TIDMGRG
RNS Number : 3200H
Greggs PLC
03 August 2021
3 August 2021
INTERIM RESULTS FOR THE 26 WEEKSED 3 JULY 2021
Greggs is a leading UK food-on-the-go retailer,
with more than 2,100 retail outlets throughout the country
A strong first half recovery
First half financial highlights
H1 2021 H1 2020 H1 2019
Total sales GBP546.2m GBP300.6m GBP546.3m
---------- ----------- ----------
Underlying pre-tax profit/(loss)** GBP55.5m (GBP64.5m) GBP40.7m
---------- ----------- ----------
Statutory pre-tax profit/(loss) GBP55.5m (GBP65.2m) GBP36.7m
---------- ----------- ----------
Diluted earnings/(loss) per
share 43.2p (53.4p) 28.5p
---------- ----------- ----------
Ordinary interim dividend
per share 15.0p Nil 11.9p
---------- ----------- ----------
-- Two-year LFL* for first half down 9.2%
-- Two-year LFL* positive since non-essential retail reopened
-- Strong cash position and good liquidity, with net cash at period end of GBP118.3m
* Like-for-like (LFL) company-managed shop sales performance
against comparable period in 2019
** 2020 H1 and 2019 H1 underlying profit before exceptional
charges (2020: GBP0.7m; 2019: GBP4.0m) and taxation
Operational and strategic development
-- Shop opening pipeline : 48 new shops opened in first half, 11
closures; 2,115 shops as at 3 July 2021. Anticipate circa 100 net
new shop openings in 2021; expected to create 500 new retail roles
in second half
-- New channels : delivery service now available from 837 shops;
delivery sales represented 8.5% of company-managed shop sales in
the first half of 2021
-- New Greggs Rewards app launched offering customer rewards across the full range of purchases
-- New product development : continued to drive menu development, including an expanded range of vegan-friendly products and options for other diets and dayparts
-- Investment in supply chain : new automated frozen distribution facility commenced operation
-- Greggs Pledge commitments well-received by colleagues, customers and investors
"Greggs once again showed its resilience in a challenging first
half, emerging from the lockdown months in a strong position and
rebuilding sales as social restrictions were progressively
relaxed.
"We continue to make good progress with our strategic
priorities, growing the shop estate and investing in our digital
capabilities to compete in all channels and dayparts of our
market.
"Whilst there continue to be general uncertainties in the
market, given our recent performance we now expect full year profit
to be slightly ahead of our previous expectation."
- Roger Whiteside OBE, Chief Executive
ENQUIRIES:
Greggs plc Hudson Sandler
Roger Whiteside, Chief Executive Wendy Baker / Nick Moore
Richard Hutton, Finance Director Tel: 020 7796 4133
Tel: 0191 281 7721
An audio webcast of the analysts' presentation will be available
to download later today at http://corporate.greggs.co.uk/
CHIEF EXECUTIVE'S REPORT
Greggs once again showed its resilience in a challenging first
half, emerging from the lockdown months in a strong position to
rebuild sales as social restrictions were progressively relaxed.
Total sales for the 26 weeks to 3 July 2021 were GBP546 million and
like-for-like sales in company-managed shops, measured on a
two-year basis, were 9.2 per cent lower than the equivalent period
of 2019.
Sales in the second quarter exceeded our expectations,
delivering like-for-like sales growth versus the second quarter of
2019. We continue to make good progress with our strategic
priorities, growing the shop estate and investing in our digital
capabilities to compete in all channels and dayparts of the
food-on-the-go market.
Operational review
Sales developed progressively through the first half in response
to our recovery initiatives and the easing of social restrictions.
To provide a consistent reference point we are currently reporting
like-for-like sales on a two-year basis, against the level achieved
in 2019. On this basis sales in the first quarter were 21.5 per
cent lower than the 2019 level. In the second quarter the lifting
of restrictions, particularly the re-opening of non-essential
retail, made a significant difference to footfall and resulted in
2.8 per cent growth on a two-year like-for-like basis. Walk-in
customer transactions were still below the level seen in 2019 but
were compensated for by higher average transaction values and
increases in delivery sales.
We continue to experience differential performance by location
type across our broad and diversified estate. Shops in public
transport hubs and large city centres continue to lag the overall
Group recovery rate whilst customers staying closer to home are
supporting our heartland shops in suburban and high street areas.
The strongest locations continue to be shops typically accessed by
car, including many operated by our franchise partners.
The strongest-performing parts of the estate are also the
locations where we see significant potential for further expansion,
making Greggs accessible to more customers on-the-go. In the first
half of 2021 we opened 48 new shops (including 17 franchised units)
and closed 11 shops, giving a total of 2,115 shops (of which 343
are franchised) trading at 3 July 2021.
Strategic development
We have refreshed our five-year plan and, in doing so, have
reinforced our confidence in Greggs' ability to deliver
sustainable, profitable growth into the long term. The key areas of
strategic development in the first half are outlined below; we
expect to be in a position to provide a more detailed update on our
plans later in the year.
