REG - Greggs PLC - Interim Results
02/08/2022 07:15
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RNS Number : 5828U Greggs PLC 02 August 2022
2 August 2022
INTERIM RESULTS FOR THE 26 WEEKS ENDED 2 JULY 2022
Greggs is a leading UK food-on-the-go retailer,
with more than 2,200 retail outlets throughout the country
Trading in line with plan and good strategic progress
First half financial highlights
H1 2022 H1 2021
Total sales £694.5m £546.2m
Pre-tax profit £55.8m £55.5m
Diluted earnings per share 44.8p 43.2p
Ordinary interim dividend per share 15.0p 15.0p
• Total sales up 27.1%, with 22.4% LFL* sales growth in first half of 2022 (Q1:
36.9%, Q2: 11.2%)
• First half LFL sales 12.3% higher than comparable period in 2019
• Flat profit outcome primarily reflects re-introduction of business rates,
increase in VAT and higher levels of cost inflation
• Strong cash position and good liquidity, with net cash at period end of
£145.7m, having paid a special dividend of 40p per share (£40.6m total) in
April 2022
* Like-for-like (LFL) company-managed shop sales performance against
comparable period in 2021
Operational and strategic developments
• Shop opening progress: 70 new shops opened in first half, 12 closures; 2,239
shops as at 2 July 2022. Strong pipeline, anticipate circa 150 net new shop
openings in 2022
• Growth channels: extension of evening hours going well, delivery service
continuing to prove incremental despite recovery of 'walk-in' trade
• Greggs App: strong growth in usage driving loyalty engagement. New services
such as Click + Collect and product customisation progressing well
• New product development: menu development focused on healthier choices, hot
food and evening daypart
• Infrastructure: new manufacturing capacity progressing well, technology
development now focused on digital
• Greggs Pledge: Science-based targets for emissions submitted for
verification. National Equality Standard accreditation achieved and first
"Eco-Shop" opened to test solutions to minimise environmental impact of retail
operations
• Chair succession: Matt Davies announced today as Chair Designate, succeeding
Ian Durant from 1 November 2022
"Greggs delivered an encouraging performance in the first half of the year
with sales ahead of 2019 levels. These results demonstrate the continued
strength of the Greggs brand and demand for our great tasting, quality and
value for money offering.
"During the period we continued to make good progress with our strategic
priorities, including expanding our shop estate and making Greggs more
accessible to customers through extended trading hours and digital channels.
"In a market where consumer incomes are under pressure Greggs offers
exceptional value for customers looking for food and drink on-the-go. We are
well positioned to navigate the widely publicised challenges affecting the
economy and continue to have a number of exciting growth opportunities ahead,
with a clear strategy for expansion. We remain confident in Greggs' ability
to deliver continued success."
- Roisin Currie, Chief Executive
ENQUIRIES:
Greggs plc (http://www.greggs.co.uk) Hudson Sandler (http://www.hudsonsandler.com)
Roisin Currie, Chief Executive Wendy Baker / Hattie Dreyfus
Richard Hutton, Finance Director Nick Moore / Emily Brooker
Tel: 0191 281 7721 Tel: 020 7796 4133
An audio webcast of the analysts' presentation will be available to download
later today at http://corporate.greggs.co.uk/ (http://corporate.greggs.co.uk/)
CHIEF EXECUTIVE'S REPORT
Greggs has continued to trade well in 2022 with like-for-like (LFL) sales in
company-managed shops growing by 22.4% (Q1: 36.9%, Q2: 11.2%) when compared
with the equivalent period of 2021. As expected, the rate of growth in the
second quarter began to normalise but remained encouraging as we passed the
anniversary of restrictions being lifted in 2021. Total sales for the 26
weeks to 2 July 2022 were £694.5 million, an increase of 27.1% (H1 2021:
£546.2 million).
We are making good progress with our strategic priorities, growing the shop
estate at a faster pace and making Greggs more accessible to customers through
extended trading hours and digital channels. At the same time, we continue
to invest in further improving the sustainability of Greggs as a major brand
in the food-on-the-go market.
Operational review
Sales levels were encouraging in the first half of 2022. Performance in the
first quarter was flattered by comparison with restricted trading conditions
in the same period of 2021 but we are now reporting against a more similar
year-on-year base. Comparing with the pre-pandemic level, first half
like-for-like sales in company-managed shops were 12.3% per cent higher than
the equivalent period of 2019 despite footfall remaining below 2019 levels.
The breadth of the Greggs estate continues to provide geographical
diversification as consumer behaviour adjusts coming out of the pandemic.
