REG - Greggs PLC - Preliminary Results
05/03/2024 07:00
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RNS Number : 5433F Greggs PLC 05 March 2024
5 March 2024
GREGGS PLC
("Greggs" or the "Company")
PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 30 DECEMBER 2023
Record performance driven by execution of strategic plan
2023 Financial highlights
2023 2022
Total sales £1,810m £1,513m
Underlying pre-tax profit excluding exceptional income* £167.7m £148.3m
Pre-tax profit £188.3m £148.3m
Underlying diluted earnings per share excluding exceptional income* 123.8p 117.5p
Diluted earnings per share 139.2p 117.5p
Total ordinary dividend per share 62.0p 59.0p
Special dividend per share 40.0p -
* Excludes impact of £20.6 million exceptional net income primarily related
to settlement of business interruption insurance claims made in 2020
· Total sales** up 19.6% on 2022 level, with LFL*** sales in
company-managed shops up 13.7% year-on-year
· Underlying profit before tax excluding exceptional income up 13.1% to
£167.7 million (2022: £148.3 million); underlying diluted earnings per share
up 5.4% to 123.8p
· Robust cash position of £195.3 million supports both investment in
growth and additional shareholder returns by way of a special dividend of
40.0p per share
· Final dividend of 46.0p per share recommended bringing total ordinary
dividend per share of 62.0p per share, up 5.1% from 2022, in line with the
growth in underlying diluted earnings per share
** 52 weeks ended 30 December 2023 (2022: 52 weeks ended 31 December
2022)
*** like-for-like sales in company-managed shops (excluding franchises)
with more than one calendar year's trading history
Strategic progress
Broadening customer appeal:
· Greggs is the UK's leading food-to-go brand (YouGov's Brand Index)
· Market share at an all-time high; total share of food-to-go visits
8.2% (2022: 7.7%)
· Share of food-to-go breakfast visits increased to 19.6%, taking
Greggs to #1 in the market
Growing and developing the Greggs estate:
· Record 220 new shop openings in 2023 and 75 closures (145 net
openings), growing the estate to 2,473 shops as at 30 December 2023
· Relocated 42 existing shops and refurbished 122 existing shops
· Continued to expand partnerships with retailers including Primark,
Tesco and newest partner Sainsbury's. London presence extended including new
shops in Canary Wharf and Waterloo railway stations and Gatwick Airport
· Targeting 140 to 160 net openings in 2024; clear opportunity for
significantly more than 3,000 UK shops over longer term
Evening trade:
· More than 1,200 sites competing for food-on-the-go-sales until 7pm or
later
· Existing range popular; hot chicken goujons, potato wedges and pizzas
selling well
· Evening fastest growing daypart; 8.7% of company-managed shop sales
in H2
Digital channels:
· Delivery reach extended, now available on Just Eat (1,340 shops) and
Uber Eats (930 shops) platforms (1,440 shops in total) with sales up 23.6% in
2023
· Greggs App scanned in 12.5% of company-managed shop transactions
(2022: 6.2%)
Supply chain investment:
· Fourth production line installed at Balliol Park in Newcastle upon
Tyne, which will provide circa 35% additional manufacturing capacity for our
savoury rolls and bakes
· Work progressing well to expand logistics capacity of Birmingham and
Amesbury distribution centres, both due to come on stream later in 2024
· Two new state-of-the-art facilities planned to facilitate further
expansion. First site in Derby secured and second site planned for the
Kettering/Corby area
Greggs Pledge highlights:
· Greggs Foundation Breakfast Clubs continue to grow; 896 schools feeding
62,000 school children every day
· Now have 35 Outlet shops, providing unsold Greggs' products at a
discount
· 2040 net zero carbon target fully embedded into our business
processes; emissions reduction targets introduced to long-term incentive
schemes
· Eco-shop successes being rolled out across shop estate
Current trading
· Greggs has started 2024 well - like-for-like sales in company-managed
shops up 8.2% in the first nine weeks of 2024
· No change to management's expectations for 2024. Confident that
Greggs can deliver another year of good progress
Roisin Currie, Chief Executive commented:
"Reflecting on another year of rapid growth, I am so proud of how our teams
have risen to the challenge of serving more customers through more channels.
Whether in our shops, our manufacturing sites, our distribution network, or in
Greggs House, our teams stepped up to make sure that we kept pace with the
increased customer demand as we delivered on our strategic growth plan.
"We are very much on track to deliver our bold five-year growth plan to double
sales by 2026 and to have significantly more than 3,000 shops in the UK over
the longer term."
ENQUIRIES:
Greggs plc (http://www.greggs.co.uk) Hudson Sandler (http://www.hudsonsandler.com)
Roisin Currie, Chief Executive Wendy Baker / Hattie Dreyfus /
Richard Hutton, Chief Financial Officer Nick Moore / Emily Brooker
David Watson, Head of IR Email: 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/)
Chair's statement
It's great to see the progress that Greggs has made in 2023. Strong
operational delivery has resulted in a record financial performance and
further cemented our market position. The clarity and execution of our
strategy positions Greggs well for the significant opportunities that lie
ahead as we invest for further sustainable growth.
Overview
Greggs delivered another strong performance in 2023, making good progress
against our strategic plan and further strengthening the Company's position as
a leader in the food-to-go market. In a period when the rising cost of living
was all too evident the Greggs value proposition shone through and was
reflected in growing customer visits and record ratings for value-for-money.
The Board's activity in the year reflects its oversight of the Company's
strategic development as well as the maintenance of high standards of
governance, with oversight of risk management and returns a key focus given
our significant capital expenditure plans. We have engaged with management
plans for the expansion of the shop estate, franchise partnerships and the
development of new digital channels. To support the significant growth
potential that lies ahead the Board has scrutinised and approved plans for
further supply chain investment, which will unlock further capacity in the
years ahead. Risk management remains high on our agenda and in 2023 the Board
spent time with the Company's advisers considering the risk landscape and the
implications for our strategic risk register.
The sustainability of Greggs is founded on our responsible approach to doing
business. The Greggs Pledge sets out our ambitions to be even better in the
years ahead and we can all feel justly proud of our progress on this journey.
Our people and values
Greggs colleagues across the business have yet again played a pivotal role in
the progress we continue to make, and I would like to thank them for their
continued outstanding contribution.
It is important that the Board stays close to the views of our colleagues and
Directors devote significant time to activity that lets them hear first-hand
what is on our people's minds. Visits to shops, supply sites and support
teams, as well as attendance at listening forums equip Directors to understand
the practical implications of our plans and challenge the executive management
team. Food development has also been a focus - as a business with food at its
heart the fundamental evolution of our range to reflect changing consumer
tastes and health credentials is critical and I am proud of the progress that
our teams continue to make.
The Board
Nigel Mills joined the Board in the first quarter of 2023 and took on the role
of Senior Independent Director with effect from the Annual General Meeting
('AGM') on 17 May 2023. We said farewell to Sandra Turner, Senior Independent
Director, and Helena Ganczakowski, following their planned retirement from the
Board. Both have made significant contributions to the strategic repositioning
of Greggs and depart knowing that they have left the business in great shape.
The Nominations Committee is looking to recruit a further Non-Executive
Director and we expect to report progress in the year ahead.
Further details of the Board's work are included in the governance and
committee sections of the Annual Report and Accounts 2023.
Dividend
At the time of the interim results in August 2023 the Board declared an
interim ordinary dividend of 16.0 pence per share (2022: 15.0 pence per
share). In line with our progressive ordinary dividend policy and our target
for the ordinary dividend to be twice covered by earnings, the Board intends
to recommend at the AGM a final dividend of 46.0 pence per share (2022: 44.0
pence per share), giving a total ordinary dividend for the year of 62.0 pence
per share (2022: 59.0 pence per share).
Our capital allocation policy, as outlined in the Financial Review, details
our approach to distribution and the methodology for determining and returning
any surplus cash to shareholders. In application of this policy the Board has
approved a special dividend of 40.0 pence per share.
Looking ahead
I am proud of Greggs achievements in 2023 and confident in the plans that we
have for the year ahead. Our clear strategy, great team, powerful product
proposition and robust financial health position us well for further success
as we invest in our plans for long-term growth.
Matt Davies
Chair
5 March 2024
Chief Executive's report
Reflecting on another year of rapid growth, I am so proud of how our teams
have risen to the challenge of serving more customers through more channels.
Whether in our shops, our manufacturing sites, our distribution network, or in
Greggs House, our teams stepped up to make sure that we kept pace with the
increased customer demand as we delivered on our strategic growth plan.
Despite an economic backdrop that continued to be challenging with high
inflation and the resulting cost-of-living pressure, the resilience of the
Greggs brand and the strength of our business mean we kept on providing the
great value, tasty products and friendly service that our customers love us
for.
We are very much on track to deliver our bold five-year growth plan to double
sales by 2026 and to have significantly more than 3,000 shops in the UK over
the longer term.
A record year
In 2023, our like-for-like sales in company-managed shops were up 13.7% on
2022 showing that, two years into our ambitious five-year plan to double
sales, our strategy is working with sales up circa 50% over that period.
What started as a plan, is now a solid reality. Greggs is the UK's leading
food-to-go brand (YouGov's Brand Index), and during 2023 we became customers'
number one destination for breakfast with a 19.6% share of visits.
