TIDMGRG
RNS Number : 5828U
Greggs PLC
02 August 2022
2 August 2022
INTERIM RESULTS FOR THE 26 WEEKSED 2 JULY 2022
Greggs is a leading UK food-on-the-go retailer,
with more than 2,200 retail outlets throughout the country
Trading in line with plan and good strategic progress
First half financial highlights
H1 2022 H1 2021
Total sales GBP694.5m GBP546.2m
---------- ----------
Pre-tax profit GBP55.8m GBP55.5m
---------- ----------
Diluted earnings per share 44.8p 43.2p
---------- ----------
Ordinary interim dividend
per share 15.0p 15.0p
---------- ----------
-- Total sales up 27.1%, with 22.4% LFL* sales growth in first
half of 2022 (Q1: 36.9%, Q2: 11.2%)
-- First half LFL sales 12.3% higher than comparable period
in 2019
-- Flat profit outcome primarily reflects re-introduction of
business rates, increase in VAT and higher levels of cost
inflation
-- Strong cash position and good liquidity, with net cash at
period end of GBP145.7m, having paid a special dividend of
40p per share (GBP40.6m total) in April 2022
* Like-for-like (LFL) company-managed shop sales performance
against comparable period in 2021
Operational and strategic developments
-- Shop opening progress : 70 new shops opened in first half,
12 closures; 2,239 shops as at 2 July 2022. Strong pipeline,
anticipate circa 150 net new shop openings in 2022
-- Growth channels : extension of evening hours going well,
delivery service continuing to prove incremental despite
recovery of 'walk-in' trade
-- Greggs App: strong growth in usage driving loyalty engagement.
New services such as Click + Collect and product customisation
progressing well
-- New product development : menu development focused on healthier
choices, hot food and evening daypart
-- Infrastructure : new manufacturing capacity progressing
well, technology development now focused on digital
-- Greggs Pledge: Science-based targets for emissions submitted
for verification. National Equality Standard accreditation
achieved and first "Eco-Shop" opened to test solutions to
minimise environmental impact of retail operations
-- Chair succession: Matt Davies announced today as Chair Designate,
succeeding Ian Durant from 1 November 2022
"Greggs delivered an encouraging performance in the first half
of the year with sales ahead of 2019 levels. These results
demonstrate the continued strength of the Greggs brand and demand
for our great tasting, quality and value for money offering.
"During the period we continued to make good progress with our
strategic priorities, including expanding our shop estate and
making Greggs more accessible to customers through extended trading
hours and digital channels.
"In a market where consumer incomes are under pressure Greggs
offers exceptional value for customers looking for food and drink
on-the-go. We are well positioned to navigate the widely publicised
challenges affecting the economy and continue to have a number of
exciting growth opportunities ahead, with a clear strategy for
expansion. We remain confident in Greggs' ability to deliver
continued success."
- Roisin Currie, Chief Executive
ENQUIRIES:
Greggs plc Hudson Sandler
Roisin Currie, Chief Executive Wendy Baker / Hattie Dreyfus
Richard Hutton, Finance Director Nick Moore / Emily Brooker
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/
CHIEF EXECUTIVE'S REPORT
Greggs has continued to trade well in 2022 with like-for-like
(LFL) sales in company-managed shops growing by 22.4% (Q1: 36.9%,
Q2: 11.2%) when compared with the equivalent period of 2021 . As
expected, the rate of growth in the second quarter began to
normalise but remained encouraging as we passed the anniversary of
restrictions being lifted in 2021. Total sales for the 26 weeks to
2 July 2022 were GBP694.5 million, an increase of 27.1% (H1 2021:
GBP546.2 million).
We are making good progress with our strategic priorities,
growing the shop estate at a faster pace and making Greggs more
accessible to customers through extended trading hours and digital
channels. At the same time, we continue to invest in further
improving the sustainability of Greggs as a major brand in the
food-on-the-go market.
Operational review
Sales levels were encouraging in the first half of 2022.
Performance in the first quarter was flattered by comparison with
restricted trading conditions in the same period of 2021 but we are
now reporting against a more similar year-on-year base. Comparing
with the pre-pandemic level, first half like-for-like sales in
company-managed shops were 12.3% per cent higher than the
equivalent period of 2019 despite footfall remaining below 2019
levels.
The breadth of the Greggs estate continues to provide
geographical diversification as consumer behaviour adjusts coming
out of the pandemic. Our strong presence in towns and suburbs,
along with a growing portfolio of convenient roadside shops, has
counter-balanced the slower recovery seen in large city centres and
public transport hubs.
