5 March 2024
GREGGS PLC
("Greggs" or the
"Company")
PRELIMINARY RESULTS FOR THE
52 WEEKS ENDED 30 DECEMBER 2023
Record performance driven by
execution of strategic plan
2023 Financial highlights
|
|
2023
|
2022
|
|
Total sales
|
£1,810m
|
£1,513m
|
|
Underlying pre-tax profit excluding
exceptional income*
|
£167.7m
|
£148.3m
|
|
Pre-tax profit
|
£188.3m
|
£148.3m
|
|
Underlying diluted earnings per
share excluding exceptional income*
|
123.8p
|
117.5p
|
|
Diluted earnings per
share
|
139.2p
|
117.5p
|
|
Total ordinary dividend per
share
|
62.0p
|
59.0p
|
|
Special dividend per
share
|
40.0p
|
-
|
*
Excludes impact of £20.6 million exceptional net income primarily
related to settlement of business interruption insurance claims
made in 2020
·
Total sales** up 19.6% on 2022 level, with LFL***
sales in company-managed shops up 13.7% year-on-year
·
Underlying profit before tax excluding exceptional
income up 13.1% to £167.7 million (2022: £148.3 million);
underlying diluted earnings per share up 5.4% to 123.8p
· Robust cash
position of £195.3 million supports both investment in growth and
additional shareholder returns by way of a special dividend of
40.0p per share
·
Final dividend of 46.0p per share recommended
bringing total ordinary dividend per share of 62.0p per share, up
5.1% from 2022, in line with the growth in underlying diluted
earnings per share
** 52 weeks ended
30 December 2023 (2022: 52 weeks ended 31 December 2022)
*** like-for-like sales
in company-managed shops (excluding franchises) with more than one
calendar year's trading history
Strategic progress
Broadening customer appeal:
·
Greggs is the UK's leading food-to-go brand
(YouGov's Brand Index)
·
Market share at an all-time high; total
share of food-to-go visits 8.2% (2022:
7.7%)
·
Share of food-to-go breakfast visits increased to
19.6%, taking Greggs to #1 in the market
Growing and developing the Greggs estate:
·
Record 220 new shop openings in 2023 and 75
closures (145 net openings), growing the estate to 2,473 shops as
at 30 December 2023
·
Relocated 42 existing shops and refurbished 122
existing shops
·
Continued to expand partnerships with retailers
including Primark, Tesco and newest partner
Sainsbury's. London
presence extended including new shops in Canary Wharf and Waterloo
railway stations and Gatwick Airport
·
Targeting 140 to 160 net openings in 2024; clear
opportunity for significantly more than 3,000 UK shops over longer
term
Evening trade:
·
More than 1,200 sites competing for
food-on-the-go-sales until 7pm or later
·
Existing range popular; hot chicken goujons,
potato wedges and pizzas selling well
·
Evening fastest growing daypart; 8.7% of
company-managed shop sales in H2
Digital channels:
·
Delivery reach extended, now available on Just Eat
(1,340 shops) and Uber Eats (930 shops) platforms (1,440 shops in
total) with sales up 23.6% in 2023
·
Greggs App scanned in 12.5% of company-managed
shop transactions (2022: 6.2%)
Supply chain investment:
·
Fourth production line installed at Balliol Park
in Newcastle upon Tyne, which will provide circa 35% additional
manufacturing capacity for our savoury rolls and bakes
· Work progressing
well to expand logistics capacity of Birmingham and Amesbury
distribution centres, both due to come on stream later in
2024
· Two new state-of-the-art facilities planned
to facilitate further
expansion. First site in Derby secured and
second site planned for the Kettering/Corby
area
Greggs Pledge highlights:
· Greggs Foundation Breakfast Clubs continue to grow; 896
schools feeding 62,000 school children every day
·
Now have 35 Outlet shops, providing unsold Greggs'
products at a discount
· 2040 net zero
carbon target fully embedded into our business processes; emissions
reduction targets introduced to long-term incentive
schemes
·
Eco-shop successes being rolled out across shop estate
Current trading
·
Greggs has started 2024 well - like-for-like sales in company-managed shops up 8.2% in the
first nine weeks of 2024
·
No change to management's expectations for
2024. Confident that Greggs can deliver another year of good
progress
Roisin Currie, Chief
Executive commented:
"Reflecting on another year
of rapid growth, I am so proud of how our teams have risen to the
challenge of serving more customers through more channels. Whether
in our shops, our manufacturing sites, our distribution network, or
in Greggs House, our teams stepped up to make sure that we kept
pace with the increased customer demand as we delivered on our
strategic growth plan.
"We are very much on track to
deliver our bold five-year growth plan to double sales by 2026 and
to have significantly more than 3,000 shops in the UK over the
longer term."
|
ENQUIRIES:
Greggs plc
Roisin Currie, Chief
Executive
Richard Hutton, Chief Financial
Officer
David Watson, Head of IR
Tel: 0191 281 7721
|
Hudson Sandler
Wendy Baker / Hattie Dreyfus
/
Nick Moore / Emily
Brooker
Email:
greggs@hudsonsandler.com
Tel: 020 7796 4133
|
|
An audio webcast of the analysts'
presentation will be available to download later today at
http://corporate.greggs.co.uk/
|
Chair's statement
It's great to see the progress that Greggs has made in 2023.
Strong operational delivery has resulted in a record financial
performance and further cemented our market position. The clarity
and execution of our strategy positions Greggs well for the
significant opportunities that lie ahead as we invest for further
sustainable growth.
Overview
Greggs delivered another strong
performance in 2023, making good progress against our strategic
plan and further strengthening the Company's position as a leader
in the food-to-go market. In a period when the rising cost of
living was all too evident the Greggs value proposition shone
through and was reflected in growing customer visits and record
ratings for value-for-money.
The Board's activity in the year
reflects its oversight of the Company's strategic development as
well as the maintenance of high standards of governance, with
oversight of risk management and returns a key focus given our
significant capital expenditure plans. We have engaged with
management plans for the expansion of the shop estate, franchise
partnerships and the development of new digital channels. To
support the significant growth potential that lies ahead the Board
has scrutinised and approved plans for further supply chain
investment, which will unlock further capacity in the years ahead.
Risk management remains high on our agenda and in 2023 the Board
spent time with the Company's advisers considering the risk
landscape and the implications for our strategic risk
register.
The sustainability of Greggs is
founded on our responsible approach to doing business. The Greggs
Pledge sets out our ambitions to be even better in the years ahead
and we can all feel justly proud of our progress on this
journey.
Our people and
values
Greggs colleagues across the
business have yet again played a pivotal role in the progress we
continue to make, and I would like to thank them for their
continued outstanding contribution.
It is important that the Board stays
close to the views of our colleagues and Directors devote
significant time to activity that lets them hear first-hand what is
on our people's minds. Visits to shops, supply sites and support
teams, as well as attendance at listening forums equip Directors to
understand the practical implications of our plans and challenge
the executive management team. Food development has also been a
focus - as a business with food at its heart the fundamental
evolution of our range to reflect changing consumer tastes and
health credentials is critical and I am proud of the progress that
our teams continue to make.
The Board
Nigel Mills joined the Board in the
first quarter of 2023 and took on the role of Senior Independent
Director with effect from the Annual General Meeting ('AGM') on 17
May 2023. We said farewell to Sandra Turner, Senior Independent
Director, and Helena Ganczakowski, following their planned
retirement from the Board. Both have made significant contributions
to the strategic repositioning of Greggs and depart knowing that
they have left the business in great shape. The Nominations
Committee is looking to recruit a further Non-Executive Director
and we expect to report progress in the year ahead.
Further details of the Board's work
are included in the governance and committee sections of the Annual
Report and Accounts 2023.
Dividend
At the time of the interim results
in August 2023 the Board declared an interim ordinary dividend of
16.0 pence per share (2022: 15.0 pence per share). In line with our
progressive ordinary dividend policy and our target for the
ordinary dividend to be twice covered by earnings, the Board
intends to recommend at the AGM a final dividend of 46.0 pence per
share (2022: 44.0 pence per share), giving a total ordinary
dividend for the year of 62.0 pence per share (2022: 59.0 pence per
share).
Our capital allocation policy, as
outlined in the Financial Review, details our approach to
distribution and the methodology for determining and returning any
surplus cash to shareholders. In application of this policy the
Board has approved a special dividend of 40.0 pence per
share.
Looking
ahead
I am proud of Greggs achievements in
2023 and confident in the plans that we have for the year ahead.
Our clear strategy, great team, powerful product proposition and
robust financial health position us well for further success as we
invest in our plans for long-term growth.
Matt Davies
Chair
5 March 2024
Chief Executive's report
Reflecting on another year of rapid growth, I am so proud of
how our teams have risen to the challenge of serving more customers
through more channels. Whether in our shops, our manufacturing
sites, our distribution network, or in Greggs House, our teams
stepped up to make sure that we kept pace with the increased
customer demand as we delivered on our strategic growth
plan.
Despite an economic backdrop that
continued to be challenging with high inflation and the resulting
cost-of-living pressure, the resilience of the Greggs brand and the
strength of our business mean we kept on providing the great value,
tasty products and friendly service that our customers love us
for.
We
are very much on track to deliver our bold five-year growth plan to
double sales by 2026 and to have significantly more than 3,000
shops in the UK over the longer term.
A record
year
In 2023, our like-for-like sales in
company-managed shops were up 13.7% on 2022 showing that, two years
into our ambitious five-year plan to double sales, our strategy is
working with sales up circa 50% over that period.
What started as a plan, is now a
solid reality. Greggs is the UK's leading food-to-go brand
(YouGov's Brand Index), and during 2023 we became customers' number
one destination for breakfast with a 19.6% share of
visits.
Our success demonstrates that the
growth drivers we are pursuing are the right ones, giving us the
confidence to accelerate our efforts. We will open our
2,500th shop in the coming weeks and see the potential
for significantly more than 3,000 in the UK in the longer term.