Our strong presence in towns and suburbs, along with a growing portfolio of
convenient roadside shops, has counter-balanced the slower recovery seen in
large city centres and public transport hubs.
Our estate expansion has been focused away from traditional shopping areas
while, at the same time, we have taken the opportunity to grow in catchments
where Greggs has traditionally been underrepresented, such as central London
and rail hubs. In the first half of 2022 we opened 70 new shops (including
26 franchised units) and closed 12 shops, giving a total of 2,239 shops (of
which 401 are franchised) trading at 2 July 2022.
In June 2022 we opened our 400(th) franchised shop in Selby in partnership
with our newest franchise partner, Rontec, one of the leading players in the
UK forecourt industry. Other notable shop openings in the first half of 2022
included three 'drive-thru' sites, of which we have a growing pipeline, and
our in-store café concept in Primark Birmingham. In the most recent two
weeks we have also opened shops in London's Leicester Square and Liverpool
Street Station.
Strategic development
We have a clear plan to address the many attractive growth opportunities
available to Greggs over the coming years. This was set out at our Capital
Markets Day in October 2021 and we have made good progress in the first half
of 2022 as we seek to make Greggs more accessible to customers across multiple
channels and dayparts. Our strategic investment in the Greggs estate, brand
and support infrastructure over recent years puts us in a strong position to
move forward at pace.
Estate growth
We see a clear opportunity for Greggs to expand its UK estate to at least
3,000 shops, and have increased the rate at which we are opening in new
locations given the increased availability of good sites. Our confidence in
the scale of opportunity is underpinned by the success we have already had in
catchments where Greggs currently has a relatively low presence such as retail
parks, railway stations, airports, supermarkets and central London.
The Greggs brand, and our strong, proven covenant is attractive to landlords
and has resulted in a strong pipeline of opportunities. In 2022 we expect to
open 150 net new shops and believe that this rate of growth is sustainable
beyond the current year. At least a third of this annual growth is expected
to be achieved with franchise partners; we currently have fourteen such
partners covering travel and convenience shopping catchments.
Shop refurbishment will also play a part in enabling the strategic growth
agenda. Our latest shopfitting standard, which is already being deployed for
all new shops and relocations, supports operational excellence in serving new
channels such as delivery and Click + Collect, as well as presenting an
attractive, modern environment for customers. We expect to refurbish around
100 shops to this standard in 2022, progressing to 250 annually in the medium
term.
Evening trade
The evening daypart represents the largest segment of the food-to-go market by
value, but is the area where Greggs currently has the lowest penetration. By
extending trading hours, addressing menu options and offering delivery we
believe that Greggs can increase its participation in the evening market,
further leveraging our investment in facilities that are under-utilised after
4pm.
In the first half of 2022 we extended trading hours in the company-managed
estate. 300 shops now trade until at least 8pm (July 2021: 130). In the
second half of 2022 we will extend trading hours in more shops as we better
understand the extent of demand in different locations. The evening daypart
is now our strongest-growing trading time, albeit from a low base.
Ranging trials have reinforced the importance of hot food options in the
evening daypart, as well as the demand for our core food and drink range. In
developing the range our aim is to stock options that are in demand throughout
the day, in order to minimise operational complexity and maintain strong
availability for customers.
Delivery
Delivery, through our partnership with Just Eat, is now available across the
UK from 1,180 of our shops, up from 1,000 at the start of the year. Delivery
is a channel that presents further growth potential for Greggs as we learn to
serve it more effectively and increase availability into the evening.
The recovery in out-of-home activity over the past twelve months has seen a
market-wide trend whereby a proportion of delivery customers have switched
their purchases back to the walk-in channel. It is clear, however, that the
majority of the new trade we have generated through delivery is incremental
and that it offers additional access to Greggs at times when customers are
unable to visit our shops themselves.
Greggs App
The Greggs App, relaunched in 2021, offers a convenient platform for customers
to access additional services from Greggs whilst also being rewarded for their
loyalty. Use of the app has grown strongly, aided by increased marketing of
the benefits. From a strategic perspective the Greggs App offers:
• Rewards - our loyalty proposition rewards customers for their purchases via
the accumulation of 'stamps', which can then be exchanged for free products.
The scheme is increasing the frequency with which app customers visit us
whilst enhancing further Greggs' market-leading reputation for great value.
• Click + Collect - customers can skip the queue by pre-ordering, and guarantee
availability before they visit. In the first half of 2022 we launched
personalised pizza toppings as an option for customers who use Click + Collect
to pre-order. In time we expect customisation to be extended to other
elements of our made-in-store range.
