REG - Greggs PLC - Preliminary Results <Origin Href="QuoteRef">GRG.L</Origin> - Part 2
28/02/2017 07:06
- Part 2: For the preceding part double click ID:nRSb9896Xa
4,063 4,063
Purchase of own shares - - - (12,398) (12,398)
Share-based payment transactions - - - 1,994 1,994
Dividends to equity holders - - - (30,936) (30,936)
Tax items taken directly to reserves - - - (5,128) (5,128)
________ ________ ________ ________ ________
Total transactions with owners - - - (42,405) (42,405)
________ ________ ________ ________ ________
Balance at 31 December 2016 2,023 13,533 416 248,688 264,660
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Greggs plc
Consolidated statement of cashflows
for the 52 weeks ended 31 December 2016 (2015: 52 weeks ended 2 January 2016)
2016 2015
£'000 £'000
Operating activities
Cash generated from operations (see below) 133,773 119,637
Income tax paid (16,157) (15,916)
________ ________
Net cash inflow from operating activities 117,616 103,721
________ ________
Investing activities
Acquisition of property, plant and equipment (74,016) (65,785)
Acquisition of intangible assets (6,106) (5,981)
Proceeds from sale of property, plant and equipment 4,698 8,086
Interest received 124 222
Redemption of other investments - 10,000
________ ________
Net cash outflow from investing activities (75,300) (53,458)
________ ________
Financing activities
Sale of own shares 4,063 3,876
Purchase of own shares (12,398) (11,125)
Dividends paid (30,936) (43,714)
________ ________
Net cash outflow from financing activities (39,271) (50,963)
________ ________
Net increase / (decrease) in cash and cash equivalents 3,045 (700)
Cash and cash equivalents at the start of the year 42,915 43,615
________ ________
Cash and cash equivalents at the end of the year 45,960 42,915
======= =======
Cash flow statement - cash generated from operations
2016 2015
As restated
£'000 £'000
Profit for the financial year 57,993 57,600
Amortisation 2,100 454
Depreciation 43,453 39,687
Impairment 488 66
Loss on sale of property, plant and equipment 2,476 2,952
Release of government grants (472) (484)
Share-based payment expenses 1,994 2,057
Finance expense 26 85
Income tax expense 17,149 15,428
Increase in inventories (490) (154)
Increase in receivables (3,066) (1,555)
Increase in payables 11,845 2,875
Increase in provisions 277 626
________ ________
Cash from operating activities 133,773 119,637
======= =======
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 31 December 2016 or 2 January 2016 but
is derived from these accounts. Statutory accounts for the 52 weeks ended 2
January 2016 have been delivered to the registrar of companies, and those for
the 52 weeks ended 31 December 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 52 weeks ended 2 January 2016, 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:
· Amendments to IAS 16 and IAS 38 - Clarification of Acceptable Methods of
Depreciation and Amortisation
· Annual Improvements to IFRSs - 2012-2014 Cycle
· Disclosure Initiative - Amendments to IAS 1
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 2015 a provision was recognised for the future employers' national
insurance costs on share-settled option schemes where there is no requirement
for the employee to reimburse these costs. This accounting is in accordance
with IFRS 2. The charge was included within the share-based payments charge
within the income statement with the credit being taken directly to reserves
in line with the rest of the charge. It has been determined that the element
of the charge relating to future national insurance costs should have been
accounted for as a provision rather than directly to reserves. The impact of
this for the 52 weeks ended 2 January 2016 is that the closing retained
earnings reserve has been reduced by £1,605,000, current liability provisions
have increased by £590,000 and long-term provisions have increased by
£1,015,000. There is no impact on profit or cash flows.
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
2016 2015
£'000 £'000
Cost of sales
Supply chain restructuring - redundancy costs 3,028 -
- asset-related costs 1,852 -
- other contractual obligations 44
Prior year items - dilapidations (557) -
__________ __________
4,367
Distribution and selling
Supply chain restructuring - redundancy costs 1,108 -
- transfer of operations 356
Prior year items - property related (870) -
__________ __________
594 -
Administrative expenses
Restructuring of support functions 391 -
Prior year items - restructuring of support functions (175)
__________ __________
216 -
________ ________
Total exceptional items 5,177 -
======= =======
3. Exceptional items (continued)
Supply chain restructuring
This charge arises from the decision, announced in March 2016, to invest in
and reshape the Company's supply chain in order to support future growth. The
costs relate to the closure of three bakery sites and include redundancy and
other employment-related costs, asset write-offs, impairment and transfer and
other contractual obligations that arise as a result of the closure of the
sites.
Restructuring of support functions
This charge relates to redundancy costs arising from the restructuring of
bakery administration and payroll functions.
Prior year items
These relate to the movement on costs treated as exceptional in prior years
and arise from the settlement of various property and redundancy
transactions.