Estate growth
Greggs has the opportunity to expand its UK estate to at least
3,000 shops, presenting a multi-year growth path. Our strong,
proven covenant is attractive to landlords and opportunities are
now greater in number than they were before the pandemic. As well
as growing the overall size of the estate we will continue to
relocate existing shops to enable them to better deal with the
increased demands of multi-channel growth. Our latest shop design,
to be used for all new shops and relocations, will support
collection of digital orders and incorporate kitchen modifications
to allow better product customisation and menu development.
Seventy per cent of our shop openings in the first half were in
car-accessed locations such as roadsides, petrol stations, retail
parks and supermarkets. We have also been able to gain access on
improved terms to sites in central London and transport
interchanges, which we see being good strategic sites in the medium
term. Our pipeline of new shop opportunities remains strong and we
expect around 100 net openings in the year as a whole, of which
around half are anticipated to be with franchise partners, creating
approximately 500 new retail roles in the second half of 2021.
New channels and dayparts
Alongside estate expansion to serve our walk-in customers,
Greggs has invested to meet customer needs for food via new
channels and at additional times of the day. The most developed of
these is our delivery partnership with Just Eat, which continues to
grow and is now available across the UK from 837 of our shops. In
the first half of 2021 delivery sales represented 8.5% of
company-managed shop sales.
Customers are becoming more used to pre-ordering food, either
for delivery or to guarantee availability when they 'click and
collect'. Pre-ordering presents us with the opportunity to improve
availability of our standard menu as well as offering personalised
choices where customers can, for example, adapt the ingredients in
their sandwich or the topping on their pizza. Pre-ordering is a
market trend that we believe will support, in particular, our
ambition to grow sales in the evening daypart, a segment of the
market where we are currently underrepresented. Delivery will also
have a role to play here, giving customers convenient access to
Greggs' products wherever they are throughout the day.
Greggs Rewards
In today's consumer environment, it is key to have strong
digital capabilities; we have invested significantly in recent
years in this area to strengthen our customer proposition. Our new
Greggs Rewards app and new customer website have recently been
launched to make the customer journey as convenient as possible.
Our new app offers customers rewards across the full range of their
purchases and is integrated with our click and collect service,
described above. Improved features such as an upgraded shop finder
and access to nutritional information all work to make the customer
journey with us easier.
Greggs Rewards will allow us to strengthen our relationship with
our customers, better understanding their needs and providing us
with improved communication tools to encourage increased visit
frequency and wider menu participation.
Menu development
Our focus during the Covid pandemic has been to maintain full
service on our best-selling lines. We have seen strong growth in
traditional areas such as our bakery range, which has been
supported by our recent investments in centralised production
platforms.
Following a temporary suspension in 2020, our new product
development pipeline has been restarted. Recent launches have
included new options in our vegan-friendly range such as a 'Vegan
Ham & Cheeze Baguette' and a vegan-friendly breakfast sausage.
Our latest line, the 'Vegan Sausage, Bean & Cheeze Melt' is due
in our shops from 5 August.
We continue to develop our menu, adapting to offer greater
choice in growth categories such as coffee and hot food, and
reflecting consumer demand for dietary variety. Further progress
has been made in developing the health credentials of our food and
drink, reducing fat, salt and sugar wherever possible and offering
more choices in low-calorie and vegan-friendly ranges. We are
increasing our in-store capabilities with the roll-out of more
sophisticated coffee machines that can offer decaffeinated and
dairy-free options. We are developing new offers in the delivery
channel including sharing-box combinations and additional pizza
toppings.
Supply chain
The growth opportunity ahead of us will require further
development of our supply chain to meet demand for our in-house
specialities and to create the logistical capacity to reach many
more shops. Our centralised manufacturing platforms have proved to
be an efficient, high-quality basis from which to supply the bakery
favourites that we are famous for and will be the template for
capacity expansion in the years ahead. In the short term we have
plans to increase pizza capacity with a new manufacturing line at
our Enfield manufacturing site and have already begun operating
from our new automated frozen distribution facility at Balliol Park
in Newcastle upon Tyne.
Support systems
Systems capability is key to meeting our growth ambitions. The
successful deployment of our SAP platform will complete in the
second half and we have moved forward rapidly with new Microsoft
Office capabilities, cloud database and reporting systems and
leading customer relationship management solutions. Our support
teams have successfully adapted to remote working and we are
increasingly seeing opportunity to bring technology solutions to
our shop environment, making tasks easier and enabling more choice
for customers. We have begun deployment of our new shop sandwich
production and labelling systems to meet new legislative
requirements due by 1 October, and these are also key for our
made-to-order ambitions.
Greggs Pledge
Carrying out our plans in a responsible manner has always been
an essential element of our approach. In February 2021 we launched
the Greggs Pledge, our commitment to further improve our ESG
credentials in ten key areas. This has been well-received by
colleagues, customers and investors alike and will challenge us to
be an even better business for the long term.