Meanwhile, our multi-channel strategy is allowing us to grow home
delivery and Click + Collect orders, and we are reconfiguring our
shops to allow us to serve digital customers more quickly and
smoothly whilst ensuring our walk-in customers continue to receive
the brilliant service they are used to.
We are keeping more shops open for
longer, expanding our share of the evening food-to-go market, and
we are building our brand by making Greggs mean more to more
people. That means strengthening the loyalty of our existing base,
while broadening that base by enticing new people through our doors
and converting occasional shoppers into regulars.
To meet this increase in customer
demand, we are investing in our manufacturing sites and
distribution networks so that all parts of our
vertically-integrated business grow together.
At the heart of Greggs is our value
proposition. Our teams have done everything they can this year to
ensure that our great quality, freshly prepared food is available
and accessible to everyone. We have been relentless in our search
for efficiency gains so that we can protect our pricing and
continue to provide outstanding value for our customers.
Financial
results
Total sales grew to £1,810 million
in 2023 (2022: £1,513 million), a 19.6% increase on the level seen
in 2022. Within this, company-managed shop like-for-like sales were
13.7% higher than the equivalent period in 2022.
Underlying pre-tax profit for the
year increased to £167.7 million (2022: £148.3 million), in
addition to which we recorded exceptional income of £20.6 million.
For further detail, see the full financial review.
Our key drivers of
growth
Broadening customer appeal
This growth driver is about telling
our customers all the ways they can interact with us - growing awareness of our menu and new developments,
our opening hours, our delivery service, and our Click + Collect
offer - and building their loyalty through rewards and engaging
communications via our website and app.
Our aim is to reach all food-to-go
consumers across the UK throughout the day, letting them know that
they can find us whenever and wherever they fancy.
We have worked hard to win and keep
the loyalty of our regular customers and I'm delighted that our
successful growth strategy is allowing us to welcome so many new
customers too.
The cost-of-living crisis has
affected everyone; rising energy bills and interest rates have
meant we are all looking for ways to make our money go further. As
a value proposition, Greggs has been well placed to help. We have
noticed occasional Greggs customers becoming regulars and we know
that rewarding their loyalty is helping to increase the frequency
of visits.
Our brand awareness remains
consistently high at 95%, and we have worked hard this year to let
people know that Greggs is for everyone. Our market share is at an all-time high, with Greggs'
total share of visits in the food-to-go
market increasing to 8.2% (2022: 7.7%) (source: Circana, December
2023).
In December, we launched a pop-up
'Bistro Greggs' in the premium department
store Fenwick, in Newcastle upon
Tyne, proving that Greggs' quality is
welcomed everywhere. Our products were reinterpreted by Fenwick's
chef and served under silver cloches to be eaten with knives and
forks. This tongue-in-cheek partnership delivered gems such as
'Greggs Benedict' and Steak Bake paired with truffled dauphinoise
potatoes.
Another key event in 2023 was
Fenders Unplugged, a two-day live music event in our Grainger
Street shop in Newcastle in celebration of Geordie legend Sam
Fender ahead of his headline appearances at St James'
Park.
Growing and developing the Greggs estate
During 2023, we opened 220 new shops
(145 net of closures and relocations) meaning that, by the end of
the year, we had 2,473 shops trading (comprising 1,970
company-managed shops and 503 franchised units). As well as
continuing to nurture and build our presence on the high street,
our much-loved brand soared to new heights with further openings in
travel hubs, including our first in a London airport, at Gatwick,
more roadside locations, more retail parks and supermarkets and
further expansion of our drive-thru offer.
We have also grown our reach in
central London, adding new shops across the capital including
Canary Wharf and Waterloo railway stations, and the Westfield
Shopping Centre in Shepherd's Bush.
We expanded our partnerships with
other retailers; opening four new 'Tasty' cafes inside Primark
stores (taking the total to six), 17 further shops in Tesco stores
(taking the total to thirty-two), and five with our newest retail
partner, Sainsbury's.
We proudly celebrated the opening of
our 500th franchise shop. Working with our 16 franchise
partners has enabled us to reach new locations and has been key to
increasing our presence in motorway services and petrol forecourts.
Our franchise model is key in supporting the delivery of our
long-term growth strategy.
Growth isn't just about opening new
shops, it is also about finding bigger, better premises for
successful sites. During the year, we relocated 42 shops. In
Runcorn, for instance, we swapped our site for the unit next door
which is three times as big allowing us to add seating, a hot food
cabinet, and better facilities for our colleagues. Sales in the
shop were up 30% following the move and we have the space to
accommodate further growth. We have identified a further 50 shops
that we plan to relocate to bigger, better sites in
2024.
Our programme of shop refits is also
making sure that our existing estate looks great and remains
appealing. We refitted 122 shops in 2023 using our newest design
which maximises space while also making it easier for our teams to
service our delivery and Click + Collect digital channels. We plan
to refurbish a further 195 shops in 2024.
Extending evening trade
During 2023, we continued to open
our shops later into the evening and now have more than 1,200 sites
competing for food-on-the-go-sales until 7pm or later. Throughout
the year, evening (defined as post-4pm sales) was the fastest
growing daypart, albeit from a low base. As a result evening
sales were 8.7% of company-managed shop sales in the second half of
2023, and our market share for the evening daypart increased to
1.6% for 2023 (2022: 1.2%, source: Circana, December
2023).
We know many customers stop by our
shops on their way home from work, looking for quick and easy
evening meals and snacks. Our delivery service also plays a key
role in the evening trade, with more than 600 of our later-opening
shops available to customers via Just Eat or Uber Eats. We see
strong potential for expanding our home delivery offer further in
this daypart.
Competing for evening sales means
having the right products to meet our customers' preferences. Our
existing range is proving popular, with our hot southern fried
chicken goujons, southern fried potato wedges, and pizzas all
selling well. Our family pizza box (available for delivery) comes
with six individual slices and can be customised, meaning that
everyone can get the flavour they want. We continue to innovate
with new hot food options and expanded our pizza range with a Spicy
Veg version this year, as well as trialling new menu ideas such as
Mozzarella and Cheddar Bites.
Our ongoing focus is on making sure
we have the right products in the evening to give people more
reasons to visit us and, in 2024, we will continue our trial with a
number of items including customisable hot chicken wraps and
made-to-order drinks.
Developing digital channels
Greggs is now a truly multi-channel
retailer. We aim to serve our customers wherever, whenever, and
however they choose. That might be a customer visiting a shop,
someone who wants the frictionless experience of Click + Collect,
or customers at work or at home who want the convenience of Greggs
delivered to their door.
I have been extremely impressed by
the growth in engagement with our loyalty app, whereby customers
benefit from our popular 'buy-9-get-the-10th-free'
offer. Use of the Greggs App doubled during 2023, far exceeding our
internal targets. In the year as a whole, customers scanned the
Greggs App in 12.5% of transactions in our company-managed shops
(2022: 6.2%), and in the final quarter of the year the
participation rate exceeded 15%. Customers who engage with our
loyalty app shop more frequently with us and we are able to market
to them directly, which provides further opportunity to drive sales
growth through this channel.
The slick efficiency of Click +
Collect continues to help busy people save precious minutes in
their day and use of this digital service continues to increase.
Busy commuters, for example, can now pay for their morning coffee
or bacon sandwich before their train has pulled into their station,
choose a time slot, skip the queue and go straight to the counter
to collect their order.
Sales through the delivery channel
were up 23.6% in 2023. We introduced home delivery during the
Covid-19 pandemic in 2020 through a partnership with Just Eat, and
in Q3 2023 extended our reach by rolling out with Uber Eats. We now
have 1,340 shops offering delivery through Just Eat and 930 sites
working with Uber Eats. A total of 1,440 shops offer delivery
services, allowing us to now offer home delivery across the
UK. In 2023 this channel represented 5.6% of company-managed
shop sales, and we grew our market share of
food-to-go delivery visits to 3.8% in 2023 (2022: 2.7%) (source: Circana, December 2023).
For our customers, shopping with us
gets simpler and easier every year as we use technology to make
things better and more rewarding. Behind the scenes, that means we
are managing greater complexity, but our teams have done a
fantastic job of integrating new systems, working hard to enable
our processes to stay streamlined and simple for the shop teams so
that they can continue to operate at pace and deliver great
customer service.
Investing in our supply chain and technology for a bigger
business
One of the unique strengths of our
business is its vertical integration: we own and run the
manufacturing sites and logistics operations that serve our shops.
Our ambitious plans mean that we are investing further in our
infrastructure to ensure that we can increase supply chain capacity
to support business growth, as previously communicated in our
capital expenditure forecasts.
Investment in our Balliol Park
manufacturing site will enable us to increase production of savoury
rolls and bakes by 35% over time, and the additional pizza line at
our Enfield site commissioned in late 2022 has double the capacity
of our original line.
In order to facilitate further
expansion, we plan to build two brand new state-of-the-art
facilities in the Midlands. The first site will be for frozen
products and will be located in Derby. Opening in 2026, this site
will not only provide additional manufacturing capacity for frozen
products, including new savoury and sweet production lines, but
also enable frozen storage, picking and distribution which will be
key to our future growth.
The second site will be located in
the Kettering/Corby area, and will be a new National Distribution
Centre for the storage, picking and distribution of ambient and
chilled goods. The site will enable our existing Radial
Distribution Centres to service many more shops, allowing them to
support growth in their regions. We expect this site to be
operational in the first half of 2027.
In the meantime we are investing in
scaling up two of our existing Radial Distribution Centres. We are
currently on-site undertaking work to double capacity at our
Amesbury distribution facility and are restructuring our Birmingham
site into a more efficient purpose-designed operation which will
increase our capacity. These two projects will add the capacity to
service around 300 more shops to our network. In the second
half of 2023, we took over the lease of a substantial warehousing
facility next to our Kettering distribution centre when our
supplier entered administration, securing our requirements and
saving the jobs of everyone employed at the site.