Our success demonstrates that the growth drivers we are pursuing are the right
ones, giving us the confidence to accelerate our efforts. We will open our
2,500(th) shop in the coming weeks and see the potential for significantly
more than 3,000 in the UK in the longer term. Meanwhile, our multi-channel
strategy is allowing us to grow home delivery and Click + Collect orders, and
we are reconfiguring our shops to allow us to serve digital customers more
quickly and smoothly whilst ensuring our walk-in customers continue to receive
the brilliant service they are used to.
We are keeping more shops open for longer, expanding our share of the evening
food-to-go market, and we are building our brand by making Greggs mean more to
more people. That means strengthening the loyalty of our existing base, while
broadening that base by enticing new people through our doors and converting
occasional shoppers into regulars.
To meet this increase in customer demand, we are investing in our
manufacturing sites and distribution networks so that all parts of our
vertically-integrated business grow together.
At the heart of Greggs is our value proposition. Our teams have done
everything they can this year to ensure that our great quality, freshly
prepared food is available and accessible to everyone. We have been relentless
in our search for efficiency gains so that we can protect our pricing and
continue to provide outstanding value for our customers.
Financial results
Total sales grew to £1,810 million in 2023 (2022: £1,513 million), a 19.6%
increase on the level seen in 2022. Within this, company-managed shop
like-for-like sales were 13.7% higher than the equivalent period in 2022.
Underlying pre-tax profit for the year increased to £167.7 million (2022:
£148.3 million), in addition to which we recorded exceptional income of
£20.6 million. For further detail, see the full financial review.
Our key drivers of growth
Broadening customer appeal
This growth driver is about telling our customers all the ways they can
interact with us - growing awareness of our menu and new developments, our
opening hours, our delivery service, and our Click + Collect offer - and
building their loyalty through rewards and engaging communications via our
website and app.
Our aim is to reach all food-to-go consumers across the UK throughout the day,
letting them know that they can find us whenever and wherever they fancy.
We have worked hard to win and keep the loyalty of our regular customers and
I'm delighted that our successful growth strategy is allowing us to welcome so
many new customers too.
The cost-of-living crisis has affected everyone; rising energy bills and
interest rates have meant we are all looking for ways to make our money go
further. As a value proposition, Greggs has been well placed to help. We have
noticed occasional Greggs customers becoming regulars and we know that
rewarding their loyalty is helping to increase the frequency of visits.
Our brand awareness remains consistently high at 95%, and we have worked hard
this year to let people know that Greggs is for everyone. Our market share is
at an all-time high, with Greggs' total share of visits in the food-to-go
market increasing to 8.2% (2022: 7.7%) (source: Circana, December 2023).
In December, we launched a pop-up 'Bistro Greggs' in the premium department
store Fenwick, in Newcastle upon Tyne, proving that Greggs' quality is
welcomed everywhere. Our products were reinterpreted by Fenwick's chef and
served under silver cloches to be eaten with knives and forks. This
tongue-in-cheek partnership delivered gems such as 'Greggs Benedict' and Steak
Bake paired with truffled dauphinoise potatoes.
Another key event in 2023 was Fenders Unplugged, a two-day live music event in
our Grainger Street shop in Newcastle in celebration of Geordie legend Sam
Fender ahead of his headline appearances at St James' Park.
Growing and developing the Greggs estate
During 2023, we opened 220 new shops (145 net of closures and relocations)
meaning that, by the end of the year, we had 2,473 shops trading (comprising
1,970 company-managed shops and 503 franchised units). As well as continuing
to nurture and build our presence on the high street, our much-loved brand
soared to new heights with further openings in travel hubs, including our
first in a London airport, at Gatwick, more roadside locations, more retail
parks and supermarkets and further expansion of our drive-thru offer.
We have also grown our reach in central London, adding new shops across the
capital including Canary Wharf and Waterloo railway stations, and the
Westfield Shopping Centre in Shepherd's Bush.
We expanded our partnerships with other retailers; opening four new 'Tasty'
cafes inside Primark stores (taking the total to six), 17 further shops in
Tesco stores (taking the total to thirty-two), and five with our newest retail
partner, Sainsbury's.
We proudly celebrated the opening of our 500(th) franchise shop. Working with
our 16 franchise partners has enabled us to reach new locations and has been
key to increasing our presence in motorway services and petrol forecourts. Our
franchise model is key in supporting the delivery of our long-term growth
strategy.
Growth isn't just about opening new shops, it is also about finding bigger,
better premises for successful sites. During the year, we relocated 42 shops.
In Runcorn, for instance, we swapped our site for the unit next door which is
three times as big allowing us to add seating, a hot food cabinet, and better
facilities for our colleagues. Sales in the shop were up 30% following the
move and we have the space to accommodate further growth. We have identified a
further 50 shops that we plan to relocate to bigger, better sites in 2024.
Our programme of shop refits is also making sure that our existing estate
looks great and remains appealing. We refitted 122 shops in 2023 using our
newest design which maximises space while also making it easier for our teams
to service our delivery and Click + Collect digital channels. We plan to
refurbish a further 195 shops in 2024.
Extending evening trade
During 2023, we continued to open our shops later into the evening and now
have more than 1,200 sites competing for food-on-the-go-sales until 7pm or
later. Throughout the year, evening (defined as post-4pm sales) was the
fastest growing daypart, albeit from a low base. As a result evening sales
were 8.7% of company-managed shop sales in the second half of 2023, and our
market share for the evening daypart increased to 1.6% for 2023 (2022: 1.2%,
source: Circana, December 2023).
We know many customers stop by our shops on their way home from work, looking
for quick and easy evening meals and snacks. Our delivery service also plays a
key role in the evening trade, with more than 600 of our later-opening shops
available to customers via Just Eat or Uber Eats. We see strong potential for
expanding our home delivery offer further in this daypart.
Competing for evening sales means having the right products to meet our
customers' preferences. Our existing range is proving popular, with our hot
southern fried chicken goujons, southern fried potato wedges, and pizzas all
selling well. Our family pizza box (available for delivery) comes with six
individual slices and can be customised, meaning that everyone can get the
flavour they want. We continue to innovate with new hot food options and
expanded our pizza range with a Spicy Veg version this year, as well as
trialling new menu ideas such as Mozzarella and Cheddar Bites.
Our ongoing focus is on making sure we have the right products in the evening
to give people more reasons to visit us and, in 2024, we will continue our
trial with a number of items including customisable hot chicken wraps and
made-to-order drinks.
Developing digital channels
Greggs is now a truly multi-channel retailer. We aim to serve our customers
wherever, whenever, and however they choose. That might be a customer visiting
a shop, someone who wants the frictionless experience of Click + Collect, or
customers at work or at home who want the convenience of Greggs delivered to
their door.
I have been extremely impressed by the growth in engagement with our loyalty
app, whereby customers benefit from our popular 'buy-9-get-the-10(th)-free'
offer. Use of the Greggs App doubled during 2023, far exceeding our internal
targets. In the year as a whole, customers scanned the Greggs App in 12.5% of
transactions in our company-managed shops (2022: 6.2%), and in the final
quarter of the year the participation rate exceeded 15%. Customers who engage
with our loyalty app shop more frequently with us and we are able to market to
them directly, which provides further opportunity to drive sales growth
through this channel.
The slick efficiency of Click + Collect continues to help busy people save
precious minutes in their day and use of this digital service continues to
increase. Busy commuters, for example, can now pay for their morning coffee or
bacon sandwich before their train has pulled into their station, choose a time
slot, skip the queue and go straight to the counter to collect their order.
Sales through the delivery channel were up 23.6% in 2023. We introduced home
delivery during the Covid-19 pandemic in 2020 through a partnership with Just
Eat, and in Q3 2023 extended our reach by rolling out with Uber Eats. We now
have 1,340 shops offering delivery through Just Eat and 930 sites working with
Uber Eats. A total of 1,440 shops offer delivery services, allowing us to now
offer home delivery across the UK. In 2023 this channel represented 5.6% of
company-managed shop sales, and we grew our market share of food-to-go
delivery visits to 3.8% in 2023 (2022: 2.7%) (source: Circana, December 2023).
For our customers, shopping with us gets simpler and easier every year as we
use technology to make things better and more rewarding. Behind the scenes,
that means we are managing greater complexity, but our teams have done a
fantastic job of integrating new systems, working hard to enable our processes
to stay streamlined and simple for the shop teams so that they can continue to
operate at pace and deliver great customer service.
Investing in our supply chain and technology for a bigger business
One of the unique strengths of our business is its vertical integration: we
own and run the manufacturing sites and logistics operations that serve our
shops. Our ambitious plans mean that we are investing further in our
infrastructure to ensure that we can increase supply chain capacity to support
business growth, as previously communicated in our capital expenditure
forecasts.
Investment in our Balliol Park manufacturing site will enable us to increase
production of savoury rolls and bakes by 35% over time, and the additional
pizza line at our Enfield site commissioned in late 2022 has double the
capacity of our original line.
In order to facilitate further expansion, we plan to build two brand new
state-of-the-art facilities in the Midlands. The first site will be for frozen
products and will be located in Derby. Opening in 2026, this site will not
only provide additional manufacturing capacity for frozen products, including
new savoury and sweet production lines, but also enable frozen storage,
picking and distribution which will be key to our future growth.
The second site will be located in the Kettering/Corby area, and will be a new
National Distribution Centre for the storage, picking and distribution of
ambient and chilled goods. The site will enable our existing Radial
Distribution Centres to service many more shops, allowing them to support
growth in their regions. We expect this site to be operational in the first
half of 2027.