Our estate expansion has been focused away from traditional
shopping areas while, at the same time, we have taken the
opportunity to grow in catchments where Greggs has traditionally
been underrepresented, such as central London and rail hubs. In the
first half of 2022 we opened 70 new shops (including 26 franchised
units) and closed 12 shops, giving a total of 2,239 shops (of which
401 are franchised) trading at 2 July 2022.
In June 2022 we opened our 400(th) franchised shop in Selby in
partnership with our newest franchise partner, Rontec, one of the
leading players in the UK forecourt industry. Other notable shop
openings in the first half of 2022 included three 'drive-thru'
sites, of which we have a growing pipeline, and our in-store café
concept in Primark Birmingham. In the most recent two weeks we have
also opened shops in London's Leicester Square and Liverpool Street
Station.
Strategic development
We have a clear plan to address the many attractive growth
opportunities available to Greggs over the coming years. This was
set out at our Capital Markets Day in October 2021 and we have made
good progress in the first half of 2022 as we seek to make Greggs
more accessible to customers across multiple channels and dayparts.
Our strategic investment in the Greggs estate, brand and support
infrastructure over recent years puts us in a strong position to
move forward at pace.
Estate growth
We see a clear opportunity for Greggs to expand its UK estate to
at least 3,000 shops, and have increased the rate at which we are
opening in new locations given the increased availability of good
sites. Our confidence in the scale of opportunity is underpinned by
the success we have already had in catchments where Greggs
currently has a relatively low presence such as retail parks,
railway stations, airports, supermarkets and central London.
The Greggs brand, and our strong, proven covenant is attractive
to landlords and has resulted in a strong pipeline of
opportunities. In 2022 we expect to open 150 net new shops and
believe that this rate of growth is sustainable beyond the current
year. At least a third of this annual growth is expected to be
achieved with franchise partners; we currently have fourteen such
partners covering travel and convenience shopping catchments.
Shop refurbishment will also play a part in enabling the
strategic growth agenda. Our latest shopfitting standard, which is
already being deployed for all new shops and relocations, supports
operational excellence in serving new channels such as delivery and
Click + Collect, as well as presenting an attractive, modern
environment for customers. We expect to refurbish around 100 shops
to this standard in 2022, progressing to 250 annually in the medium
term.
Evening trade
The evening daypart represents the largest segment of the
food-to-go market by value, but is the area where Greggs currently
has the lowest penetration. By extending trading hours, addressing
menu options and offering delivery we believe that Greggs can
increase its participation in the evening market, further
leveraging our investment in facilities that are under-utilised
after 4pm.
In the first half of 2022 we extended trading hours in the
company-managed estate. 300 shops now trade until at least 8pm
(July 2021: 130). In the second half of 2022 we will extend trading
hours in more shops as we better understand the extent of demand in
different locations. The evening daypart is now our
strongest-growing trading time, albeit from a low base.
Ranging trials have reinforced the importance of hot food
options in the evening daypart, as well as the demand for our core
food and drink range. In developing the range our aim is to stock
options that are in demand throughout the day, in order to minimise
operational complexity and maintain strong availability for
customers.
Delivery
Delivery, through our partnership with Just Eat, is now
available across the UK from 1,180 of our shops, up from 1,000 at
the start of the year. Delivery is a channel that presents further
growth potential for Greggs as we learn to serve it more
effectively and increase availability into the evening.
The recovery in out-of-home activity over the past twelve months
has seen a market-wide trend whereby a proportion of delivery
customers have switched their purchases back to the walk-in
channel. It is clear, however, that the majority of the new trade
we have generated through delivery is incremental and that it
offers additional access to Greggs at times when customers are
unable to visit our shops themselves.
Greggs App
The Greggs App, relaunched in 2021, offers a convenient platform
for customers to access additional services from Greggs whilst also
being rewarded for their loyalty. Use of the app has grown
strongly, aided by increased marketing of the benefits. From a
strategic perspective the Greggs App offers:
-- Rewards - our loyalty proposition rewards customers for their
purchases via the accumulation of 'stamps', which can then
be exchanged for free products. The scheme is increasing the
frequency with which app customers visit us whilst enhancing
further Greggs' market-leading reputation for great value.
-- Click + Collect - customers can skip the queue by pre-ordering,
and guarantee availability before they visit. In the first
half of 2022 we launched personalised pizza toppings as an
option for customers who use Click + Collect to pre-order.
In time we expect customisation to be extended to other elements
of our made-in-store range.
-- Deeper customer understanding - our investment in technology
to help us better understand our customers' behaviours and
preferences will enable us to tailor our communications and
experiences with them. Our new CRM platform is now live and
a key step forward in our vision to truly understand our customers'
needs across all of our channels and to enable us to serve
them even better, every day.