During 2023, we added more
double-deck trailers to our fleet. We now have 34 vehicles able to
carry 56% more per load, with a further 18 arriving in the business
by 2025. These reduce the carbon intensity of our logistics
operations and also save on fuel.
We continue to make improvements to
our shop systems, making processes simpler for our colleagues. We
tested a new, upgraded till suite that was redesigned based on
feedback from our people and we will roll out the clearer, easier
system to all shops during the current year.
Looking after our
people
For the first time, we are including
a section on 'Our People' in our Annual Report because our
colleagues, culture and values are what makes Greggs, Greggs. We
know that when our people thrive, our business is stronger and
better, so we work hard to make Greggs a great place to
work.
Just as our customers are relying on
us to help them weather the current challenging economic
circumstances, our colleagues rely on us too: we pride ourselves on
paying fair wages, providing secure employment, and offering
consistent contracted hours so that our colleagues know what their
weekly wage will be, and can budget for it.
We continue to share 10% of our
profits with team members with at least six months of service. We
have also increased our matched contribution rates for Greggs
pensions, meaning that all our colleagues can now access up to 6%
employer contributions.
On top of this, we offer a colleague
discount, our employee share plans, and an Employee Assistance
Programme that gives our people access to additional help when they
need extra support - we make sure that we are there for them,
whatever they need.
All this helps to keep our people
motivated and committed to Greggs. More than 24,000 colleagues
completed our annual employee survey in 2023, and three-quarters of
them told us that they would recommend Greggs as a
great place to work - 7% ahead of the UK retail
benchmark (source: People
Insight).
We know that great people are
important to our long-term sustainable growth. We nurture and grow
talent within our organisation so that our pipeline of future
leaders is primed, and there are great people ready to step into
our management team as we expand.
Our growth also means that we are
creating new jobs across the country within our shops,
manufacturing sites and distribution networks. During 2023, we
created 1,597 net new jobs.
A significant number of our shop and
area managers started as team members and worked their way up,
proving that Greggs can be an agent of social mobility. The
flexibility of our roles enables people to arrange their work life
around their personal life - reducing their hours to part time when
they have school-aged children, for instance, or pushing for
training and career progression when they are ready for more of a
challenge. Whatever they want from us, we aim to provide long-term
employment.
Giving back
We continue to donate at least 1% of
our underlying pre-tax profits to the Greggs Foundation each year,
which it then passes on to our communities through hardship grants,
community funding, and donations to help run the Breakfast Club
programme.
This is generously topped up by our
colleagues, partners and customers: we raised a record £202,000
through 25p 'buy a child a breakfast' donations in Greggs shops
last year - three times the amount raised in 2022 - and ran Greggs
Breakfast Club Appeal Weeks in June and September, raising a
further £190,000.
During 2023, the Greggs
Foundation distributed over £4.5 million to
schools and charitable organisations in the UK, including £1.5
million in hardship funding as it
responded to the increased need from our
communities due to the cost-of-living crisis. Almost half of
all the hardship grants awarded last year went to families
in schools with a Greggs Foundation
Breakfast Club.
In addition to donating money to the
Greggs Foundation, our fundraising activities raised over £1
million for Children in Need, a charity we have supported for 17
years now. We also proudly celebrated our 40-year partnership with
the charity Children's Cancer North through its annual Children's
Cancer Run. In February, we turned our charity buckets over to the
Disasters Emergency Committee raising £149,000 to help people in
Turkey and Syria who were affected by the devastating
earthquakes.
The Greggs
Pledge
We want our people to be proud to
work for Greggs. Not just because of the great job they do, day in
and day out, but because they are part of a business that strives
to do the right thing. Together, we are working towards delivering
the Greggs Pledge - ten commitments that aim to make the world a
better place. Our latest report on the progress we made towards
these commitments in 2023 will be published in the coming weeks and
I share some highlights below.
Stronger, healthier communities
Greggs Foundation Breakfast Clubs
continue to grow. By the end of 2023, we had Clubs in 896 schools
feeding 62,000 school children every day. This is about so much
more than providing a free meal in Britain's least-privileged
areas: our Clubs also contribute to improving attendance rates,
helping to build the habit of turning up to school every day, and
ensuring children start their day with a full stomach, so they are
better able to concentrate at school which, over time, means they
are more likely to fulfil their potential. In this way, Greggs
Foundation Breakfast Clubs are making a meaningful contribution to
enabling social mobility - fundamental for a flourishing
society.
We now have 35 Outlet shops open
around the country, providing people on a budget with the
opportunity to buy day-old Greggs products at a discount. A portion
of the profits made in these shops is then given to local community
organisations working to tackle food poverty. In 2023, that
donation totalled almost £650,000. Outlet shops also play an
important part in our efforts to make sure that unsold food is put
to good use. We passed around 2,600 tonnes of surplus food to this
network of shops in 2023 - approximately 44% more than
2022.
Of course, our focus on healthier
communities is also delivered through our commitment to ensuring
that 30% of our product range is a healthier option. We provide our
customers with well-priced, tempting, and tasty healthier options
including porridge, soups, and salads and, during 2023, introduced
a new range of flatbread sandwiches, improved the veg content of
our pasta salad, and launched new savoury bakes, including the
Spicy Vegetable Curry Bake. We were
delighted that our efforts were
recognised at the 2023 Sandwich and Food to Go Industry
Awards ('The
Sammies'), where we
not only won chain retailer of the year, but also the healthy
eating award for our Sweet Potato Bhaji and Rice Salad
Bowl.
Safer planet
Our 2040 net zero carbon target is
now fully embedded into our business processes, meaning it has gone
from a set of plans to an actionable programme of work, with data
outputs that we can - and do - scrutinise each month. To keep
everyone focused, our Scope 1 and 2 emissions targets form part of
the latest three-year long-term incentive schemes for our
leaders.
Decarbonising our business is no
small feat and we continue to work with experts such as the Carbon
Trust to inform and guide our decisions. Over time, seemingly small
actions aggregate to have a big impact, as we have seen by
switching the refrigerant gas we use to top up our coolers,
swapping to double-deck trailers, or migrating our company car
fleet to hybrid or electric models.
We did more work in 2023 to
understand our Scope 3 emissions and will complete the next part of
our supplier engagement plan in the year ahead. Our suppliers are
vital partners in this journey and we are already working in
partnership with many of them to see what we can collectively do
next.
This year, for instance, we began
using flour made from Wildfarmed wheat to make some of our
wholemeal products. This flour is made from wheat that is grown
following regenerative farming practices and standards that
prioritise soil health, soil condition, and farm biodiversity by
using low input farming methods.
Another example comes from work with
our suppliers of milk and refuse collection, Müller and Biffa. Our
milk bottles are separately disposed of with other dry mixed
recycling, Biffa convert this into food grade pellets, some of
which are then sent to Müller to be extruded into new bottles for
us containing 30% recycled content.
Today, 97% of the electricity and
30% of the gas we purchase comes from certified renewable sources.
Ultimately, we want to stop using natural gas for baking and diesel
for transportation and, in 2023, began discussions with a potential
green hydrogen supplier to explore the feasibility of powering our
manufacturing sites and logistics fleets with green
hydrogen.
The equipment we choose to put into
our shops is under scrutiny too. We test in-store sustainability
initiatives in our Eco-Shop and, during 2023, started the roll out
of seven new items - Unisan bins, knee-operated sinks, a prep
bench, microwave, fridge, freezer, and oven. The
new model microwave has an anticipated lifespan twice that of our
previous choice and is now utilised to warm our soup in a more
efficient way. We have therefore removed our soup kettles, heating
soup to order instead which uses around 1/20th of the
electricity previously consumed.
Our colleagues are also a source of
new ideas. This year, we ran the Greggs Sustainability Challenge
with our waste partner Biffa, inviting our people to propose
pioneering sustainability initiatives. Ideas included enriching
local ecosystems, a community kitchen garden, plastic reduction
initiatives, and engagement forums. The winners will see their
ideas become reality.
Better Business
I am proud to lead a Board with
excellent female representation on it; we have already met the FTSE
Women Leaders 2025 target of 40%. Across the business, women made
up 64% of our total workforce and half of our management population
in 2023. Our gender pay gap is reducing, predominantly driven by
getting a more balanced workforce at the entry level, which
historically has been disproportionately female. A gender pay gap
remains, in part because of having more males than females in our
most senior roles and supply chain roles where shift premiums
apply, but also because we still have more females than males in
our hourly-paid retail roles.
This year, we report on our
Ethnicity Pay Gap for the first time. We publish figures for both
2022 and 2023 which reveal a small gap that is largely static
year-on-year. We continue on our journey to embrace diversity in
Greggs following our achievement of the National Equality Standard
in 2021.
We continue to support and grow our
diversity and inclusion networks, set up to give a voice to our
different communities. The four groups - focused on Ethnicity,
Disability Inclusion, LGBTQ+, and Women's development - provide a
safe space for discussion and debate, and help to shape the
business. This year, among other things, their advocacy has led to
a new policy on transitioning at work, activities to mark Deaf
Awareness week, and input into an online learning module on our
zero-tolerance approach to harassment.
Looking
ahead
Our strong growth during these tough
years for the British economy gives me great optimism for the years
ahead. Back in 2021, we were bold when we set out our ambition to
double our sales by 2026 but we are ahead of our plan and have
proven that our strategy to open new shops, extend into the
evening, and build up our digital presence is a successful
one.
Our brand is stronger than ever
before, with more people coming to us more often in more locations
to enjoy the UK's favourite sausage roll, bacon breakfast roll,
sweet potato bhaji and rice salad bowl or doughnut. Our range gets
more enticing every year, with more healthy options, more hot food,
and new flavours to tempt our customers. That spirit of innovation
continues into 2024 with new product trials and roll-outs
planned.
