TIDMGRG
RNS Number : 9896X
Greggs PLC
28 February 2017
28 February 2017
PRELIMINARY RESULTS FOR THE 52 WEEKSED 31 DECEMBER 2016
Greggs is the leading bakery food-on-the-go retailer in the
UK,
with over 1,750 retail outlets throughout the country
A STRONG PERFORMANCE AND FURTHER STRATEGIC PROGRESS
2016 Financial highlights
-- Total sales up 7.0% to GBP894.2m (2015: GBP835.7m)
-- Company-managed shop like-for-like sales* up 4.2% (2015: 4.7%)
-- Operating profit excluding property profits** and exceptional
items*** up 8.6% to GBP78.1m (2015: GBP71.9m)
-- Pre-tax profit excluding exceptional items*** GBP80.3m (2015: GBP73.0m)
-- Pre-tax profit GBP75.1m (2015: GBP73.0m)
-- Strong cash generation enabling significant, self-funded capital investment to support growth
-- Total ordinary dividend per share up 8.4% to 31.0p (2015: 28.6p)
* like-for-like sales in Company-managed shops (excluding
franchises) with a calendar year's trading history
** freehold property disposal gains of GBP2.2m in 2016 (2015:
GBP1.2m)
*** exceptional pre-tax charge of GBP5.2m in 2016 (2015: GBP
nil)
Strategic progress
-- Growing strength in the food-on-the-go market
-- Further improvements to product range, including extended choice in hot drinks and hot food
-- 'Balanced Choice' range of healthier options now accounts for over 10% of sales
-- 208 shops refurbished - 92% of shop estate now transformed to food-on-the-go format
-- 145 new shops opened, 79 closures (66 net openings); 1,764 shops trading at 31 December 2016
-- Investment in upgraded operating systems progressing well -
finance system implemented and shop replenishment successfully
trialled
-- GBP100m, five-year investment programme in manufacturing and
distribution operations commenced
Current trading
-- 2017 has started in line with our expectations
-- Company-managed shop like-for-like sales up by 2.0% in 8 weeks to 25 February 2017
-- Underlying (excluding New Year trading pattern)
Company-managed shop like-for-like sales in weeks 2 to 8 up by
2.9%
"In 2016 we delivered another strong performance as we continued
on our journey to transform Greggs from a traditional bakery
business into a modern, attractive food-on-the-go retailer. Our
product offer is evolving to meet the changing needs of our
customers and our shop estate and service levels have benefited
from significant investment.
"The UK consumer outlook is more challenging than we have seen
in recent years, with industry-wide pressures emerging in
commodities as well as labour costs. However we are confident of
making further progress as we implement our plan to grow Greggs as
a contemporary food-on-the-go brand."
- Roger Whiteside, Chief Executive
ENQUIRIES:
Greggs plc Hudson Sandler
Roger Whiteside, Chief Wendy Baker / Alex Brennan/Fern
Executive Duncan
Richard Hutton, Finance Tel: 020 7796 4133
Director
Tel: 0191 281 7721
An audio webcast of the analysts' presentation
will be available to download later today at
http://corporate.greggs.co.uk/
Chairman's statement
Greggs performed strongly in 2016, benefiting from the
investments that we have made in recent years and the continued
implementation of changes in line with our strategic plan. The
food-on-the-go market continues to grow and is highly competitive
and fast-moving. This requires us to constantly evolve and develop
our offer to customers. Our clear plan and record of delivery is
bringing sustainable long-term growth for the benefit of all
stakeholders.
Overview
In 2016 Greggs demonstrated once again its ability to manage a
major change agenda whilst delivering a strong trading and
financial performance. The Greggs brand is increasingly relevant to
consumers in the food-on-the-go market as a result of our
investments in the shop estate and the quality of our food and
drink offer. We have made notable progress in the overhaul of our
processes and systems and this will continue in the year ahead,
alongside significant investment to transform our internal supply
chain to support further growth in shop numbers and deliver a more
efficient business.
The Chief Executive's report provides greater detail on
performance in 2016 and progress against our strategic plan.
Our people and values
Consumers have many options in the food-on-the-go market, and we
have to ensure that all aspects of our business support our purpose
and strategy. This has required us to make some difficult
decisions, particularly regarding the organisation of our
manufacturing and logistics operations, which the Board has
considered carefully and which are outlined in this report. In all
its discussions the Board has been clear to ensure that any changes
are implemented with due regard to our values; being open, honest,
and treating people with consideration and respect.
These values are also reflected in our approach to conducting
business responsibly. We have made further improvements to our
already strong reputation in areas such as environmental
management, animal welfare and support for the communities where we
trade. Acting responsibly and conducting business in a sustainable
manner by looking after the interests of all stakeholders is
ultimately in the best interests of shareholders.
I would like to thank everyone who has worked for Greggs during
the past year and contributed to such a strong performance on so
many levels. Their commitment to delivering outstanding service and
value to our customers every day was clearly reflected in customer
satisfaction and sales in 2016.
The Board
The composition of the Board was unchanged in 2016. Much of our
time has been spent overseeing the major programmes of change that
support the Company's strategic plan, particularly the significant
investment under way to grow our internal supply chain. We also
continued to focus on the development of our people and our
understanding of the needs of customers.
Directors continue to be encouraged to get out into the
business, sample our products and talk with colleagues and
customers. In doing so we ensure that Non-Executive Directors'
contributions to Board discussions are well informed, supporting
open and constructive dialogue with the management team.
The Board oversees the allocation of resources for the business
and this includes the level of investment in its operations, taking
account of shareholder returns as well as a fair reward to staff,
responsible funding of pension obligations and equitable treatment
of suppliers. The business is highly cash-generative and continues
to operate without external financial debt, a position considered
appropriate given the lease obligations inherent in our business
model.