Menu development
Menu development supports our strategic growth objectives as
well as the commitments made in the Greggs Pledge.
In the first half of 2022 we broadened our healthier choices
through the launch of two salad meal boxes - Smoky Cajun Rice with
BBQ Chicken & Sweetcorn Fritters and Sweet Potato Bhaji &
Rice, which is a vegan option. Both can be eaten cold or taken away
to heat. We also continued to incentivise healthier choices by
offering fruit pots for just 75 pence as an add-on to our meal
deals.
To meet demand for hot food options we continued to roll out hot
food cabinets, particularly to those shops that are targeting the
evening trade. 867 company-managed shops now have hot food cabinets
and we plan to add a further 400 in the second half of the
year.
To support further our objective of growing the level of trade
in the evening we have added two new pizza flavours, Mexican
Chicken and Pepperoni Hot Shot. Our great-value pizza offer can now
be accessed through the walk-in, Click + Collect and delivery
channels. Customers can customise their pizza toppings when
ordering through our digital channels and we intend to trial the
customisation of sandwich fillings in the second half of 2022.
Supply chain development
The development of our supply chain will support the significant
growth opportunity ahead of us and require additional manufacturing
and logistics capacity. In the third quarter of 2022 we expect to
commission the new pizza manufacturing line that is under
construction at our Enfield manufacturing site. At Balliol Park in
Newcastle, we are undertaking preparatory works ahead of adding a
fourth line to extend capacity for the production of our iconic
savoury products.
Our plans for ambitious growth will require the addition of
further manufacturing and logistics capacity in the years ahead. We
have been exploring site options on which to base this capacity and
expect to make further progress on this in the second half of the
year.
Support systems
In the first half of 2022 we achieved a major milestone with the
completion of the deployment of SAP across our supply chain, a huge
achievement for the teams involved. The focus of our systems
development has now turned to support for our growth ambitions,
particularly our digital capabilities but also the integration of
new channels to our core systems. In a tight labour market, we have
also been working on an upgraded recruitment platform that will
improve current processes and the overall candidate experience.
Greggs Pledge
Our separate sustainability report details the progress made in
2021 on the objectives of the Greggs Pledge, our commitment to
further improve our ESG credentials in ten key areas. In the first
half of 2022 we continued to advance this agenda, and were
delighted to achieve the National Equality Standard, an
industry-recognised standard for diversity and inclusion. This
accreditation reflects the significant progress we have made in
respect of diversity and inclusion whilst supporting us to identify
areas where we can continue to improve. A key element of the
accreditation was having leaders who advocate diversity and
inclusion, supporting people through their employment journey and
having strategies in place to drive change.
We have also been focused on setting science-based targets to
reduce our emissions in line with a 1.5(oC) ambition. These targets
have now been submitted to the Science Based Targets initiative for
verification, and will support our ambition to be Net Zero in
Scopes 1 & 2 by 2035, and in Scope 3 by 2040.
Another notable landmark in early July was the opening of our
first "Eco-Shop" in Northampton. This gives us a platform to
develop and test solutions to minimise our impact on the
environment by cutting down on waste and reducing the use of energy
and water. Successful elements of the trial will be rolled out in
line with our Pledge commitment.
Board changes
Today we have announced the appointment of Matt Davies as an
independent non-executive director and Chair Designate with
immediate effect. Matt will succeed Ian Durant as Chair of the
Board of Greggs on 1st November 2022, when Ian steps down from the
Board. On behalf of the Board I would like to thank Ian for his
support and leadership through what has been a transformational
period for Greggs.
As part of our ongoing plans to ensure smooth succession for
Board roles Lynne Weedall, who joined the Board in May 2022, will
become Chair of our Remuneration Committee with effect from 1
September 2022.
Financial performance
Total sales for the 26 weeks to 2 July 2022 were GBP694.5
million (H1 2021: GBP546.2 million). Like-for-like sales in
company-managed shops grew by 22.4% (Q1: 36.9%, Q2: 11.2%).
Pre-tax profit was GBP55.8 million in the first half of 2022 (H1
2021: GBP55.5 million). The contribution from sales in the period
was significantly stronger than that seen under the more restricted
conditions experienced in the first half of 2021, although the 2021
outcome did benefit from temporary relief from business rates and
reduced rates of VAT. We have worked hard to mitigate the impact of
cost inflation on customers but some further small price increases
have been necessary; these appear not to have impacted transaction
numbers.
The rate of cost inflation increased significantly in the first
half of the year, driven by food, packaging and energy commodities.
We have continued to extend forward our purchasing cover and have
fixed input prices for an average of around five months of our
future requirements across these areas. Across all cost areas we
now estimate that the overall level of cost inflation in 2022 will
be around nine per cent, although some uncertainty remains.