We now employ 32,000 people across
the country, and I credit them with our success. It is their
passion for creating great food at affordable prices, and their
commitment to delivering warm and friendly service, that makes
Greggs the hugely popular destination that it is.
As their Chief Executive, I remain
fully committed to enabling our people to fulfil their potential
and build the career with us that they want. Just as we work hard
to win and keep the loyalty of our customers, we work hard to win
and keep the loyalty of our colleagues too.
Together, we will continue to grow
this brilliant business, while sharing our success with our
colleagues and communities. As we thrive, we can open more Greggs
Foundation Breakfast Clubs and Outlet shops, raise more money for
charities, and do more work to decarbonise food retailing. In our
small way, we are making the world a better place.
Current trading and
outlook
Greggs has started 2024 well, with
like-for-like sales in company-managed shops growing by 8.2% in the
first nine weeks. As we have previously reported,
inflationary pressures are reducing and we have improved visibility
of costs in the coming year. There is no
change to management's expectations for 2024, and
we are confident that Greggs can deliver another
year of good progress as we continue our plans for sustainable
growth. I am enormously proud of what we are already achieving and
excited about what's ahead.
Roisin Currie
Chief Executive
5 March 2024
Financial review
Greggs delivered a strong financial performance in 2023
against an economic backdrop that continued to be challenging.
Sales growth reflected our strategic ambitions and progress, and we
opened a record number of new shops. Cash generation was good and
our robust balance sheet will support our growth strategy as we
invest in capacity to enable further growth and strong capital
returns.
|
|
2023
£m
|
2022
£m
|
|
Variance
|
|
|
|
|
|
|
|
|
|
Revenue
|
1,809.6
|
|
1,512.8
|
|
+19.6%
|
|
|
|
|
|
|
|
|
|
|
Underlying operating
profit
|
171.7
|
|
154.4
|
|
+11.2%
|
|
|
|
|
|
|
|
|
|
|
Net finance expense (inc.
leases)
|
(4.0)
|
|
(6.1)
|
|
-34.4%
|
|
|
|
|
|
|
|
|
|
|
Underlying profit before
tax
|
167.7
|
|
148.3
|
|
+13.1%
|
|
|
|
|
|
|
|
|
|
|
Exceptional income
|
20.6
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before tax
|
188.3
|
|
148.3
|
|
+27.0%
|
|
|
|
|
|
|
|
|
|
|
Income tax
|
(45.8)
|
|
(28.0)
|
|
+63.6%
|
|
|
|
|
|
|
|
|
|
|
Profit after tax
|
142.5
|
|
120.3
|
|
+18.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying diluted Earnings per
share
|
123.8p
|
|
117.5p
|
|
+5.4%
|
|
|
Underlying Return on capital
employed
|
21.1%
|
|
21.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Total Group sales for the 52 weeks
ended 30 December 2023 grew by 19.6% to £1,810 million (2022:
£1,513 million). Growth was delivered through both new shop
openings and like-for-like sales growth in existing stores, driven
by a combination of volume growth and price increases. Total Group
revenue reflects sales from company-managed shops, which include
delivery sales, and sales through business-to-business channels
with our franchise and wholesale partners.
Reporting 'like-for-like' sales
(sales in company-managed shops with more than one calendar year's
trading history) is a key alternative performance measure for
Greggs, as it shows underlying estate sales performance excluding
the impact of new shop openings and closures. Our like-for-like
sales volume growth remained strong through the year whilst the
element relating to pricing reduced as we annualised against price
increases made in May and October 2022. The Q3 2023 result was
flattered by c.1% due to the comparison with Q3 2022 when we closed
the estate for a day for the funeral of Queen Elizabeth II. Overall
growth was in line with our plans for the year, with like-for-like
sales 13.7% higher year-on-year.
|
|
Q1
|
Q2
|
Q3
|
Q4
|
2023
|
|
|
|
|
|
|
|
|
Company-managed like-for-like sales
vs. 2022
|
17.0%
|
15.1%
|
14.2%
|
9.4%
|
13.7%
|
Profit for the
year
Underlying profit before tax
(excluding exceptional income) in 2023 was £167.7 million (2022:
£148.3 million). Our strong trading performance reflected the
Greggs brand's value proposition and continued momentum from our
strategic growth initiatives. Profit before tax of £188.3 million
includes a net exceptional gain of £20.6 million which primarily
relates to the settlement of business
interruption insurance claims made in 2020.
The overall level of cost inflation
in 2023 averaged 8.5% for the year but with an exit rate closer to
5%. Our wage award was fixed for the year from January, and food
and packaging inflation reduced through the second half of the year
once we had annualised on the significant increases seen in 2022.
Energy costs were less volatile than in recent times and our shop
occupancy cost ratio (shop costs such as rent, rates and service
charges as a percentage of sales) continued to improve.
Looking forward we currently expect
overall input cost inflation in 2024 to be in the range of 4-5%,
although an element of this remains subject to geopolitical risks.
We have improved levels of forward cover, with circa 80% of our
energy requirements fixed for the year and forward purchase
agreements representing four months of our food and packaging
needs. Looking further ahead we have fixed the price of 50% of our
energy requirements for 2025.
Strategic progress, margin and return on
capital
In October 2021 we set out our
ambitious plans to double sales over a five-year period as we
emerged from the pandemic with a strong brand and clear growth
opportunities. Two years on from this we are very much on track
with sales of £1.8 billion in 2023, up circa 50% in two years. A
couple of things have changed - back in 2021 no one foresaw the
dramatic rise in cost (and consequently price) inflation that was
to come. Also, with the benefit of hindsight, it is clear that some
of our early success in the food delivery market was a reflection
of temporary pandemic conditions. However, despite these factors
looking across the last two years we are pleased with the progress
that has been made in developing the growth pillars that we
identified:
·
Our core daytime
walk-in business has recovered well after the pandemic and
data shows that we have taken market share, supported by an
investment in marketing to drive consideration and purchase
intent.
· Estate
growth has been a particular success story, with a
net 292 new shops opened (164 company-managed and 128 franchised)
over 2022 and 2023. In addition we have relocated 67 existing
shops, in general moving them to bigger, better units that have the
space to realise the growth potential in their
catchments.
·
Evening customer growth is
developing well. This will be one of the longer-term drivers of
growth and requires us to invest in staffing initially as we
develop awareness of Greggs as an early evening
option.
·
As noted above, our
delivery success in 2021
was partly attributable to pandemic conditions and has since
rebased. Rolling out with a second delivery partner has resulted in
a modest increase in commission costs but will further leverage our
shop network, supporting strong returns on the capital invested
there. Sales increased 23.6% in 2023, supported by the roll out
with the second partner.
· Marketing
is becoming more personalised as we incentivise
customers to engage with our loyalty scheme and learn more about
how they shop with Greggs.
Our primary financial objective
remains to maintain the strong returns on capital employed (ROCE)
in the business, as evidenced by our performance over many
years:
|
|
2019
|
2020
|
2021*
|
2022
|
2023
|
|
ROCE**
|
20.0%
|
pandemic
|
23.0%
|
21.0%
|
21.1%
|
* 2021 result reflects pandemic support measures
** Underlying ROCE, excluding
exceptional items
Business growth has been delivered
whilst maintaining strong capital returns, despite the cost
investments that we have made to develop new channels.
Delivering a healthy ROCE is embedded as a key
element of our performance management and we aim to deliver a ROCE
which averages circa 20% over time. In recent years we have
exceeded this as capacity utilisation in our supply chain has been
at a historically high level. As previously stated, we have
significant new facilities coming online in the near to medium term
to support growth; while the business 'grows into' this new
capacity we would naturally expect modest dilution of Group
returns, which we expect will be seen in 2025/26. As the benefits
of capacity utilisation return, we would expect this dilution to
reverse.
The development of new channels and
dayparts is driving incremental sales volumes and, as noted above,
strong returns on capital. In support of this, in 2023 we increased
our investment in marketing and in shop labour, as well as agreeing
additional delivery aggregator costs as we moved to a non-exclusive
partner arrangement. These initiatives, along with growth in
participation in the Greggs App loyalty programme, are successfully
increasing the frequency of customer visits and increasing Greggs'
share of the food-to-go market. The overall margin mix impact of
this incremental business resulted in a modest dilution in
underlying net profit margin to 9.3% in 2023 (2022:
9.8%).
Financing
charges
The net financing expense of £4.0
million in the year (2022: £6.1 million) comprised £9.6 million in
respect of the IFRS 16 interest charge on lease liabilities and
£0.7 million of facility charges under the Company's (undrawn)
financing facilities, offset by net income of £6.3 million relating
to income on cash deposits, interest on the defined benefit pension
liability and foreign exchange losses.
Taxation
The Company has a simple corporate
structure, carries out its business entirely in the UK and all
taxes are paid here. We aim to act with integrity and transparency
in respect of our taxation obligations.
The Group's overall effective tax
rate on profit, including the impact of exceptional items, in 2023
was 24.3% (2022: 18.9%) which reflects the increase from 19% to 25%
in the corporation tax rate from 1 April 2023 and the
discontinuance of 'super-deduction' enhanced capital allowances
from the same date. The underlying tax rate for the year was 24.4%
(2022: 18.9%).
We expect the effective tax rate for
2024 to be around 26.0% and going forward the effective rate is
expected to remain around 1.0 percentage point above the headline
corporation tax rate; this is principally because of expenditure
for which no tax relief is available, such as depreciation on
properties acquired before the introduction of structures and
buildings tax allowances, and acquisition costs relating to new
shops.
Earnings per share and
dividend
Underlying diluted earnings per
share in 2023 were 123.8 pence (2022: 117.5 pence per share).
Including the net exceptional income diluted earnings per share
were 139.2 pence (2022: 117.5 pence per share).
