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Greggs

Greggs plc a record-breaking, award winning year

Greggs plc (LON:GRG) has today provided preliminary results for the 52 weeks ended 28th Dec 2019.

2019 Financial highlights*

  • Total sales up 13.5% to £1,167.9m (2018: £1,029.3m)
  • Company-managed shop like-for-like sales** up 9.2% (2018: 2.9%)
  • Pre-tax profit excluding exceptional items*** up 27.2% to £114.2m (2018: £89.8m)
  • Pre-tax profit £108.3m (2018: £82.6m)
  • Strong cash generation supporting capital investment programme, additional shareholder returns, and a record annual profit share and special payment for employees
  • Total ordinary dividend per share up 25.8% to 44.9p (2018: 35.7p)
  • Will consider capacity for special dividend at time of interim results

*2019 figures reflect the adoption of IFRS16 (lease accounting) and are not directly comparable with 2018, which has not been restated

**like-for-like sales in Company-managed shops (excluding franchises) with a calendar year’s trading history

***exceptional pre-tax charge of £5.9m in 2019 (2018: £7.2m charge)

Strategic progress

  • Exceptional performance founded on transformational changes made across multi-year strategic investment programme
  • Product development driving quality, sustainability, variety and brand appeal
  • 138 new shops opened, 41 closures (97 net openings); 2,050 shops trading at 28 December 2019
  • Significant progress in delivery of supply chain investment programme, with benefits ahead of plan
  • Commencing roll-out of delivery service in partnership with Just Eat
  • Developing ‘Next Generation Greggs’ programme aimed at increasing customer loyalty, choice and access to Greggs across multiple channels

Current trading

  • Very strong start to 2020 in January, but significant slowdown in February due to storms
  • Company-managed shop like-for-like sales up by 7.5% in the nine weeks to 29 February 2020

“2019 was an exceptional year of progress for Greggs, during which we experienced a sustained increase in customer visits as increased awareness and appreciation of our brand gathered momentum. Our exceptional performance was founded on the changes that we have made across our multi-year strategic investment programme, which has delivered transformational change across the business and has now set us up for the next phase of growth.

“We made a very strong start to 2020 in January, but in February saw a significant slowdown in sales growth as a result of the storms that have affected the UK. There is some uncertainty in the outlook, particularly given the potential impact of Coronavirus. This aside we expect to make year-on-year progress and will do so from a strong financial position, supporting our investment for further growth whilst also delivering good returns for all stakeholders.” – Roger Whiteside OBE, Greggs Chief Executive

Chairman’s statement

Greggs’ exceptional performance in 2019 comes after a multi-year programme of change and improvement. More customers are recognising the benefits of this and are shopping with us in increasing numbers. Our colleagues have shown the resilience and versatility necessary to deliver transformational change across the business, and this has now set us up for the next phase of growth. We will embrace the opportunities this presents whilst continuing to run the business in a responsible manner, such that we deliver sustainable long-term growth for the benefit of all stakeholders.

Overview

Greggs delivered a record performance in 2019. We started the year with very strong growth in customer visits and sustained these higher customer numbers throughout the year, demonstrating that increased awareness of what Greggs has to offer has translated into customer loyalty. Cash generation has been very strong, allowing us to self-fund the significant investment programme that will enable further growth, whilst also increasing shareholder and other stakeholder returns. Given the crucial role that our colleagues have played in this success it is entirely appropriate that we have been able to reward them for an exceptional performance whilst still enhancing returns to shareholders.

Our people and values

Greggs’ vertically-integrated operating model gives us the control and flexibility that are key to our commercial success. Our people produce great products, take care in transporting them, and deliver outstanding service in our shops and support operations. The culture of the business, and the willingness of our teams to work together to deliver an exceptional experience for customers, has always been at the heart of Greggs’ success. The Board recognises this and takes great care to ensure that decisions it makes are consistent with the Company’s long-term objectives and its values. The recent re-launch of the Company’s ‘Culture Statement’, after extensive consultation with staff, is outlined in the governance section of the annual report. This is a good example of the importance we place on the cultural underpinnings of the business; a key element in being able to deliver our strategy.

Behind the scenes at Greggs significant programmes of change have been delivered and continue to be undertaken. These have affected the roles of many of our people and I have huge admiration for the manner in which our 25,000 colleagues have dealt with this while, at the same time, delivering a record performance. I would like to record my personal thanks to them all on behalf of the Company and its shareholders.

The Board

In 2019 we welcomed Kate Ferry, CFO of TalkTalk, to the Board as a Non-Executive Director, succeeding Allison Kirkby as Audit Committee Chair. This was part of an ongoing succession plan for the Board that aims to deliver continuity and maintain a broad range of talents and experience that reflect the needs of the business. As part of this planning process, upon re-election as directors at the AGM, Helena Ganczakowski will take on the role of chairing the Remuneration Committee from Sandra Turner, who will continue to act as Senior Independent Director, and Peter McPhillips will become our designated Non-Executive Director in relation to engagement with colleagues.

During the year the Board continued to oversee the major investments being made in our internal supply chain and core systems infrastructure, but increasingly turned its attention to the manner in which these platforms can be used to meet changing consumer needs in a digital age. Understanding these trends, and the consumer insights that explain the very strong growth in Company sales in the year, has been important as we shape future plans.

As you will see from the governance section of the annual report, the Board continues to make a significant effort to listen to the views of employees. This helps to ensure that Non-Executive Directors’ contributions to Board discussions are well informed, supporting open and constructive dialogue with the management team.

Risk management continues to be an important area of focus for the Board. In 2019 the Board spent a significant amount of time examining the Company’s approach to the management of allergens and its preparedness for the various scenarios relating to the UK’s exit from the European Union.

Further details of the Board’s work are included in the governance and committee sections of the annual report.

Dividend

Our dividend policy targets a progressive ordinary dividend, normally two times covered by earnings, with further surplus cash being returned to shareholders as appropriate. This was the case in 2019 when we were able to return £35.5 million of surplus cash by way of a special dividend. Our Finance Director, Richard Hutton, outlines the expected application of the distribution policy in more detail in the financial review.

In line with its progressive ordinary dividend policy, the Board intends to recommend at the Annual General Meeting a final dividend of 33.0 pence per share (2018: 25.0 pence), giving a total ordinary dividend for the year of 44.9 pence (2018: 35.7 pence), an increase of 25.8 per cent.

Looking ahead

Notwithstanding the tough conditions that continue to affect the UK retail sector, and uncertainties that remain in the global economy such as the potential impact of Coronavirus, Greggs has made a strong start to the new year, attracting more customer visits as consumers become increasingly aware of the breadth, quality and value of our offer. We have invested in the infrastructure to compete in the growing UK food-on-the-go market and see great opportunities ahead as we embrace new channels that will extend our reach.

The relationship between business and society has been a matter of public debate recently, and we recognise that Greggs has a part to play by approaching business in the responsible manner it has become known for. ‘The Greggs Pledge’ is our vision of how we will continue to play our part and ensure that customers can trust us to act responsibly on their behalf. This continues a long-standing record of running the business in the right way for the long term and, I believe, will maintain our competitiveness for the future as it has done in the past.

With a strong balance sheet and cash flow, a clear strategy, dedicated and motivated employees and positive trading momentum we are looking ahead at future challenges and opportunities with confidence.

Ian Durant

Chairman

3 March 2020

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