The net financing expense of GBP3.2 million in the period (H1
2021: GBP3.9 million) comprised GBP3.2 million in respect of the
IFRS 16 interest charge on lease liabilities, GBP0.4 million of
facility charges under the Company's (undrawn) financing facilities
and GBP0.4m income relating to interest received on bank deposits,
the Company's defined benefit pension scheme and foreign exchange
gains.
The effective rate of Corporation Tax for the period was 17.7%
(H1 2021: 20.0%) with the year-on-year reduction reflecting the
availability of super-deduction capital allowances.
D iluted earnings per share for the period were 44.8 pence (H1
2021: 43.2 pence).
Capital expenditure and financial position
Capital expenditure during the first half was GBP41.9 million
(H1 2021: GBP23.5 million) as we increased investment in line with
our estate growth and development plans and neared completion of
additional pizza capacity at our Enfield manufacturing site. In the
balance of the year we will continue the development of our retail
estate. We are making good progress with the identification of
potential sites for expansion of our supply chain. The timing of
any land purchase will be material to 2022 capital expenditure and,
in the context of the uncertainty over this, our full year guidance
of circa GBP170 million capital expenditure remains
appropriate.
We continue to carry a higher-than-normal cash position in order
to fund the investment in our significant growth programme and
ended the period with a cash balance of GBP145.7 million (3 July
2021: GBP118.3 million). 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
The previously-declared special dividend of 40.0 pence per share
was paid in April 2022.
The Board has declared an interim dividend of 15.0 pence per
share (2021: 15.0 pence). The overall ordinary dividend for the
year will be proposed in line with our progressive dividend policy,
which targets a full year ordinary dividend that is around two
times covered by underlying earnings.
The interim dividend will be paid on 7 October 2022 to those
shareholders on the register at the close of business on 9
September 2022.
Outlook
Despite market-wide inflationary pressures Greggs has continued
to perform well. Consumer behaviour is still recovering from the
impact of the pandemic and employment levels are high. In a market
where consumer incomes are under pressure Greggs offers exceptional
value for customers looking for food and drink on-the-go. In the
four weeks to 30 July like-for-like sales in company-managed shops
were 13.1% above the equivalent period of 2021.
Clearly there are considerable uncertainties in the economy as a
whole, but we continue to trade in line with our plan and are
making good progress against our strategic objective to become a
larger, multi-channel business. As such, the Board's expectations
for the full year outcome remain unchanged.
Roisin Currie
Chief Executive
2 August 2022
Greggs plc
Consolidated income statement
For the 26 weeks ended 2 July 2022
26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
--------------- --------------- ----------------
Total Total Total
--------------- --------------- ----------------
GBPm GBPm GBPm
Revenue 694.5 546.2 1,229.7
Cost of sales (260.7) (196.3) (447.7)
------------------------------------------------------------------ --------------- --------------- ----------------
Gross profit 433.8 349.9 782.0
Distribution and selling costs (339.3) (257.8) (567.6)
Administrative expenses (35.5) (32.7) (61.2)
Operating profit 59.0 59.4 153.2
Finance expense (net) (3.2) (3.9) (7.6)
Profit before tax 55.8 55.5 145.6
Income tax (9.9) (11.1) (28.1)
Profit for the period attributable to equity holders of the
parent 45.9 44.4 117.5
=============== =============== ================
Basic earnings per share 45.2p 43.8p 115.7p
Diluted earnings per share 44.8p 43.2p 114.3p
Greggs plc
Consolidated statement of comprehensive income
For the 26 weeks ended 2 July 2022
26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
GBPm GBPm GBPm
Profit for the period 45.9 44.4 117.5
Other comprehensive income
Items that will not be recycled to profit and loss:
Remeasurements on defined benefit pension plans 2.2 13.8 7.1
Tax on remeasurements on defined benefit pension plans 0.0 (3.5) (1.7)
Other comprehensive income for the period, net of income tax 2.2 10.3 5.4
--------------- --------------- ----------------
Total comprehensive income for the period 48.1 54.7 122.9
=============== =============== ================
Greggs plc
Consolidated balance sheet
as at 2 July 2022
2 July 2022 3 July 2021 1 January 2022
GBPm GBPm GBPm
ASSETS
Non-current assets
Intangible assets 14.0 15.0 14.9
Property, plant and equipment 355.4 340.3 343.8
Right-of-use assets 271.1 269.2 263.6
Defined benefit pension asset 2.3 4.3 -
642.8 628.8 622.3
Current assets
Inventories 33.1 24.8 27.9
Trade and other receivables 37.3 36.3 37.6
Assets held for resale - - 1.6
Current tax - - 0.4
Cash and cash equivalents 145.7 118.3 198.6
216.1 179.4 266.1
Total assets 858.9 808.2 888.4
------------ ------------ ---------------