Further details of the Board's work can be found in the
Governance and Committee sections of the Annual Report.
Dividend
Our progressive dividend policy targets an ordinary dividend
that is two times covered by earnings, with any further surplus
capital being returned to shareholders. 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 dividend policy the Board intends
to recommend at the Annual General Meeting a final dividend of
21.5p per share (2015: 21.2p), giving a total ordinary dividend for
the year of 31.0p (2015: 28.6p), an increase of 8.4%.
Looking ahead
The Board recognises the need to engage with, and balance the
interests of, many different stakeholders including customers,
employees, pensioners, suppliers and shareholders. There is an
overriding priority to maintain and enhance the competitiveness of
the business in order to equip Greggs for long-term sustained
success.
In the short term we face a period of greater economic
uncertainty and increased pressure from cost inflation. We have
highlighted the changes necessary to support the ongoing strategic
realignment of the business, including the major investment
programme under way to grow our supply chain. This will involve
some difficult changes for some of our colleagues, as detailed in
the Chief Executive's report, but is essential to support the
long-term competitiveness of the business.
Greggs is a strong business with a great team. I am confident
that we can build on our recent success and make further progress
in the year ahead.
Ian Durant
Chairman
28 February 2017
Chief Executive's report
In 2016 we delivered another strong performance as we continued
on our journey to transform Greggs from a traditional bakery
business into a modern, attractive food-on-the-go retailer. Our
product offer is evolving to meet the changing needs of our
customers and our shop estate and service levels have benefited
from significant investment. We have made good progress in the
modernisation of our systems and processes and have commenced the
investment programme that will transform our supply chain
capability and increase capacity to support our ambitions for shop
growth.
Financial performance
Total sales grew to GBP894.2 million in 2016, up 7.0 per cent.
Within this company-managed shop like-for-like sales grew by 4.2
per cent.
Underlying operating profit, excluding property profits and
exceptional items, grew by 8.6 per cent to GBP78.1 million (2015:
GBP71.9 million). Pre-tax profit (including exceptional items) grew
by 2.9 per cent to GBP75.1 million.
Market background: Growing food-on-the-go market
The overall market for food-on-the-go continued to be favourable
during 2016, with growing consumer disposable income supporting
demand despite uncertainty in the economic outlook. Customer
footfall remained challenging in a number of shopping locations,
supporting our strategy of progressively reducing our dependence on
general shopping activity through alternative shop location and
enhancing our offer to meet customers' needs at different times of
the day. The market for food-on-the-go remains highly competitive
but we saw like-for-like sales and transaction growth throughout
2016, demonstrating the strength of the Greggs brand, its relevance
and our quality, value and differentiated offer.
Strategic direction: Focus on food-on-the-go
Our strategic plan, first announced in 2013, set out to show
that Greggs could be a winning brand in the highly competitive
food-on-the-go market. Our business has been transformed in that
time delivering an unbroken record of positive like-for-like sales
and new levels of profit. It is now time to set a higher aspiration
for the business, our purpose being to make good freshly prepared
food accessible to everyone, with the aim of becoming the
customers' favourite for food-on-the-go.
For this next phase we have refreshed our plan to reinforce our
commitment to putting the customer at the heart of our strategy -
it has four key pillars:
1. Great-tasting freshly prepared food
2. Best customer experience
3. Competitive supply chain
4. First class support teams
These pillars are all supported by our long-standing approach to
conducting our business in a responsible manner, and in doing so
making a positive impact on people's lives.
Delivering our strategy
1. Great-tasting freshly prepared food
Greggs is a strong and trusted brand and we draw on our heritage
in fresh bakery to compete successfully in the food-on-the-go
market. The Greggs product offer is differentiated by the way we
freshly prepare food each day in our shops and by offering
outstanding value for money for good quality, great-tasting
food-on-the-go.
Making good freshly prepared food accessible to all income
levels is embedded in our core purpose as a brand, with outstanding
value meal deals setting us apart from the competition. We
maintained the price of our breakfast meal deal for the seventh
year running and saw increased participation in our range of
all-day meal deals offering any savoury or sweet product plus any
hot drink.
We have continued to make improvements to our product ranges
that have helped drive positive like-for-like sales growth for
thirteen consecutive quarters.
Breakfast
This continues to be the fastest growing part of our trading
day, linked predominantly with customers travelling, thereby
lessening our dependence on general shopping footfall. The value of
our breakfast meal deal remains market leading and we have
successfully built on this to offer greater menu choice,
encouraging increased spend and visit frequency.
Hot drinks
Our reputation for great-tasting coffee continues to grow both
alongside our breakfast offer and, increasingly, as an
accompaniment to food at any time of the day. 'Any hot drink'
features across our meal deal offers and is proving increasingly
popular. Significant investment in additional coffee machines is
driving speed of service and, as our reputation in this category
builds, we are successfully extending choice in our coffee
options.
Balanced Choice
Demand for healthier choices in food-on-the-go continues to grow
and our Balanced Choice range, offering fewer than 400 calories and
good nutritionals, has been growing to match. Sales last year
exceeded GBP100m showing how our reach as a brand can have real
impact in encouraging people to make healthier food-on-the-go
choices. In the summer we built on our early success in sandwiches
and 'no added sugar' drinks by launching a range of freshly
prepared salads followed by a new range of savoury bakes in the
autumn. Alongside these developments we extended the availability
of fresh fruit, freshly prepared yoghurts, fruit and nut snacks and
our first gluten-free products.
Hot food
This is another area of growing customer demand where we are
investing in our capability to offer choice and speed of service.
Hot sandwiches have proved particularly popular and we have
invested in additional ovens in response to demand. This opens up
opportunities for menu development which last year included
burritos. Hot soup has been another source of growth lending itself
well to full-flavoured Balanced Choice development.
