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REG - Greggs PLC - Preliminary Results <Origin Href="QuoteRef">GRG.L</Origin> - Part 2

- Part 2: For the preceding part double click  ID:nRSA5421Qa 

year          43,615    21,572    
                                                             ________  ________  
 Cash and cash equivalents at the end of the year            42,915    43,615    
                                                             =======   =======   
                                                                                 
 
 
Cash flow statement - cash generated from operations 
 
                                                    2015      2014      
                                                    £'000     £'000     
                                                                        
 Profit for the financial year                      57,600    37,556    
 Amortisation                                       454       100       
 Depreciation                                       39,687    37,463    
 Impairment                                         66        414       
 Loss on sale of property, plant and equipment      2,952     3,576     
 Release of government grants                       (484)     (473)     
 Share-based payment expenses                       3,662     529       
 Finance expense / (income)                         85        (175)     
 Income tax expense                                 15,428    12,187    
 (Increase) / decrease in inventories               (154)     115       
 Increase in receivables                            (1,555)   (1,079)   
 Increase in payables                               2,875     17,089    
 (Decrease) / increase in provisions                (979)     1,250     
                                                    ________  ________  
 Cash from operating activities                     119,637   108,552   
                                                    =======   =======   
 
 
Greggs plc 
 
Notes 
 
1.   Basis of preparation and accounting policies 
 
The preliminary announcement has been prepared in accordance with the
recognition and measurement principles of International Financial Reporting
Standards as adopted by the EU ("adopted IFRSs"), IFRIC interpretations and
the Companies Act 2006 applicable to companies reporting under IFRS.  It does
not include all the information required for full annual accounts. 
 
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 2 January 2016 or 3 January 2015 but is
derived from these accounts.  Statutory accounts for the 53 weeks ended 3
January 2015 have been delivered to the registrar of companies, and those for
the 52 weeks ended 2 January 2016 will be delivered in due course.  The
auditor has reported on those accounts; the audit reports were (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 preliminary announcement has been prepared using the accounting policies
published in the Group's accounts for the 53 weeks ended 3 January 2015, which
are available on the Company's website www.greggs.co.uk, with the exception of
the adoption of the following relevant standards, amendments and
interpretations: 
 
·     Defined Benefit Plans: Employee Contributions - Amendments to IAS 19 
 
·     Annual Improvements to IFRSs - 2010-2012 Cycle 
 
·     Annual Improvements to IFRSs - 2011-2013 Cycle 
 
The adoption of the above has not had a significant impact on the Group's
profit for the year or equity. 
 
Restatement of comparatives 
 
During the current year the Group has continued to expand its franchise
operations.  Certain of these arrangements include up-front payments from
franchisees receivable in respect of the capital fit-out of the franchise
operators' shops.  Due to these up-front payments becoming material in the
year, the Directors have reconsidered the application of IAS 18 to these
specific transactions. They have now determined that the Group is acting as a
principal in these transactions whilst previously these had been presented as
if they were acting as agents.  The prior year figures have been restated for
this change in presentation.  For the 53 weeks ended 3 January 2015 both
turnover and cost of sales have increased by £2,135,000.  There is no impact
on profit, balance sheet or cash flows for this change in presentation. 
 
In addition, a review of income statement categorisations was carried out
which identified two re-categorisations. Firstly it was determined that it was
more appropriate for all wage costs associated with bakery and distribution
centre despatch activities to be included in distribution and selling costs,
rather than some being included in cost of sales. The net impact of this for
the 53 weeks ended 3 January 2015 has been a decrease in cost of sales and a
corresponding increase in distribution and selling costs of £7,294,000. 
Secondly, early settlement discounts should have been included in
administrative costs rather than cost of sales.  The net impact for the 53
weeks ended 3 January 2015 has been an increase in cost of sales and a
decrease in administrative costs of £80,000.  There is no impact on profit,
balance sheet or cash flows arising from these changes in categorisation. 
 
2.   Segmental analysis 
 
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 retail
activities, the Group generates revenues from franchise and wholesale.
However, these elements of the business are not sufficiently significant to be
"Reportable Segments" in the context of IFRS 8. 
 
Products and services - the Group sells a consistent range of fresh bakery
goods, sandwiches and drinks in its shops.  The Group also provides frozen
bakery products to its wholesale customers. 
 
Major customers - the majority of sales are made to the general public on a
cash basis.  A small proportion of sales are made on credit to certain
organisations, including wholesale customers, but these are immaterial in a
Group context. 
 
Geographical areas - all results arise in the UK. 
 
The Board has carefully considered the requirements of IFRS 8 and concluded
that, as there is 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. 
 