LIABILITIES
Current liabilities
Trade and other payables (149.1) (115.5) (153.4)
Current tax liability (5.8) (1.3) -
Lease liabilities (49.7) (49.4) (49.3)
Provisions (3.9) (3.1) (4.2)
(208.5) (169.3) (206.9)
Non-current liabilities
Other payables (3.0) (3.5) (3.2)
Defined benefit pension liability - - (2.4)
Lease liabilities (241.2) (240.1) (233.9)
Deferred tax liability (12.5) (5.9) (10.0)
Long-term provisions (2.1) (3.8) (2.8)
(258.8) (253.3) (252.3)
Total liabilities (467.3) (422.6) (459.2)
------------ ------------ ---------------
Net assets 391.6 385.6 429.2
============ ============ ===============
EQUITY
Capital and reserves
Issued capital 2.0 2.0 2.0
Share premium account 22.3 19.3 20.0
Capital redemption reserve 0.4 0.4 0.4
Retained earnings 366.9 363.9 406.8
Total equity attributable to equity holders of the Parent 391.6 385.6 429.2
============ ============ ===============
Greggs plc
Consolidated statement of changes in equity
For the 26 weeks ended 2 July 2022
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
--------- --------- ------------ ---------- ------
52 weeks ended 1 January 2022
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 financial year - - - 117.5 117.5
Other comprehensive income - - - 5.4 5.4
--------- --------- ------------ ---------- -------
Total comprehensive income
for the year - - - 122.9 122.9
Transactions with owners,
recorded directly in equity
Issue of ordinary shares - 4.3 - - 4.3
Sale of own shares - - - 0.3 0.3
Purchase of own shares - - - (10.0) (10.0)
Share-based payment transactions - - - 2.2 2.2
Dividends to equity holders - - - (15.3) (15.3)
Tax items taken directly to
reserves - - - 3.2 3.2
--------- --------- ------------ ---------- -------
Total transactions with owners - 4.3 - (19.6) (15.3)
--------- --------- ------------ ---------- -------
Balance at 1 January 2022 2.0 20.0 0.4 406.8 429.2
========= ========= ============ ========== =======
26 weeks ended 2 July 2022
Issued Share Capital Retained Total
capital premium redemption earnings
reserve
GBPm GBPm GBPm GBPm GBPm
Balance at 2 January 2022 2.0 20.0 0.4 406.8 429.2
Total comprehensive income for the period
Profit for the period - - - 45.9 45.9
Other comprehensive income - - - 2.2 2.2
--------- --------- ------------ ---------- -------
Total comprehensive income for the period - - - 48.1 48.1
Transactions with owners, recorded directly in equity
Issue of ordinary shares - 2.3 - - 2.3
Purchase of own shares - - - (3.0) (3.0)
Share-based payment transactions - - - 2.1 2.1
Dividends to equity holders (83.3) (83.3)
Tax items taken directly to reserves - - - (3.8) (3.8)
--------- --------- ------------ ---------- -------
Total transactions with owners - 2.3 - (88.0) (85.7)
--------- --------- ------------ ---------- -------
Balance at 2 July 2022 2.0 22.3 0.4 366.9 391.6
========= ========= ============ ========== =======
Greggs plc
Consolidated statement of cash flows
For the 26 weeks ended 2 July 2022
26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
GBPm GBPm GBPm
Cash flows from operating activities
Cash generated from operations (see page 14) 100.1 130.8 312.1
Income tax paid (5.0) (6.7) (19.2)
Interest paid on lease liabilities (3.2) (3.1) (6.3)
Interest paid on loans and borrowings (0.4) (0.8) (1.1)
Net cash inflow from operating activities 91.5 120.2 285.5
--------------- --------------- ----------------
Cash flows from investing activities
Acquisition of property, plant and equipment (34.6) (17.3) (50.5)
Acquisition of intangible assets (1.5) (1.6) (3.8)
Proceeds from sale of property, plant and equipment 1.9 0.2 0.3
Interest received 0.3 - -
Net cash outflow from investing activities (33.9) (18.7) (54.0)
--------------- --------------- ----------------
Cash flows from financing activities
Proceeds from issue of share capital 2.2 3.6 4.3
Sale of own shares - 0.3 0.3
Purchase of own shares (3.0) - (10.0)
Dividends paid (83.3) - (15.3)
Repayment of principal of lease liabilities (26.4) (23.9) (49.0)
Net cash outflow from financing activities (110.5) (20.0) (69.7)
--------------- --------------- ----------------
Net (decrease) / increase in cash and cash equivalents (52.9) 81.5 161.8
Cash and cash equivalents at the start of the period 198.6 36.8 36.8
Cash and cash equivalents at the end of the period 145.7 118.3 198.6
=============== =============== ================
Greggs plc
Consolidated statement of cash flows (continued)
For the 26 weeks ended 2 July 2022
Cash flow statement - cash generated from operations
26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
GBPm GBPm GBPm
Profit for the period 45.9 44.4 117.5
Amortisation 2.4 2.2 4.5
Depreciation - property, plant and equipment 28.2 26.9 54.2
Depreciation - right-of-use assets 25.9 23.9 48.7
Impairment reversal - property, plant and equipment (0.2) (0.6) (1.9)
Impairment charge/(reversal) - right-of-use assets 0.6 (1.4) (1.6)
Loss on sale of property, plant and equipment 0.5 0.3 0.9
Release of government grants (0.2) (0.2) (0.5)
Share-based payment expenses 2.1 2.5 2.2
Finance expense 3.2 3.9 7.6
