REG - Greggs PLC - Interim Results
01/08/2023 07:00
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RNS Number : 8038H Greggs PLC 01 August 2023
1 August 2023
GREGGS PLC
("Greggs" or the "Company")
INTERIM RESULTS FOR THE 26 WEEKS ENDED 1 JULY 2023
Strategic growth plans delivering strong performance
First half financial highlights
H1 2023 H1 2022
Total sales £844.0m £694.5m
Underlying pre-tax profit excluding exceptional items * £63.7m £55.8m
Pre-tax profit £80.0m £55.8m
Underlying diluted earnings per share excluding exceptional items* 46.8p 44.8p
Diluted earnings per share 59.0p 44.8p
Ordinary interim dividend per share 16.0p 15.0p
* Excludes impact of £16.3 million exceptional net income related to
settlement of a Covid business interruption insurance claim
· Total first-half sales up 21.5%, with company-managed shop LFL** sales
up 16.0%
· Underlying profit before tax excluding exceptional items up 14.2% to
£63.7 million.
· Reported pre-tax profit includes an additional £16.3 million of
exceptional net income recognised in respect of the settlement of a Covid
business interruption insurance claim
· Strong cash position of £139 million supporting plans for future
investment in growth
· Underlying earnings growth of 4.5% reflects increase in Corporation Tax
rate
· Interim dividend of 16 pence per share declared, an increase of 6.7%
** Like-for-like (LFL) company-managed shop sales performance against
comparable period in 2022
Strategic progress
· Growing and developing the Greggs estate: 94 new shops opened in the first
half, 44 closures; 2,378 shops trading as at 1 July 2023. Strong pipeline of
good opportunities and continue to anticipate circa 150 net new shop openings
in 2023.
· Expanding our evening trade: continued extension of early evening trading
progressing in line with plan. Evening remains the fastest growing daypart
and, in the first half, represented 8.3% of company-managed shop sales (H1
2022: 6.5%).
· Developing our digital channels: good progress in improving operational
service levels for delivery customers. Trial with second delivery aggregator
progressing well.
· Broadening customer appeal and driving loyalty: continued growth in brand
health and market share. Further increase in Greggs App participation: 10.6%
of company-managed shop transactions scanned in first half (H1 2022: 5.2%).
· Supply chain investment: commenced redevelopment of Birmingham
distribution centre, extension of Amesbury distribution centre due to start in
the second half. Fourth savoury production line at Balliol Park in Newcastle
upon Tyne due to be commissioned in the fourth quarter.
Outlook
The strong trading momentum of the first half has continued into the second
half of the year, with good sales reflecting the exceptional value that Greggs
offers to customers who need food and drink on-the-go. The rate of cost
inflation has started to ease and we expect this trend to continue through the
second half.
Whilst uncertainties in the economic outlook remain, we continue to trade in
line with our plan and are making good progress against our strategic
objective to grow the frequency of customer visits through new channels. As
such, the Board's expectations for the full year outcome are unchanged.
"Greggs strong performance continued in the first half of 2023 as we deliver
on our strategic growth plan. With consumers remaining under pressure, we
continue to offer exceptional value, which is reflected in our performance and
growing market share.
"In the period we continued to open further new shops, extended trading hours
into the evening and saw increased participation in the Greggs App.
"Our ambitious plans for growth are on track and our amazing teams are
committed to realising the opportunity to become a significantly larger,
multi-channel business."
- Roisin Currie, Chief Executive
ENQUIRIES:
Greggs plc (http://www.greggs.co.uk) Hudson Sandler (http://www.hudsonsandler.com)
Roisin Currie, Chief Executive Wendy Baker / Nick Moore /
Richard Hutton, Chief Financial Officer Sophie Miles / Emily Brooker
David Watson, Head of IR Email: greggs@hudsonsandler.com (mailto:greggs@hudsonsandler.com)
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 2023 with like-for-like sales in
company-managed shops growing by 16.0% when compared with the equivalent
period of 2022. Total sales for the 26 weeks to 1 July 2023 were £844.0
million, an increase of 21.5% (H1 2022: £694.5 million).
We continue to make good progress with our strategic growth plan, which is
centred around 1) growing and developing our estate; 2) expanding our evening
trade; 3) developing our digital services; 4) broadening customer appeal and
driving loyalty. These objectives are underpinned by investment in our supply
chain and systems which will enable us to drive progress and growth across our
business.