The Board recommends a final
ordinary dividend of 46.0 pence per share (2022: 44.0 pence per
share). Together with the interim dividend of 16.0 pence (2022:
15.0 pence) paid in October 2023, this makes a total ordinary
dividend for the year of 62.0 pence (2022: 59.0 pence). This
is covered two times by underlying diluted earnings per share and
is in line with our progressive ordinary dividend policy, which
aims to increase the dividend in line with growth in earnings per
share.
In application of the capital
allocation policy outlined below under "Cash flow and capital
structure" the Board has determined that the current level of cash
held by the Company exceeds its minimum requirements, having taken
into account investment plans and the distribution of ordinary
dividends. As a result the Board has approved a special dividend of
40.0 pence per share.
Subject to the approval of
shareholders at the Annual General Meeting, the final ordinary and
special dividends will be paid on 24 May 2024 to shareholders on
the register at 26 April 2024.
Balance
sheet
Capital expenditure
We invested a total of £199.8
million (2022: £110.8 million) in capital expenditure during 2023.
Retail estate expenditure grew as we increased the number of new
company-managed shop openings and relocations, and completed more
shop refurbishments. In our supply chain we installed a fourth
production line for our iconic savoury rolls and bakes at Balliol
Park in Newcastle and have also started work to extend logistics
capacity at our Birmingham and Amesbury distribution
centres.
Depreciation and amortisation on
property, plant and equipment and intangibles in the year was £70.5
million (2022: £62.7 million). A further £54.5 million (2022 £52.8
million) of depreciation was charged in respect of right-of-use
assets on capitalised leases.
As previously communicated, our
investment in capital expenditure will continue at an elevated
level until 2026 as we provide increased capacity in our supply
chain to support our ambitious growth plans, whilst also growing
and refurbishing our retail estate. In 2024 we will continue the
work to expand Radial Distribution Capacity at our Birmingham and
Amesbury sites. We also expect to start work on the construction of
two new sites in the Midlands, one in Derby and one in the
Kettering/Corby area, which will provide new manufacturing and
logistics capacity to support our ambitious growth plans. We expect
the new sites to be operational in 2026/27.
Our shop opening and relocation
plans mean that we will invest in circa 170 new company-managed
shops in 2024 and refurbish around 150 existing company-managed
stores as we modernise older sites and introduce additional
facilities to support our growth plans. Our forward view on retail
capital expenditure reflects the changing mix of shop openings in
the pipeline as we service additional channels and support growth
opportunities, for example the roll out of equipment to support
made-to-order iced drinks. In our retail estate we target a 25%
cash return on investment on new shops and typically exceed this
level. The success of the business means we are opening shops that
trade longer hours and have higher than average sales and
returns.
Overall we expect capital
expenditure in 2024 to be in the range of £250 to £280 million,
dependent on timing of the planned acquisition of the additional
site in the Kettering/Corby area. We anticipate that capital
expenditure will be around £200 million in each of 2025 and 2026 as
we invest to support our growth plans. Beyond this investment phase
we expect maintenance capital expenditure to be up to 5% of
revenue, with additional expenditure to support further
growth.
Working capital
We ended the year with Group net
current assets of £25.4 million (2022 £38.9 million) as we continue
to carry a robust cash and cash equivalents position of £195.3
million (2022: £191.6 million) to support investment in our capital
expenditure programme. Excluding cash and cash equivalents, net
current liabilities increased from £152.7 million to £169.9 million
over the year. This reflects the impact of strong growth on trade
and other payables.
Pension scheme
The Company's closed defined benefit
pension scheme continues to be in a net asset position; £6.6
million at the end of 2023 (2022: £6.3 million). The stable balance
sheet position reflects small movements in the discount rate and
inflation assumptions which increased liabilities by £2 million,
offset by an equivalent reduction in liabilities as a result of
changes in the mortality assumptions.
The scheme underwent a full
actuarial revaluation in 2020, the results of which showed a
deficit in funding. The Company committed to making additional
contributions of £2.5 million each year from 2021 to 2026 to ensure
that any funding requirements are met over the medium term as the
scheme works towards full de-risking. £5.5 million of these
committed contributions were accelerated in 2022 due to volatile
market conditions, leaving £4.5 million of the original commitment
to pay in future years.
Cash flow and capital
structure
The net cash inflow from operating
activities after lease payments in the year was £257.1 million
(2022: £198.8 million). The strength of cash generation reflected
the growth in profits, settlement of two insurance claims related
to business interruption in 2020 and a rephasing of tax payments to
reflect full expensing capital allowances. At the end of the year
the Group had net cash and cash equivalents of £195.3 million
(2022: £191.6 million).
The Company's undrawn revolving
credit facility, which runs to December 2025, allows it to draw up
to £100 million in committed funds, subject to it retaining a
minimum liquidity of £30 million (i.e. maximum net borrowings are
£70 million). Taking this into account, total available liquidity
at the end of 2023 was £265.3 million (2022: £261.6 million). We
intend to refinance the revolving credit facility in the year
ahead.
Our approach to capital allocation
can be described as a series of priorities:
1. Invest to adequately maintain the
business in order to support its continued success. As noted
above, in normal circumstances we expect maintenance capital
expenditure to be circa 5% of revenue.
2. Maintain a strong balance sheet.
Reflecting the inherent gearing in the Group's leaseholds and
working capital we aim, in normal circumstances, to maintain a
year-end net cash position of £50 to £60 million to allow for
seasonality in the working capital cycle and to protect the
interests of all creditors. This will be periodically reassessed as
the Group grows.
3. Deliver an attractive ordinary dividend
to shareholders. We continue to target a progressive ordinary
dividend, normally around two times covered by underlying profit
after taxation.
4. Selectively invest to grow. As outlined
above we intend to continue to make capital investments in excess
of the maintenance level in the coming years to support our growth
plans.
5. Return surplus cash to shareholders.
Where net cash on the balance sheet exceeds our minimum
requirement, taking into account that reserved for growth
investments, we expect to return cash to shareholders by way of
special dividends.
The Company's current cash position
will normalise in future years following our investment to support
our ambitious growth plan and payment of the special dividend
described above.
Looking
forward
We are leveraging our strong
financial position to support our ambitious growth plans. At the
same time we will maintain the discipline that has delivered
profitable growth and excellent capital returns, to the benefit of
all of our stakeholders. We remain confident in the
future.
Richard Hutton
Chief Financial Officer
5 March 2024
Greggs plc
Consolidated income statement
for
the 52 weeks ended 30 December 2023 (2022: 52 weeks ended 31 December 2022)
|
|
2023
|
2023
|
2023
|
2022
|
|
|
Excluding exceptional
items
|
Exceptional items (see note
3)
|
Total
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
Revenue
|
1,809.6
|
-
|
1,809.6
|
1,512.8
|
|
Cost of sales
|
(710.5)
|
-
|
(710.5)
|
(574.5)
|
|
|
________
|
________
|
________
|
________
|
|
Gross profit
|
1,099.1
|
-
|
1,099.1
|
938.3
|
|
|
|
|
|
|
|
Distribution and selling
costs
|
(844.5)
|
0.3
|
(844.2)
|
(713.2)
|
|
Administrative expenses
|
(82.9)
|
-
|
(82.9)
|
(70.7)
|
|
Other income
|
-
|
20.3
|
20.3
|
-
|
|
|
________
|
________
|
________
|
________
|
|
Operating profit
|
171.7
|
20.6
|
192.3
|
154.4
|
|
|
|
|
|
|
|
Finance expense (net)
|
(4.0)
|
-
|
(4.0)
|
(6.1)
|
|
|
________
|
________
|
________
|
________
|
|
Profit before tax
|
167.7
|
20.6
|
188.3
|
148.3
|
|
|
|
|
|
|
|
Income tax
|
(41.0)
|
(4.8)
|
(45.8)
|
(28.0)
|
|
|
________
|
________
|
________
|
________
|
|
Profit for the financial year attributable to equity holders
of the Parent
|
126.7
|
15.8
|
142.5
|
120.3
|
|
|
=======
|
=======
|
=======
|
=======
|
|
Basic earnings per share
|
125.0p
|
15.6p
|
140.6p
|
118.5p
|
|
Diluted earnings per share
|
123.8p
|
15.4p
|
139.2p
|
117.5p
|
Greggs plc
Consolidated statement of comprehensive