4. Taxation
Recognised in the income statement
Excluding exceptional items Exceptional items Total Total
2016 2016 2016 2015
£'000 £'000 £'000 £'000
Current tax
Current year 18,716 (767) 17,949 17,970
Adjustment for prior years (946) - (946) (530)
________ ________ ________ ________
17,770 (767) 17,003 17,440
________ ________ ________ ________
Deferred tax
Origination and reversal of temporary differences (342) (148) (490) (1,038)
Reduction in tax rate 239 - 239 (254)
Adjustment for prior years 397 - 397 (720)
________ ________ ________ ________
294 (148) 146 (2,012)
________ ________ ________ ________
Total income tax expense in income statement 18,064 (915) 17,149 15,428
======= ======= ======= =======
5. Earnings per share
Basic earnings per share
Basic earnings per share for the 52 weeks ended 31 December 2016 is calculated
by dividing profit attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the 52 weeks ended 31
December 2016 as calculated below.
Diluted earnings per share
Diluted earnings per share for the 52 weeks ended 31 December 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 31 December 2016 as
calculated below.
Profit attributable to ordinary shareholders
2016 2016 2016 2015
Excluding exceptional items Exceptional items Total Total
£'000 £'000 £'000 £'000
Profit for the financial year attributable to equity holders of the Parent 62,255 (4,262) 57,993 57,600
======= ======= ======= ======
Basic earnings per share 62.0p (4.2p) 57.8p 57.3p
Diluted earnings per share 60.8p (4.1p) 56.7p 55.8p
Weighted average number of ordinary shares
2016 2015
Number Number
Issued ordinary shares at start of year 101,155,901 101,155,901
Effect of own shares held (710,295) (551,314)
__________ __________
Weighted average number of ordinary shares during the year 100,445,606 100,604,587
Effect of share options on issue 1,921,344 2,616,364
__________ __________
Weighted average number of ordinary shares (diluted) during the year 102,366,950 103,220,951
========= =========
6. Dividends
The following tables analyse dividends when paid and the year to which they
relate:
2016 2015
Per share Per share
pence pence
2014 final dividend - 16.0p
2015 interim dividend - 7.4p
2015 special dividend - 20.0p
2015 final dividend 21.2p -
2016 interim dividend 9.5p -
________ ________
30.7p 43.4p
======= =======
The proposed final dividend in respect of 2016 amounts to 21.5 pence per share
(£21,560,000). This proposed dividend is subject to approval at the Annual
General Meeting and has not been included as a liability in these accounts.
2016 2015
£'000 £'000
2014 final dividend - 16,090
2015 interim dividend - 7,463
2015 special dividend - 20,161
2015 final dividend 21,326 -
2016 interim dividend 9,610 -
________ ________
30,936 43,714
======= =======
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 above, in January 2017 the Company
communicated further restructuring proposals to staff relating to the
previously communicated investment in its supply chain. This communication
included the planned impact of consolidating manufacturing operations and
announced a consultation with trade unions and employee representatives over
the detail of the proposals.
The total one-off exceptional costs of this major change programme are
expected to be in the region of £25 million. This includes £6.4 million
charged in 2016 (see note 3) and we expect to charge a further £12 million in
2017, of which £6 million will be a cash cost.
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.
Area of principal risk or uncertainty Mitigating actions and controls Risk rating
Business change - Greggs is implementing a strategic plan to transform the business from a decentralised traditional bakery to a centralised modern food-on-the-go brand. 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. Increasing
This is a major programme of business change involving restructuring, new systems, significant capital investment and a major overhaul of every aspect of the business,
particularly supply chain.Progress may not be in line with plans, disruption could occur and financial returns may fall short of expectation.
Product quality and safety - Greggs is unusual in the food-on-the-go sector in that it is vertically integrated, owning its own manufacturing and supply chain operations. 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
In addition, we freshly prepare food on our retail premises. This exposes us to greater risk in ensuring good food safety than many of our competitors.
Food scare - Greggs may suffer from a loss of customer confidence due to a major food scare beyond its control. Dependent upon the nature of this, it may have a 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
disproportionate impact on Greggs.
Loss of production - Some of our products are produced in one location and distributed nationwide. Any disruption to supply would have a significant impact on our 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
customers.
9. Principal risks and uncertainties(continued)
Market pressures - Changing shopping habits driven by new customer channels such as the internet may have a greater impact on Greggs due to our historical bias to shops located on high streets. Greggs operates a leasehold shop estate with typically five-year break provisions, allowing us to change locations in line with customer traffic trends. In addition, new No change
shops are predominantly opened in locations away from the high street to offer our services to customers away from home for reasons other than shopping. The nature of
our franchise partners also provide mitigation.
Consumer trends - Increasing customer concern with health and nutrition may affect demand for some of our traditional bakery product ranges. 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 No change
choice to include healthier options branded `Balanced Choice` which is growing rapidly.
This information is provided by RNS
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