• Deeper customer understanding - our investment in technology to help us better
understand our customers' behaviours and preferences will enable us to tailor
our communications and experiences with them. Our new CRM platform is now
live and a key step forward in our vision to truly understand our customers'
needs across all of our channels and to enable us to serve them even better,
every day.
Menu development
Menu development supports our strategic growth objectives as well as the
commitments made in the Greggs Pledge.
In the first half of 2022 we broadened our healthier choices through the
launch of two salad meal boxes - Smoky Cajun Rice with BBQ Chicken &
Sweetcorn Fritters and Sweet Potato Bhaji & Rice, which is a vegan option.
Both can be eaten cold or taken away to heat. We also continued to
incentivise healthier choices by offering fruit pots for just 75 pence as an
add-on to our meal deals.
To meet demand for hot food options we continued to roll out hot food
cabinets, particularly to those shops that are targeting the evening trade.
867 company-managed shops now have hot food cabinets and we plan to add a
further 400 in the second half of the year.
To support further our objective of growing the level of trade in the evening
we have added two new pizza flavours, Mexican Chicken and Pepperoni Hot
Shot. Our great-value pizza offer can now be accessed through the walk-in,
Click + Collect and delivery channels. Customers can customise their pizza
toppings when ordering through our digital channels and we intend to trial the
customisation of sandwich fillings in the second half of 2022.
Supply chain development
The development of our supply chain will support the significant growth
opportunity ahead of us and require additional manufacturing and logistics
capacity. In the third quarter of 2022 we expect to commission the new pizza
manufacturing line that is under construction at our Enfield manufacturing
site. At Balliol Park in Newcastle, we are undertaking preparatory works
ahead of adding a fourth line to extend capacity for the production of our
iconic savoury products.
Our plans for ambitious growth will require the addition of further
manufacturing and logistics capacity in the years ahead. We have been
exploring site options on which to base this capacity and expect to make
further progress on this in the second half of the year.
Support systems
In the first half of 2022 we achieved a major milestone with the completion of
the deployment of SAP across our supply chain, a huge achievement for the
teams involved. The focus of our systems development has now turned to
support for our growth ambitions, particularly our digital capabilities but
also the integration of new channels to our core systems. In a tight labour
market, we have also been working on an upgraded recruitment platform that
will improve current processes and the overall candidate experience.
Greggs Pledge
Our separate sustainability report details the progress made in 2021 on the
objectives of the Greggs Pledge, our commitment to further improve our ESG
credentials in ten key areas. In the first half of 2022 we continued to
advance this agenda, and were delighted to achieve the National Equality
Standard, an industry-recognised standard for diversity and inclusion. This
accreditation reflects the significant progress we have made in respect of
diversity and inclusion whilst supporting us to identify areas where we can
continue to improve. A key element of the accreditation was having leaders who
advocate diversity and inclusion, supporting people through their employment
journey and having strategies in place to drive change.
We have also been focused on setting science-based targets to reduce our
emissions in line with a 1.5(oC) ambition. These targets have now been
submitted to the Science Based Targets initiative for verification, and will
support our ambition to be Net Zero in Scopes 1 & 2 by 2035, and in Scope
3 by 2040.
Another notable landmark in early July was the opening of our first "Eco-Shop"
in Northampton. This gives us a platform to develop and test solutions to
minimise our impact on the environment by cutting down on waste and reducing
the use of energy and water. Successful elements of the trial will be rolled
out in line with our Pledge commitment.
Board changes
Today we have announced the appointment of Matt Davies as an independent
non-executive director and Chair Designate with immediate effect. Matt will
succeed Ian Durant as Chair of the Board of Greggs on 1st November 2022, when
Ian steps down from the Board. On behalf of the Board I would like to thank
Ian for his support and leadership through what has been a transformational
period for Greggs.
As part of our ongoing plans to ensure smooth succession for Board roles Lynne
Weedall, who joined the Board in May 2022, will become Chair of our
Remuneration Committee with effect from 1 September 2022.
Financial performance
Total sales for the 26 weeks to 2 July 2022 were £694.5 million (H1 2021:
£546.2 million). Like-for-like sales in company-managed shops grew by 22.4%
(Q1: 36.9%, Q2: 11.2%).
Pre-tax profit was £55.8 million in the first half of 2022 (H1 2021: £55.5
million). The contribution from sales in the period was significantly
stronger than that seen under the more restricted conditions experienced in
the first half of 2021, although the 2021 outcome did benefit from temporary
relief from business rates and reduced rates of VAT. We have worked hard to
mitigate the impact of cost inflation on customers but some further small
price increases have been necessary; these appear not to have impacted
transaction numbers.