Good food
Customers increasingly care where their food comes from. Because
we make the majority of the food we sell ourselves we are well
placed to reassure customers that we deliver food they can trust.
As a large-scale food manufacturer buying base ingredients we are
one step closer to the source than many of our competitors who buy
finished products. We are investing more in telling our story to
customers, extending our association with Fairtrade, promoting our
Good Egg award, committing to sustainable tuna fishing and gaining
accreditation in animal welfare.
Alongside this we are setting out to lead the food-on-the-go
sector in eliminating or reducing unnecessary ingredients including
salt, fat and sugar. In addition, we want our customers to be able
to make informed choices and are the only major food-on-the-go
brand providing full traffic light nutritional information on all
products via our website.
Looking ahead
We have a strong pipeline of new product developments planned
for 2017, offering more choice in growth areas while making sure
that we continue to deliver a great customer experience with our
traditional best-selling favourites.
2. Best customer experience
Investing in service
Great products alone will not succeed in food-on-the-go without
great customer service.
Our busy customers demand convenience with fast and friendly
service and we continue to invest to improve in these areas.
Extended opening hours, particularly early in the morning and on
Sundays, are meeting increased demand as our popularity for
food-on-the-go grows. Investment in coffee machines, hot food ovens
and new systems to free up more staff time are all contributing to
our speed of service. Working in a Greggs shop can be very
demanding so we rely on great people to deliver friendly service
under pressure. Making Greggs a great place to work is key to a
great customer experience and we are investing in training and
systems to help us release time for customer-facing activities.
Alongside our internal measures used to reward teams who deliver
great standards we were pleased to be ranked best in sector and
6(th) overall in the Institute of Customer Service's January 2017
Customer Satisfaction Index.
Greggs Rewards
The latest release of our award-winning mobile customer loyalty
scheme allowing fully flexible payment has created a step change in
customer participation. Customer data capture is now at a level
that allows us to analyse behaviour and develop targeted marketing
campaigns. We have recently appointed our first Customer Director
with experience in digital multi-channel marketing who will lead
development of our capabilities in this area.
Greggs Delivered
Food-on-the-go delivery is a growing market channel offering
growth potential for Greggs by targeting the workplace sector. A
pilot lunchtime delivery service targeted at offices has been
launched in trial locations from which we intend to learn and grow.
Whilst we do not see an opportunity in home delivery we do believe
that a smartphone-based order and collect service for customers
offers future opportunity.
Looking ahead
Further investment this year in new systems and process
improvement will deliver additional gains, making shop operations
simpler and supporting improved service levels.
Rapid growth in Greggs Rewards recruitment will see this become
an increasingly important source of customer insight and marketing
opportunities.
Building experience with customer delivery will enable us to
develop this channel with the initial aim of converting our
existing lunch time platter business to a digital platform.
Estate changes and refurbishments
We continue to see opportunities to increase our estate to
substantially more than 2,000 shops and in 2016 we opened 145 new
shops (including 56 franchised units) and closed 79, growing the
estate to 1,764 shops trading as at 31 December 2016. At the end of
2016 we had 157 franchised shops operating in travel and other
convenience locations, with a particular focus on motorway services
and petrol forecourts. We expanded our presence in Northern Ireland
in the year, opening seven company-managed shops and two franchised
units, bringing our total shop numbers there to ten at the end of
2016.
We completed 208 shop refurbishments during the year and in
total 92 per cent of our shop estate now operates in a
food-on-the-go format. The results of our refurbishment programme
continue to be strong, both in terms of return on investment and
the repositioning of the Greggs brand as a contemporary place to
buy and eat food-on-the-go. In the year ahead we plan to refurbish
another 200 shops, completing the conversion of our legacy bakery
shops and starting to refresh older food-on-the-go shops to the
latest look and facilities.
In 2017 we expect to open 140-150 shops, including further
development of our franchise partnerships, and to close 40-50
shops. We will continue to relocate shops to rebalance our estate,
increasing our presence in travel, leisure and work-centred
catchments. In 2013 only 20 per cent of our estate was located in
these location types and by the end of 2016 this proportion had
risen to 30 per cent.
3. Competitive supply chain
In March 2016 we announced a major GBP100m programme of
investment to support growth in shop numbers and reshape our supply
chain in order to compete more effectively in the food-on-the-go
market. The first phase of this programme involves the closure of
three bakeries before going on to invest in our remaining supply
sites to create centres of excellence in manufacturing and
distribution.
In 2016 we successfully opened our new distribution centre in
Enfield and closed both our Twickenham and Sleaford bakeries. Good
progress was also made with the extension of our bakery in Glasgow,
enabling us to plan for the closure of our Edinburgh Bakery in the
second quarter of 2017.
Alongside this work we have undertaken detailed planning for the
subsequent investment phase across our remaining bakery sites. In
January 2017 we communicated our proposals to staff at each of our
sites, including the planned impact of consolidating our
manufacturing operations. Overall our expansion plans will create
thousands of new roles in retail and distribution operations, but
will result in fewer roles in manufacturing. We have therefore
entered into consultation with trade unions and employee
representatives over the detail of these proposals.
Our investment programme will create increased capacity and
efficiency in shop distribution to support substantial shop growth
alongside improved quality and efficiency in bakery manufacturing
by centralising production. This is a complicated investment phase,
transforming the use of space and equipment across our bakery
network and is expected to take approximately two years to
implement.
Strategic decisions of this magnitude impacting jobs are always
difficult and I am grateful for the contribution and
professionalism of our teams who have been making these changes
whilst maintaining service standards to our shops.
Once implemented this new supply chain platform will
substantially improve product quality, our competitiveness and,
alongside system investment, will complete our transformation from
traditional bakery to food-on-the-go. This is our largest ever
investment in our supply chain, reaffirming our strategic
commitment to the competitive advantage offered through vertical
integration and delivering an attractive return on investment.