In the meantime we are investing in scaling up two of our existing Radial
Distribution Centres. We are currently on-site undertaking work to double
capacity at our Amesbury distribution facility and are restructuring our
Birmingham site into a more efficient purpose-designed operation which will
increase our capacity. These two projects will add the capacity to service
around 300 more shops to our network. In the second half of 2023, we took
over the lease of a substantial warehousing facility next to our Kettering
distribution centre when our supplier entered administration, securing our
requirements and saving the jobs of everyone employed at the site.
During 2023, we added more double-deck trailers to our fleet. We now have 34
vehicles able to carry 56% more per load, with a further 18 arriving in the
business by 2025. These reduce the carbon intensity of our logistics
operations and also save on fuel.
We continue to make improvements to our shop systems, making processes simpler
for our colleagues. We tested a new, upgraded till suite that was redesigned
based on feedback from our people and we will roll out the clearer, easier
system to all shops during the current year.
Looking after our people
For the first time, we are including a section on 'Our People' in our Annual
Report because our colleagues, culture and values are what makes Greggs,
Greggs. We know that when our people thrive, our business is stronger and
better, so we work hard to make Greggs a great place to work.
Just as our customers are relying on us to help them weather the current
challenging economic circumstances, our colleagues rely on us too: we pride
ourselves on paying fair wages, providing secure employment, and offering
consistent contracted hours so that our colleagues know what their weekly wage
will be, and can budget for it.
We continue to share 10% of our profits with team members with at least six
months of service. We have also increased our matched contribution rates for
Greggs pensions, meaning that all our colleagues can now access up to 6%
employer contributions.
On top of this, we offer a colleague discount, our employee share plans, and
an Employee Assistance Programme that gives our people access to additional
help when they need extra support - we make sure that we are there for them,
whatever they need.
All this helps to keep our people motivated and committed to Greggs. More than
24,000 colleagues completed our annual employee survey in 2023, and
three-quarters of them told us that they would recommend Greggs as a great
place to work - 7% ahead of the UK retail benchmark (source: People Insight).
We know that great people are important to our long-term sustainable growth.
We nurture and grow talent within our organisation so that our pipeline of
future leaders is primed, and there are great people ready to step into our
management team as we expand.
Our growth also means that we are creating new jobs across the country within
our shops, manufacturing sites and distribution networks. During 2023, we
created 1,597 net new jobs.
A significant number of our shop and area managers started as team members and
worked their way up, proving that Greggs can be an agent of social mobility.
The flexibility of our roles enables people to arrange their work life around
their personal life - reducing their hours to part time when they have
school-aged children, for instance, or pushing for training and career
progression when they are ready for more of a challenge. Whatever they want
from us, we aim to provide long-term employment.
Giving back
We continue to donate at least 1% of our underlying pre-tax profits to the
Greggs Foundation each year, which it then passes on to our communities
through hardship grants, community funding, and donations to help run the
Breakfast Club programme.
This is generously topped up by our colleagues, partners and customers: we
raised a record £202,000 through 25p 'buy a child a breakfast' donations in
Greggs shops last year - three times the amount raised in 2022 - and ran
Greggs Breakfast Club Appeal Weeks in June and September, raising a further
£190,000.
During 2023, the Greggs Foundation distributed over £4.5 million to schools
and charitable organisations in the UK, including £1.5 million in hardship
funding as it responded to the increased need from our communities due to the
cost-of-living crisis. Almost half of all the hardship grants awarded last
year went to families in schools with a Greggs Foundation Breakfast Club.
In addition to donating money to the Greggs Foundation, our fundraising
activities raised over £1 million for Children in Need, a charity we have
supported for 17 years now. We also proudly celebrated our 40-year partnership
with the charity Children's Cancer North through its annual Children's Cancer
Run. In February, we turned our charity buckets over to the Disasters
Emergency Committee raising £149,000 to help people in Turkey and Syria who
were affected by the devastating earthquakes.
The Greggs Pledge
We want our people to be proud to work for Greggs. Not just because of the
great job they do, day in and day out, but because they are part of a business
that strives to do the right thing. Together, we are working towards
delivering the Greggs Pledge - ten commitments that aim to make the world a
better place. Our latest report on the progress we made towards these
commitments in 2023 will be published in the coming weeks and I share some
highlights below.
Stronger, healthier communities
Greggs Foundation Breakfast Clubs continue to grow. By the end of 2023, we had
Clubs in 896 schools feeding 62,000 school children every day. This is about
so much more than providing a free meal in Britain's least-privileged areas:
our Clubs also contribute to improving attendance rates, helping to build the
habit of turning up to school every day, and ensuring children start their day
with a full stomach, so they are better able to concentrate at school which,
over time, means they are more likely to fulfil their potential. In this way,
Greggs Foundation Breakfast Clubs are making a meaningful contribution to
enabling social mobility - fundamental for a flourishing society.
We now have 35 Outlet shops open around the country, providing people on a
budget with the opportunity to buy day-old Greggs products at a discount. A
portion of the profits made in these shops is then given to local community
organisations working to tackle food poverty. In 2023, that donation totalled
almost £650,000. Outlet shops also play an important part in our efforts to
make sure that unsold food is put to good use. We passed around 2,600 tonnes
of surplus food to this network of shops in 2023 - approximately 44% more than
2022.
Of course, our focus on healthier communities is also delivered through our
commitment to ensuring that 30% of our product range is a healthier option. We
provide our customers with well-priced, tempting, and tasty healthier options
including porridge, soups, and salads and, during 2023, introduced a new range
of flatbread sandwiches, improved the veg content of our pasta salad, and
launched new savoury bakes, including the Spicy Vegetable Curry Bake. We were
delighted that our efforts were recognised at the 2023 Sandwich and Food to Go
Industry Awards ('The Sammies'), where we not only won chain retailer of the
year, but also the healthy eating award for our Sweet Potato Bhaji and Rice
Salad Bowl.
Safer planet
Our 2040 net zero carbon target is now fully embedded into our business
processes, meaning it has gone from a set of plans to an actionable programme
of work, with data outputs that we can - and do - scrutinise each month. To
keep everyone focused, our Scope 1 and 2 emissions targets form part of the
latest three-year long-term incentive schemes for our leaders.
Decarbonising our business is no small feat and we continue to work with
experts such as the Carbon Trust to inform and guide our decisions. Over time,
seemingly small actions aggregate to have a big impact, as we have seen by
switching the refrigerant gas we use to top up our coolers, swapping to
double-deck trailers, or migrating our company car fleet to hybrid or electric
models.
We did more work in 2023 to understand our Scope 3 emissions and will complete
the next part of our supplier engagement plan in the year ahead. Our suppliers
are vital partners in this journey and we are already working in partnership
with many of them to see what we can collectively do next.
This year, for instance, we began using flour made from Wildfarmed wheat to
make some of our wholemeal products. This flour is made from wheat that is
grown following regenerative farming practices and standards that prioritise
soil health, soil condition, and farm biodiversity by using low input farming
methods.
Another example comes from work with our suppliers of milk and refuse
collection, Müller and Biffa. Our milk bottles are separately disposed of
with other dry mixed recycling, Biffa convert this into food grade pellets,
some of which are then sent to Müller to be extruded into new bottles for us
containing 30% recycled content.
Today, 97% of the electricity and 30% of the gas we purchase comes from
certified renewable sources. Ultimately, we want to stop using natural gas for
baking and diesel for transportation and, in 2023, began discussions with a
potential green hydrogen supplier to explore the feasibility of powering our
manufacturing sites and logistics fleets with green hydrogen.
The equipment we choose to put into our shops is under scrutiny too. We test
in-store sustainability initiatives in our Eco-Shop and, during 2023, started
the roll out of seven new items - Unisan bins, knee-operated sinks, a prep
bench, microwave, fridge, freezer, and oven. The new model microwave has an
anticipated lifespan twice that of our previous choice and is now utilised to
warm our soup in a more efficient way. We have therefore removed our soup
kettles, heating soup to order instead which uses around 1/20(th) of the
electricity previously consumed.
Our colleagues are also a source of new ideas. This year, we ran the Greggs
Sustainability Challenge with our waste partner Biffa, inviting our people to
propose pioneering sustainability initiatives. Ideas included enriching local
ecosystems, a community kitchen garden, plastic reduction initiatives, and
engagement forums. The winners will see their ideas become reality.
Better Business
I am proud to lead a Board with excellent female representation on it; we have
already met the FTSE Women Leaders 2025 target of 40%. Across the business,
women made up 64% of our total workforce and half of our management population
in 2023. Our gender pay gap is reducing, predominantly driven by getting a
more balanced workforce at the entry level, which historically has been
disproportionately female. A gender pay gap remains, in part because of having
more males than females in our most senior roles and supply chain roles where
shift premiums apply, but also because we still have more females than males
in our hourly-paid retail roles.
This year, we report on our Ethnicity Pay Gap for the first time. We publish
figures for both 2022 and 2023 which reveal a small gap that is largely static
year-on-year. We continue on our journey to embrace diversity in Greggs
following our achievement of the National Equality Standard in 2021.
We continue to support and grow our diversity and inclusion networks, set up
to give a voice to our different communities. The four groups - focused on
Ethnicity, Disability Inclusion, LGBTQ+, and Women's development - provide a
safe space for discussion and debate, and help to shape the business. This
year, among other things, their advocacy has led to a new policy on
transitioning at work, activities to mark Deaf Awareness week, and input into
an online learning module on our zero-tolerance approach to harassment.