Board changes
As previously announced, Peter McPhillips retired as an
independent non-executive director on 31 July 2021. Peter has
provided great support and commitment to the Board and management
team during a period of significant change for the business and its
supply chain operations. On 21 June 2021 the Board announced the
appointment of Mohamed Elsarky as an independent non-executive
director. Mohamed is an experienced international food
manufacturing executive, who has held senior positions in Kellogg,
Danone, and Godiva Chocolatier. He is currently Executive Chairman
of Artisan du Chocolat, and has previously held non-executive
director positions including at Nomad Foods, a company listed on
the New York Stock Exchange.
We thank Peter for his support and guidance over the past seven
years and look forward to working with Mohamed as we develop the
business further. Sandra Turner, senior independent director, will
take over from Peter as non-executive director responsible for
overseeing colleague engagement.
Financial performance
Pre-tax profit was GBP55.5 million in the first half of 2021 (H1
2020: GBP64.5 million loss, H1 2019: GBP40.7m profit, both before
exceptional costs). Structural cost reduction resulting from our
actions in 2020 to reduce overheads and logistics costs, and the
temporary benefit of relief from business rates, helped to mitigate
the impact of restricted trading in the first quarter. The better
performance in the second quarter was further supported by stronger
sales, relatively low levels of food input inflation and strong
margins as a result of good cost control.
The improved performance and trading outlook of our shops
resulted in us deciding to repay all CJRS support received in the
first half and to reverse GBP2.0 million of previously-provided
asset impairment charges. Looking forward, commodity cost pressure
is increasing; nonetheless overall we still expect relatively
modest food input inflation in 2021 as a result of our forward
purchasing cover.
The net financing expense of GBP3.9 million in the period (2020:
GBP3.0 million, 2019: GBP3.2 million) comprised GBP3.1 million in
respect of the IFRS 16 interest charge on lease liabilities, GBP0.6
million of facility charges under the Company's (undrawn) financing
facilities and GBP0.2m relating to the Company's defined benefit
pension scheme and foreign exchange losses.
Diluted earnings per share for the period were 43.2 pence (2020:
53.4 pence loss, 2019: 28.5 pence earnings).
Capital expenditure and financial position
Capital expenditure during the first half was GBP23.5 million
(2020: GBP33.6 million; 2019: GBP33.2 million) as we completed work
on our automated frozen distribution facility, commenced the roll
out of new coffee machines and added 31 new shops to the
company-managed estate. We now expect total capital expenditure in
2021 to be circa GBP65 million (2020: GBP58.7 million; 2019:
GBP86.0m).
The recovery in trading performance in the first half, and the
related working capital inflow, generated strong cash flow and we
ended the period with a cash balance of GBP118.3 million (27 June
2020: GBP26.2 million net debt). In addition, the Company has
access to a revolving credit facility that allows it to draw up to
GBP100 million in committed funds, subject to it retaining a
minimum liquidity of GBP30 million (i.e. maximum net borrowings are
GBP70 million).
Dividends
Greggs last paid a dividend in October 2019, after which the
planned final dividend for 2019 was cancelled in order to preserve
cash in the early months of the pandemic. Whilst there are still
significant uncertainties in the months ahead, we now have a strong
cash position and additional financing facilities to draw on if
required.
With all this in mind the Board has declared an interim ordinary
dividend of 15.0 pence per share. It is the Board's current
intention to target a full-year ordinary dividend that is around
two times covered by underlying earnings.
The Board acknowledges that the business will be carrying a
higher-than-normal cash balance in the short term but believes this
is a prudent position to adopt given the backdrop, and intends to
return any surplus cash to shareholders in due course, in line with
its longstanding policy.
The interim dividend will be paid on 8 October 2021 to those
shareholders on the register at the close of business on 10
September 2021.
Outlook
As we reported in our most recent trading update the level of
sustained sales recovery in recent months was stronger than we had
anticipated. In the most recent four weeks to 31 July,
like-for-like sales in company-managed shops, measured on a
two-year basis, were 0.4 per cent above the equivalent period of
2019.
Despite the general uncertainties in the market, Greggs has
traded well in recent months and demonstrated the resilience of its
business model as well as its potential for longer-term growth as a
multi-channel food-on-the-go brand. As a result, we now expect full
year profit to be slightly ahead of our previous expectation.