4. First class support teams
We have made further significant progress in the third year of
our major process and systems investment programme.
Last year we successfully deployed SAP Finance as the core
platform for integrated system development, and went on to pilot
central forecasting and replenishment in trial shops in the second
half of the year. The roll out of central forecasting and
replenishment will replace shop-based ordering in 2017 and will be
our largest ever new system roll out.
Our business change programme team have now moved on to plan for
the next stage of system development, centralising logistics and
manufacturing to replace our current devolved local bakery
solutions. We are aiming to launch pilots for both logistics and
manufacturing by the end of 2017 with roll out to other sites in
2018. In addition to this core activity our teams have successfully
deployed supporting SAP modules in procurement, product lifecycle
management and human resource management, which together are
transforming our working practices and effectiveness.
Having a positive impact on people's lives
Greggs has a long-standing tradition and reputation as a
socially responsible business and as such we want our actions to
have a positive impact on people's lives. This ambition covers a
broad range of stakeholders and is focused on five areas:
-- Customer health - We encourage healthier food-on-the-go choices.
-- Responsible sourcing - We care about where our ingredients come from.
-- Community - We share our success with the people around us.
-- Environment - We aim to use energy efficiently and minimise waste.
-- People - We are committed to creating a great place to work.
These ambitions are championed separately but embedded in the
core strategic pillars of our business plan. In 2016 we made
further improvements in all areas and were pleased to achieve an
increase to a 'four star' rating in the Business In The Community
CR index.
Customer health
Customers are increasingly aware of our Balanced Choice range
and in 2016 we introduced traffic light labelling on our website
and app. The Institute of Grocery Distribution have recognised our
Balanced Choice range as having a positive impact on the health and
wellness of customers and we will continue to extend the range of
products that meet this need. We recently launched a 'healthier
shop' format at New Cross Hospital in Wolverhampton, designed to
meet NHS England, PHE and DEFRA guidelines.
Responsible sourcing
All the tea, coffee, hot chocolate, sugar sachets, orange juice,
apple juice and bananas we sell are certified Fairtrade. We source
our prawns and tuna from sustainable sources and have recently
moved up to 'tier two' in the Business Benchmark on Farm Animal
Welfare. All of our manufacturing sites have achieved top marks on
v7 of the British Retail Consortium's global standard for food
safety.
Community
We continue to share our success with the local communities in
which we operate. In 2016 this included doubling the amount of
end-of-day food that we donated to good causes and continuing to
support the work of the Greggs Foundation. Staff and customers
raised GBP613,000 for the Foundation in 2016 and this, combined
with donations from the Company and the proceeds of carrier bag
charges, enabled the Greggs Foundation to distribute GBP2.8 million
to support a wide range of initiatives that improve the quality of
life in our local communities. These included the award-winning
Greggs Breakfast Club programme which, with support from 72 partner
organisations, now provides five million free wholesome breakfasts
each year to children in more than 400 primary schools.
Environment
We hold the Carbon Trust Standard in recognition of our work on
carbon efficiencies and our Environmental Management System was
certificated to ISO 14001 standard in 2016. We continue to trial
technologies that could help to reduce our carbon footprint even
further in the years ahead.
People
We pay all of our people more than the National Living Wage,
including those under the age of 25. We share ten per cent of our
profits with employees and our people will be sharing a record
GBP8.8 million as a result of our strong performance in 2016.
Our Employee Opinion Survey engagement score has increased by
five percentage points over the last two years; 80 per cent of our
people say they feel committed to Greggs and to helping us achieve
our goals. However we are not complacent and in the year ahead will
be working towards achieving the National Equality Standard as part
of our commitment to make Greggs an even better place to work.
Further details of all of our actions in these areas are
described in the Annual Report.
Outlook for 2017
The year has started in line with our expectations, with
company-managed shop like-for-like sales in the eight weeks to 25
February 2017 up by 2.0 per cent, and total sales up 5.8 per cent.
As expected the year to date position has been impacted by the
timing of the New Year public holiday, which fell outside of the
comparative period in 2016. Excluding the effect of this,
company-managed shop like-for-like sales have grown by 2.9 per cent
in weeks two to eight of the current year.
The UK consumer outlook is more challenging than we have seen in
recent years, with industry-wide pressures emerging in commodities
as well as labour costs. As previously stated we expect this to
have a modest impact on margins in the short term.
2017 will be another busy year of change as we continue to
progress our investment in better systems and the transformation
and development of our supply chain. Over the medium term we are
confident of making further progress as we implement our plan to
grow Greggs as a contemporary food-on-the-go brand.
Roger Whiteside
Chief Executive
28 February 2017
Financial review
In 2016 we delivered another strong financial performance,
increasing the rate of sales growth whilst controlling costs well.
Continued good cash generation is supporting our programme of
investment for further growth whilst allowing us to also increase
dividends to shareholders.
2016 2015
GBPm GBPm
Revenue 894.2 835.7
Operating profit (excluding
exceptional items and property
profits) 78.1 71.9
Property profits 2.2 1.2
------ ------
Operating profit (excluding
exceptional items) 80.3 73.1
Operating margin (excluding
exceptional items) 9.0% 8.7%
Finance expense (0.0) (0.1)
Exceptional items (5.2) 0.0
------ ------
Profit before taxation 75.1 73.0
------ ------
Sales
Total Group sales for the 52 weeks ended 31 December 2016 were
GBP894.2 million (2015: GBP835.7 million), an increase of 7.0 per
cent. Sales in company-managed shops with more than one calendar
year's trading history ("like-for-like") grew by 4.2 per cent to
GBP777.2 million (2015: GBP745.6 million). We also saw
like-for-like and total sales growth in our franchised shop
estate.