Income tax expense 9.9 11.1 28.1
Increase in inventories (5.3) (2.2) (5.4)
Decrease in receivables 0.3 3.1 1.8
(Decrease) / increase in payables (9.7) 19.9 58.9
(Decrease) in provisions (1.0) (0.5) (0.4)
Decrease in pension liability (2.5) (2.5) (2.5)
Cash from operating activities 100.1 130.8 312.1
=============== =============== ================
Notes
1. Basis of preparation
The condensed accounts have been prepared for the 26 weeks ended
2 July 2022. Comparative figures are presented for the 26 weeks
ended 3 July 2021. These condensed accounts have been prepared in
accordance with IAS 34 Interim Financial Reporting as adopted by
the UK. They do not include all the information required for full
annual accounts, and should be read in conjunction with the Group
accounts for the 52 weeks ended 1 January 2022.
These condensed accounts are unaudited and were approved by the
Board of Directors on 2 August 2022.
The comparative figures for the 52 weeks ended 1 January 2022
are not the Company's statutory accounts for that financial year.
Those accounts were reported on by the Company's auditor and
delivered to the Registrar of Companies. The report of the auditors
was (i) unqualified, (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying their report; and (iii) did not contain a
statement under section 498(2) or (3) of the Companies Act
2006.
Going concern
The Directors have considered the adoption of the going concern
basis of preparation for these condensed accounts. The Directors
have reviewed cash flow forecasts prepared for a period of 18
months from the date of approval of these condensed accounts.
At the end of the reporting period the Group had GBP215.7
million of available liquidity including GBP145.7 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 cashflow forecasts show that the Group expects to comply with
the covenants included within the RCF agreement throughout the
review period. The main uncertainty for the review period is the
impact of cost inflation on both the Group's cost base and also on
consumer disposable income. Trading to date has been in line with
our plan and given the significant liquidity available we do not
believe this presents a risk to our ability to continue as a going
concern.
Taking into account the current cash level and the committed
facilities the Directors are confident that the Group will have
sufficient funds to allow it to continue to operate. After
reviewing the projections and sensitivity analysis the Directors
believe that it is appropriate to prepare the condensed accounts on
a going concern basis.
Judgements and estimates
In preparing these condensed accounts, management have made
judgements and estimates that affect the application of accounting
policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates. In
addition to the key estimates and judgements disclosed in the
consolidated accounts for the 52 weeks ended 1 January 2022 the
following additional areas have been identified or updated for the
26 weeks ended 2 July 2022.
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 Covid-19 pandemic meant that during 2020 and 2021 all shops
had periods of no, or reduced, sales and this was deemed to be an
impairment trigger in both financial years. As a result, assets in
company-managed shops were tested for impairment for the 2020 and
2021 financial years. Sales have performed in line with
expectations for the first 6 months of 2022, however given the
level of impairment previously recognised and with customer
transaction numbers remaining below pre-pandemic levels the
impairment review has been updated as at 2 July 2022 using the
following assumptions:
-- Shops have been categorised into different catchment areas
(e.g. city centres, transport hubs, retail parks) and assumptions
made as to the rate of like-for-like sales recovery for each
catchment;
-- Like-for-like sales excluding price inflation and the
incremental impact of delivery have been assumed to return to a
level equivalent to the pre-Covid-19 levels (on average across the
estate) by June 2023. Like-for-like sales for the period 2023 to
2026 are then assumed to grow by an average of 3% per annum;
-- Where shops are currently used to fulfil orders for delivery,
or are planned to offer delivery in 2022, the net cash flows for
fulfilling these orders are included within the estimated cash
flows for the shop;
-- Earnings before interest, tax, depreciation, amortisation and
rent ('EBITDAR') is used as a proxy for net cash flow excluding
rental payments;
-- Cash flows have been discounted at a pre-tax discount rate
that reflects the current market assessment of the time value of
money, including a risk uplift for uncertainty of future cash
flows. The discount rate as at 2 July 2022 was 9.0% (1 January
2022: 6.9%); and
-- Consideration of the appropriate period over which to
forecast cash flows, including reference to the lease term. Where
considered appropriate cashflows have been included for periods
beyond the lease probable end date (to a maximum of five years in
accordance with IAS 36).