Roger Whiteside
Chief Executive
3 August 2021
Greggs plc
Consolidated income statement
For the 26 weeks ended 3 July 2021
26 weeks ended 26 weeks ended 53 weeks ended
3 July 2021 27 June 2020 2 January 2021
--------------- --------------- ----------------
Total Total Total
--------------- --------------- ----------------
GBPm GBPm GBPm
Revenue 546.2 300.6 811.3
Cost of sales (196.3) (122.9) (300.4)
------------------------------------------------------------------ --------------- --------------- ----------------
Cost of sales excluding exceptional items (196.3) (122.2) (299.6)
Exceptional items (see note 4) - (0.7) (0.8)
------------------------------------------------------------------ --------------- --------------- ----------------
Gross profit 349.9 177.7 510.9
Distribution and selling costs (257.8) (210.6) (465.8)
Administrative expenses (32.7) (29.3) (52.1)
Operating profit/(loss) 59.4 (62.2) (7.0)
Finance expense (3.9) (3.0) (6.7)
Profit/(loss) before tax 55.5 (65.2) (13.7)
Income tax (11.1) 11.4 0.7
Profit/(loss) for the period attributable to equity holders of
the parent 44.4 (53.8) (13.0)
=============== =============== ================
Basic earnings/(loss) per share 43.8p (53.4p) (12.9p)
Diluted earnings/(loss) per share 43.2p (53.4p) (12.9p)
Greggs plc
Consolidated statement of comprehensive income
For the 26 weeks ended 3 July 2021
26 weeks ended 26 weeks ended 53 weeks ended
3 July 2021 27 June 2020 2 January 2021
GBPm GBPm GBPm
Profit/(loss) for the period 44.4 (53.8) (13.0)
Other comprehensive income/(expense)
Items that will not be recycled to profit and loss:
Remeasurements on defined benefit pension plans 13.8 (13.8) (11.2)
Tax on remeasurements on defined benefit pension plans (3.5) 2.6 2.1
Other comprehensive income/(expense) for the period, net of
income tax 10.3 (11.2) (9.1)
--------------- --------------- ----------------
Total comprehensive income/(expense) for the period 54.7 (65.0) (22.1)
=============== =============== ================
Greggs plc
Consolidated balance sheet
as at 3 July 2021
3 July 2021 27 June 2020 2 January 2021
Restated
(see page 14)
GBPm GBPm GBPm
ASSETS
Non-current assets
Intangible assets 15.0 16.0 15.6
Property, plant and equipment 340.3 354.0 345.3
Right-of-use assets 269.2 264.3 270.1
Defined benefit pension asset 4.3 - -
628.8 634.3 631.0
Current assets
Inventories 24.8 20.8 22.5
Trade and other receivables 36.3 23.5 39.4
Current tax asset - 4.9 -
Cash and cash equivalents 118.3 52.9 36.8
Investments - short-term deposits - 70.0 -
179.4 172.1 98.7
Total assets 808.2 806.4 729.7
------------ --------------- ---------------
LIABILITIES
Current liabilities
Trade and other payables (115.5) (70.7) (91.1)
Current tax liability (1.3) - -
Borrowings - (150.0) -
Lease liabilities (49.4) (54.5) (48.6)
Provisions (3.1) (5.6) (4.4)
(169.3) (280.8) (144.1)
Non-current liabilities
Other payables (3.5) (4.0) (3.7)
Defined benefit pension liability - (14.4) (11.9)
Lease liabilities (240.1) (224.6) (243.1)
Deferred tax liability (5.9) (1.0) (2.3)
Long-term provisions (3.8) (3.5) (3.0)
(253.3) (247.5) (264.0)
Total liabilities (422.6) (528.3) (408.1)
------------ --------------- ---------------
Net assets 385.6 278.1 321.6
============ =============== ===============
EQUITY
Capital and reserves
Issued capital 2.0 2.0 2.0
Share premium account 19.3 14.8 15.7
Capital redemption reserve 0.4 0.4 0.4
Retained earnings 363.9 260.9 303.5
Total equity attributable to equity holders of the Parent 385.6 278.1 321.6
============ =============== ===============
Greggs plc
Consolidated statement of changes in equity
For the 26 weeks ended 3 July 2021
26 weeks ended 27 June 2020 (Restated - see page 14)
Issued Share Capital Retained Total
capital premium redemption earnings
reserve
GBPm GBPm GBPm GBPm GBPm
Balance at 29 December 2019 2.0 13.5 0.4 325.2 341.1
Total comprehensive income for the period
Loss for the period - - - (53.8) (53.8)
Other comprehensive income - - - (11.2) (11.2)
Total comprehensive income for the period - - - (65.0) (65.0)
Transactions with owners, recorded directly in equity
Issue of ordinary shares - 1.3 - - 1.3
Sale of own shares - - - 1.4 1.4
Purchase of own shares - - - (0.5) (0.5)
Share-based payment transactions - - - 1.4 1.4
Tax items taken directly to reserves - - - (1.6) (1.6)
Total transactions with owners - 1.3 - 0.7 2.0
--------- --------- ------------ ---------- -------
Balance at 27 June 2020 2.0 14.8 0.4 260.9 278.1
========= ========= ============ ========== =======
53 weeks ended 2 January 2021
Issued Share Capital Retained Total
capital premium redemption earnings
reserve
GBPm GBPm GBPm GBPm GBPm
Balance at 29 December 2019 2.0 13.5 0.4 325.2 341.1
Total comprehensive income
for the period
Loss for the financial year - - - (13.0) (13.0)