income
for
the 52 weeks ended 30 December 2023 (2022: 52 weeks ended 31 December 2022)
|
|
|
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
|
|
|
|
Profit for the financial year
|
142.5
|
120.3
|
|
|
|
|
|
Other comprehensive income
|
|
|
|
Items that will not be recycled to profit and
loss:
|
|
|
|
Remeasurements on defined benefit
pension plans
|
-
|
0.7
|
|
Tax on remeasurements on defined
benefit pension plans
|
0.4
|
1.8
|
|
|
________
|
________
|
|
Other comprehensive income for the financial year, net of
income tax
|
0.4
|
2.5
|
|
|
________
|
________
|
|
|
|
|
|
Total comprehensive income for the financial
year
|
142.9
|
122.8
|
|
|
=======
|
=======
|
Greggs plc
Consolidated Balance Sheet
at
30 December 2023 (2022: 31 December
2022)
|
|
|
|
|
|
|
2023
|
2022
|
|
|
|
£m
|
£m
|
|
ASSETS
|
|
|
|
|
Non-current assets
|
|
|
|
|
Intangible assets
|
|
18.3
|
13.5
|
|
Property, plant and
equipment
|
|
510.3
|
390.0
|
|
Right-of-use assets
|
|
296.6
|
281.6
|
|
Defined benefit pension
asset
|
|
6.6
|
6.3
|
|
|
|
________
|
________
|
|
|
|
831.8
|
691.4
|
|
Current assets
|
|
|
|
|
Inventories
|
|
48.8
|
40.6
|
|
Trade and other
receivables
|
|
53.8
|
50.2
|
|
Current tax asset
|
|
-
|
0.6
|
|
Cash and cash equivalents
|
|
195.3
|
191.6
|
|
|
|
________
|
________
|
|
|
|
297.9
|
283.0
|
|
|
|
________
|
________
|
|
Total assets
|
|
1,129.7
|
974.4
|
|
|
|
________
|
________
|
|
LIABILITIES
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
|
(211.1)
|
(191.7)
|
|
Current tax liabilities
|
|
(4.9)
|
-
|
|
Lease liabilities
|
|
(52.5)
|
(48.8)
|
|
Provisions
|
|
(4.0)
|
(3.6)
|
|
|
|
________
|
________
|
|
|
|
(272.5)
|
(244.1)
|
|
Non-current liabilities
|
|
|
|
|
Other payables
|
|
(2.3)
|
(2.8)
|
|
Lease liabilities
|
|
(267.1)
|
(252.5)
|
|
Deferred tax liability
|
|
(54.7)
|
(26.3)
|
|
Long-term provisions
|
|
(2.2)
|
(2.7)
|
|
|
|
________
|
________
|
|
|
|
(326.3)
|
(284.3)
|
|
|
|
________
|
________
|
|
Total liabilities
|
|
(598.8)
|
(528.4)
|
|
|
|
________
|
________
|
|
Net
assets
|
|
530.9
|
446.0
|
|
|
|
=======
|
=======
|
|
EQUITY
|
|
|
|
|
Capital and reserves
|
|
|
|
|
Issued capital
|
|
2.0
|
2.0
|
|
Share premium account
|
|
25.1
|
23.1
|
|
Capital redemption reserve
|
|
0.4
|
0.4
|
|
Retained earnings
|
|
503.4
|
420.5
|
|
|
|
________
|
________
|
|
Total equity attributable to equity holders of the
Parent
|
|
530.9
|
446.0
|
|
|
|
=======
|
=======
|
Greggs plc
Statements of changes in equity
for
the 52 weeks ended 30 December 2023 (2022: 52 weeks ended 31 December 2022)
52
weeks ended 31 December 2022
|
|
Attributable to equity holders of the Company
|
|
|
Issued
capital
|
Share
premium
|
Capital
redemption reserve
|
Retained
earnings
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
Balance at 2 January 2022
|
2.0
|
20.0
|
0.4
|
406.8
|
429.2
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the financial
year
|
-
|
-
|
-
|
120.3
|
120.3
|
|
Other comprehensive income
|
-
|
-
|
-
|
2.5
|
2.5
|
|
|
________
|
________
|
________
|
________
|
________
|
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
122.8
|
122.8
|
|
|
|
|
|
|
|
|
Transactions with owners, recorded directly in
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of ordinary shares
|
-
|
3.1
|
-
|
-
|
3.1
|
|
Purchase of own shares
|
-
|
-
|
-
|
(11.0)
|
(11.0)
|
|
Share-based payment
transactions
|
-
|
-
|
-
|
3.6
|
3.6
|
|
Dividends to equity
holders
|
-
|
-
|
-
|
(98.5)
|
(98.5)
|
|
Tax items taken directly to
reserves
|
-
|
-
|
-
|
(3.2)
|
(3.2)
|
|
|
________
|
________
|
________
|
________
|
________
|
|
Total transactions with
owners
|
-
|
3.1
|
-
|
(109.1)
|
(106.0)
|
|
|
________
|
________
|
________
|
________
|
________
|
|
Balance at 31 December
2022
|
2.0
|
23.1
|
0.4
|
420.5
|
446.0
|
|
|
=======
|
=======
|
=======
|
=======
|
=======
|
|
|
|
|
|
|
|
Greggs plc
Consolidated statement of changes in equity
(continued)
52
weeks ended 30 December 2023
|
|
Issued
capital
|
Share
premium
|
Capital
redemption reserve
|
Retained
earnings
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
|
Balance at 1 January 2023
|
2.0
|
23.1
|
0.4
|
420.5
|
446.0
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the financial
year
|
-
|
-
|
-
|
142.5
|
142.5
|
|
Other comprehensive income
|
-
|
-
|
-
|
0.4
|
0.4
|
|
|
________
|
________
|
________
|
________
|
________
|
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
142.9
|
142.9
|
|
|
|
|
|
|
|
|
Transactions with owners, recorded directly in
equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of ordinary shares
|
-
|
2.0
|
-
|
-
|
2.0
|
|
Purchase of own shares
|
-
|
-
|
-
|
(5.0)
|
(5.0)
|
|
Sale of own shares
|
-
|
-
|
-
|
1.6
|
1.6
|
|
Share-based payment
transactions
|
-
|
-
|
-
|
4.6
|
4.6
|
|
Dividends to equity
holders
|
-
|
-
|
-
|
(60.8)
|
(60.8)
|
|
Tax items taken directly to
reserves
|
-
|
-
|
-
|
(0.4)
|
(0.4)
|
|
|
________
|
________
|
________
|
________
|
________
|
|
Total transactions with
owners
|
-
|
2.0
|
-
|
(60.0)
|
(58.0)
|
|
|
________
|
________
|
________
|
________
|
________
|
|
Balance at 30 December
2023
|
2.0
|
25.1
|
0.4
|
503.4
|
530.9
|
|
|
=======
|
=======
|
=======
|
=======
|
=======
|
Greggs plc
Statements of cashflows
for
the 52 weeks ended 30 December 2023 (2022: 52 weeks ended 31 December 2022)
|
|
Group
|
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
Operating activities
|
|
|
|
Cash generated from operations (see
below)
|
333.0
|
272.3
|
|
Income tax paid
|
(11.9)
|
(13.3)
|
|
Interest paid on lease
liabilities
|
(9.6)
|
(6.8)
|
|
Interest paid on borrowings and other
related charges
|
(0.7)
|
(0.7)
|
|
|
________
|
________
|
|
Net
cash inflow from operating activities
|
310.8
|
251.5
|
|
|
________
|
________
|
|
Investing activities
|
|
|
|
Acquisition of property, plant and
equipment
|
(189.5)
|
(100.0)
|
|
Acquisition of intangible
assets
|
(8.6)
|
(3.3)
|
|
Proceeds from sale of property, plant
and equipment
|
0.8
|
0.9
|
|
Proceeds from sale of assets held for
sale
|
-
|
1.6
|
|
Interest received
|
6.1
|
1.4
|
|
|
________
|
________
|
|
Net
cash outflow from investing activities
|
(191.2)
|
(99.4)
|
|
|
________
|
________
|
|
Financing activities
|
|
|
|
Proceeds from issue of share
capital
|
2.0
|
3.1
|
|
Sale of own shares
|
1.6
|
-
|
|
Purchase of own shares
|
(5.0)
|
(11.0)
|
|
Dividends paid
|
(60.8)
|
(98.5)
|
|
Repayment of principal on lease
liabilities
|
(53.7)
|
(52.7)
|
|
|
________
|
________
|
|
Net
cash outflow from financing activities
|
(115.9)
|
(159.1)
|
|
|
________
|
________
|
|
Net
increase/(decrease) in cash and cash equivalents
|
3.7
|
(7.0)
|
|
|
|
|
|
Cash and cash equivalents at the
start of the year
|
191.6
|
198.6
|
|
|
________
|
________
|
|
Cash
and cash equivalents at the end of the year
|
195.3
|
191.6
|
|
|
=======
|
=======
|
|
|
|
|
Cash flow statement - cash generated from
operations
|
|
2023
|
2022
|
|
|
£m
|
£m
|
|
|
|
|
|
Profit for the financial
year
|
142.5
|
120.3
|
|
Amortisation
|
3.9
|
4.7
|
|
Depreciation - property, plant and
equipment
|
66.6
|
58.0
|
|
Depreciation - right-of-use
assets
|
54.5
|
52.8
|
|
Net impairment charge - property,
plant and equipment
|
1.4
|
1.2
|
|
Impairment charge - right-of-use
assets
|
2.5
|
0.0
|
|
Loss on sale of property, plant and
equipment
|
2.0
|
1.0
|
|
Release of Government
grants
|
(0.5)
|
(0.4)
|
|
Share-based payment
expenses
|
4.6
|
3.6
|
|
Finance expense
|
4.0
|
6.1
|
|
Income tax expense
|
45.8
|
28.0
|
|
Increase in inventories
|
(8.2)
|
(12.7)
|
|
Increase in receivables
|
(3.6)
|
(12.4)
|
|
Increase in payables
|
18.0
|
30.8
|
|
Decrease in provisions
|
(0.5)
|
(0.7)
|
|
Decrease in pension
liability
|
-
|
(8.0)
|
|
|
________
|
________
|
|
Cash
from operating activities
|
333.0
|
272.3
|
|
|
=======
|
=======
|
Greggs plc
Notes
1. Basis of preparation and accounting
policies
The preliminary announcement has
been prepared in accordance with international accounts standards
in conformity with the requirements of the Companies Act 2006 and,
as regards the Group accounts, UK-adopted International Accounting
Standards. It does not include all the information required
for full annual accounts.
The financial information set out
above does not constitute the Company's statutory accounts for the
years ended 30 December 2023 or 31 December 2022 but is derived
from these accounts. Statutory accounts for the 52 weeks
ended 31 December 2022 have been delivered to the registrar of
companies, and those for the 52 weeks ended 30 December 2023 will
be delivered in due course. The auditor has reported on those
accounts; the audit reports were (i) unqualified, (ii) did not
include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
The preliminary announcement has
been prepared using the accounting policies published in the
Group's accounts for the 52 weeks ended 31 December 2022, which are
available on the Company's website www.greggs.co.uk.
From 1 January 2023 the following amendments were adopted by the
Group:
· Amendments to IFRS 1 and IAS 12: Deferred Tax related to
Assets and Liabilities arising from a Single
Transaction.