Operational review
The first half of 2023 saw Greggs deliver a strong sales performance. At a
time when consumers are under pressure, our long-standing focus on providing
outstanding value on-the-go food and drink is as relevant as ever. The LFL
performance for the first two months of the year was flattered by comparison
with the Omicron-affected period in 2022 and the actions we have taken to make
Greggs available in more channels and at more times of day continue to result
in additional customer visits.
Our new Flatbread Range, including Mexican Chicken and Vegan Tandoori
Chicken-Free has performed well and, alongside the new Sweet Chilli Chicken
Noodle Salad, extends our range of healthier options for customers.
Plant-based foods are contributing more significantly to our range over time
and the introduction of new options such as the Vegan Mexican Chicken-Free
Bake are testament to this trend. Pizza continues to be in high demand,
particularly in the evening and our Late Trade Pizza Deal is proving to be
very popular.
In the first half of 2023 we opened 94 new shops (including 33 franchised
units) and closed 44 shops, giving a total of 2,378 shops (of which 466 are
franchised) trading as at 1 July 2023. We have increased the pace of both
openings and closures as we expand the reach of our shops into new locations
and relocate existing shops to larger sites in better locations to facilitate
further growth. The phasing of shop closures was unusual in its weighting
towards the first half of the year. However, we have a strong new shop
pipeline and we remain confident that we will open around 150 net new shops in
the year as a whole.
Greggs has a growing presence in travel hubs and in the first half we opened
shops at Glasgow and Cardiff Airports as well as Shepherds Bush and Canary
Wharf Underground stations. Last week we opened our latest airport unit at
London Gatwick Airport's South Terminal.
In the first half of 2023 we refurbished 71 shops, modernising them to our
latest look and enhancing their capability for food preparation and digital
collection. We anticipate completing around 140 shop refurbishments, 125
company-managed and 15 franchised, in 2023 (2022: 86 refurbishments).
Strategic development
Growing and developing the Greggs estate
Our assessment of catchments across the UK continues to support our ambition
to have significantly more than 3,000 shops in the Greggs estate. Our
confidence in this opportunity is underpinned by recent success in catchments
where Greggs is underrepresented such as retail parks, railway stations,
airports, roadsides and supermarkets. We now have shops trading in Tesco,
Asda and Sainsburys supermarkets, with plans for further development.
Greggs is a trusted brand offering a strong covenant to landlords and
franchise partners and this continues to support the strength of our shop
pipeline. We are on track to deliver 150 net new shop openings in 2023 with
around a third of these expected to be with franchise partners, in line with
the trend in recent years. We now work with 16 franchise partners who
recognise the value that the Greggs brand brings to the catchments in which
they operate.
Evening trade
We have continued to grow sales in the evening daypart. This remains a
significant opportunity for Greggs as it is the largest segment of the
food-to-go market by value, yet the one where Greggs currently has the lowest
level of penetration. In the first half of 2023, post-4pm sales grew more
strongly than any other daypart, and represented 8.3% of company-managed shop
sales, up from 6.5% in the first half of 2022. The extension of trading
hours supported evening growth and we also saw increased levels of trade
post-4pm in existing opening hours as customers recognise the convenience and
value of our offer later in the day.
Analysis of customer missions in the evening food-to-go market suggests that
'Grab & Go' and 'Delivery' occasions represented more than three quarters
of the market in 2022 (source: Circana). Our shop estate and existing menu
are well positioned to serve Grab & Go customers with key locations being
transport hubs, city centres, shopping centres and retail parks. In
addition, suburban shops offer a significant opportunity to grow our share of
the evening delivery market. Over time our new shops, relocation and
refurbishment programmes are all adding further seating capacity for customers
who choose to dine in.
Digital channels
Our multi-channel development strategy has progressed well in the period, with
a new and improved Click + Collect website ready to launch, improving the
customer experience through the order process. Improved operational service
levels, combined with adaptation of shop pick-up points, are making for a
better collection experience for our customers. With the expansion of
personalisation options and the convenience that this channel offers we expect
to continue to see growing participation from our customers.
Delivery sales remain an important opportunity and we made good progress in
the first half improving operational service levels through our existing
partnership with Just Eat. Our 30-shop trial with a second delivery
aggregator is progressing well.