Other comprehensive income - - - (9.1) (9.1)
--------- --------- ------------ ---------- -------
Total comprehensive income
for the year - - - (22.1) (22.1)
Transactions with owners, recorded
directly in equity
Issue of ordinary shares - 2.2 - - 2.2
Sale of own shares - - - 1.5 1.5
Purchase of own shares - - - (0.5) (0.5)
Share-based payment transactions - - - 0.9 0.9
Tax items taken directly to
reserves - - - (1.5) (1.5)
--------- --------- ------------ ---------- -------
Total transactions with owners - 2.2 - 0.4 2.6
--------- --------- ------------ ---------- -------
Balance at 2 January 2021 2.0 15.7 0.4 303.5 321.6
========= ========= ============ ========== =======
26 weeks ended 3 July 2021
Issued Share Capital Retained Total
capital premium redemption earnings
reserve
GBPm GBPm GBPm GBPm GBPm
Balance at 3 January 2021 2.0 15.7 0.4 303.5 321.6
Total comprehensive income for the period
Profit for the period - - - 44.4 44.4
Other comprehensive income - - - 10.3 10.3
--------- --------- ------------ ---------- ------
Total comprehensive income for the period - - - 54.7 54.7
Transactions with owners, recorded directly in equity
Issue of ordinary shares - 3.6 - - 3.6
Sale of own shares - - - 0.3 0.3
Share-based payment transactions - - - 2.5 2.5
Tax items taken directly to reserves - - - 2.9 2.9
--------- --------- ------------ ---------- ------
Total transactions with owners - 3.6 - 5.7 9.3
--------- --------- ------------ ---------- ------
Balance at 3 July 2021 2.0 19.3 0.4 363.9 385.6
========= ========= ============ ========== ======
Greggs plc
Consolidated statement of cash flows
For the 26 weeks ended 3 July 2021
26 weeks ended 26 weeks ended 53 weeks ended
3 July 2021 27 June 2020 2 January 2021
Restated
(see page 14 )
GBPm GBPm GBPm
Cash flows from operating activities
Cash generated from / (absorbed by) operations (see page 13) 130.8 (56.7) 61.6
Income tax paid (6.7) (5.7) (10.7)
Interest paid on lease liabilities (3.1) (3.3) (6.5)
Interest paid on loans and borrowings (0.8) (0.8) (0.8)
Net cash inflow/(outflow) from operating activities 120.2 (66.5) 43.6
--------------- --------------- ----------------
Cash flows from investing activities
Acquisition of property, plant and equipment (17.3) (36.1) (58.8)
Acquisition of intangible assets (1.6) (1.2) (2.8)
Proceeds from sale of property, plant and equipment 0.2 0.6 1.8
Interest received - 0.5 0.6
Acquisition of investments - (70.0) -
Net cash outflow from investing activities (18.7) (106.2) (59.2)
--------------- --------------- ----------------
Cash flows from financing activities
Proceeds from issue of share capital 3.6 1.3 2.2
Sale of own shares 0.3 1.4 1.5
Purchase of own shares - (0.5) (0.5)
Proceeds from loans and borrowings - 150.0 150.0
Repayment of loans and borrowings - - (150.0)
Repayment of principal of lease liabilities (23.9) (17.9) (42.1)
Net cash (outflow) / inflow from financing activities (20.0) 134.3 (38.9)
--------------- --------------- ----------------
Net increase / (decrease) in cash and cash equivalents 81.5 (38.4) (54.5)
Cash and cash equivalents at the start of the period 36.8 91.3 91.3
Cash and cash equivalents at the end of the period 118.3 52.9 36.8
=============== =============== ================
Greggs plc
Consolidated statement of cash flows (continued)
For the 26 weeks ended 3 July 2020
Cash flow statement - cash generated from operations
26 weeks ended 26 weeks ended 53 weeks ended
3 July 2021 27 June 2020 2 January 2021
GBPm GBPm GBPm
Profit/(loss) for the period 44.4 (53.8) (13.0)
Amortisation 2.2 2.0 4.0
Depreciation - property, plant and equipment 26.9 27.6 56.9
Depreciation - right-of-use assets 23.9 25.9 51.9
Impairment - property, plant and equipment (0.6) 3.7 5.2
Impairment - right-of-use assets (1.4) 3.8 8.8
Loss on sale of property, plant and equipment 0.3 0.4 0.5
Release of government grants (0.2) (0.2) (0.5)
Share-based payment expenses 2.5 1.4 0.9
Finance expense 3.9 3.0 6.7
Income tax expense / (credit) 11.1 (11.4) (0.7)
(Increase) / decrease in inventories (2.2) 3.1 1.4
Decrease / (increase) in receivables 3.1 3.6 (12.3)
Increase / (decrease) in payables 19.9 (67.5) (48.2)
(Decrease) / increase in provisions (0.5) 1.7 -
Decrease in pension liability (2.5) - -
Cash from operating activities 130.8 (56.7) 61.6
=============== =============== ================
Notes
1. Basis of preparation
The condensed accounts have been prepared for the 26 weeks ended
3 July 2021. Comparative figures are presented for the 26 weeks
ended 27 June 2020. These condensed accounts have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the EU. They do not include all the information required for full
annual accounts, and should be read in conjunction with the Group
accounts for the 53 weeks ended 2 January 2021.