The rate of cost inflation increased significantly in the first half of the
year, driven by food, packaging and energy commodities. We have continued to
extend forward our purchasing cover and have fixed input prices for an average
of around five months of our future requirements across these areas. Across
all cost areas we now estimate that the overall level of cost inflation in
2022 will be around nine per cent, although some uncertainty remains.
The net financing expense of £3.2 million in the period (H1 2021: £3.9
million) comprised £3.2 million in respect of the IFRS 16 interest charge on
lease liabilities, £0.4 million of facility charges under the Company's
(undrawn) financing facilities and £0.4m income relating to interest received
on bank deposits, the Company's defined benefit pension scheme and foreign
exchange gains.
The effective rate of Corporation Tax for the period was 17.7% (H1 2021:
20.0%) with the year-on-year reduction reflecting the availability of
super-deduction capital allowances.
Diluted earnings per share for the period were 44.8 pence (H1 2021: 43.2
pence).
Capital expenditure and financial position
Capital expenditure during the first half was £41.9 million (H1 2021: £23.5
million) as we increased investment in line with our estate growth and
development plans and neared completion of additional pizza capacity at our
Enfield manufacturing site. In the balance of the year we will continue the
development of our retail estate. We are making good progress with the
identification of potential sites for expansion of our supply chain. The
timing of any land purchase will be material to 2022 capital expenditure and,
in the context of the uncertainty over this, our full year guidance of circa
£170 million capital expenditure remains appropriate.
We continue to carry a higher-than-normal cash position in order to fund the
investment in our significant growth programme and ended the period with a
cash balance of £145.7 million (3 July 2021: £118.3 million). In addition,
the Company has access to a revolving credit facility that allows it to draw
up to £100 million in committed funds, subject to it retaining a minimum
liquidity of £30 million (i.e. maximum net borrowings are £70 million).
Dividends
The previously-declared special dividend of 40.0 pence per share was paid in
April 2022.
The Board has declared an interim dividend of 15.0 pence per share (2021: 15.0
pence). The overall ordinary dividend for the year will be proposed in line
with our progressive dividend policy, which targets a full year ordinary
dividend that is around two times covered by underlying earnings.
The interim dividend will be paid on 7 October 2022 to those shareholders on
the register at the close of business on 9 September 2022.
Outlook
Despite market-wide inflationary pressures Greggs has continued to perform
well. Consumer behaviour is still recovering from the impact of the pandemic
and employment levels are high. In a market where consumer incomes are under
pressure Greggs offers exceptional value for customers looking for food and
drink on-the-go. In the four weeks to 30 July like-for-like sales in
company-managed shops were 13.1% above the equivalent period of 2021.
Clearly there are considerable uncertainties in the economy as a whole, but we
continue to trade in line with our plan and are making good progress against
our strategic objective to become a larger, multi-channel business. As such,
the Board's expectations for the full year outcome remain unchanged.
Roisin Currie
Chief Executive
2 August 2022
Greggs plc
Consolidated income statement
For the 26 weeks ended 2 July 2022
26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
Total Total Total
£m £m £m
Revenue 694.5 546.2 1,229.7
Cost of sales (260.7) (196.3) (447.7)
Gross profit 433.8 349.9 782.0
Distribution and selling costs (339.3) (257.8) (567.6)
Administrative expenses (35.5) (32.7) (61.2)
Operating profit 59.0 59.4 153.2
Finance expense (net) (3.2) (3.9) (7.6)
Profit before tax 55.8 55.5 145.6
Income tax (9.9) (11.1) (28.1)
Profit for the period attributable to equity holders of the parent
45.9 44.4 117.5
Basic earnings per share 45.2p 43.8p 115.7p
Diluted earnings per share 44.8p 43.2p 114.3p
Greggs plc
Consolidated statement of comprehensive income
For the 26 weeks ended 2 July 2022
26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
£m £m £m
Profit for the period 45.9 44.4 117.5
Other comprehensive income
Items that will not be recycled to profit and loss:
Remeasurements on defined benefit pension plans 2.2 13.8 7.1
Tax on remeasurements on defined benefit pension plans 0.0 (3.5) (1.7)