Broadening customer appeal and driving loyalty
Greggs brand health and market share metrics continue to improve further from
the record levels reported in 2022. In particular, our reputation for value
remains sector-leading, reflecting our focus on delivering exceptional prices
relative to the market. The evolution of our range to include more
plant-based and hot food and drink options is important in broadening our
appeal to more consumers at more times of day.
We have continued to invest in enhancing our customer relationship management
capabilities in the first half of the year, focusing on customer journeys such
as onboarding, retention and reactivation. Our growing digital data and
analytics capability is enabling us to understand better the needs of our
customers and provide them with more tailored, relevant communication.
Growth in use of the Greggs App has continued, with 10.6% of company-managed
customer transactions scanned in the first half of 2023 (H1 2022: 5.2%).
Analysis of customer behaviour continues to indicate that the additional
rewards offered to App users are more than compensated by increased frequency
of purchase.
Investing in our supply chain and technology for a bigger business
To facilitate our strategic growth plan, we are investing in our supply chain
and in technology. We are on track to add additional manufacturing capacity
for our iconic savoury rolls and bakes at Balliol Park in Newcastle upon Tyne,
with a fourth production line due to be commissioned in the fourth quarter.
We have commenced the redevelopment of our Birmingham distribution centre, and
work to extend our distribution centre in Amesbury is due to start in the
second half of 2023. This will add additional logistics capacity to our
network by the end of 2024. Good progress is being made on the
identification of sites for the development of a national distribution centre
and further manufacturing and frozen storage facilities.
Our investment in technology continues to drive improved processes and provide
greater insight from our data. We have also rolled out new EPOS tills across
our shop estate, which will enable improved management of pricing and
promotions.
The Greggs Pledge
Our separate sustainability report details the progress made in 2022 on the
objectives of the Greggs Pledge, our commitment to continue to improve our ESG
credentials in ten key areas by the end of 2025. In the first half of 2023
we continued to make good progress across the broad range of commitments,
including opening a further three "Outlet" shops to provide affordable food in
areas of social deprivation, with a share of profits also given to local
community organisations. As we continue to make good progress against our
Pledge objectives for 2025 we are also ensuring that we have in place
ambitious targets for the period beyond 2025. In doing so we are assessing
the next stage of our Pledge journey for the period 2025 to 2030 and look
forward to providing further details on this in due course.
Financial performance
Total sales for the 26 weeks to 1 July 2023 were £844.0 million (H1 2022:
£694.5 million). Like-for-like sales in company-managed shops grew by
16.0%.
Underlying pre-tax profit (excluding a £16.3 million exceptional gain,
discussed below) was £63.7 million in the first half of 2023 (H1 2022: £55.8
million). The year-on-year progression was supported by a strong start to
the year in January and February where the sales comparatives in 2022
reflected the impact of Omicron. Sales and profit progression normalised
through the remainder of the first half in line with our plan. The level of
interest income also grew by £2.5 million as a result of improved deposit
rates on the cash we have earmarked for our supply chain capital investment.
Cost inflation, particularly in food and packaging commodities, continued to
be a feature of the first half of 2023 but is expected to ease somewhat as we
annualise on the significant mid-year increases seen in 2022. Overall
like-for-like cost inflation was 11% in the first half of 2023 and we expect
this to reduce to around 7% in the second half, averaging around 9% for the
year as a whole, in line with our previously communicated expectations.
Looking forward we have around four months' forward purchasing cover on
requirements for food, packaging and energy input costs. The underlying net
profit margin before taxation in the first half of 2023 was 7.5% (H1 2022:
8.0%).
Our investments to grow the frequency of customer visits through new channels
and dayparts improve the leverage of our existing shop base, delivering strong
returns on capital. Delivering a healthy return on capital employed (ROCE)
is embedded as a key element of our performance management and we aim to
continue to deliver strong overall returns as we grow the business further.
Capacity utilisation in our supply chain is currently at a historically high
level and this will normalise as we commission new facilities in the coming
years. Whilst this is likely to have a modest impact on ROCE in the short
term, this investment supports our long-term growth ambitions, with our plans
focused on a highly-efficient supply chain model that supports the business's
long-term record of delivering strong returns on capital.
The net financing expense of £1.7 million in the period (H1 2022: £3.2
million) comprised £4.2 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 offset by £2.9 million of interest received on
bank deposits and the Company's defined benefit pension scheme surplus.