These condensed accounts are unaudited and were approved by the
Board of Directors on 3 August 2021.
The comparative figures for the 53 weeks ended 2 January 2021
are not the Company's statutory accounts for that financial year.
Those accounts were reported on by the Company's auditor and
delivered to the Registrar of Companies. The report of the auditors
was (i) unqualified, (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report; and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
Restatement of comparatives
a) Deferred tax
As noted in the 2020 Annual Report there was a prior year
restatement of deferred tax balances in 2020 following a change in
accounting policy. As a result, a deferred tax asset of GBP5.7
million relating to buildings which previously qualified for
industrial buildings allowances that was first recognised in 2008
was derecognised in the opening position for the comparative period
due to not being considered recoverable. Consequently, the balance
sheet at 27 June 2020 which is presented in this interim statement
has also been restated.
This restatement has resulted in the following changes to the
Group balance sheet at 27 June 2020 whereby deferred tax is
adjusted by GBP5.7 million, resulting in derecognition of the
previous deferred tax asset and recognition of a deferred tax
liability, and retained earnings reduced by GBP5.7 million. There
is no impact on profit and loss or earnings per share.
At 27June 2020
GBP m
Deferred tax asset / (liability)
As originally stated - deferred tax
asset 4.7
Adjustment (5.7)
_____
As restated - deferred tax liability (1.0)
=====
Retained earnings
As originally stated 266.6
Adjustment (5.7)
_____
As restated 260.9
=====
b) Cash flows from financing activities
Due to a drafting error in the preparation of the accounts for
the 53 weeks ended 2 January 2021 the figures in the cash flow
statement for the proceeds from and the repayment of loans and
borrowings were incorrectly stated as GBP100.0 million. These
figures should have been stated as GBP150.0 million. The
comparative financial information within financing activities for
the 53 weeks ended 2 January 2021 has been restated. The
restatement does not impact upon the overall cash out flow from
financing activities or on the net decrease in cash and cash
equivalents for the 53 weeks ended 2 January 2021 as previously
presented.
Going concern
The Directors have considered the adoption of the going concern
basis of preparation for these condensed accounts. The Directors
have reviewed cash flow forecasts prepared for a period of 18
months from the date of approval of these condensed accounts and
considered the impact that further lockdowns would have on the
liquidity of the Group.
At the end of the reporting period the Group had GBP188.3
million of available liquidity including GBP118.3 million cash and
cash equivalents and GBP70.0 million of the undrawn revolving
credit facility ('RCF').
In reviewing the cash flow forecasts the Directors considered
the current trading position of the Group and the likely capital
expenditure and working capital requirements of its growth plans.
The main uncertainty for the review period ahead is the possibility
of further lockdowns that would limit or prevent the business from
trading. Should such scenarios arise the Directors consider that
the RCF provides significant additional liquidity based on their
experience in 2020. The Directors consider the likelihood of a
complete closure scenario to be remote given the widespread
vaccination programme and the demonstrated ability of the sector to
operate successfully in a Covid-secure environment.
Based on the current trading and forecasts the Directors have
invoked a switch election within the RCF that has allowed the Group
to move to covenants based on Leverage and Fixed Charge Cover. The
cashflow forecasts show that the Group expects to comply with the
covenants included within the RCF agreement throughout the review
period.
Taking into account the current cash level and the committed
facilities the Directors are confident that the Group will have
sufficient funds to allow it to continue to operate. After
reviewing the projections and sensitivity analysis, and considering
the continued uncertainties and mitigating actions that can be
taken, the Directors believe that it is appropriate to prepare the
condensed accounts on a going concern basis.
Judgements and estimates
In preparing these condensed accounts, management have made
judgements and estimates that affect the application of accounting
policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates. In
addition to the key estimates and judgements disclosed in the
consolidated accounts for the 53 weeks ended 2 January 2021 the
following additional areas have been identified or updated for the
26 weeks ended 3 July 2021.
Impairment
Property, plant and equipment and right-of-use assets are
reviewed for impairment if events or changes in circumstances
indicate that the carrying value may not be recoverable. For
example, shop fittings and right-of-use assets may be impaired if
sales in that shop fall. When a review for impairment is conducted,
the recoverable amount is estimated based on either value- in-use
calculations or fair value less costs of disposal. Value-in-use
calculations are based on management's estimates of future cash
flows generated by the assets and an appropriate discount rate.