On the basis of these calculations a net impairment charge of
GBP0.6m has been made in respect of 74 shops reflecting the higher
discount rate used in the calculation.
2. Accounting policies
The accounting policies applied by the Group in these condensed
accounts are the same as those applied by the Group in its
consolidated accounts for the 52 weeks ended 2 January 2022 other
than as disclosed below:
-- Amendments to IAS 16: Property, Plant and Equipment - Proceeds before Intended Use;
-- Amendments to IAS 37: Provisions, Contingent Liabilities and
Contingent Assets: Onerous Contracts - Cost of Fulfilling a
Contract; and
-- Annual Improvements 2018-2020.
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 performance for
the remainder of the financial year.
The assessment of principal risks and uncertainties made in the
2021 Annual Report and Accounts remains valid and we do not believe
there to have been any material changes in the profile of those
risks since then.
We have considered whether the Company is facing any new
principal risks since our last report and identified the
following:
-- The war in Ukraine has had the following impacts on our business:
o Additional pressure on supply chains due to increased demand
globally, resulting in increases to input prices.
o Possible increased cyber security risks.
-- Cost of living pressures are impacting the household budgets
of customers. We continue to work hard to ensure that we offer
exceptional value for customers looking for food and drink
on-the-go.
-- Lack of availability of certain ingredients for our products,
which has resulted in the need for us to find alternatives. Our
normal food safety processes ensure the integrity and safety of any
substitute ingredients.
-- We identified climate change as an emerging risk in our
annual report. Work to understand the future impacts of this
continues, and we anticipate including it as a principal risk in
the 2022 Annual Report.
The assessment above should be read in conjunction with the
statement of principal risks described on pages 59-62 in the 2021
Annual Report and Accounts. Other than the matters described above
we believe our exposure to other principal risks faced by the
business is not significantly different to that described in that
statement.
3. Operating segments
The Board is considered to be the 'chief operating decision
maker' of the Group in the context of the IFRS 8 definition. In
addition to its company-managed retail activities, the Group
generates revenues from its business to business channel which
includes franchise and wholesale activities. Both channels were
categorised as reportable segments for the purposes of IFRS 8.
Company-managed retail activities - the Group sells a consistent
range of fresh bakery goods, sandwiches and drinks in its own shops
or via delivery channels. Sales are made to the general public on a
cash basis. All results arise in the UK.
Business to business channel - the Group sells products to
franchise and wholesale partners for sale in their own outlets as
well as charging a licence fee to franchise partners. These sales
and fees are invoiced to the partners on a credit basis. All
results arise in the UK.
All revenue in 2022 and 2021 was recognised at a point in
time.
The Board regularly reviews the revenues and trading profit of
each segment. The Board receives information on overheads, assets
and liabilities on an aggregated basis consistent with the Group
accounts.
26 26 weeks 26 weeks 26 weeks 26 weeks 26 weeks 52 weeks 52 weeks 52
weeks ended ended ended ended ended ended ended weeks
ended 2 July 2 July 3 July 2 July 3 July 1 January 1 ended
2 July 2022 2022 2021 2021 2021 2022 January 1
2022 2022 January
2022
Retail Business Retail Business Retail Business
company-managed to company-managed to company-managed to
shops business Total shops business Total shops business Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenue 622.6 71.9 694.5 488.3 57.9 546.2 1,098.2 131.5 1,229.7
================ ========= ========= ================ ========= ========= ================ ========= ========
Trading
profit* 92.2 12.6 104.8 86.9 12.1 99.0 207.1 28.5 235.6
Overheads
including
profit
share (45.8) (39.6) (82.4)
--------- --------- --------
Operating
profit 59.0 59.4 153.2
Finance
expense (3.2) (3.9) (7.6)
--------- --------- --------
Profit
before
tax 55.8 55.5 145.6
========= ========= ========
* 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. Defined benefit pension scheme
The valuation of the defined benefit pension scheme for the
purposes of IAS 19 (Revised) as at 1 January 2022 has been updated
as at 2 July 2022 and the movements have been reflected in these
condensed accounts.