Looking ahead
Our strong growth during these tough years for the British economy gives me
great optimism for the years ahead. Back in 2021, we were bold when we set out
our ambition to double our sales by 2026 but we are ahead of our plan and have
proven that our strategy to open new shops, extend into the evening, and build
up our digital presence is a successful one.
Our brand is stronger than ever before, with more people coming to us more
often in more locations to enjoy the UK's favourite sausage roll, bacon
breakfast roll, sweet potato bhaji and rice salad bowl or doughnut. Our range
gets more enticing every year, with more healthy options, more hot food, and
new flavours to tempt our customers. That spirit of innovation continues into
2024 with new product trials and roll-outs planned.
We now employ 32,000 people across the country, and I credit them with our
success. It is their passion for creating great food at affordable prices, and
their commitment to delivering warm and friendly service, that makes Greggs
the hugely popular destination that it is.
As their Chief Executive, I remain fully committed to enabling our people to
fulfil their potential and build the career with us that they want. Just as we
work hard to win and keep the loyalty of our customers, we work hard to win
and keep the loyalty of our colleagues too.
Together, we will continue to grow this brilliant business, while sharing our
success with our colleagues and communities. As we thrive, we can open more
Greggs Foundation Breakfast Clubs and Outlet shops, raise more money for
charities, and do more work to decarbonise food retailing. In our small way,
we are making the world a better place.
Current trading and outlook
Greggs has started 2024 well, with like-for-like sales in company-managed
shops growing by 8.2% in the first nine weeks. As we have previously
reported, inflationary pressures are reducing and we have improved visibility
of costs in the coming year. There is no change to management's expectations
for 2024, and we are confident that Greggs can deliver another year of good
progress as we continue our plans for sustainable growth. I am enormously
proud of what we are already achieving and excited about what's ahead.
Roisin Currie
Chief Executive
5 March 2024
Financial review
Greggs delivered a strong financial performance in 2023 against an economic
backdrop that continued to be challenging. Sales growth reflected our
strategic ambitions and progress, and we opened a record number of new shops.
Cash generation was good and our robust balance sheet will support our growth
strategy as we invest in capacity to enable further growth and strong capital
returns.
2023 2022
£m £m Variance
Revenue 1,809.6 1,512.8 +19.6%
Underlying operating profit 171.7 154.4 +11.2%
Net finance expense (inc. leases) (4.0) (6.1) -34.4%
Underlying profit before tax 167.7 148.3 +13.1%
Exceptional income 20.6 -
Profit before tax 188.3 148.3 +27.0%
Income tax (45.8) (28.0) +63.6%
Profit after tax 142.5 120.3 +18.5%
Underlying diluted Earnings per share 123.8p 117.5p +5.4%
Underlying Return on capital employed 21.1% 21.0%
Sales
Total Group sales for the 52 weeks ended 30 December 2023 grew by 19.6% to
£1,810 million (2022: £1,513 million). Growth was delivered through both new
shop openings and like-for-like sales growth in existing stores, driven by a
combination of volume growth and price increases. Total Group revenue reflects
sales from company-managed shops, which include delivery sales, and sales
through business-to-business channels with our franchise and wholesale
partners.
Reporting 'like-for-like' sales (sales in company-managed shops with more than
one calendar year's trading history) is a key alternative performance measure
for Greggs, as it shows underlying estate sales performance excluding the
impact of new shop openings and closures. Our like-for-like sales volume
growth remained strong through the year whilst the element relating to pricing
reduced as we annualised against price increases made in May and October 2022.
The Q3 2023 result was flattered by c.1% due to the comparison with Q3 2022
when we closed the estate for a day for the funeral of Queen Elizabeth II.
Overall growth was in line with our plans for the year, with like-for-like
sales 13.7% higher year-on-year.
Q1 Q2 Q3 Q4 2023
Company-managed like-for-like sales vs. 2022 17.0% 15.1% 14.2% 9.4% 13.7%
Profit for the year
Underlying profit before tax (excluding exceptional income) in 2023 was
£167.7 million (2022: £148.3 million). Our strong trading performance
reflected the Greggs brand's value proposition and continued momentum from our
strategic growth initiatives. Profit before tax of £188.3 million includes a
net exceptional gain of £20.6 million which primarily relates to the
settlement of business interruption insurance claims made in 2020.
The overall level of cost inflation in 2023 averaged 8.5% for the year but
with an exit rate closer to 5%. Our wage award was fixed for the year from
January, and food and packaging inflation reduced through the second half of
the year once we had annualised on the significant increases seen in 2022.
Energy costs were less volatile than in recent times and our shop occupancy
cost ratio (shop costs such as rent, rates and service charges as a percentage
of sales) continued to improve.
Looking forward we currently expect overall input cost inflation in 2024 to be
in the range of 4-5%, although an element of this remains subject to
geopolitical risks. We have improved levels of forward cover, with circa 80%
of our energy requirements fixed for the year and forward purchase agreements
representing four months of our food and packaging needs. Looking further
ahead we have fixed the price of 50% of our energy requirements for 2025.
Strategic progress, margin and return on capital
In October 2021 we set out our ambitious plans to double sales over a
five-year period as we emerged from the pandemic with a strong brand and clear
growth opportunities. Two years on from this we are very much on track with
sales of £1.8 billion in 2023, up circa 50% in two years. A couple of things
have changed - back in 2021 no one foresaw the dramatic rise in cost (and
consequently price) inflation that was to come. Also, with the benefit of
hindsight, it is clear that some of our early success in the food delivery
market was a reflection of temporary pandemic conditions. However, despite
these factors looking across the last two years we are pleased with the
progress that has been made in developing the growth pillars that we
identified:
· Our core daytime walk-in business has recovered well after the
pandemic and data shows that we have taken market share, supported by an
investment in marketing to drive consideration and purchase intent.
· Estate growth has been a particular success story, with a net 292 new
shops opened (164 company-managed and 128 franchised) over 2022 and 2023. In
addition we have relocated 67 existing shops, in general moving them to
bigger, better units that have the space to realise the growth potential in
their catchments.
· Evening customer growth is developing well. This will be one of the
longer-term drivers of growth and requires us to invest in staffing initially
as we develop awareness of Greggs as an early evening option.
· As noted above, our delivery success in 2021 was partly attributable
to pandemic conditions and has since rebased. Rolling out with a second
delivery partner has resulted in a modest increase in commission costs but
will further leverage our shop network, supporting strong returns on the
capital invested there. Sales increased 23.6% in 2023, supported by the roll
out with the second partner.
· Marketing is becoming more personalised as we incentivise customers to
engage with our loyalty scheme and learn more about how they shop with Greggs.
Our primary financial objective remains to maintain the strong returns on
capital employed (ROCE) in the business, as evidenced by our performance over
many years:
2019 2020 2021* 2022 2023
ROCE** 20.0% pandemic 23.0% 21.0% 21.1%
* 2021 result reflects pandemic support measures
** Underlying ROCE, excluding exceptional items
Business growth has been delivered whilst maintaining strong capital returns,
despite the cost investments that we have made to develop new channels.
Delivering a healthy ROCE is embedded as a key element of our performance
management and we aim to deliver a ROCE which averages circa 20% over time. In
recent years we have exceeded this as capacity utilisation in our supply chain
has been at a historically high level. As previously stated, we have
significant new facilities coming online in the near to medium term to support
growth; while the business 'grows into' this new capacity we would naturally
expect modest dilution of Group returns, which we expect will be seen in
2025/26. As the benefits of capacity utilisation return, we would expect this
dilution to reverse.
The development of new channels and dayparts is driving incremental sales
volumes and, as noted above, strong returns on capital. In support of this, in
2023 we increased our investment in marketing and in shop labour, as well as
agreeing additional delivery aggregator costs as we moved to a non-exclusive
partner arrangement. These initiatives, along with growth in participation in
the Greggs App loyalty programme, are successfully increasing the frequency of
customer visits and increasing Greggs' share of the food-to-go market. The
overall margin mix impact of this incremental business resulted in a modest
dilution in underlying net profit margin to 9.3% in 2023 (2022: 9.8%).
Financing charges
The net financing expense of £4.0 million in the year (2022: £6.1 million)
comprised £9.6 million in respect of the IFRS 16 interest charge on lease
liabilities and £0.7 million of facility charges under the Company's
(undrawn) financing facilities, offset by net income of £6.3 million relating
to income on cash deposits, interest on the defined benefit pension liability
and foreign exchange losses.
Taxation
The Company has a simple corporate structure, carries out its business
entirely in the UK and all taxes are paid here. We aim to act with integrity
and transparency in respect of our taxation obligations.
The Group's overall effective tax rate on profit, including the impact of
exceptional items, in 2023 was 24.3% (2022: 18.9%) which reflects the increase
from 19% to 25% in the corporation tax rate from 1 April 2023 and the
discontinuance of 'super-deduction' enhanced capital allowances from the same
date. The underlying tax rate for the year was 24.4% (2022: 18.9%).
We expect the effective tax rate for 2024 to be around 26.0% and going forward
the effective rate is expected to remain around 1.0 percentage point above the
headline corporation tax rate; this is principally because of expenditure for
which no tax relief is available, such as depreciation on properties acquired
before the introduction of structures and buildings tax allowances, and
acquisition costs relating to new shops.