Consideration is also given to whether the impairment assessments
made in prior years remain appropriate based on the latest
expectations in respect of recoverable amount. Where it is
concluded that the impairment has reduced, a reversal of the
impairment is recorded.
The uncertainty of future trading conditions at the end of 2020
was considered to be an impairment trigger and a full impairment
review was undertaken across all core shops in the company-managed
estate. With the significantly improved trading levels in the first
half of 2021, this impairment review has been updated to determine
if the level of impairment remains appropriate.
The update was carried out using the following assumptions:
-- Shops have been split by location type and separate LFL sales
recovery or decline versus 2019 levels have been plotted for each
location. Latest trading performance for June has been used as the
starting sales assumptions with performance gradually reverting to
2019 levels during the remainder of 2021, except for some highly
impacted locations types such as airports;
-- LFL sales growth of 1 per cent per annum has been forecast
for subsequent years to a maximum of 105 per cent;
-- EBITDAR is used as a proxy for net cash flow excluding rental payments;
-- The discount rate is based on a WACC calculation, with an
uplift for risk in the current environment; and
-- Consideration of the remaining lease term.
On the basis of these calculations a release of impairment
provisions of GBP2.0 million has been made in respect of 86 shops.
No additional shops have been impaired as a result of this
review.
2. Accounting policies
The accounting policies applied by the Group in these condensed
accounts are the same as those applied by the Group in its
consolidated accounts for the 53 weeks ended 2 January 2021 other
than as disclosed below:
-- Amendments to IFRS 9, IAS 39, IFRS 7, and IFRS 16: Interest Rate Benchmark Reform - Phase 2
Their adoption did not have a material effect on the
accounts.
Principal risks and uncertainties
The Directors have considered the principal risks and
uncertainties which could have a material impact on the Group's
performance in the remaining 26 weeks of the financial year. The
Covid-19 pandemic continues to have an impact on our business. The
assessment of principal risks and uncertainties made in the 2020
Annual Report and Accounts remains valid but we believe that the
following risks have increased:
-- Management of third-party relationships - business
interruption suffered by third party suppliers, subsequently
impacting on our operations. This is primarily the result of
Covid-19 pressures on resource levels, which is restricting the
availability and movement of goods in the short term. We have
contingency plans in place to mitigate the impact of this.
-- Ability to attract / retain / motivate people - along with
many other businesses, we are facing challenges recruiting staff
into current vacancies. We are streamlining our recruitment
processes and making adjustments to trading hours where necessary
to respond to this.
The Covid-19 pandemic remains a risk to the business. We
continue to increase our capacity to provide products to our
customers across all levels of potential restrictions, and have
established a safe operating model for all of our colleagues. Our
estate growth and development of new channels for customers to
access Greggs provide the business with additional opportunities in
this environment.
The assessment above should be read in conjunction with the
statement of principal risks described on pages 47-50 in the 2020
Annual Report and Accounts. Other than the matters described above
we believe our exposure to the principal risks faced by the
business is not significantly different to that described in that
statement.
3. Operating segments
The Board is considered to be the 'chief operating decision
maker' of the Group in the context of the IFRS 8 definition. In
addition to its company-managed retail activities, the Group
generates revenues from its business to business ('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 channels. 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.
In the current period the Board has regularly reviewed the
revenues and trading profit of each segment. During 2020 the Board
regularly reviewed the revenues of each segment. However, a review
of the trading profit for each segment was not possible during 2020
as there was no basis on which meaningfully to allocate costs
during the period when company-managed shops were closed. The Board
receives information on overheads, assets and liabilities on an
aggregated basis consistent with the Group accounts.
26 weeks 26 26 weeks 26 weeks 26 26 53 weeks 53 53
ended weeks ended ended weeks weeks ended weeks weeks
3 July ended 3 July 27 June ended ended 2 January ended ended
2021 3 2021 2020 27 27 2021 2 2
July June June January January
2021 2020 2020 2021 2021
Retail Retail Retail
company-managed company-managed company-managed
shops B2B Total shops B2B Total shops B2B Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 488.3 57.9 546.2 262.5 38.1 300.6 715.3 96.0 811.3
================ ====== ========= ================ ====== ======= ================ ======== ========
Trading
profit/(loss)* 86.9 12.1 99.0 (33.6) 66.4
Overheads
including
profit share (39.6) (28.6) (73.4)
--------- ------- --------
Operating
profit/(loss) 59.4 (62.2) (7.0)
Finance expense (3.9) (3.0) (6.7)
--------- ------- --------
Profit/(loss)
before tax 55.5 (65.2) (13.7)
========= ======= ========
* Trading profit is defined as gross profit less supply chain
costs and retail costs (including property and direct management
costs) and before central overheads.