Statutory pre-tax profit was £80.0 million (H1 2022: £55.8 million),
reflecting an exceptional net gain of £16.3 million on the settlement of our
Covid business interruption insurance claim. The net gain is recognised
after deduction of fees payable to advisers and the £2.5 million advance
already recognised as income in 2020.
The effective rate of Corporation Tax on underlying profits for the period was
24.9% (H1 2022: 17.7%) with the year-on-year change reflecting the increase in
the headline rate of UK corporation tax from 19% to 25% from 1 April of this
year and the discontinuance of 'super-deduction' enhanced capital allowances
from the same date. The introduction of temporary 'full expensing' of
capital expenditure for the period from April 2023 to April 2026 will add
c1.0% to the previously-expected effective rate for this year only as deferred
tax is provided for at 25%. Including the exceptional net gain the effective
rate of Corporation Tax on profits for the period was 24.6%.
Underlying diluted earnings per share (excluding the exceptional gain) for the
period were 46.8 pence (H1 2022: 44.8 pence). Including the exceptional gain
diluted earnings per share for the period were 59.0 pence (H1 2022: 44.8
pence).
Capital expenditure and financial position
Capital expenditure during the first half was £85.6 million (H1 2022: £41.9
million) as we increased investment in line with our estate growth and
development plans, added additional savoury manufacturing capacity at our
Balliol Park site and commenced the redevelopment of our Birmingham
distribution centre to increase logistics capacity. In the balance of the
year we will continue the development of our retail estate and savoury
manufacturing capacity and commence work to extend the capacity of our
Amesbury distribution centre. Our full year guidance of circa £200 million
capital expenditure is unchanged.
We continue to carry a higher-than-normal cash position in order to self-fund
the multi-year investment in our significant growth programme and ended the
period with a cash balance of £138.6 million (2 July 2022: £145.7
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 of
£70 million). The half year cash balance does not include the exceptional
insurance settlement, which was received after the balance sheet date.
Dividend
The Board has declared an interim dividend of 16.0 pence per share (2022: 15.0
pence), consistent with the first-half increase in earnings per share. 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 6 October 2023 to those shareholders on
the register at the close of business on 8 September 2023.
Outlook
The strong trading momentum of the first half has continued into the second
half of the year, with good sales reflecting the exceptional value that Greggs
offers to customers who need food and drink on-the-go. The rate of cost
inflation has started to ease and we expect this trend to continue through the
second half.
Whilst uncertainties in the economic outlook remain, we continue to trade in
line with our plan and are making good progress against our strategic
objective to grow the frequency of customer visits through new channels. As
such, the Board's expectations for the full year outcome are unchanged.
Roisin Currie
Chief Executive
1 August 2023
Greggs plc
Consolidated income statement
For the 26 weeks ended 1 July 2023
26 weeks ended 26 weeks ended 26 weeks ended 26 weeks ended 52 weeks ended
1 July 2023 1 July 2023 1 July 2023 2 July 2022 31 December 2022
Excluding exceptional items Exceptional items
(see Note 4) Total Total Total
£m £m £m £m £m
Revenue 844.0 - 844.0 694.5 1,512.8
Cost of sales (329.7) - (329.7) (260.7) (574.5)
Gross profit 514.3 - 514.3 433.8 938.3
Distribution and selling costs (408.0) - (408.0) (339.3) (713.2)
Administrative expenses (40.9) - (40.9) (35.5) (70.7)
Other income - 16.3 16.3 - -
Operating profit 65.4 16.3 81.7 59.0 154.4
Finance expense (net) (1.7) - (1.7) (3.2) (6.1)
Profit before tax 63.7 16.3 80.0 55.8 148.3
Income tax (15.9) (3.8) (19.7) (9.9) (28.0)
Profit for the period attributable to equity holders of the parent
47.8 12.5 60.3 45.9 120.3
Basic earnings per share 47.2p 12.3p 59.5p 45.2p 118.5p
Diluted earnings per share 46.8p 12.2p 59.0p 44.8p 117.5p
Greggs plc
Consolidated statement of comprehensive income
