 13,555 13,555
2013 interim dividend - - 6,027
2013 final dividend 13,656 - -
Total dividend paid in period 13,656 13,555 19,582
Dividend proposed at period end and not included as a liability in the accounts
2013 interim dividend (6.0p per share) - 6,026 -
2013 final dividend (13.5 p per share) - - 13,567
2014 interim dividend (6.0p per share) 6,034 - -
6,034 6,026 13,567
10. Related party transactions
There have been no related party transactions in the first 26 weeks of the
current financial year which have materially affected the financial position
or performance of the Group.
Related parties are consistent with those disclosed in the Group's Annual
Report and Accounts for the 52 weeks ended 28 December 2013 other than the
changes in Directors detailed in Note 12.
11. Half year report
The condensed accounts were approved by the Board of Directors on 30 July
2014. They will be available on the Company's website, www.greggs.co.uk.
12. Statement of Directors' responsibilities
The Directors named below confirm on behalf of the Board of Directors that to
the best of their knowledge:
· the condensed set of accounts has been prepared in accordance with IAS
34 Interim Financial Reporting as adopted by the EU;
· the interim management report includes a fair review of the information
required by:
(a) DTR4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first 26 weeks of the
financial year and their impact on the condensed set of accounts; and a
description of the principal risks and uncertainties for the remaining 26
weeks of the year; and
(b) DTR4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first 26 weeks of the financial year
and that have materially affected the financial position or performance of the
Group during the period; and any changes in the related party transactions
described in the last annual report that could do so.
The Directors of Greggs plc are listed in the Annual Report and Accounts for
the 52 weeks ended 28 December 2013. The following changes have taken place
since the approval of the Annual Report and Accounts:
Peter McPhillips appointed 10 March 2014
Julie Baddeley resigned 1 May 2014
Iain Ferguson resigned 1 May 2014
Sandra Turner appointed 1 May 2014
For and on behalf of the Board of Directors
Roger Whiteside
Richard
Hutton
Chief Executive
Finance
Director
30 July 2014
This information is provided by RNS
The company news service from the London Stock Exchange