· Definition of Accounting Estimates - amendments to IAS
8.
· Disclosure of Accounting Policies - amendments to IAS 1 and
IFRS Practice Statement 2.
Their adoption did not have a
material effect on the accounts.
Going concern
The Directors have considered the
adoption of the going concern basis of preparation for these
accounts in the context of recent trading performance,
macro-economic conditions and the trading outlook of the Group. At
the end of the reporting period the Group had available liquidity
totalling £265.3 million, comprised of cash and cash equivalents of
£195.3 million plus an undrawn revolving credit facility (RCF) of
£70.0 million, which is committed to December 2025. The RCF
includes financial covenants that the Group must comply with
related to maximum leverage and a minimum fixed charge
cover.
The Directors have reviewed cash
flow forecasts prepared for the period up to December 2025 as well
as covenant compliance for that period. In reviewing the cash flow
forecasts the Directors considered the current trading performance
of the Group and the likely capital expenditure and working capital
requirements of its growth plans.
After reviewing these cash flow
forecasts and making enquiries, the Directors are confident that
the Company and the Group will have sufficient funds to continue to
meet their liabilities as they fall due for at least 12 months from
the date of approval of the accounts. Accordingly, they continue to
adopt the going concern basis in preparing the annual report and
accounts.
Judgements and estimates
In preparing this preliminary
announcement, management have made judgements and estimates that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the year in which the
estimate is revised if the revision affects only that year, or in
the year of revision and future years if the revision affects both
current and future years.
Impairment
Property, plant and equipment and
right-of-use assets are reviewed for impairment if events or
changes in circumstances indicate that the carrying value may not
be recoverable. For example, shop fittings and right-of-use assets
may be impaired if sales in that shop fall. When a review for
impairment is conducted the recoverable amount is estimated based
on the higher of the value-in-use calculations or fair value less
costs of disposal. Value-in-use calculations are based on
management's estimates of future cash flows generated by the assets
and an appropriate discount rate. Consideration is also given to
whether the impairment assessments made in prior years remain
appropriate based on the latest expectations in respect of
recoverable amount. Where it is concluded that the impairment has
reduced, a reversal of the impairment is recorded to the carrying
value that would have been recognised if the original impairment
had not occurred, net of depreciation that would have been
charged.
The Group has traded profitably
throughout 2023, growing volumes and increasing underlying profit
before tax by 13.1% to £167.7 million. As such there is not
considered to be a global indicator of impairment across the
Group's asset base. Where indicators of impairments exist for
specific cash generating units (CGUs), with each individual shop
considered its own CGU, then an impairment review has been
performed to calculate the recoverable value.
For those shops with indications of
impairment, the value-in-use has been calculated using the
following assumptions:
·
Cash generation for mature shops has been assumed
to grow at a rate of 3.0% for year one of the period of the
impairment review, reducing steadily to 0.0% for year six
onwards.
·
Earnings before interest, tax, depreciation,
amortisation and rent (EBITDAR) is used as a proxy for net cash
flow excluding rental payments;
·
The discount rate is based on the Group's pre-tax
cost of capital and at 30 December 2023 was 9.9% (31 December 2022:
9.6%); and
·
Consideration of the appropriate period over which
to forecast cash flows, including reference to the lease term.
Where considered appropriate cash flows have been included for
periods beyond the lease probable end date (to a maximum of five
years in accordance with IAS 36).
On the basis of these value-in-use
calculations, a net impairment charge of £3.9 million has been
recognised during the current year (of which £1.4 million relates
to fixtures and fittings and £2.5 million relates to right-of-use
assets) resulting in an impairment provision of £6.8 million being
retained at 30 December 2023 in respect of 118 shops (of which £2.8
million relates to fixtures and fittings and £4.0 million relates
to right-of-use assets).
Given the uncertainties in the
impairment model, the sensitivities of these assumptions on the
impairment calculation have been tested:
·
A 1% increase in the discount rate would result in
an increased impairment of £0.4 million, with an additional seven
shops impaired. A 1% decrease in the discount rate would result in
a reduced impairment of £0.3 million, with four fewer shops
impaired.
·
A 5% increase in the growth assumption for net
cash flow (per annum) would result in a reduced impairment of £1.2
million with ten fewer shops impaired. A 5% decrease in the growth
assumption would result in an increased provision of £2.2 million
with an additional 26 shops impaired.
Determining the rate used to discount lease
payments
At the commencement date of property
leases the lease liability is calculated by discounting the lease
payments. The discount rate used should be the interest rate
implicit in the lease. However, if that rate cannot be readily
determined, which is generally the case for property leases, the
lessee's incremental borrowing rate is used, being the rate that
the individual lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms,
security and conditions. As the Group had no suitable external
borrowings from which to determine that rate, judgement is required
to determine the incremental borrowing rate to be used. At the
start of each month a risk-free rate is obtained, linked to the
length of the lease and an adjustment is then made to reflect
credit risk. During the year discount rates in the range 4.4% to
6.8% (2022: 2.5% to 5.9%) were used. Small changes in the discount
rate would have an immaterial impact on the accounts. A 0.1% change
in the discount rate used for each lease is estimated to adjust the
total liabilities by c. £1.5 million.
Determining the lease term of property
leases
At the commencement date of property
leases the Group normally determines the lease term to be the full
term of the lease, assuming that any option to break or extend the
lease is unlikely to be exercised and it is not reasonably certain
that the Group will continue in occupation for any period beyond
the lease term. Leases are regularly reviewed and will be revalued
if it becomes reasonably certain that a break clause or option to
extend the lease will be exercised.
The leases typically run for a
period of 10 or 15 years. In England and Wales, the majority of the
Group's property leases are protected by the Landlord and Tenant
Act 1954 (LTA) which affords protection to the lessee at the end of
an existing lease term.
Judgement is required in respect of
those property leases where the current lease term has expired but
the Group has not yet renewed the lease. Where the Group believes
renewal to be reasonably certain and the lease is protected by the
LTA it will be treated as having been renewed at the date of
termination of the previous lease term and on the same terms as the
previous lease. Where renewal is not considered to be reasonably
certain the leases are included with a lease term which reflects
the anticipated notice period under relevant legislation. The lease
will be revalued when it is renewed to take account of the new
terms. As at 30 December 2023 the financial effect of applying this
judgement was an increase in recognised lease liabilities of £36.0
million (31 December 2022: £45.1 million).
2. Segmental analysis
The Board is considered to be the
'chief operating decision maker' of the Group in the context of the
IFRS 8 definition. In addition to its company-managed retail
activities, the Group generates revenues from its business to
business (B2B) channel which includes franchise and wholesale
activities. Both channels were categorised as reportable segments
for the purposes of IFRS 8.
Company-managed retail activities -
the Group sells a consistent range of fresh bakery goods,
sandwiches and drinks in its own shops or via delivery. Sales are
made to the general public on a cash basis. All results arise in
the UK.
B2B channel - the Group sells
products to franchise and wholesale partners for sale in their own
outlets as well as charging a licence fee to franchise partners.
These sales and fees are invoiced to the partners on a credit
basis. All results arise in the UK.
All revenue in 2023 and 2022 was
recognised at a point in time.
The Board
regularly reviews the revenues and trading profit of each segment.
The Board receives information on overheads, assets and
liabilities on an aggregated basis consistent with the Group
accounts.
|
|
2023
|
2023
|
2023
|
2022
|
2022
|
2022
|
|
|
Retail
company-managed
shops
|
Business to
business
|
Total
|
Retail
company-managed
shops
|
Business
to business
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
£m
|
£m
|
|
Revenue
|
1,610.9
|
198.7
|
1,809.6
|
1,352.3
|
160.5
|
1,512.8
|
|
|
=======
|
=======
|
========
|
=======
|
=======
|
========
|
|
Trading
profit*
|
250.1
|
41.1
|
291.2
|
224.6
|
31.3
|
255.9
|
|
Overheads
including profit share
|
|
|
(119.5)
|
|
|
(101.5)
|
|
|
|
|
________
|
|
|
________
|
|
Operating
profit before exceptional items
|
|
|
171.7
|
|
|
154.4
|
|
Finance
expense (net)
|
|
|
(4.0)
|
|
|
(6.1)
|
|
|
|
|
________
|
|
|
________
|
|
Profit
before tax (excluding exceptional items)
|
|
|
167.7
|
|
|
148.3
|
|
Exceptional
items (see note 3)
|
|
|
20.6
|
|
|
-
|
|
|
|
|
_______
|
|
|
_______
|
|
Profit
before tax
|
|
|
188.3
|
|
|
148.3
|
|
|
|
|
=======
|
|
|
=======
|
*
Trading profit is defined as gross profit less
supply chain costs and retail costs (including property costs) and
before central overheads.
3. Exceptional item
The exceptional item relates
to:
·
a net gain of £16.3 million on the settlement of a
Covid business interruption insurance claim. The net gain is
recognised after deduction of fees payable to advisers and the £2.5
million advance already recognised as income in 2020;
·
a net gain of £4.0 million on the settlement of a
business interruption insurance claim relating to flooding at the
Treforest bakery in 2020;
·
the £0.3m release of a previous provision for
onerous leases no longer required.