Profit
Operating profit before exceptional items was GBP80.3 million
(2015: GBP73.1 million), a 9.9 per cent increase on an underlying
basis. The result reflects good sales growth combined with actions
to make the business simpler and more efficient, plus a higher than
normal GBP2.2 million contribution from property disposals (2015:
GBP1.2 million).
Pre-tax profit before exceptional items was GBP80.3 million
(2015: GBP73.0 million). Including exceptional items pre-tax profit
was GBP75.1 million (2015: GBP73.0 million).
Exceptional items
As noted in the Chief Executive's report, in 2016 we commenced
the first phase of our major investment programme to reshape our
internal supply chain. This involved the closure of our Twickenham
and Sleaford bakeries in 2016, with Edinburgh due to close in 2017.
As a result in 2016 we incurred GBP6.4 million of redundancy and
other employment-related costs, asset write-offs and impairment
charges and other costs arising directly as a result of the closure
of the three sites.
These were partly offset by credits arising from the settlement
of property and redundancy transactions treated as exceptional in
prior years. The components of the net GBP5.2 million charge were
as follows:
2016
GBP'm
Supply chain restructuring:
- redundancy costs 4.1
- asset-related costs 1.9
- transfer of operations 0.4
Restructuring of support
functions 0.4
Release of prior years'
exceptional items:
- dilapidations (0.5)
- property provisions (0.9)
- restructuring of
support functions (0.2)
------
Total exceptional items 5.2
------
In January 2017 we communicated proposals for the next phase of
this programme, which will invest in greater distribution capacity
across our remaining sites whilst consolidating our existing
manufacturing operations. The total one-off cash exceptional costs
of this major change programme are expected to be in the region of
GBP25.0 million, as previously communicated. This includes GBP6.4
million charged in 2016 and we expect to charge a further GBP12.0
million in 2017 as a result of the proposals for the next phase of
consolidation.
Any property gains resulting from the disposal of our sites in
Twickenham and Edinburgh will also be treated as exceptional. Our
Twickenham property has now been marketed and discussions with
interested parties are ongoing.
Operating margin
Operating margin before exceptional items was 9.0 per cent
(2015: 8.7 per cent). Including exceptional items operating margin
was 8.4 per cent (2015: 8.7 per cent).
Within this gross margin before exceptional items increased to
63.7 per cent (2015: 63.5 per cent) reflecting benign input cost
conditions for most of the year, although these became inflationary
in the fourth quarter. Including exceptional items gross margin was
63.2 per cent (2015: 63.5 per cent).
We continue to see savings from our actions to make the business
simpler and more efficient. In 2016 we delivered savings of GBP7.1
million, slightly ahead of the targets we had set. Benefits were
achieved through better procurement and as a result of investments
made to simplify our operations across retail and supply chain. In
2017 we expect to make a similar level of progress as we see
initial benefits from our supply chain restructuring and continue
to invest in improved processes and systems.
As noted above in 2016 we recognised gains on the disposal of
freehold properties totalling GBP2.2 million (2015: GBP1.2 million)
as a result of the sale of freehold shops on closure and the
disposal of former office buildings. In 2017 we expect property
disposal gains will be in the range of GBP0.5 to GBP1.0
million.
Financing charges
There was a net financing expense of GBPnil million in the year
(2015: GBP0.1 million) reflecting finance income of GBP0.2 million
and a GBP0.2 million charge in respect of the funding position of
the defined benefit pension scheme. In the year ahead we expect to
incur a financing expense of around GBP0.6 million relating to the
net liability of the pension scheme at the end of the year. As
discussed below the scheme's net liability increased substantially
over the year as a result of market conditions.
Taxation
The Company has a simple corporate structure, carries out its
business entirely in the UK and all taxes are paid there. We aim to
act with integrity and transparency in respect of our taxation
obligations.
Excluding the effect of exceptional items the Group's underlying
effective tax rate was 22.5 per cent (2015: 21.1 per cent). The
overall tax rate for the year including exceptional items was 22.8
per cent (2015: 21.1 per cent). The effective rate primarily
reflected reductions in the headline rate of corporation tax and
the impact of the Group's share price on allowances for share
scheme costs.
We expect the effective rate for 2017 to be around 21.25 per
cent, the reduction from 2016 reflecting the lowering of the
headline rate to 19% with effect from April 2017. We expect the
effective rate to remain around two per cent above the headline
corporation tax rate going forward due, principally, to disallowed
expenditure such as depreciation on non-tax-deductible qualifying
properties and costs of acquisition of new shops.
Earnings per share
Diluted earnings per share before exceptional items were 60.8
pence (2015: 55.8 pence), an increase of 9.0 per cent. Basic
earnings per share before exceptional items were 62.0 pence (2015:
57.3 pence). Including exceptional items diluted earnings per share
were 56.7 pence (2015: 55.8 pence) and basic earnings per share
were 57.8 pence (2015: 57.3 pence).
Dividend
The Board recommends a final ordinary dividend of 21.5 pence per
share (2015: 21.2 pence). Together with the interim dividend of 9.5
pence (2015: 7.4 pence) paid in October 2016, this makes a total
ordinary dividend for the year of 31.0 pence (2015: 28.6 pence).
This is covered two times by diluted earnings per share before
exceptional items in line with our progressive dividend policy. In
July 2015 the Group paid a special dividend of 20.0 pence per
share. Our policy on special distributions is outlined below under
"Cash flow and capital structure".
Subject to the approval of shareholders at the Annual General
Meeting, the final dividend will be paid on 26 May 2017 to
shareholders on the register on 28 April 2017.