Earnings per share and dividend
Underlying diluted earnings per share in 2023 were 123.8 pence (2022: 117.5
pence per share). Including the net exceptional income diluted earnings per
share were 139.2 pence (2022: 117.5 pence per share).
The Board recommends a final ordinary dividend of 46.0 pence per share (2022:
44.0 pence per share). Together with the interim dividend of 16.0 pence (2022:
15.0 pence) paid in October 2023, this makes a total ordinary dividend for the
year of 62.0 pence (2022: 59.0 pence). This is covered two times by
underlying diluted earnings per share and is in line with our progressive
ordinary dividend policy, which aims to increase the dividend in line with
growth in earnings per share.
In application of the capital allocation policy outlined below under "Cash
flow and capital structure" the Board has determined that the current level of
cash held by the Company exceeds its minimum requirements, having taken into
account investment plans and the distribution of ordinary dividends. As a
result the Board has approved a special dividend of 40.0 pence per share.
Subject to the approval of shareholders at the Annual General Meeting, the
final ordinary and special dividends will be paid on 24 May 2024 to
shareholders on the register at 26 April 2024.
Balance sheet
Capital expenditure
We invested a total of £199.8 million (2022: £110.8 million) in capital
expenditure during 2023. Retail estate expenditure grew as we increased the
number of new company-managed shop openings and relocations, and completed
more shop refurbishments. In our supply chain we installed a fourth production
line for our iconic savoury rolls and bakes at Balliol Park in Newcastle and
have also started work to extend logistics capacity at our Birmingham and
Amesbury distribution centres.
Depreciation and amortisation on property, plant and equipment and intangibles
in the year was £70.5 million (2022: £62.7 million). A further £54.5
million (2022 £52.8 million) of depreciation was charged in respect of
right-of-use assets on capitalised leases.
As previously communicated, our investment in capital expenditure will
continue at an elevated level until 2026 as we provide increased capacity in
our supply chain to support our ambitious growth plans, whilst also growing
and refurbishing our retail estate. In 2024 we will continue the work to
expand Radial Distribution Capacity at our Birmingham and Amesbury sites. We
also expect to start work on the construction of two new sites in the
Midlands, one in Derby and one in the Kettering/Corby area, which will provide
new manufacturing and logistics capacity to support our ambitious growth
plans. We expect the new sites to be operational in 2026/27.
Our shop opening and relocation plans mean that we will invest in circa 170
new company-managed shops in 2024 and refurbish around 150 existing
company-managed stores as we modernise older sites and introduce additional
facilities to support our growth plans. Our forward view on retail capital
expenditure reflects the changing mix of shop openings in the pipeline as we
service additional channels and support growth opportunities, for example the
roll out of equipment to support made-to-order iced drinks. In our retail
estate we target a 25% cash return on investment on new shops and typically
exceed this level. The success of the business means we are opening shops that
trade longer hours and have higher than average sales and returns.
Overall we expect capital expenditure in 2024 to be in the range of £250 to
£280 million, dependent on timing of the planned acquisition of the
additional site in the Kettering/Corby area. We anticipate that capital
expenditure will be around £200 million in each of 2025 and 2026 as we invest
to support our growth plans. Beyond this investment phase we expect
maintenance capital expenditure to be up to 5% of revenue, with additional
expenditure to support further growth.
Working capital
We ended the year with Group net current assets of £25.4 million (2022 £38.9
million) as we continue to carry a robust cash and cash equivalents position
of £195.3 million (2022: £191.6 million) to support investment in our
capital expenditure programme. Excluding cash and cash equivalents, net
current liabilities increased from £152.7 million to £169.9 million over the
year. This reflects the impact of strong growth on trade and other payables.
Pension scheme
The Company's closed defined benefit pension scheme continues to be in a net
asset position; £6.6 million at the end of 2023 (2022: £6.3 million). The
stable balance sheet position reflects small movements in the discount rate
and inflation assumptions which increased liabilities by £2 million, offset
by an equivalent reduction in liabilities as a result of changes in the
mortality assumptions.
The scheme underwent a full actuarial revaluation in 2020, the results of
which showed a deficit in funding. The Company committed to making additional
contributions of £2.5 million each year from 2021 to 2026 to ensure that any
funding requirements are met over the medium term as the scheme works towards
full de-risking. £5.5 million of these committed contributions were
accelerated in 2022 due to volatile market conditions, leaving £4.5 million
of the original commitment to pay in future years.
Cash flow and capital structure
The net cash inflow from operating activities after lease payments in the year
was £257.1 million (2022: £198.8 million). The strength of cash generation
reflected the growth in profits, settlement of two insurance claims related to
business interruption in 2020 and a rephasing of tax payments to reflect full
expensing capital allowances. At the end of the year the Group had net cash
and cash equivalents of £195.3 million (2022: £191.6 million).
The Company's undrawn revolving credit facility, which runs to December 2025,
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). Taking this into account, total available liquidity at the end
of 2023 was £265.3 million (2022: £261.6 million). We intend to refinance
the revolving credit facility in the year ahead.
Our approach to capital allocation can be described as a series of priorities:
1. Invest to adequately maintain the business in order to support its
continued success. As noted above, in normal circumstances we expect
maintenance capital expenditure to be circa 5% of revenue.
2. Maintain a strong balance sheet. Reflecting the inherent gearing in the
Group's leaseholds and working capital we aim, in normal circumstances, to
maintain a year-end net cash position of £50 to £60 million to allow for
seasonality in the working capital cycle and to protect the interests of all
creditors. This will be periodically reassessed as the Group grows.
3. Deliver an attractive ordinary dividend to shareholders. We continue to
target a progressive ordinary dividend, normally around two times covered by
underlying profit after taxation.
4. Selectively invest to grow. As outlined above we intend to continue to
make capital investments in excess of the maintenance level in the coming
years to support our growth plans.
5. Return surplus cash to shareholders. Where net cash on the balance sheet
exceeds our minimum requirement, taking into account that reserved for growth
investments, we expect to return cash to shareholders by way of special
dividends.
The Company's current cash position will normalise in future years following
our investment to support our ambitious growth plan and payment of the special
dividend described above.
Looking forward
We are leveraging our strong financial position to support our ambitious
growth plans. At the same time we will maintain the discipline that has
delivered profitable growth and excellent capital returns, to the benefit of
all of our stakeholders. We remain confident in the future.
Richard Hutton
Chief Financial Officer
5 March 2024
Greggs plc
Consolidated income statement
for the 52 weeks ended 30 December 2023 (2022: 52 weeks ended 31 December
2022)
2023 2023 2023 2022
Excluding exceptional items Exceptional items (see note 3) Total Total
£m £m £m £m
Revenue 1,809.6 - 1,809.6 1,512.8
Cost of sales (710.5) - (710.5) (574.5)
________ ________ ________ ________
Gross profit 1,099.1 - 1,099.1 938.3
Distribution and selling costs (844.5) 0.3 (844.2) (713.2)
Administrative expenses (82.9) - (82.9) (70.7)
Other income - 20.3 20.3 -
________ ________ ________ ________
Operating profit 171.7 20.6 192.3 154.4
Finance expense (net) (4.0) - (4.0) (6.1)
________ ________ ________ ________
Profit before tax 167.7 20.6 188.3 148.3
Income tax (41.0) (4.8) (45.8) (28.0)
________ ________ ________ ________
Profit for the financial year attributable to equity holders of the Parent
126.7 15.8 142.5 120.3
======= ======= ======= =======
Basic earnings per share 125.0p 15.6p 140.6p 118.5p
Diluted earnings per share 123.8p 15.4p 139.2p 117.5p
Greggs plc
Consolidated statement of comprehensive income
for the 52 weeks ended 30 December 2023 (2022: 52 weeks ended 31 December
2022)
2023 2022
£m £m
Profit for the financial year 142.5 120.3
Other comprehensive income
Items that will not be recycled to profit and loss:
Remeasurements on defined benefit pension plans - 0.7
Tax on remeasurements on defined benefit pension plans 0.4 1.8
________ ________
Other comprehensive income for the financial year, net of income tax 0.4 2.5
________ ________
Total comprehensive income for the financial year 142.9 122.8
======= =======
Greggs plc
Consolidated Balance Sheet
at 30 December 2023 (2022: 31 December 2022)
2023 2022
£m £m
ASSETS
Non-current assets
Intangible assets 18.3 13.5
Property, plant and equipment 510.3 390.0
Right-of-use assets 296.6 281.6
Defined benefit pension asset 6.6 6.3
________ ________
831.8 691.4
Current assets
Inventories 48.8 40.6
Trade and other receivables 53.8 50.2
Current tax asset - 0.6
Cash and cash equivalents 195.3 191.6
________ ________
297.9 283.0
________ ________
Total assets 1,129.7 974.4
________ ________
LIABILITIES
Current liabilities
Trade and other payables (211.1) (191.7)
Current tax liabilities (4.9) -
Lease liabilities (52.5) (48.8)
Provisions (4.0) (3.6)
________ ________
(272.5) (244.1)
Non-current liabilities
Other payables (2.3) (2.8)
Lease liabilities (267.1) (252.5)
Deferred tax liability (54.7) (26.3)
Long-term provisions (2.2) (2.7)
________ ________
(326.3) (284.3)
________ ________
Total liabilities (598.8) (528.4)
________ ________
Net assets 530.9 446.0
======= =======
EQUITY
Capital and reserves
Issued capital 2.0 2.0
Share premium account 25.1 23.1
Capital redemption reserve 0.4 0.4
Retained earnings 503.4 420.5
________ ________
Total equity attributable to equity holders of the Parent 530.9 446.0