Other comprehensive income for the period, net of income tax 2.2 10.3 5.4
Total comprehensive income for the period 48.1 54.7 122.9
Greggs plc
Consolidated balance sheet
as at 2 July 2022
2 July 2022 3 July 2021 1 January 2022
£m £m £m
ASSETS
Non-current assets
Intangible assets 14.0 15.0 14.9
Property, plant and equipment 355.4 340.3 343.8
Right-of-use assets 271.1 269.2 263.6
Defined benefit pension asset 2.3 4.3 -
642.8 628.8 622.3
Current assets
Inventories 33.1 24.8 27.9
Trade and other receivables 37.3 36.3 37.6
Assets held for resale - - 1.6
Current tax - - 0.4
Cash and cash equivalents 145.7 118.3 198.6
216.1 179.4 266.1
Total assets 858.9 808.2 888.4
LIABILITIES
Current liabilities
Trade and other payables (149.1) (115.5) (153.4)
Current tax liability (5.8) (1.3) -
Lease liabilities (49.7) (49.4) (49.3)
Provisions (3.9) (3.1) (4.2)
(208.5) (169.3) (206.9)
Non-current liabilities
Other payables (3.0) (3.5) (3.2)
Defined benefit pension liability - - (2.4)
Lease liabilities (241.2) (240.1) (233.9)
Deferred tax liability (12.5) (5.9) (10.0)
Long-term provisions (2.1) (3.8) (2.8)
(258.8) (253.3) (252.3)
Total liabilities (467.3) (422.6) (459.2)
Net assets 391.6 385.6 429.2
EQUITY
Capital and reserves
Issued capital 2.0 2.0 2.0
Share premium account 22.3 19.3 20.0
Capital redemption reserve 0.4 0.4 0.4
Retained earnings 366.9 363.9 406.8
Total equity attributable to equity holders of the Parent 391.6
385.6 429.2
Greggs plc
Consolidated statement of changes in equity
For the 26 weeks ended 2 July 2022
26 weeks ended 3 July 2021
Issued Share Capital Retained Total
capital premium redemption earnings
reserve
£m £m £m £m £m
Balance at 3 January 2021 2.0 15.7 0.4 303.5 321.6
Total comprehensive income for the period
Profit for the period - - - 44.4 44.4
Other comprehensive income - - - 10.3 10.3
Total comprehensive income for the period - - - 54.7 54.7
Transactions with owners, recorded directly in equity
Issue of ordinary shares - 3.6 - - 3.6
Sale of own shares - - - 0.3 0.3
Share-based payment transactions - - - 2.5 2.5
Tax items taken directly to reserves - - - 2.9 2.9
Total transactions with owners - 3.6 - 5.7 9.3
Balance at 3 July 2021 2.0 19.3 0.4 363.9 385.6
52 weeks ended 1 January 2022
Issued Share Capital Retained Total
capital premium redemption earnings
reserve
£m £m £m £m £m
Balance at 3 January 2021 2.0 15.7 0.4 303.5 321.6
Total comprehensive income for the period
Profit for the financial year - - - 117.5 117.5
Other comprehensive income - - - 5.4 5.4
Total comprehensive income for the year - - - 122.9 122.9
Transactions with owners, recorded directly in equity
Issue of ordinary shares - 4.3 - - 4.3
Sale of own shares - - - 0.3 0.3
Purchase of own shares - - - (10.0) (10.0)
Share-based payment transactions - - - 2.2 2.2
Dividends to equity holders - - - (15.3) (15.3)
Tax items taken directly to reserves - - - 3.2 3.2
Total transactions with owners - 4.3 - (19.6) (15.3)
Balance at 1 January 2022 2.0 20.0 0.4 406.8 429.2
26 weeks ended 2 July 2022
Issued Share Capital Retained Total
capital premium redemption earnings
reserve
£m £m £m £m £m
Balance at 2 January 2022 2.0 20.0 0.4 406.8 429.2
Total comprehensive income for the period
Profit for the period - - - 45.9 45.9
Other comprehensive income - - - 2.2 2.2
Total comprehensive income for the period - - - 48.1 48.1
Transactions with owners, recorded directly in equity
Issue of ordinary shares - 2.3 - - 2.3
Purchase of own shares - - - (3.0) (3.0)
Share-based payment transactions - - - 2.1 2.1
Dividends to equity holders (83.3) (83.3)
Tax items taken directly to reserves - - - (3.8) (3.8)
Total transactions with owners - 2.3 - (88.0) (85.7)
Balance at 2 July 2022 2.0 22.3 0.4 366.9 391.6
Greggs plc
Consolidated statement of cash flows
For the 26 weeks ended 2 July 2022
26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
£m £m £m
Cash flows from operating activities
Cash generated from operations (see page 14) 100.1 130.8 312.1
Income tax paid (5.0) (6.7) (19.2)
Interest paid on lease liabilities (3.2) (3.1) (6.3)
Interest paid on loans and borrowings (0.4) (0.8) (1.1)
Net cash inflow from operating activities 91.5 120.2 285.5
Cash flows from investing activities
Acquisition of property, plant and equipment (34.6) (17.3) (50.5)
Acquisition of intangible assets (1.5) (1.6) (3.8)
Proceeds from sale of property, plant and equipment 1.9 0.2 0.3
Interest received 0.3 - -
Net cash outflow from investing activities (33.9) (18.7) (54.0)
Cash flows from financing activities
Proceeds from issue of share capital 2.2 3.6 4.3
Sale of own shares - 0.3 0.3
Purchase of own shares (3.0) - (10.0)
Dividends paid (83.3) - (15.3)