Balance sheet
Capital expenditure
We invested a total of GBP80.4 million (2015: GBP71.7 million)
on capital expenditure in the business during 2016. This included
GBP42.6 million on 208 shop refurbishments and the opening of 89
new company-managed shops. We continued to invest in shop equipment
to support further growth in sales of coffee and hot sandwiches,
totalling GBP5.1 million, and also invested GBP5.7 million in our
programme of process and systems improvement. Investment in our
supply chain of GBP21.1 million included completion of the
refurbishment of our new distribution centre in Enfield and the
commencement of works to extend the capacity of our Glasgow site.
Depreciation and amortisation in the year was GBP45.6 million
(2015: GBP40.1 million).
In 2017 we plan capital expenditure of around GBP85 million.
This will support continued growth and diversification of our shop
estate and the next phase of investment in our supply chain (see
below). We plan to refurbish around 200 shops in 2017 and expect to
invest in c.110 new Company-managed shops, with further openings
funded by franchise partners.
Our proposed GBP100 million investment programme in
manufacturing and distribution operations comprises GBP75 million
of capital expenditure and GBP25 million of one-off cash-related
change costs over a five-year period. In 2016 we invested GBP3
million of capital expenditure relating to this programme. In 2017
we expect to invest around GBP20 million, followed by c.GBP27
million in 2018 as we execute the most capital-intensive phase of
the programme.
Working capital
Group net current liabilities increased to GBP28.8 million at
the end of 2016 (2015: GBP20.6 million). Inventory levels were
stable and receivables rose by GBP3.1 million in the year,
principally as a result of growth in the number of franchised
shops. The GBP14.8 million increase in current liabilities largely
reflected a higher level of trade payables as a result of growth in
the business, plus capital creditors and restructuring provisions
resulting from the changes made to our supply chain in the
year.
Pension scheme liability
The net liability shown on the balance sheet for the Company's
closed defined benefit pension scheme has risen to GBP22.9 million
(2015: GBP3.9 million). Despite appreciation of the scheme's assets
in 2016 the present value of the expected liabilities has risen
considerably as a result of significant falls in corporate bond
yields, which are used to determine the discount rate applied. The
scheme is due to undergo a full actuarial revaluation in April
2017.
Return on capital
We manage return on capital against predetermined targets and
monitor performance through our Investment Board, where all capital
expenditure is subject to rigorous appraisal before and after it is
made. For investments in new shops we target an average cash return
on invested capital of 25 per cent, with a hurdle rate of 22.5 per
cent, over an average investment cycle of seven years. Other
investments are appraised using discounted cash flow analysis.
The results of our refurbishment expenditure in the year were
good, with 2016 investments delivering results ahead of our target.
The performance of new shops was excellent, with prior year
openings maturing well and newer shops making a very strong start.
In the year ahead we will increase the rate of openings further, as
long as we continue to see strong investment returns.
We delivered an overall return on capital employed (ROCE) for
2016 of 28.1 per cent excluding exceptional items (2015: 26.8 per
cent). The stronger ROCE reflects the improved operating
performance in the year as well as good capital investment
returns.
Cash flow and capital structure
The net cash inflow from operating activities in the year was
GBP117.6 million (2015: GBP103.7 million). At the end of the year
the Group had net cash and cash equivalents of GBP46.0 million
(2015: GBP42.9 million).
Having taken into account the views of shareholders the Board
continues to believe that it is appropriate to maintain a year-end
net cash position of around GBP40 million to allow for seasonality
in our working capital cycle and to protect the interests of all
creditors.
Looking forward we intend to maintain our progressive dividend
policy, and, to the extent that we have material surplus capital
within the Group, the Board would expect to return capital to
shareholders. This was the case in 2015, when a distribution of
GBP20 million was made through a special dividend. In 2017 we
expect that cash flows will be sufficient to meet the Group's
investment plans and pay ordinary dividends in line with our
policy, whilst maintaining a year-end net cash position in line
with our stated target.
Richard Hutton
Finance Director
28 February 2017
Greggs plc
Consolidated income statement
for the 52 weeks ended 31 December 2016 (2015: 52 weeks ended 2
January 2016)
Note 2016 2016 2016 2015
Excluding exceptional items Exceptional items Total Total
(see Note 3)
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 2 894,195 - 894,195 835,749
Cost of sales (324,289) (4,367) (328,656) (305,116)
________ ________ ________ ________
Gross profit 569,906 (4,367) 565,539 530,633
Distribution and selling costs (441,246) (594) (441,840) (412,426)
Administrative expenses (48,315) (216) (48,531) (45,094)
________ ________ ________ ________
Operating profit 80,345 (5,177) 75,168 73,113
Finance expense (26) - (26) (85)
________ ________ ________ ________
Profit before tax 80,319 (5,177) 75,142 73,028
Income tax 4 (18,064) 915 (17,149) (15,428)
________ ________ ________ ________
Profit for the financial year
attributable to equity holders of
the Parent 62,255 (4,262) 57,993 57,600
======= ======= ======= =======
Basic earnings per share 5 62.0p (4.2p) 57.8p 57.3p
Diluted earnings per share 5 60.8p (4.1p) 56.7p 55.8p
Greggs plc
Consolidated statement of comprehensive income
for the 52 weeks ended 31 December 2016 (2015: 52 weeks ended 2
January 2016)
2016 2015
GBP'000 GBP'000
Profit for the financial
year 57,993 57,600
Other comprehensive income
Items that will not be recycled
to profit and loss:
Re-measurements on defined
benefit pension plans (18,791) 4,915
Tax on re-measurements on
defined benefit pension
plans 3,194 (885)
________ ________
Other comprehensive income
for the financial year,
net of income tax (15,597) 4,030
________ ________
Total comprehensive income
for the financial year 42,396 61,630
======= =======
Greggs plc