4. Exceptional items
26 weeks 26 weeks 53 weeks
ended ended ended
3 July 2021 27 June 2 January
2020 2021
GBPm GBPm GBPm
Cost of sales
Supply chain
restructuring - redundancy - 0.1 0.1
- transfer of
operations - 0.6 0.7
Total exceptional
items - 0.7 0.8
============= ========= ===========
Supply chain restructuring
This charge arises from the decisions, announced in 2016 and
2017, to invest in and reshape the Company's supply chain in order
to support future growth. The costs related to accelerated
depreciation and the expenses incurred as a result of transferring
manufacturing processes between sites, including additional running
costs. This restructuring is now complete and therefore no further
exceptional costs have been incurred in 2021.
5. Defined benefit pension scheme
The valuation of the defined benefit pension scheme for the
purposes of IAS 19 (Revised) as at 2 January 2021 has been updated
as at 3 July 2021 and the movements have been reflected in these
condensed accounts.
6. Taxation
The taxation charge for the 26 weeks ended 3 July 2021 and 27
June 2020 is calculated by applying the Directors' best estimate of
the annual effective tax rate to the profit or loss for the period
using rates substantively enacted by the half year date as required
by IAS34 'Interim Financial Reporting'.
An increase in the rate of UK corporation tax from 19 per cent
to 25 per cent with effect from 1 April 2023 was substantively
enacted on 24 May 2021. Consequently, deferred tax balances at 3
July 2021 have been calculated at 25 per cent (27 June 2020: 19 per
cent) as this is the rate at which they are expected to unwind.
7. Earnings per share
26 weeks ended 3 July 2021 26 weeks ended 27 June 2020 53 weeks ended 2 January
2021
--------------------------- ---------------------------- ----------------------------
Total Total Total
--------------------------- ---------------------------- ----------------------------
GBPm GBPm GBPm
Profit/(loss) for the period
attributable to equity
holders of the parent 44.4 (53.8) (13.0)
=========================== ============================ ============================
Basic earnings/(loss) per
share 43.8p (53.4p) (12.9p)
Diluted earnings/(loss) per
share 43.2p (53.4p) (12.9p)
Weighted average number of ordinary shares
26 weeks ended 26 weeks ended 53 weeks ended
3 July 2021 27 June 2020 2 January
2021
Number Number Number
Issued ordinary shares at start
of period 101,426,038 101,155,901 101,155,901
Effect of shares issued 126,480 19,031 113,334
Effect of own shares held (168,244) (374,748) (302,104)
Weighted average number of ordinary
shares during the period 101,384,274 100,800,184 100,967,131
Effect of share options in issue 1,252,095 - -
Weighted average number of ordinary
shares (diluted) during the period 102,636,369 100,800,184 100,967,131
=============== =============== ===============
Issued ordinary shares at end
of period 101,813,986 101,313,006 101,426,038
=============== =============== ===============
Potential ordinary shares can only be treated as dilutive when
their conversion to ordinary shares would decrease earnings per
share or increase loss per share. As the Group has recognised a
loss for the 26 weeks ended 27 June 2020 and the 53 weeks ended 2
January 2021, none of the potential ordinary shares were considered
to be dilutive for those periods.
8. Dividends
No dividends were paid during the 26 weeks ended 3 July 2021 (26
weeks ended 27 June 2020: nil, 53 weeks ended 2 January 2021: nil).
The proposed interim dividend of 15.0 pence in respect of 2021
amounting to GBP15.3 million has not been recognised as a liability
in these condensed accounts.
9. Related party transactions
There have been no related party transactions in the first 26
weeks of the current financial year which have materially affected
the financial position or performance of the Group.
Related parties are consistent with those disclosed in the
Group's Annual Report and Accounts for the 53 weeks ended 2 January
2021.
10. Half year report
The condensed accounts were approved by the Board of Directors
on 3 August 2021. They will be available on the Company's website,
corporate.greggs.co.uk
11. Calculation of Alternative Performance Measures
Two-year like-for-like (LFL) sales decline - Like-for-like (LFL)
company-managed shop sales performance against comparable period in
2019
26 weeks ended
3 July 2021
GBPm
Current year LFL sales 438.7
2019 LFL sales 483.2
Decline (44.5)
==============
LFL sales decline percentage (9.2%)
12. Statement of Directors' responsibilities
The Directors named below confirm on behalf of the Board of
Directors that to the best of their knowledge:
-- the condensed set of accounts has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the EU;
-- the interim management report includes a fair review of the information required by:
(a) DTR4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
26 weeks of the financial year and their impact on the condensed
set of accounts; and a description of the principal risks and
uncertainties for the remaining 26 weeks of the year; and
(b) DTR4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first 26
weeks of the financial year and that have materially affected the
financial position or performance of the Group during the period;
and any changes in the related party transactions described in the
last annual report that could do so.
The Directors of Greggs plc are listed in the Annual Report and
Accounts for the 53 weeks ended 2 January 2021. On 21 June 2021
Mohamed Elsarky was appointed as an independent Non-Executive
Director and on 31 July 2021 Peter McPhillips retired from the
Board.
For and on behalf of the Board of Directors
Roger Whiteside Richard Hutton
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END
IR DLLFBFVLLBBE
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