3.    Exceptional items 
 
                                                                 2015      2014      
                                                                 £'000     £'000     
                                                                                     
 Cost of sales                                                                       
 Closure of in-store bakeries - redundancy and disruption costs  -         3,190     
 - loss on disposal of assets                                    -         664       
 - dilapidations                                                 -         2,078     
                                                                 ________  ________  
                                                                 -         5,932     
 Distribution and selling                                                            
 Shop asset impairment reversal                                  -         (149)     
 Onerous leases                                                  -         431       
                                                                 ________  ________  
                                                                 -         282       
 Administration expenses                                                             
 Restructuring of support functions                              -         2,302     
                                                                 ________  ________  
 Total exceptional items                                         -         8,516     
                                                                 =======   =======   
 
 
The judgements made in calculating the provisions which arose as prior year
exceptional items have been revisited. No additional amounts have been charged
or reversed in the current year in respect of these. There remains some
uncertainty in relation to these provisions which will be re-assessed in
future periods, with any movements being classified as exceptional. 
 
Closure of in-store bakeries 
 
The charge arose from the decision to consolidate the Company's in-store
bakeries into its regional bakery network and comprised of redundancy costs,
disruption costs arising on the transfer of production from stores to regional
bakeries, asset write-offs and the costs of making good the shops
(dilapidations) as bakery equipment is removed. 
 
3          Exceptional items (continued) 
 
Shop impairment and onerous leases 
 
The charges arose from the decision to focus on reshaping the Group's existing
estate through closure and resite of shops and withdrawal from the Greggs
moment brand. 
 
Restructuring of support functions 
 
The charge related to the redundancy costs incurred in respect of
restructuring within the support functions. 
 
4.    Taxation 
 
Recognised in the income statement 
 
                                                    Total     Excluding exceptional items  Exceptional items  Total     
                                                    2015      2014                         2014               2014      
                                                    £'000     £'000                        £'000              £'000     
                                                                                                                        
 Current tax expense                                                                                                    
 Current year                                       17,970    15,776                       (1,534)            14,242    
 Adjustment for prior years                         (530)     (229)                        -                  (229)     
                                                    ________  ________                     ________           ________  
                                                    17,440    15,547                       (1,534)            14,013    
 Deferred tax credit                                                                                                    
                                                                                                                        
 Origination and reversal of temporary differences  (1,038)   (1,471)                      (276)              (1,747)   
 Reduction in tax rate                              (254)     -                            -                  -         
 Adjustment for prior years                         (720)     (79)                         -                  (79)      
                                                    ________  ________                     ________           ________  
                                                    (2,012)   (1,550)                      (276)              (1,826)   
                                                    ________  ________                     ________           ________  
 Total income tax expense in income statement       15,428    13,997                       (1,810)            12,187    
                                                    =======   =======                      =======            =======   
 
 
5.    Earnings per share 
 
Basic earnings per share 
 
Basic earnings per share for the 52 weeks ended 2 January 2016 is calculated
by dividing profit attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the 52 weeks ended 2
January 2016 as calculated below. 
 
Diluted earnings per share 
 
Diluted earnings per share for the 52 weeks ended 2 January 2016 is calculated
by dividing profit attributable to ordinary shareholders by the weighted
average number of ordinary shares, adjusted for the effects of all dilutive
potential ordinary shares (which comprise share options granted to employees)
outstanding during the 52 weeks ended 2 January 2016 as calculated below. 
 
5.         Earnings per share (continued) 
 
Profit attributable to ordinary shareholders 
 
                                                                             2015     2014           2014          2014    
                                                                             Total    Excluding      Exceptional   Total   
                                                                                      exceptional    items                 
                                                                                      items                                
                                                                                                                           
                                                                             £'000    £'000          £'000         £'000   
 Profit for the financial year attributable to equity holders of the Parent  57,600   44,262         (6,706)       37,556  
                                                                             =======  =======        =======       ======  
 Basic earnings per share                                                    57.3p    44.0p          (6.6p)        37.4p   
 Diluted earnings per share                                                  55.8p    43.4p          (6.6p)        36.8p   
 
 
Weighted average number of ordinary shares 
 
                                                                       2015         2014         
                                                                       Number       Number       
                                                                                                 
 Issued ordinary shares at start of year                               101,155,901  101,155,901  
 Effect of own shares held                                             (551,314)    (638,815)    
                                                                       __________   __________   
 Weighted average number of ordinary shares during the year            100,604,587  100,517,086  
 Effect of share options on issue                                      2,616,364    1,517,722    
                                                                       __________   __________   
 Weighted average number of ordinary shares (diluted) during the year  103,220,951  102,034,808  
                                                                       =========    =========    
 
 
6.    Dividends 
 
The following tables analyse dividends when paid and the year to which they
relate: 
 
                            2015       2014       
                            Per share  Per share  
                            pence      pence      
                                                  
 2013 final dividend        -          13.5p      
 2014 interim dividend      -          6.0p       
 2014 final dividend        16.0p      -          
 2015 interim dividend      7.4p       -          
 2015 special dividend      20.0p                 
                            ________   ________   
                            43.4p      19.5p      
                            =======    =======    
 
 
6.         Dividends(continued) 
 
The proposed final dividend in respect of 2015 amounts to 21.2 pence per share
(£21,264,000).  This proposed dividend is subject to approval at the Annual
General Meeting and has not been included as a liability in these accounts. 
 