For the 26 weeks ended 1 July 2023
26 weeks ended 26 weeks ended 52 weeks ended
1 July 2023 2 July 2022 31 December 2022
£m £m £m
Profit for the period 60.3 45.9 120.3
Other comprehensive income
Items that will not be recycled to profit and loss:
Remeasurements on defined benefit pension plans 0.2 2.2 0.7
Tax on remeasurements on defined benefit pension plans 0.1 0.0 1.8
Other comprehensive income for the period, net of income tax 0.3 2.2 2.5
Total comprehensive income for the period 60.6 48.1 122.8
Greggs plc
Consolidated balance sheet
as at 1 July 2023
1 July 2023 2 July 2022 31 December 2022
£m £m £m
ASSETS
Non-current assets
Intangible assets 13.6 14.0 13.5
Property, plant and equipment 439.4 355.4 390.0
Right-of-use assets 284.3 271.1 281.6
Defined benefit pension asset 6.7 2.3 6.3
744.0 642.8 691.4
Current assets
Inventories 44.6 33.1 40.6
Trade and other receivables 64.4 37.3 50.2
Current tax 8.1 - 0.6
Cash and cash equivalents 138.6 145.7 191.6
255.7 216.1 283.0
Total assets 999.7 858.9 974.4
LIABILITIES
Current liabilities
Trade and other payables (180.9) (149.1) (191.7)
Current tax liability - (5.8) -
Lease liabilities (51.9) (49.7) (48.8)
Provisions (3.0) (3.9) (3.6)
(235.8) (208.5) (244.1)
Non-current liabilities
Other payables (2.6) (3.0) (2.8)
Lease liabilities (252.5) (241.2) (252.5)
Deferred tax liability (44.4) (12.5) (26.3)
Long-term provisions (3.0) (2.1) (2.7)
(302.5) (258.8) (284.3)
Total liabilities (538.3) (467.3) (528.4)
Net assets 461.4 391.6 446.0
EQUITY
Capital and reserves
Issued capital 2.0 2.0 2.0
Share premium account 25.1 22.3 23.1
Capital redemption reserve 0.4 0.4 0.4
Retained earnings 433.9 366.9 420.5
Total equity attributable to equity holders of the Parent 461.4 391.6 446.0
Greggs plc
Consolidated statement of changes in equity
For the 26 weeks ended 1 July 2023
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
52 weeks ended 31 December 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 financial year - - - 120.3 120.3
Other comprehensive income - - - 2.5 2.5
Total comprehensive income for the year - - - 122.8 122.8
Transactions with owners, recorded directly in equity
Issue of ordinary shares - 3.1 - - 3.1
Purchase of own shares - - - (11.0) (11.0)
Share-based payment transactions - - - 3.6 3.6
Dividends to equity holders - - - (98.5) (98.5)
Tax items taken directly to reserves - - - (3.2) (3.2)
Total transactions with owners - 3.1 - (109.1) (106.0)
Balance at 31 December 2022 2.0 23.1 0.4 420.5 446.0
26 weeks ended 1 July 2023
Issued Share Capital Retained Total
capital premium redemption earnings
reserve
£m £m £m £m £m
Balance at 1 January 2023 2.0 23.1 0.4 420.5 446.0
Total comprehensive income for the period
Profit for the period - - - 60.3 60.3
Other comprehensive income - - - 0.3 0.3
Total comprehensive income for the period - - - 60.6 60.6
Transactions with owners, recorded directly in equity
Issue of ordinary shares - 2.0 - - 2.0
Sale of own shares - - - 0.8 0.8
Purchase of own shares - - - (5.0) (5.0)
Share-based payment transactions - - - 2.3 2.3
Dividends to equity holders (44.6) (44.6)
Tax items taken directly to reserves - - - (0.7) (0.7)
Total transactions with owners - 2.0 - (47.2) (45.2)
Balance at 1 July 2023 2.0 25.1 0.4 433.9 461.4
Greggs plc
Consolidated statement of cash flows
For the 26 weeks ended 1 July 2023
26 weeks ended 26 weeks ended 52 weeks ended
1 July 2023 2 July 2022 31 December 2022
£m £m £m
Cash flows from operating activities
Cash generated from operations (see page 13) 114.7 100.1 272.3
Income tax paid (9.8) (5.0) (13.3)
Interest paid on lease liabilities (4.2) (3.2) (6.8)
Interest paid on loans and borrowings (0.4) (0.4) (0.7)
Net cash inflow from operating activities 100.3 91.5 251.5
Cash flows from investing activities
Acquisition of property, plant and equipment (81.0) (34.6) (100.0)
Acquisition of intangible assets (2.2) (1.5) (3.3)
Proceeds from sale of property, plant and equipment 0.5 1.9 0.9
Proceeds from sale of assets held for sale - - 1.6
Interest received 2.9 0.3 1.4
Net cash outflow from investing activities (79.8) (33.9) (99.4)
Cash flows from financing activities
Proceeds from issue of share capital 2.0 2.2 3.1
Sale of own shares 0.8 - -
Purchase of own shares (5.0) (3.0) (11.0)
Dividends paid (44.6) (83.3) (98.5)
Repayment of principal of lease liabilities (26.7) (26.4) (52.7)