Repayment of principal of lease liabilities (26.4) (23.9) (49.0)
Net cash outflow from financing activities (110.5) (20.0) (69.7)
Net (decrease) / increase in cash and cash equivalents (52.9) 81.5 161.8
Cash and cash equivalents at the start of the period 198.6 36.8 36.8
Cash and cash equivalents at the end of the period 145.7 118.3 198.6
Greggs plc
Consolidated statement of cash flows (continued)
For the 26 weeks ended 2 July 2022
Cash flow statement - cash generated from operations
26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
£m £m £m
Profit for the period 45.9 44.4 117.5
Amortisation 2.4 2.2 4.5
Depreciation - property, plant and equipment 28.2 26.9 54.2
Depreciation - right-of-use assets 25.9 23.9 48.7
Impairment reversal - property, plant and equipment (0.2) (0.6) (1.9)
Impairment charge/(reversal) - right-of-use assets 0.6 (1.4) (1.6)
Loss on sale of property, plant and equipment 0.5 0.3 0.9
Release of government grants (0.2) (0.2) (0.5)
Share-based payment expenses 2.1 2.5 2.2
Finance expense 3.2 3.9 7.6
Income tax expense 9.9 11.1 28.1
Increase in inventories (5.3) (2.2) (5.4)
Decrease in receivables 0.3 3.1 1.8
(Decrease) / increase in payables (9.7) 19.9 58.9
(Decrease) in provisions (1.0) (0.5) (0.4)
Decrease in pension liability (2.5) (2.5) (2.5)
Cash from operating activities 100.1 130.8 312.1
Notes
1. Basis of preparation
The condensed accounts have been prepared for the 26 weeks ended 2 July 2022.
Comparative figures are presented for the 26 weeks ended 3 July 2021. These
condensed accounts have been prepared in accordance with IAS 34 Interim
Financial Reporting as adopted by the UK. 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 1 January 2022.
These condensed accounts are unaudited and were approved by the Board of
Directors on 2 August 2022.
The comparative figures for the 52 weeks ended 1 January 2022 are not the
Company's statutory accounts for that financial year. Those accounts were
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.
Going concern
The Directors have considered the adoption of the going concern basis of
preparation for these condensed accounts. The Directors have reviewed cash
flow forecasts prepared for a period of 18 months from the date of approval of
these condensed accounts.
At the end of the reporting period the Group had £215.7 million of available
liquidity including £145.7 million cash and cash equivalents and £70.0
million of the undrawn revolving credit facility ('RCF').
In reviewing the cash flow forecasts the Directors considered the current
trading position of the Group and the likely capital expenditure and working
capital requirements of its growth plans. The cashflow forecasts show that the
Group expects to comply with the covenants included within the RCF agreement
throughout the review period. The main uncertainty for the review period is
the impact of cost inflation on both the Group's cost base and also on
consumer disposable income. Trading to date has been in line with our plan
and given the significant liquidity available we do not believe this presents
a risk to our ability to continue as a going concern.
Taking into account the current cash level and the committed facilities the
Directors are confident that the Group will have sufficient funds to allow it
to continue to operate. After reviewing the projections and sensitivity
analysis the Directors believe that it is appropriate to prepare the condensed
accounts on a going concern basis.
Judgements and estimates
In preparing these condensed accounts, management have made judgements and
estimates that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual results may
differ from these estimates. In addition to the key estimates and judgements
disclosed in the consolidated accounts for the 52 weeks ended 1 January 2022
the following additional areas have been identified or updated for the 26
weeks ended 2 July 2022.
Impairment
Property, plant and equipment and right-of-use assets are reviewed for
impairment if events or changes in circumstances indicate that the carrying
value may not be recoverable. For example, shop fittings and right-of-use
assets may be impaired if sales in that shop fall. When a review for
impairment is conducted, the recoverable amount is estimated based on either
value- in-use calculations or fair value less costs of disposal. Value-in-use
calculations are based on management's estimates of future cash flows
generated by the assets and an appropriate discount rate. Consideration is
also given to whether the impairment assessments made in prior years remain
appropriate based on the latest expectations in respect of recoverable amount.