======= =======
Greggs plc
Statements of changes in equity
for the 52 weeks ended 30 December 2023 (2022: 52 weeks ended 31 December
2022)
52 weeks ended 31 December 2022
Attributable to equity holders of the Company
Issued capital Share premium Capital redemption reserve Retained earnings Total
£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 year
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
======= ======= ======= ======= =======
Greggs plc
Consolidated statement of changes in equity (continued)
52 weeks ended 30 December 2023
Issued capital Share premium Capital redemption reserve Retained earnings Total
£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 year
Profit for the financial year - - - 142.5 142.5
Other comprehensive income - - - 0.4 0.4
________ ________ ________ ________ ________
Total comprehensive income for the year - - - 142.9 142.9
Transactions with owners, recorded directly in equity
Issue of ordinary shares - 2.0 - - 2.0
Purchase of own shares - - - (5.0) (5.0)
Sale of own shares - - - 1.6 1.6
Share-based payment transactions - - - 4.6 4.6
Dividends to equity holders - - - (60.8) (60.8)
Tax items taken directly to reserves - - - (0.4) (0.4)
________ ________ ________ ________ ________
Total transactions with owners - 2.0 - (60.0) (58.0)
________ ________ ________ ________ ________
Balance at 30 December 2023 2.0 25.1 0.4 503.4 530.9
======= ======= ======= ======= =======
Greggs plc
Statements of cashflows
for the 52 weeks ended 30 December 2023 (2022: 52 weeks ended 31 December
2022)
Group
2023 2022
£m £m
Operating activities
Cash generated from operations (see below) 333.0 272.3
Income tax paid (11.9) (13.3)
Interest paid on lease liabilities (9.6) (6.8)
Interest paid on borrowings and other related charges (0.7) (0.7)
________ ________
Net cash inflow from operating activities 310.8 251.5
________ ________
Investing activities
Acquisition of property, plant and equipment (189.5) (100.0)
Acquisition of intangible assets (8.6) (3.3)
Proceeds from sale of property, plant and equipment 0.8 0.9
Proceeds from sale of assets held for sale - 1.6
Interest received 6.1 1.4
________ ________
Net cash outflow from investing activities (191.2) (99.4)
________ ________
Financing activities
Proceeds from issue of share capital 2.0 3.1
Sale of own shares 1.6 -
Purchase of own shares (5.0) (11.0)
Dividends paid (60.8) (98.5)
Repayment of principal on lease liabilities (53.7) (52.7)
________ ________
Net cash outflow from financing activities (115.9) (159.1)
________ ________
Net increase/(decrease) in cash and cash equivalents 3.7 (7.0)
Cash and cash equivalents at the start of the year 191.6 198.6
________ ________
Cash and cash equivalents at the end of the year 195.3 191.6
======= =======
Cash flow statement - cash generated from operations
2023 2022
£m £m
Profit for the financial year 142.5 120.3
Amortisation 3.9 4.7
Depreciation - property, plant and equipment 66.6 58.0
Depreciation - right-of-use assets 54.5 52.8
Net impairment charge - property, plant and equipment 1.4 1.2
Impairment charge - right-of-use assets 2.5 0.0
Loss on sale of property, plant and equipment 2.0 1.0
Release of Government grants (0.5) (0.4)
Share-based payment expenses 4.6 3.6
Finance expense 4.0 6.1
Income tax expense 45.8 28.0
Increase in inventories (8.2) (12.7)
Increase in receivables (3.6) (12.4)
Increase in payables 18.0 30.8
Decrease in provisions (0.5) (0.7)
Decrease in pension liability - (8.0)
________ ________
Cash from operating activities 333.0 272.3
======= =======
Greggs plc
Notes
1. Basis of preparation and accounting policies
The preliminary announcement has been prepared in accordance with
international accounts standards in conformity with the requirements of the
Companies Act 2006 and, as regards the Group accounts, UK-adopted
International Accounting Standards. 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 30 December 2023 or 31 December 2022
but is derived from these accounts. Statutory accounts for the 52 weeks
ended 31 December 2022 have been delivered to the registrar of companies, and
those for the 52 weeks ended 30 December 2023 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 31 December 2022,
which are available on the Company's website www.greggs.co.uk
(http://www.greggs.co.uk) . From 1 January 2023 the following amendments
were adopted by the Group:
· Amendments to IFRS 1 and IAS 12: Deferred Tax related to Assets and
Liabilities arising from a Single Transaction.
· Definition of Accounting Estimates - amendments to IAS 8.
· Disclosure of Accounting Policies - amendments to IAS 1 and IFRS
Practice Statement 2.
Their adoption did not have a material effect on the accounts.
Going concern
The Directors have considered the adoption of the going concern basis of
preparation for these accounts in the context of recent trading performance,
macro-economic conditions and the trading outlook of the Group. At the end of
the reporting period the Group had available liquidity totalling £265.3
million, comprised of cash and cash equivalents of £195.3 million plus an
undrawn revolving credit facility (RCF) of £70.0 million, which is committed
to December 2025. The RCF includes financial covenants that the Group must
comply with related to maximum leverage and a minimum fixed charge cover.
The Directors have reviewed cash flow forecasts prepared for the period up to
December 2025 as well as covenant compliance for that period. In reviewing the
cash flow forecasts the Directors considered the current trading performance
of the Group and the likely capital expenditure and working capital
requirements of its growth plans.
After reviewing these cash flow forecasts and making enquiries, the Directors
are confident that the Company and the Group will have sufficient funds to
continue to meet their liabilities as they fall due for at least 12 months
from the date of approval of the accounts. Accordingly, they continue to adopt
the going concern basis in preparing the annual report and accounts.
Judgements and estimates
In preparing this preliminary announcement, management have made judgements
and estimates that affect the application of accounting policies and the
reported amounts of assets and liabilities, income and expense. The
estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the year in which the
estimate is revised if the revision affects only that year, or in the year of
revision and future years if the revision affects both current and future
years.
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 the
higher of the 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 to the carrying value that would have been recognised
if the original impairment had not occurred, net of depreciation that would
have been charged.
The Group has traded profitably throughout 2023, growing volumes and
increasing underlying profit before tax by 13.1% to £167.7 million. As such
there is not considered to be a global indicator of impairment across the
Group's asset base. Where indicators of impairments 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, the value-in-use has been
calculated using the following assumptions:
· Cash generation for mature shops has been assumed to grow at a rate
of 3.0% for year one of the period of the impairment review, reducing steadily
to 0.0% for year six onwards.
· Earnings before interest, tax, depreciation, amortisation and rent
(EBITDAR) is used as a proxy for net cash flow excluding rental payments;
· The discount rate is based on the Group's pre-tax cost of capital
and at 30 December 2023 was 9.9% (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 value-in-use calculations, a net impairment charge of
£3.9 million has been recognised during the current year (of which £1.4
million relates to fixtures and fittings and £2.5 million relates to
right-of-use assets) resulting in an impairment provision of £6.8 million
being retained at 30 December 2023 in respect of 118 shops (of which £2.8
million relates to fixtures and fittings and £4.0 million relates to
right-of-use assets).
Given the uncertainties in the impairment model, the sensitivities of these
assumptions on the impairment calculation have been tested:
· A 1% increase in the discount rate would result in an increased
impairment of £0.4 million, with an additional seven shops impaired. A 1%
decrease in the discount rate would result in a reduced impairment of £0.3
million, with four fewer shops impaired.
· A 5% increase in the growth assumption for net cash flow (per
annum) would result in a reduced impairment of £1.2 million with ten fewer
shops impaired. A 5% decrease in the growth assumption would result in an
increased provision of £2.2 million with an additional 26 shops impaired.
Determining the rate used to discount lease payments
At the commencement date of property leases the lease liability is calculated
by discounting the lease payments. The discount rate used should be the
interest rate implicit in the lease. However, if that rate cannot be readily
determined, which is generally the case for property leases, the lessee's
incremental borrowing rate is used, being the rate that the individual lessee
would have to pay to borrow the funds necessary to obtain an asset of similar
value to the right-of-use asset in a similar economic environment with similar
terms, security and conditions. As the Group had no suitable external
borrowings from which to determine that rate, judgement is required to
determine the incremental borrowing rate to be used. At the start of each
month a risk-free rate is obtained, linked to the length of the lease and an
adjustment is then made to reflect credit risk. During the year discount rates
in the range 4.4% to 6.8% (2022: 2.5% to 5.9%) were used. Small changes in the
discount rate would have an immaterial impact on the accounts. A 0.1% change
in the discount rate used for each lease is estimated to adjust the total
liabilities by c. £1.5 million.
Determining the lease term of property leases
At the commencement date of property leases the Group normally determines the
lease term to be the full term of the lease, assuming that any option to break
or extend the lease is unlikely to be exercised and it is not reasonably
certain that the Group will continue in occupation for any period beyond the
lease term. Leases are regularly reviewed and will be revalued if it becomes
reasonably certain that a break clause or option to extend the lease will be
exercised.
The leases typically run for a period of 10 or 15 years. In England and Wales,
the majority of the Group's property leases are protected by the Landlord and
Tenant Act 1954 (LTA) which affords protection to the lessee at the end of an
existing lease term.