Net cash outflow from financing activities (73.5) (110.5) (159.1)
Net decrease in cash and cash equivalents (53.0) (52.9) (7.0)
Cash and cash equivalents at the start of the period 191.6 198.6 198.6
Cash and cash equivalents at the end of the period 138.6 145.7 191.6
Greggs plc
Consolidated statement of cash flows (continued)
For the 26 weeks ended 1 July 2023
Cash flow statement - cash generated from operations
26 weeks ended 26 weeks ended 52 weeks ended
1 July 2023 2 July 2022 31 December 2022
£m £m £m
Profit for the period 60.3 45.9 120.3
Amortisation 2.1 2.4 4.7
Depreciation - property, plant and equipment 31.8 28.2 58.0
Depreciation - right-of-use assets 26.7 25.9 52.8
Impairment charge/(reversal) - property, plant and equipment 0.7 (0.2) 1.2
Impairment charge - right-of-use assets 0.3 0.6 0.0
Loss on sale of property, plant and equipment 1.0 0.5 1.0
Release of government grants (0.2) (0.2) (0.4)
Share-based payment expenses 2.3 2.1 3.6
Finance expense 1.7 3.2 6.1
Income tax expense 19.7 9.9 28.0
Increase in inventories (4.0) (5.3) (12.7)
(Increase)/decrease in receivables (14.2) 0.3 (12.4)
(Decrease)/increase in payables (13.2) (9.7) 30.8
Decrease in provisions (0.3) (1.0) (0.7)
Decrease in pension liability - (2.5) (8.0)
Cash from operating activities 114.7 100.1 272.3
Notes
1. Basis of preparation
The condensed accounts have been prepared for the 26 weeks ended 1 July
2023. Comparative figures are presented for the 26 weeks ended 2 July 2022.
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 31 December 2022.
These condensed accounts are unaudited and were approved by the Board of
Directors on 1 August 2023.
The comparative figures for the 52 weeks ended 31 December 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 £208.6 million of available
liquidity including £138.6 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.
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 31 December 2022
the following additional areas have been identified or updated for the 26
weeks ended 1 July 2023.
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 Group has traded profitably throughout 2022 and 2023 to date. As such
there is not considered to be a global indicator of impairment across the
Group's asset base. Where indicators of impairment exist for specific cash
generating units (CGUs), with each individual shop considered its own CGU,
then an impairment review has been performed to calculate the recoverable
value.
For those shops with indications of impairment (identified as mature shops
with low cash generation relative to the carrying value of the associated
assets), the value-in-use has been calculated using the following assumptions:
· Like-for-like transaction volumes for those shops have been
assumed to grow at a rate of 2.0% for the period of the impairment review;
· Where shops are currently used to fulfil orders for delivery, 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 1
July 2023 was 10.4% (31 December 2022: 9.6%); and
· Consideration of the appropriate period over which to forecast
cash flows, including reference to the lease term. Where considered
appropriate cash flows 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 £1.0m has been
made in respect of 84 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 31 December 2022 other than as disclosed below:
· Amendments to IFRS 1 and IAS 12: Deferred Tax related to Assets
and Liabilities arising from a Single Transaction.
Its 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 2022 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 at
each of our Risk Committee meetings so far during 2023. All new and emerging
areas of risk which have been identified fall within the scope of our existing
principal risks and uncertainties.
We continue to consider climate risk as part of our overarching risk
discussions, and factor climate into existing risks rather than describing it
as a separate principal risk in its own right. This ensures that climate risk
is embedded within our core risk activity, and is considered as an inherent
part of our processes, rather than as a standalone issue.
The assessment above should be read in conjunction with the statement of
principal risks described on pages 49-52 in the 2022 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.