Where it is concluded that the impairment has reduced, a reversal of the
impairment is recorded.
The Covid-19 pandemic meant that during 2020 and 2021 all shops had periods of
no, or reduced, sales and this was deemed to be an impairment trigger in both
financial years. As a result, assets in company-managed shops were tested
for impairment for the 2020 and 2021 financial years. Sales have performed
in line with expectations for the first 6 months of 2022, however given the
level of impairment previously recognised and with customer transaction
numbers remaining below pre-pandemic levels the impairment review has been
updated as at 2 July 2022 using the following assumptions:
· Shops have been categorised into different catchment areas (e.g. city
centres, transport hubs, retail parks) and assumptions made as to the rate of
like-for-like sales recovery for each catchment;
· Like-for-like sales excluding price inflation and the incremental
impact of delivery have been assumed to return to a level equivalent to the
pre-Covid-19 levels (on average across the estate) by June 2023.
Like-for-like sales for the period 2023 to 2026 are then assumed to grow by
an average of 3% per annum;
· Where shops are currently used to fulfil orders for delivery, or are
planned to offer delivery in 2022, the net cash flows for fulfilling these
orders are included within the estimated cash flows for the shop;
· Earnings before interest, tax, depreciation, amortisation and rent
('EBITDAR') is used as a proxy for net cash flow excluding rental payments;
· Cash flows have been discounted at a pre-tax discount rate that
reflects the current market assessment of the time value of money, including a
risk uplift for uncertainty of future cash flows. The discount rate as at 2
July 2022 was 9.0% (1 January 2022: 6.9%); and
· Consideration of the appropriate period over which to forecast cash
flows, including reference to the lease term. Where considered appropriate
cashflows have been included for periods beyond the lease probable end date
(to a maximum of five years in accordance with IAS 36).
On the basis of these calculations a net impairment charge of £0.6m has been
made in respect of 74 shops reflecting the higher discount rate used in the
calculation.
2. Accounting policies
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 2 January 2022 other than as disclosed below:
· Amendments to IAS 16: Property, Plant and Equipment - Proceeds
before Intended Use;
· Amendments to IAS 37: Provisions, Contingent Liabilities and
Contingent Assets: Onerous Contracts - Cost of Fulfilling a Contract; and
· Annual Improvements 2018-2020.
Their adoption did not have a material effect on the accounts.
Principal risks and uncertainties
The Directors have considered the principal risks and uncertainties which
could have a material impact on performance for the remainder of the financial
year.
The assessment of principal risks and uncertainties made in the 2021 Annual
Report and Accounts remains valid and we do not believe there to have been any
material changes in the profile of those risks since then.
We have considered whether the Company is facing any new principal risks since
our last report and identified the following:
· The war in Ukraine has had the following impacts on our business:
o Additional pressure on supply chains due to increased demand globally,
resulting in increases to input prices.
o Possible increased cyber security risks.
· Cost of living pressures are impacting the household budgets of
customers. We continue to work hard to ensure that we offer exceptional
value for customers looking for food and drink on-the-go.
· Lack of availability of certain ingredients for our products, which
has resulted in the need for us to find alternatives. Our normal food safety
processes ensure the integrity and safety of any substitute ingredients.
· We identified climate change as an emerging risk in our annual
report. Work to understand the future impacts of this continues, and we
anticipate including it as a principal risk in the 2022 Annual Report.
The assessment above should be read in conjunction with the statement of
principal risks described on pages 59-62 in the 2021 Annual Report and
Accounts. Other than the matters described above we believe our exposure to
other principal risks faced by the business is not significantly different to
that described in that statement.
3. Operating segments
The Board is considered to be the 'chief operating decision maker' of the
Group in the context of the IFRS 8 definition. In addition to its
company-managed retail activities, the Group generates revenues from its
business to business channel which includes franchise and wholesale
activities. Both channels were categorised as reportable segments for the
purposes of IFRS 8.
Company-managed retail activities - the Group sells a consistent range of
fresh bakery goods, sandwiches and drinks in its own shops or via delivery
channels. Sales are made to the general public on a cash basis. All
results arise in the UK.
Business to business channel - the Group sells products to franchise and
wholesale partners for sale in their own outlets as well as charging a licence
fee to franchise partners. These sales and fees are invoiced to the partners
on a credit basis. All results arise in the UK.
All revenue in 2022 and 2021 was recognised at a point in time.
The Board regularly reviews the revenues and trading profit of each segment.
The Board receives information on overheads, assets and liabilities on an
aggregated basis consistent with the Group accounts.