                            2015      2014      
                            £'000     £'000     
                                                
 2013 final dividend        -         13,530    
 2014 interim dividend      -         6,040     
 2014 final dividend        16,090    -         
 2015 interim dividend      7,463     -         
 2015 special dividend      20,161              
                            ________  ________  
                            43,714    19,570    
                            =======   =======   
 
 
7.    Related parties 
 
The Group has a related party relationship with its subsidiaries, associates
and its Directors and executive officers. 
 
There have been no related party transactions in the year which have
materially affected the financial position or performance of the Group. There
have been no related party transactions in the year which have materially
affected the financial position or performance of the Group. 
 
8.    Events after the reporting period 
 
As noted in the Chief Executive's report on pages 9-10 the Group has completed
a detailed review of its manufacturing and distribution operations.  As a
result of this, subsequent to the year end, the Board has agreed a proposal to
invest substantially to reshape its supply chain over the next five years,
which includes the proposed closure of three bakery sites. Alongside an
increased level of capital expenditure the proposals would lead to one-off
costs of around £7 million in 2016, of which £6 million would be a cash cost. 
No costs arising from this plan has been recognised in these accounts in
accordance with IAS 10. 
 
9.    Principal risks and uncertainties 
 
The Board has carried out a robust assessment of the principal risks facing
the company, including those that would threaten its business model, future
performance, solvency and liquidity.  These risks are described below,
together with a brief description of mitigating activity. 
 
Greggs is exposed to a wider range of risks than those listed.  However, these
are the risks which are considered to be the most important to the business'
future development, performance or position.  The risks identified are those
to which the Board considers there is a disproportionate exposure, relative to
the food-on-the-go sector.  The impact of these risks occurring has been
considered in developing the scenarios tested as part of the financial
viability statement. 
 
The risks are not set out in any particular order. 
 
9          Principal risks and uncertainties (continued) 
 
 Area of principal risk or uncertainty                                                                                           Mitigating actions and controls                                                                                                                                                                                                                                                                                              Risk rating  
 Business changeGreggs is implementing a strategic plan to transform the business from a decentralised traditional bakery to a   The project delivery is overseen by the Operating Board, under the guidance of a project sponsor, providing robust governance.   Regular updates are provided to the Board, to monitor progress against clearly defined timelines and financial forecasts.                                                                   No change    
 centralised modern food-on-the-go brand. This involves a major programme of business change involving restructuring, new                                                                                                                                                                                                                                                                                                                                                  
 systems, increased capital investment and a major overhaul of every aspect of the business.Progress may not be in line with                                                                                                                                                                                                                                                                                                                                               
 plans, disruption could occur and financial returns may fall short of expectation.                                                                                                                                                                                                                                                                                                                                                                                        
 Product quality and safetyGreggs is unusual in the food-on-the-go sector in that it is vertically integrated, owning its own    Procedures are in place throughout our operations to ensure that food safety is maintained.  These procedures are supported by robust audit processes, both internally, and by regulatory bodies.                                                                                                                            No change    
 manufacturing and supply chain operations. In addition, we freshly prepare food on the premises. This exposes us to greater risk                                                                                                                                                                                                                                                                                                                                           
 in ensuring good food safety than many of our competitors.                                                                                                                                                                                                                                                                                                                                                                                                                
 Food scareGreggs may suffer from a loss of customer confidence due to a major food scare beyond its control.  Dependent upon the The majority of products for sale in our shops have been manufactured by our staff in our bakeries.  Checks are carried out to confirm the integrity of our products and ingredients as part of routine processes.                                                                                                           No change    
 nature of this, it may have a disproportionate impact on Greggs.                                                                                                                                                                                                                                                                                                                                                                                                          
 Loss of productionSome of our products are produced in one location and distributed nationwide.  Any disruption to supply would Contingency plans are in place for our supply sites, and these are regularly tested.  Our property insurers carry out annual site inspections, which help to protect our facilities from loss.  We have alternative supply sources for key products, and these are periodically tested.                                      No change    
 have a significant impact on our customers.                                                                                                                                                                                                                                                                                                                                                                                                                               
 Market pressuresChanging shopping habits driven by the convenience of new customer channels and locations may have a greater    Greggs operates a leasehold shop estate with typically 5 year break provisions, allowing us to change locations in line with customer traffic trends. In addition, new shops are predominantly opened in non- shopping locations to offer our services to customers who are away from home for reasons other than shopping.  Improving    
 impact on Greggs due to our historical bias to shops located in high streets.                                                                                                                                                                                                                                                                                                                                                                                             
 Consumer trendsIncreasing customer concern with health and nutrition may affect demand for some of our traditional bakery       We have a proactive programme to improve the nutritional qualities of our traditional products where possible without impacting taste. In addition we are extending range choice to include healthier options branded `Balanced Choice` which is growing rapidly.                                                            No change    
 product ranges.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
 
 
This information is provided by RNS
The company news service from the London Stock Exchange

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