5. Taxation
The taxation charge for the 26 weeks ended 2 July 2022 and 3
July 2021 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'.
6. Earnings per share
26 weeks ended 2 July 2022 26 weeks ended 3 July 2021 52 weeks ended 1 January
2022
--------------------------- --------------------------- -----------------------------
Total Total Total
--------------------------- --------------------------- -----------------------------
GBPm GBPm GBPm
Profit for the period
attributable to equity
holders of the parent 45.9 44.4 117.5
=========================== =========================== =============================
Basic earnings per share 45.2p 43.8p 115.7p
Diluted earnings per share 44.8p 43.2p 114.3p
Weighted average number of ordinary shares
26 weeks 26 weeks ended 52 weeks ended
ended 2 July 3 July 2021 1 January
2022 2022
Number Number Number
Issued ordinary shares at start
of period 101,897,021 101,426,038 101,426,038
Effect of shares issued 28,515 126,480 284,386
Effect of own shares held (369,828) (168,244) (221,851)
Weighted average number of ordinary
shares during the period 101,555,708 101,384,274 101,488,573
Effect of share options in issue 902,676 1,252,095 1,261,311
Weighted average number of ordinary
shares (diluted) during the period 102,458,384 102,636,369 102,749,884
============== =============== ===============
Issued ordinary shares at end
of period 102,046,258 101,813,986 101,897,021
============== =============== ===============
7. Dividends
The following tables analyse dividends when paid and the year to
which they relate:
Dividend declared 26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
Pence per share Pence per share Pence per share
2021 interim dividend - - 15.0p
2021 special dividend 40.0p - -
2021 final dividend 42.0p - -
---------------- ---------------- ----------------
82.0p - 15.0p
================ ================ ================
26 weeks ended 26 weeks ended 52 weeks ended
2 July 2022 3 July 2021 1 January 2022
GBPm GBPm GBPm
Total dividend payable
2021 interim dividend - - 15.3
2021 special dividend 40.6 - -
2021 final dividend 42.6 - -
Total dividend paid in period 83.2 - 15.3
=============== =============== ================
Dividend proposed at period end and not included as a liability
in the accounts
2021 interim dividend (15.0p per share) - 15.3 -
2021 special dividend (40.0p per share) - - 40.6
2021 final dividend (42.0p per share) - - 42.6
2022 interim dividend (15.0p per share) 15.3 - -
--------------- --------------- ----------------
15.3 15.3 83.2
=============== =============== ================
8. Related party transactions
There have been no related party transactions in the first 26
weeks of the current financial year which have materially affected
the financial position or performance of the Group.
Related parties are consistent with those disclosed in the
Group's Annual Report and Accounts for the 52 weeks ended 1 January
2022.
9. Half year report
The condensed accounts were approved by the Board of Directors
on 2 August 2022. They will be available on the Company's website,
corporate.greggs.co.uk
10. Calculation of Alternative Performance Measures
One-year like-for-like (LFL) sales increase - Like-for-like
(LFL) company-managed shop sales performance against comparable
period in 2021
26 weeks ended
2 July 2022
GBPm
Current year LFL sales 581.0
2021 LFL sales 474.6
Increase 106.4
==============
LFL sales increase percentage 22.4%
Three-year like-for-like (LFL) sales increase - Like-for-like
(LFL) company-managed shop sales performance against comparable
period in 2019
26 weeks ended
2 July 2022
GBPm
Current year LFL sales 532.6
2019 LFL sales 474.1
Increase 58.5
==============
LFL sales increase percentage 12.3%
11. Statement of Directors' responsibilities
The Directors named below confirm on behalf of the Board of
Directors that to the best of their knowledge:
-- the condensed set of accounts has been prepared in accordance
with IAS 34 Interim Financial Reporting as adopted by the UK;
-- the interim management report includes a fair review of the information required by:
(a) DTR4.2.7R of the Disclosure and Transparency Rules, being an
indication of important events that have occurred during the first
26 weeks of the financial year and their impact on the condensed
set of accounts; and a description of the principal risks and
uncertainties for the remaining 26 weeks of the year; and
(b) DTR4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first 26
weeks of the financial year and that have materially affected the
financial position or performance of the Group during the period;
and any changes in the related party transactions described in the
last annual report that could do so.
The Directors of Greggs plc are listed in the Annual Report and
Accounts for the 52 weeks ended 1 January 2022. On 1 February 2022
Roisin Currie was appointed as an Executive Director and on 17 May
2022 Lynne Weedall was appointed as an independent Non-Executive
Director. On 17 May 2022 Roger Whiteside retired from the
Board.
For and on behalf of the Board of Directors
Roisin Currie Richard Hutton
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END
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