Consolidated Balance Sheet
at 31 December 2016 (2015: 2 January 2016)
2016 2015
As restated
(see note 1)
GBP'000 GBP'000
ASSETS
Non-current assets
Intangible assets 14,254 10,248
Property, plant and
equipment 307,363 284,163
Deferred tax asset 1,750 3,830
________ ________
323,367 298,241
Current assets
Inventories 15,934 15,444
Trade and other receivables 30,713 27,647
Cash and cash equivalents 45,960 42,915
________ ________
92,607 86,006
________ ________
Total assets 415,974 384,247
________ ________
LIABILITIES
Current liabilities
Trade and other payables (104,924) (92,780)
Current tax liability (10,426) (9,580)
Provisions (6,088) (4,265)
________ ________
(121,438) (106,625)
Non-current liabilities
Other payables (5,599) (6,071)
Defined benefit pension
liability (22,851) (3,910)
Long-term provisions (1,426) (2,972)
________ ________
(29,876) (12,953)
________ ________
Total liabilities (151,314) (119,578)
________ ________
Net assets 264,660 264,669
======= =======
EQUITY
Capital and reserves
Issued capital 2,023 2,023
Share premium account 13,533 13,533
Capital redemption
reserve 416 416
Retained earnings 248,688 248,697
________ ________
Total equity attributable
to equity holders of
the Parent 264,660 264,669
======= =======
Greggs plc
Consolidated statement of changes in equity
for the 52 weeks ended 31 December 2016 (2015: 52 weeks ended 2
January 2016)
52 weeks ended 2 January 2016
Attributable to equity holders of the
Company
Issued Share Capital Retained Total
capital premium redemption earnings
reserve
As restated As restated
(see note (see note
1) 1)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 4
January 2015 2,023 13,533 416 230,731 246,703
Total comprehensive
income for the
year
Profit for the
financial year - - - 57,600 57,600
Other comprehensive
income - - - 4,030 4,030
________ ________ ________ ________ ________
Total comprehensive
income for the
year - - - 61,630 61,630
Transactions
with owners,
recorded directly
in equity
Sale of own
shares - - - 3,876 3,876
Purchase of
own shares - - - (11,125) (11,125)
Share-based
payment transactions - - - 2,057 2,057
Dividends to
equity holders - - - (43,714) (43,714)
Tax items taken
directly to
reserves - - - 5,242 5,242
________ ________ ________ ________ ________
Total transactions
with owners - - - (43,664) (43,664)
________ ________ ________ ________ ________
Balance at 2
January 2016 2,023 13,533 416 248,697 264,669
======= ======= ======= ======= =======
Greggs plc
Consolidated statement of changes in equity (continued)
52 weeks ended 31 December 2016
Issued Share Capital Retained Total
capital premium redemption earnings
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 3
January 2016 2,023 13,533 416 248,697 264,669
Total comprehensive
income for the
year
Profit for the
financial year - - - 57,993 57,993
Other comprehensive
income - - - (15,597) (15,597)
________ ________ ________ ________ ________
Total comprehensive
income for the
year - - - 42,396 42,396
Transactions
with owners,
recorded directly
in equity
Sale of own
shares - - - 4,063 4,063
Purchase of
own shares - - - (12,398) (12,398)
Share-based
payment transactions - - - 1,994 1,994
Dividends to
equity holders - - - (30,936) (30,936)
Tax items taken
directly to
reserves - - - (5,128) (5,128)
________ ________ ________ ________ ________
Total transactions
with owners - - - (42,405) (42,405)
________ ________ ________ ________ ________
Balance at 31
December 2016 2,023 13,533 416 248,688 264,660
======= ======= ======= ======= =======
Greggs plc
Consolidated statement of cashflows
for the 52 weeks ended 31 December 2016 (2015: 52 weeks ended 2
January 2016)
2016 2015
GBP'000 GBP'000
Operating activities
Cash generated from
operations (see below) 133,773 119,637
Income tax paid (16,157) (15,916)
________ ________
Net cash inflow from
operating activities 117,616 103,721
________ ________
Investing activities
Acquisition of property,
plant and equipment (74,016) (65,785)
Acquisition of intangible
assets (6,106) (5,981)
Proceeds from sale of
property, plant and
equipment 4,698 8,086
Interest received 124 222
Redemption of other
investments - 10,000
________ ________
Net cash outflow from
investing activities (75,300) (53,458)
________ ________
Financing activities
Sale of own shares 4,063 3,876
Purchase of own shares (12,398) (11,125)
Dividends paid (30,936) (43,714)
________ ________
Net cash outflow from
financing activities (39,271) (50,963)
________ ________
Net increase / (decrease)
in cash and cash equivalents 3,045 (700)
Cash and cash equivalents
at the start of the
year 42,915 43,615
________ ________
Cash and cash equivalents
at the end of the year 45,960 42,915
======= =======
Cash flow statement - cash generated from operations
2016 2015
As restated
GBP'000 GBP'000
Profit for the financial
year 57,993 57,600
Amortisation 2,100 454
Depreciation 43,453 39,687
Impairment 488 66
Loss on sale of property,
plant and equipment 2,476 2,952
Release of government
grants (472) (484)
Share-based payment
expenses 1,994 2,057
Finance expense 26 85
Income tax expense 17,149 15,428
Increase in inventories (490) (154)
Increase in receivables (3,066) (1,555)
Increase in payables 11,845 2,875
Increase in provisions 277 626
________ ________
Cash from operating
activities 133,773 119,637
======= =======
Greggs plc
Notes
1. Basis of preparation and accounting policies
The preliminary announcement has been prepared in accordance
with the recognition and measurement principles of International
Financial Reporting Standards as adopted by the EU ("adopted
IFRSs"), IFRIC interpretations and the Companies Act 2006
applicable to companies reporting under IFRS. 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 31 December 2016
or 2 January 2016 but is derived from these accounts. Statutory
accounts for the 52 weeks ended 2 January 2016 have been delivered
to the registrar of companies, and those for the 52 weeks ended 31
December 2016 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 2 January 2016, which are available on the Company's
website www.greggs.co.uk, with the exception of the adoption of the
following relevant standards, amendments and interpretations:
-- Amendments to IAS 16 and IAS 38 - Clarification of Acceptable
Methods of Depreciation and Amortisation
-- Annual Improvements to IFRSs - 2012-2014 Cycle
-- Disclosure Initiative - Amendments to IAS 1
The adoption of the above has not had a significant impact on
the Group's profit for the year or equity.