Judgement is required in respect of those property leases where the current
lease term has expired but the Group has not yet renewed the lease. Where the
Group believes renewal to be reasonably certain and the lease is protected by
the LTA it will be treated as having been renewed at the date of termination
of the previous lease term and on the same terms as the previous lease. Where
renewal is not considered to be reasonably certain the leases are included
with a lease term which reflects the anticipated notice period under relevant
legislation. The lease will be revalued when it is renewed to take account of
the new terms. As at 30 December 2023 the financial effect of applying this
judgement was an increase in recognised lease liabilities of £36.0 million
(31 December 2022: £45.1 million).
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
company-managed retail activities, the Group generates revenues from its
business to business (B2B) 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.
B2B 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.
2023 2023 2023 2022 2022 2022
Retail Business to business Total Retail Business to business Total
company-managed company-managed
shops shops
£m £m £m £m £m £m
Revenue 1,610.9 198.7 1,809.6 1,352.3 160.5 1,512.8
======= ======= ======== ======= ======= ========
Trading profit* 250.1 41.1 291.2 224.6 31.3 255.9
Overheads including profit share (119.5) (101.5)
________ ________
Operating profit before exceptional items 171.7 154.4
Finance expense (net) (4.0) (6.1)
________ ________
Profit before tax (excluding exceptional items) 167.7 148.3
Exceptional items (see note 3) 20.6 -
_______ _______
Profit before tax 188.3 148.3
======= =======
* Trading profit is defined as gross profit less supply chain costs and retail
costs (including property costs) and before central overheads.
3. Exceptional item
The exceptional item relates to:
· a net gain of £16.3 million on the settlement of a 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;
· a net gain of £4.0 million on the settlement of a business
interruption insurance claim relating to flooding at the Treforest bakery in
2020;
· the £0.3m release of a previous provision for onerous leases no
longer required.
4. Taxation
Recognised in the income statement
2023 2023 2023 2022
Excluding exceptional items Exceptional items (see note 3) Total Total
£m £m £m £m
Current tax
Current year 12.2 4.8 17.0 14.1
Adjustment for prior years 0.7 - 0.7 (0.2)
________ ________ ________ ________
12.9 4.8 17.7 13.9
________ ________ ________ ________
Deferred tax
Origination and reversal of temporary differences 29.0 - 29.0 14.1
Adjustment for prior years (0.9) - (0.9) 0.0
________ ________ ________ ________
28.1 - 28.1 14.1
________ ________ ________ ________
Total income tax expense in income statement
41.0 4.8 45.8 28.0
======= ======= ======= =======
5. Earnings per share
Basic earnings per share
Basic earnings per share for the 52 weeks ended 30 December 2023 is calculated
by dividing profit attributable to ordinary shareholders by the weighted
average number of ordinary shares in issue during the 52 weeks ended 30
December 2023 as calculated below.
Diluted earnings per share
Diluted earnings per share for the 52 weeks ended 30 December 2023 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) in issue during the 52 weeks ended 30 December 2023 as calculated
below.
Profit attributable to ordinary shareholders
2023 2023 2023 2022
Excluding exceptional items Exceptional items (see note 3) Total Total
£m £m £m £m
Profit for the financial year attributable to equity holders of the Parent 126.7 15.8 142.5 120.3
======= ======= ======= =======
Basic earnings per share 125.0p 15.6p 140.6p 118.5p
Diluted earnings per share 123.8p 15.4p 139.2p 117.5p
Weighted average number of ordinary shares
2023 2022
Number Number
Issued ordinary shares at start of year 102,112,581 101,897,021
Effect of own shares held (879,975) (511,370)
Effect of shares issued 86,106 100,009
__________ __________
Weighted average number of ordinary shares during the year 101,318,712 101,485,660
Effect of share options in issue 977,753 849,222
__________ __________
Weighted average number of ordinary shares (diluted) during the year 102,296,465 102,334,882
========= =========
6. Dividends
The following tables analyse dividends when paid and the year to which they
relate:
2023 2022
Per share Per share
pence pence
2021 special dividend - 40.0p
2021 final dividend - 42.0p
2022 interim dividend - 15.0p
2022 final dividend 44.0p -
2023 interim dividend 16.0p -
________ ________
60.0p 97.0p
======= =======
The proposed final dividend and special dividend in respect of 2023 amount to
46.0 pence (£46.6 million) and 40.0 pence (£40.6 million) respectively.
These dividends are not included as a liability in these accounts.
2023 2022
£m £m
2021 special dividend - 40.6
2021 final dividend - 42.7
2022 interim dividend - 15.2
2022 final dividend 44.6 -
2023 interim dividend 16.2 -
________ ________
60.8 98.5
======= =======
7. Related parties
The Group has a related party relationship with its subsidiaries, associates,
Directors and executive officers and pension schemes.
There have been no related party transactions in the year which have
materially affected the financial position or performance of the Group.
8. Principal risks and uncertainties
We have a risk management policy and framework in place, both of which have
been approved by the Board. This provides us with a robust structure and
drives a consistent approach.
Our risk process works "top down" and "bottom up". Risks are identified by
considering potential events which could prevent the achievement of our
objectives.
The Operating Board is responsible for maintaining the overall corporate risk
map, which documents the key risks to the achievement of strategic
objectives. We conduct a formal review of our key strategic risks twice a
year via the Risk Committee, with input from each of the risk owners who have
an opportunity to highlight any changes. This allows us to discuss the risk
gradings, and ensure that the level of risk remains consistent with our risk
appetite. The Risk Committee also considers new risks escalated to it at
every meeting, and assesses whether or not these are significant enough to
merit inclusion on the strategic risk register.
The risk process is facilitated by members of the Business Assurance team, who
help identify and assess key risks, as well as providing support in developing
an appropriate risk response. The team also provides a route for matters of
concern to be quickly escalated to the Operating Board and the Risk
Committee. In addition, Business Assurance provides an independent view on
the controls in place over specific risk areas within the internal audit plan.
Risks are assessed under our strategic pillars (including the Greggs Pledge),
and are categorised into four broad groups - strategic, operational, financial
and legal / regulatory.
Our strategic risk register captures a description of each risk, and allocates
an Operating Board member as risk owner. Each risk owner is responsible for
ensuring that appropriate mitigating controls are in place. We then set out
key controls for each risk, and make an assessment of their effectiveness.
The likelihood and impact of each risk arising is then calculated, both before
and after the introduction of mitigating controls.
Developments in 2023
During 2023, we further embedded our Enterprise Risk Management ('ERM')
approach, principally through more regular and structured engagement with our
heads of business functions. They have had input into the identification of
new and emerging risks, as well as opportunities to raise any specific areas
of concern. Risk workshops have been held for our strategic risks, involving
the risk owner and all relevant subject matter experts, to ensure that the
content of the register remains accurate and up to date.
We have worked with our insurance brokers in conducting an overall review of
our approach to insurance, a significant mitigating control against a number
of our strategic risks. This has given us assurance that our insurance model
is fit for purpose and offers value for money.
Our brokers also supported us with facilitating a Board risk workshop during
the year. This provided detail on our risk management approach and
framework, linking to the UK Corporate Governance Code. Board members then
reviewed our existing strategic risks, discussed risk appetite, and considered
any new and emerging risks.
We recruited additional resource within the Business Assurance team to ensure
that we are able to continue to support risk management development across the
growing business.
Work has been undertaken to further develop our strategic risk register, to
better align it with the needs of the business. Although now more user
friendly, there is still opportunity for improvement, and we continue to build
on our existing model.
Plans for 2024
Sessions with heads of business functions will continue, and we will also
increase our engagement with the functional management teams, which will help
to widen our knowledge base.
We will review our approach to risk appetite, and apply an assessment to each
category of risk, rather than considering it on a risk-by-risk basis.
With regard to specific areas of risk, our Greggs Pledge commitments will be
scrutinised and a risk register entry completed for each. We will also
document our fraud risk and ensure that this is properly managed.
Climate risks
We are continuing to develop our understanding of material climate-related
risks and opportunities. Physical and transition risks have been identified
and are being monitored as a standing item on our Risk Committee agenda. A
"failure to effectively respond to climate related impacts on our business"
has been included within our strategic risk register, allowing us to document
and monitor the associated controls as part of our routine risk approach. We
remain of the view that climate risk does not constitute a principal risk to
the business within the time horizon of our current strategic plan. However,
we keep under review changes, particularly in legislation and customer
preferences, to identify any increase in the level of risk.
Emerging risks
We conduct an emerging risk review on a quarterly basis, and report our
findings to the Risk Committee and the Board. Various sources of information
are used to ensure this is as complete as possible:
· Horizon scanning by subject matter experts throughout the business,
with issues identified being escalated to our Operating Board via a monthly
risk dashboard;
· Engaging with our functional heads to discuss any areas of concern
within their remit;
· Monitoring customer and consumer trends;
· Taking input from our advisors and other specialists with whom we
work.
Current areas of emerging and escalating risks which we are monitoring include
supplier or partner actions damaging our reputation, reliance on third parties
for business critical systems and economic pressures.
Risk appetite
Risk appetite is the level of risk which we are prepared to take to meet our
strategic objectives. In determining this, we recognise that there is a
balance between a prudent approach to risk and sufficient flexibility to take
appropriate opportunities when they arise.
Our appetite for taking risks depends on the category of risk in question.
For example, we would be prepared to take more risk in the pursuit of our
strategy than in areas such as food safety, where compliance with legislation
drives a zero tolerance of risk. We assess our appetite on an individual
risk basis, and then determine whether the current level of risk is within our
acceptable tolerance, before identifying further mitigating action if
necessary.