26 weeks ended 2 July 2022 26 weeks ended 2 July 2022 26 weeks ended 2 July 2022 26 weeks ended 3 July 2021 26 weeks ended 2 July 2021 26 weeks ended 3 July 2021 52 weeks ended 1 January 2022 52 weeks ended 1 January 2022 52 weeks ended 1 January 2022
Retail Business to business Total Retail Business to business Total Retail Business to business Total
company-managed company-managed company-managed
shops shops shops
£m £m £m £m £m £m £m £m £m
Revenue 622.6 71.9 694.5 488.3 57.9 546.2 1,098.2 131.5 1,229.7
Trading profit* 92.2 12.6 104.8 86.9 12.1 99.0 207.1 28.5 235.6
Overheads including profit share (82.4)
(45.8) (39.6)
Operating profit 59.0 59.4 153.2
Finance expense (3.2) (3.9) (7.6)
Profit before tax 55.8 55.5 145.6
* Trading profit is defined as gross profit less supply chain costs and retail
costs (including property and direct management costs) and before central
overheads.
4. Defined benefit pension scheme
The valuation of the defined benefit pension scheme for the purposes of IAS 19
(Revised) as at 1 January 2022 has been updated as at 2 July 2022 and the
movements have been reflected in these condensed accounts.
5. Taxation
The taxation charge for the 26 weeks ended 2 July 2022 and 3 July 2021 is
calculated by applying the Directors' best estimate of the annual effective
tax rate to the profit or loss for the period using rates substantively
enacted by the half year date as required by IAS34 'Interim Financial
Reporting'.
6. Earnings per share
26 weeks ended 2 July 2022 26 weeks ended 3 July 2021 52 weeks ended 1 January 2022
Total Total Total
£m £m £m
Profit for the period attributable to equity holders of the parent
45.9 44.4 117.5
Basic earnings per share 45.2p 43.8p 115.7p
Diluted earnings per share 44.8p 43.2p 114.3p
Weighted average number of ordinary shares
26 weeks ended 2 July 2022 26 weeks ended 3 July 2021 52 weeks ended 1 January 2022
Number Number Number
Issued ordinary shares at start of period 101,897,021 101,426,038 101,426,038
Effect of shares issued 28,515 126,480 284,386
Effect of own shares held (369,828) (168,244) (221,851)
Weighted average number of ordinary shares during the period 101,555,708 101,384,274 101,488,573
Effect of share options in issue 902,676 1,252,095 1,261,311
Weighted average number of ordinary shares (diluted) during the period 102,458,384 102,636,369 102,749,884
Issued ordinary shares at end of period 102,046,258 101,813,986 101,897,021
7. Dividends
The following tables analyse dividends when paid and the year to which they
relate:
Dividend declared 26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
Pence per share Pence per share Pence per share
2021 interim dividend - - 15.0p
2021 special dividend 40.0p - -
2021 final dividend 42.0p - -
82.0p - 15.0p
26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
£m £m £m
Total dividend payable
2021 interim dividend - - 15.3
2021 special dividend 40.6 - -
2021 final dividend 42.6 - -
Total dividend paid in period 83.2 - 15.3
Dividend proposed at period end and not included as a liability in the
accounts
2021 interim dividend (15.0p per share) - 15.3 -
2021 special dividend (40.0p per share) - - 40.6
2021 final dividend (42.0p per share) - - 42.6
2022 interim dividend (15.0p per share) 15.3 - -
15.3 15.3 83.2
8. 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 1 January 2022.
9. Half year report
The condensed accounts were approved by the Board of Directors on 2 August
2022. They will be available on the Company's website,
corporate.greggs.co.uk (https://corporate.greggs.co.uk)
10. Calculation of Alternative Performance Measures
One-year like-for-like (LFL) sales increase - Like-for-like (LFL)
company-managed shop sales performance against comparable period in 2021
26 weeks ended
2 July 2022
£m
Current year LFL sales 581.0
2021 LFL sales 474.6
Increase 106.4
LFL sales increase percentage 22.4%
Three-year like-for-like (LFL) sales increase - Like-for-like (LFL)
company-managed shop sales performance against comparable period in 2019
26 weeks ended
2 July 2022
£m
Current year LFL sales 532.6
2019 LFL sales 474.1
Increase 58.5
LFL sales increase percentage 12.3%
11. 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 UK;
· 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 1 January 2022. On 1 February 2022 Roisin Currie was
appointed as an Executive Director and on 17 May 2022 Lynne Weedall was
appointed as an independent Non-Executive Director. On 17 May 2022 Roger
Whiteside retired from the Board.
For and on behalf of the Board of Directors
Roisin Currie Richard
Hutton
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