4. Taxation
Recognised in the income statement
|
|
2023
|
2023
|
2023
|
2022
|
|
|
Excluding exceptional
items
|
Exceptional items (see note
3)
|
Total
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
|
|
|
|
|
|
Current tax
|
|
|
|
|
|
Current year
|
12.2
|
4.8
|
17.0
|
14.1
|
|
Adjustment for prior
years
|
0.7
|
-
|
0.7
|
(0.2)
|
|
|
________
|
________
|
________
|
________
|
|
|
12.9
|
4.8
|
17.7
|
13.9
|
|
|
________
|
________
|
________
|
________
|
|
Deferred tax
|
|
|
|
|
|
|
|
|
|
|
|
Origination and reversal of
temporary differences
|
29.0
|
-
|
29.0
|
14.1
|
|
Adjustment for prior
years
|
(0.9)
|
-
|
(0.9)
|
0.0
|
|
|
________
|
________
|
________
|
________
|
|
|
28.1
|
-
|
28.1
|
14.1
|
|
|
________
|
________
|
________
|
________
|
|
Total income tax expense in income
statement
|
41.0
|
4.8
|
45.8
|
28.0
|
|
|
=======
|
=======
|
=======
|
=======
|
5. Earnings per share
Basic earnings per share
Basic earnings per share for the 52
weeks ended 30 December 2023 is calculated by dividing profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares in issue during the 52 weeks ended 30
December 2023 as calculated below.
Diluted earnings per share
Diluted earnings per share for the
52 weeks ended 30 December 2023 is calculated by dividing profit
attributable to ordinary shareholders by the weighted average
number of ordinary shares, adjusted for the effects of all dilutive
potential ordinary shares (which comprise share options granted to
employees) in issue during the 52 weeks ended 30 December 2023 as
calculated below.
Profit attributable to ordinary shareholders
|
|
2023
|
2023
|
2023
|
2022
|
|
|
Excluding exceptional
items
|
Exceptional items (see note
3)
|
Total
|
Total
|
|
|
£m
|
£m
|
£m
|
£m
|
|
Profit for the financial year
attributable to equity holders of the Parent
|
126.7
|
15.8
|
142.5
|
120.3
|
|
|
=======
|
=======
|
=======
|
=======
|
|
Basic earnings per share
|
125.0p
|
15.6p
|
140.6p
|
118.5p
|
|
Diluted earnings per share
|
123.8p
|
15.4p
|
139.2p
|
117.5p
|
Weighted average number of ordinary shares
|
|
2023
|
2022
|
|
|
Number
|
Number
|
|
|
|
|
|
Issued ordinary shares at start of
year
|
102,112,581
|
101,897,021
|
|
Effect of own shares held
|
(879,975)
|
(511,370)
|
|
Effect of shares issued
|
86,106
|
100,009
|
|
|
__________
|
__________
|
|
Weighted average number of ordinary shares during the
year
|
101,318,712
|
101,485,660
|
|
Effect of share options in
issue
|
977,753
|
849,222
|
|
|
__________
|
__________
|
|
Weighted average number of ordinary shares (diluted) during
the year
|
102,296,465
|
102,334,882
|
|
|
=========
|
=========
|
|
|
|
|
|
6. Dividends
The following tables analyse
dividends when paid and the year to which they relate:
|
|
|
|
2023
|
2022
|
|
|
|
|
Per
share
|
Per
share
|
|
|
|
|
pence
|
pence
|
|
|
|
|
|
|
|
2021 special dividend
|
|
|
-
|
40.0p
|
|
2021 final dividend
|
|
|
-
|
42.0p
|
|
2022 interim dividend
|
|
|
-
|
15.0p
|
|
2022 final dividend
|
|
|
44.0p
|
-
|
|
2023 interim dividend
|
|
|
16.0p
|
-
|
|
|
|
|
________
|
________
|
|
|
|
|
60.0p
|
97.0p
|
|
|
|
|
=======
|
=======
|
The proposed final dividend and
special dividend in respect of 2023 amount to 46.0 pence (£46.6
million) and 40.0 pence (£40.6 million) respectively. These
dividends are not included as a liability in these
accounts.
|
|
|
2023
|
2022
|
|
|
|
£m
|
£m
|
|
|
|
|
|
|
2021 special dividend
|
|
-
|
40.6
|
|
2021 final dividend
|
|
-
|
42.7
|
|
2022 interim dividend
|
|
-
|
15.2
|
|
2022 final dividend
|
|
44.6
|
-
|
|
2023 interim dividend
|
|
16.2
|
-
|
|
|
|
________
|
________
|
|
|
|
60.8
|
98.5
|
|
|
|
=======
|
=======
|
7. Related parties
The Group has a related party
relationship with its subsidiaries, associates, Directors and
executive officers and pension schemes.
There have been no related party
transactions in the year which have materially affected the
financial position or performance of the Group.
8. Principal risks and
uncertainties
We have a risk management policy and
framework in place, both of which have been approved by the
Board. This provides us with a robust structure and drives a
consistent approach.
Our risk process works "top down"
and "bottom up". Risks are identified by considering
potential events which could prevent the achievement of our
objectives.
The Operating Board is responsible
for maintaining the overall corporate risk map, which documents the
key risks to the achievement of strategic objectives. We
conduct a formal review of our key strategic risks twice a year via
the Risk Committee, with input from each of the risk owners who
have an opportunity to highlight any changes. This allows us
to discuss the risk gradings, and ensure that the level of risk
remains consistent with our risk appetite. The Risk Committee
also considers new risks escalated to it at every meeting, and
assesses whether or not these are significant enough to merit
inclusion on the strategic risk register.
The risk process is facilitated by
members of the Business Assurance team, who help identify and
assess key risks, as well as providing support in developing an
appropriate risk response. The team also provides a route for
matters of concern to be quickly escalated to the Operating Board
and the Risk Committee. In addition, Business Assurance
provides an independent view on the controls in place over specific
risk areas within the internal audit plan.
Risks are assessed under our
strategic pillars (including the Greggs Pledge), and are
categorised into four broad groups - strategic, operational,
financial and legal / regulatory.
Our strategic risk register captures
a description of each risk, and allocates an Operating Board member
as risk owner. Each risk owner is responsible for ensuring
that appropriate mitigating controls are in place. We then
set out key controls for each risk, and make an assessment of their
effectiveness. The likelihood and impact of each risk arising
is then calculated, both before and after the introduction of
mitigating controls.
Developments in 2023
During 2023, we further embedded our
Enterprise Risk Management ('ERM') approach, principally through
more regular and structured engagement with our heads of business
functions. They have had input into the identification of new
and emerging risks, as well as opportunities to raise any specific
areas of concern. Risk workshops have been held for our
strategic risks, involving the risk owner and all relevant subject
matter experts, to ensure that the content of the register remains
accurate and up to date.
We have worked with our insurance
brokers in conducting an overall review of our approach to
insurance, a significant mitigating control against a number of our
strategic risks. This has given us assurance that our
insurance model is fit for purpose and offers value for
money.
Our brokers also supported us with
facilitating a Board risk workshop during the year. This
provided detail on our risk management approach and framework,
linking to the UK Corporate Governance Code. Board members
then reviewed our existing strategic risks, discussed risk
appetite, and considered any new and emerging risks.
We recruited additional resource
within the Business Assurance team to ensure that we are able to
continue to support risk management development across the growing
business.
Work has been undertaken to further
develop our strategic risk register, to better align it with the
needs of the business. Although now more user friendly, there
is still opportunity for improvement, and we continue to build on
our existing model.
Plans for 2024
Sessions with heads of business
functions will continue, and we will also increase our engagement
with the functional management teams, which will help to widen our
knowledge base.
We will review our approach to risk
appetite, and apply an assessment to each category of risk, rather
than considering it on a risk-by-risk basis.
With regard to specific areas of
risk, our Greggs Pledge commitments will be scrutinised and a risk
register entry completed for each. We will also document our
fraud risk and ensure that this is properly
managed.
Climate risks
We are continuing to develop our
understanding of material climate-related risks and
opportunities. Physical and transition risks have been
identified and are being monitored as a standing item on our Risk
Committee agenda. A "failure to effectively respond to
climate related impacts on our business" has been included within
our strategic risk register, allowing us to document and monitor
the associated controls as part of our routine risk approach.
We remain of the view that climate risk does not constitute a
principal risk to the business within the time horizon of our
current strategic plan. However, we keep under review
changes, particularly in legislation and customer
preferences, to identify any increase in the level of
risk.
Emerging risks
We conduct an emerging risk review
on a quarterly basis, and report our findings to the Risk Committee
and the Board. Various sources of information are used to
ensure this is as complete as possible:
·
Horizon scanning by subject matter experts
throughout the business, with issues identified being escalated to
our Operating Board via a monthly risk dashboard;
·
Engaging with our functional heads to discuss any
areas of concern within their remit;
·
Monitoring customer and consumer
trends;
·
Taking input from our advisors and other
specialists with whom we work.
Current areas of emerging and
escalating risks which we are monitoring include supplier or
partner actions damaging our reputation, reliance on third parties
for business critical systems and economic pressures.
Risk appetite
Risk appetite is the level of risk
which we are prepared to take to meet our strategic
objectives. In determining this, we recognise that there is a
balance between a prudent approach to risk and sufficient
flexibility to take appropriate opportunities when they
arise.
Our appetite for taking risks
depends on the category of risk in question. For example, we
would be prepared to take more risk in the pursuit of our strategy
than in areas such as food safety, where compliance with
legislation drives a zero tolerance of risk. We assess our
appetite on an individual risk basis, and then determine whether
the current level of risk is within our acceptable tolerance,
before identifying further mitigating action if
necessary.
Changes to principal risk disclosures
A principal risk is a risk or
combination of risks that can seriously affect our performance,
future prospects or reputation. Not all of our strategic
risks are considered to be principal risks, only those which would
have a significant impact on our ongoing viability within the
timeframe of our strategic plan.
There have been no significant
changes to our principal risks during 2023. Changes made
within our strategic risk register had the aim of improving
visibility of controls, and clarifying risk ownership, through
sub-dividing existing risks into two or three. However, this does
not impact on the principal risk which remains
consistent.
The following table sets out the
principal risks, shows the movement during the year, and describes
the impact and key mitigations. The list is not in priority
order, and does not include all the risks which are faced by the
business. Other risks which are not included here could
also have a negative impact on the business, including those
which are not presently known to us. The position described below
is a summary at the time of publishing this
report.