Changes to principal risk disclosures
A principal risk is a risk or combination of risks that can seriously affect
our performance, future prospects or reputation. Not all of our strategic
risks are considered to be principal risks, only those which would have a
significant impact on our ongoing viability within the timeframe of our
strategic plan.
There have been no significant changes to our principal risks during 2023.
Changes made within our strategic risk register had the aim of improving
visibility of controls, and clarifying risk ownership, through sub-dividing
existing risks into two or three. However, this does not impact on the
principal risk which remains consistent.
The following table sets out the principal risks, shows the movement during
the year, and describes the impact and key mitigations. The list is not in
priority order, and does not include all the risks which are faced by the
business. Other risks which are not included here could also have a
negative impact on the business, including those which are not presently
known to us. The position described below is a summary at the time of
publishing this report.
Principal risks and uncertainties
Risk & description Impact Key mitigations Strategic Pillars Movement
Business interruption event
We could suffer a significant business interruption event impacting one or We would potentially be unable to supply our customers for a period of time. We have contingency plans in place for our sites, which are tested 1,2,3 No change
more of our key locations. For example a prolonged power outage, denial of This could impact our own customers, those of our franchise partners, and also periodically. This includes prioritising our key lines in the event of any
access or an incident resulting in physical damage. our wholesale sales through Iceland. issues. 4,5
Operational Our diversified product range from multiple production sites provides
alternatives for our customers.
We have flexibility within our network, to enable us to continue our
operations.
Insurance cover is in place, and we liaise closely with insurers, particularly
when designing new sites or improving existing premises.
Risk & description Impact Key mitigations Strategic Pillars Movement
Supply chain disruption
External supply could be interrupted, resulting from issues such as third A prolonged outage at one of our key suppliers could impact on our ability to We avoid single-source supply for key ingredients. 1,2,3 No change
party business interruption, or unexpected product shortage. produce some of our range, or otherwise affect our ability to operate.
4,5
In the event of interruptions, we are agile in our response to implementing
Operational contingency plans. These are regularly tested.
Relationships with suppliers are managed centrally by our Procurement teams,
including a risk assessment process
Cyber & data security incident
A cyber incident may occur which impacts on our IT infrastructure. We could suffer a significant loss of data, resulting in litigation and fines. Third parties provide expertise and support, including regular penetration
testing and a Security Operations Centre monitoring our networks around the
Our operations could be disrupted for a period of time. clock. 2,3,4 Increased
The external threat environment is constantly evolving.
Our technical measures are constantly reviewed and updated in line with
changing requirements and recognised information security control sets. An
Operational independent assurance programme is in place to review this.
Ongoing training and advice are provided to our colleagues to improve
awareness and strengthen our detection and prevention capabilities.
Risk & description Impact Key mitigations Strategic Pillars Movement
Prolonged system downtime/ interruption
As we streamline the business and embrace greater flexibility in our working We may be unable to run our production systems for a period of time. This We continue to invest in our IT infrastructure, including utilising cloud
arrangements, we increase our reliance on technology. Any system could ultimately impact on our ability to supply our shops. based solutions and increasing resilience within our network.
interruption becomes more disruptive, with an increased risk of it having an
2,3,4 No change
impact on business operations.
Data maybe unavailable or lost, making it difficult for us to operate. We have established disaster recovery processes which are tested periodically.
Operational
Our Enterprise Resource Planning system incorporates multiple layers of
resilience.
External partners are engaged to provide specialist support and expertise when
required.
Deterioration of relationship with key partner
We continue to work closely with franchise, wholesale and delivery partners in A lack of alignment could result in targets not being met, due to performance We work with a number of respected partners, and are continuing to broaden the
order to broaden our service offer into locations where our customers want us not being optimised. The brand's reputation could be damaged, and the range of businesses with whom we operate. This reduces the reliance on any one
to be. There is a risk that our strategy and goals are not fully aligned. relationship would be put at risk. individual partner. 1,2,3 No change
4
Strategic Contracts and service level agreements are in place, along with a robust
onboarding process for new partners. Ongoing performance is measured.
Regular dialogue ensures an alignment of goals, and early identification of
any issues.
Risk & description Impact Key mitigations Strategic Pillars Movement
Ability to attract / retain / motivate people
Our people are an essential part of our business and our culture. We may be unable to continue to deliver the product range and service We recognise that our people are a key asset to the business, and offer
Particularly in the current environment, we may be unable to attract and standards that our customers want and expect from us. competitive packages, along with extensive training and development
retain the right talent within Greggs.
opportunities. 1,2,3 No change
4,5
The loss of existing resource results in additional recruitment, which in turn
Operational creates workload and training requirements. Colleagues have a range of ways to communicate their ideas for improvement,
including annual opinion surveys, listening groups and networks focusing on
Ultimately, we may be unable to grow the business in line with our strategy minorities.
Our succession planning process has been extended to encompass our wider
management teams.
Recruitment processes have been improved to allow us to fill vacancies quickly
and effectively.
Risk & description Impact Key mitigations Strategic Pillars Movement
Damage to reputation
As we grow our social media presence, and engage more with our customers, Customers could lose their trust in the brand, ultimately impacting on our We have a robust crisis management process in place, which we test
there is a risk of damage to our brand if we fail to respond quickly and ability to grow our estate and achieve our objectives. Shareholder value regularly. This is supported by appropriate third parties (such as PR
appropriately to an incident. could be reduced. agencies) where specialist advice is required. 2,3 No change
Strategic Brand risk has been considered as a "deep dive" topic by our Risk Committee
All of our shops are required to follow established procedures, to ensure that
our food complies with required standards.
Our audit team assess compliance with standards, across both company-operated
and franchise shops.
Risk & description Impact Key mitigations Strategic Pillars Movement
Significant Food Safety incident / product quality issue
We may produce and/or sell products which are unsafe, or not of the There could be harm to our customers or colleagues. All new external suppliers require formal approval.
appropriate quality. This could be a result of incorrect labelling of
allergens, product contamination, or a failure to correctly follow procedures. 1,2,3 No change
Our reputation as a trusted brand could be significantly impacted, which in All ingredients and products have specifications, to ensure consistency. 4,5
turn would affect our financial performance. We could also be exposed to
Operational significant fines.
Allergen risk assessments are in place.
Our teams are trained, with specialists able to provide additional knowledge.
We have a Primary Authority relationship in place, which gives independent
assurance that our processes and procedures are adequate.
Audits are undertaken by our internal teams, and external bodies, with a focus
on food safety.
Our complaints process ensures all matters are investigated. When a root
cause identified, we take action to address it.
Risk & description Impact Key mitigations Strategic Pillars Movement
Changes in the regulatory landscape
New regulatory requirements could be implemented, driven by environmental, It may be necessary for us to make changes to our product range. Without the Regular horizon scanning activities are undertaken by our teams, and we
health or other concerns. ability to respond quickly, we could lose market share. receive advisory information across all professional disciplines.
1,2,3 No change
4
Legal / Regulatory We believe that we may have greater exposure in some areas than our We engage with Trade Associations and government bodies to ensure we are
competitors. updated with developments.
Participating in industry forums gives us an opportunity to influence
decision-making.
"Strategic Pillars" key:
1 Great tasting, freshly prepared food
2 Best customer experience
3 Competitive supply chain
4 First class support teams
5 The Greggs Pledge
9. Alternative Performance Measures
The Group uses alternative performance measures ('APM's) which, although
financial measures of either historical or future performance, financial
position or cash flows, are not defined or specified by IFRSs. The Directors
use a combination of these APMs and IFRS measures when reviewing the
performance, position and cash of the Group.
Like-for-like (LFL) sales growth - compares year-on-year cash sales in our
company-managed shops, with a calendar year's trading history and is
calculated as follows:
2023 2022
£m £m
Current year LFL sales 1,444.3 1,239.8
Prior year LFL sales 1,270.0 1,052.2
________ ________
Growth in LFL sales 174.3 187.6
======== ========
LFL sales growth percentage 13.7% 17.8%
Return on capital employed - calculated by dividing profit before tax by the
average total assets less current liabilities for the year.
2023 2023 2022
Underlying Including exceptional items (see note 3) Total
£m £m £m
Profit before tax 167.7 188.3 148.3
======= ======= =======
Capital employed:
Opening 730.3 730.3 681.5
Closing 857.2 857.2 730.3
------------- ------------- -------------
Average 793.8 793.8 705.8
======= ======= =======
Return on capital employed 21.1% 23.7% 21.0%
Net cash inflow from operating activities after lease payments - calculated by
deducting the repayment of principal of lease liabilities from net cash flow
from operating activities
2023 2022
£m £m
Net cash inflow from operating activities 310.8 251.5
Repayment of principal of lease liabilities (53.7) (52.7)
------------- -------------
Net cash inflow from operating activities after lease payments 257.1 198.8
======= =======
Ratio of IFRS16 'right of use' charges on leased property assets to
company-managed shop sales - calculated by dividing land and buildings
right-of-use asset charges by company-managed shop turnover
2023 2022
£m £m
Company-managed shop turnover 1,610.9 1,352.3
======= =======
Land and buildings right-of-use assets depreciation 54.5 51.6
Land and buildings right-of-use assets interest charge 9.6 6.8
------------- -------------
Right-of-use asset charges 64.1 58.4
======= =======
4.0% 4.3%
======= =======
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