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 2023 and 2022 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 1 July 2023 26 weeks ended 1 July 2023 26 weeks ended 1 July 2023 26 weeks ended 2 July 2022 26 weeks ended 2 July 2022 26 weeks ended 2 July 2022 52 weeks ended 31 December 2022 52 weeks ended 31 December 2022 52 weeks ended 31 December 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 755.8 88.2 844.0 622.6 71.9 694.5 1,352.3 160.5 1,512.8
Trading profit* 103.0 16.7 119.7 92.2 12.6 104.8 224.6 31.3 255.9
Overheads including profit share (101.5)
(54.3) (45.8)
Operating profit 65.4 59.0 154.4
Finance expense (1.7) (3.2) (6.1)
Profit before tax 63.7 55.8 148.3
(excluding exceptional items)
Exceptional items (see Note 4) 16.3 - -
Profit before tax 80.0 55.8 148.3
* 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. Exceptional items
The exceptional item relates to a net gain of £16.3 million on the settlement
of our Covid business interruption insurance claim. The net gain is
recognised after deduction of fees payable to advisers and the £2.5 million
advance already recognised as income in 2020.
5. Defined benefit pension scheme
The valuation of the defined benefit pension scheme for the purposes of IAS 19
(Revised) as at 31 December 2022 has been updated as at 1 July 2023 and the
movements have been reflected in these condensed accounts.
6. Taxation
The taxation charge for the 26 weeks ended 1 July 2023 and 2 July 2022 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'.
7. Earnings per share
26 weeks ended 1 July 2023 26 weeks ended 1 July 2023 26 weeks ended 1 July 2023 26 weeks ended 2 July 2022 52 weeks ended 31 December 2022
Excluding exceptional items
Exceptional items
(see Note 4) Total Total Total
£m £m £m £m £m
Profit for the period attributable to equity holders of the parent
47.8 12.5 60.3 45.9 120.3
Basic earnings per share 47.2p 12.3p 59.5p 45.2p 118.5p
Diluted earnings per share 46.8p 12.2p 59.0p 44.8p 117.5p
Weighted average number of ordinary shares
26 weeks ended 1 July 2023 26 weeks ended 2 July 2022 52 weeks ended 31 December 2022
Number Number Number
Issued ordinary shares at start of period 102,112,581 101,897,021 101,897,021
Effect of shares issued 29,793 28,515 100,009
Effect of own shares held (849,669) (369,828) (511,370)
Weighted average number of ordinary shares during the period 101,292,705 101,555,708 101,485,660
Effect of share options in issue 1,014,417 902,676 849,222
Weighted average number of ordinary shares (diluted) during the period 102,307,122 102,458,384 102,334,882
Issued ordinary shares at end of period 102,254,826 102,046,258 102,112,581
8. 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
1 July 2023 2 July 2022 31 December 2022
Pence per share Pence per share Pence per share
2021 special dividend - 40.0p 40.0p
2021 final dividend - 42.0p 42.0p
2022 interim dividend - - 15.0p
2022 final dividend 44.0p - -
44.0p 82.0p 97.0p
26 weeks ended 26 weeks ended 52 weeks ended
1 July 2023 2 July 2022 31 December 2022
£m £m £m
Total dividend payable
2021 special dividend - 40.6 40.6
2021 final dividend - 42.7 42.7
2022 interim dividend - - 15.2
2022 final dividend 44.6 - -
Total dividend paid in period 44.6 83.3 98.5
26 weeks ended 26 weeks ended 52 weeks ended
1 July 2023 2 July 2022 31 December 2022
£m £m £m
Dividend proposed at period end and not included as a liability in the
accounts
2022 interim dividend (15.0p per share) - 15.3 -
2022 final dividend (44.0p per share) - - 44.9
2023 interim dividend (16.0p per share) 16.1 - -
16.1 15.3 44.9
9. 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 31 December 2022.
10. Half year report
The condensed accounts were approved by the Board of Directors on 1 August
2023. They will be available on the Company's website,
corporate.greggs.co.uk (https://corporate.greggs.co.uk)
11. 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 2022
26 weeks ended
1 July 2023
£m
Current year LFL sales 692.4
2022 LFL sales 596.7
Increase 95.7
LFL sales increase percentage 16.0%
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 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 31 December 2022. On 7 March 2023 Nigel Mills was appointed
as a Non-Executive Director. On 17 May 2023 Sandra Turner and Helena
Ganczakowski retired from the Board.
For and on behalf of the Board of Directors
Roisin
Currie
Richard Hutton
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