Restatement of comparatives
During 2015 a provision was recognised for the future employers'
national insurance costs on share-settled option schemes where
there is no requirement for the employee to reimburse these costs.
This accounting is in accordance with IFRS 2. The charge was
included within the share-based payments charge within the income
statement with the credit being taken directly to reserves in line
with the rest of the charge. It has been determined that the
element of the charge relating to future national insurance costs
should have been accounted for as a provision rather than directly
to reserves. The impact of this for the 52 weeks ended 2 January
2016 is that the closing retained earnings reserve has been reduced
by GBP1,605,000, current liability provisions have increased by
GBP590,000 and long-term provisions have increased by GBP1,015,000.
There is no impact on profit or cash flows.
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 retail activities, the Group generates revenues
from franchise and wholesale. However, these elements of the
business are not sufficiently significant to be "Reportable
Segments" in the context of IFRS 8.
Products and services - the Group sells a consistent range of
fresh bakery goods, sandwiches and drinks in its shops. The Group
also provides frozen bakery products to its wholesale
customers.
Major customers - the majority of sales are made to the general
public on a cash basis. A small proportion of sales are made on
credit to certain organisations, including wholesale customers, but
these are immaterial in a Group context.
Geographical areas - all results arise in the UK.
The Board has carefully considered the requirements of IFRS 8
and concluded that, as there is only one reportable segment whose
revenue, profits, assets and liabilities are measured and reported
on a consistent basis with the Group accounts, no additional
numerical disclosures are necessary.
3. Exceptional items
2016 2015
GBP'000 GBP'000
Cost of sales
Supply chain restructuring - redundancy 3,028 -
costs
- asset-related costs 1,852 -
- other contractual obligations 44
Prior year items - dilapidations (557) -
__________ __________
4,367
Distribution and selling
Supply chain restructuring - redundancy 1,108 -
costs
- transfer of operations 356
Prior year items - property related (870) -
__________ __________
594 -
Administrative expenses
Restructuring of support functions 391 -
Prior year items - restructuring
of support functions (175)
__________ __________
216 -
________ ________
Total exceptional items 5,177 -
======= =======
3. Exceptional items (continued)
Supply chain restructuring
This charge arises from the decision, announced in March 2016,
to invest in and reshape the Company's supply chain in order to
support future growth. The costs relate to the closure of three
bakery sites and include redundancy and other employment-related
costs, asset write-offs, impairment and transfer and other
contractual obligations that arise as a result of the closure of
the sites.
Restructuring of support functions
This charge relates to redundancy costs arising from the
restructuring of bakery administration and payroll functions.
Prior year items
These relate to the movement on costs treated as exceptional in
prior years and arise from the settlement of various property and
redundancy transactions.
4. Taxation
Recognised in the income statement
Excluding Exceptional Total Total
exceptional items
items
2016 2016 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000
Current tax
Current year 18,716 (767) 17,949 17,970
Adjustment for prior years (946) - (946) (530)
________ ________ ________ ________
17,770 (767) 17,003 17,440
________ ________ ________ ________
Deferred tax
Origination and reversal
of temporary differences (342) (148) (490) (1,038)
Reduction in tax rate 239 - 239 (254)
Adjustment for prior years 397 - 397 (720)
________ ________ ________ ________
294 (148) 146 (2,012)
________ ________ ________ ________
Total income tax expense
in income statement 18,064 (915) 17,149 15,428
======= ======= ======= =======
5. Earnings per share
Basic earnings per share
Basic earnings per share for the 52 weeks ended 31 December 2016
is calculated by dividing profit attributable to ordinary
shareholders by the weighted average number of ordinary shares
outstanding during the 52 weeks ended 31 December 2016 as
calculated below.
Diluted earnings per share
Diluted earnings per share for the 52 weeks ended 31 December
2016 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) outstanding
during the 52 weeks ended 31 December 2016 as calculated below.
Profit attributable to ordinary shareholders
2016 2016 2016 2015
Excluding Exceptional Total Total
exceptional items
items
GBP'000 GBP'000 GBP'000 GBP'000
Profit for the financial
year attributable to
equity holders of the
Parent 62,255 (4,262) 57,993 57,600
======= ======= ======= ======
Basic earnings per share 62.0p (4.2p) 57.8p 57.3p
Diluted earnings per
share 60.8p (4.1p) 56.7p 55.8p
Weighted average number of ordinary shares
2016 2015
Number Number
Issued ordinary shares at start
of year 101,155,901 101,155,901
Effect of own shares held (710,295) (551,314)
__________ __________
Weighted average number of ordinary
shares during the year 100,445,606 100,604,587
Effect of share options on issue 1,921,344 2,616,364
__________ __________
Weighted average number of ordinary
shares (diluted) during the year 102,366,950 103,220,951
========= =========
6. Dividends
The following tables analyse dividends when paid and the year to
which they relate:
2016 2015
Per share Per share
pence pence
2014 final dividend - 16.0p
2015 interim dividend - 7.4p
2015 special dividend - 20.0p
2015 final dividend 21.2p -
2016 interim dividend 9.5p -
________ ________
30.7p 43.4p
======= =======
The proposed final dividend in respect of 2016 amounts to 21.5
pence per share (GBP21,560,000). This proposed dividend is subject
to approval at the Annual General Meeting and has not been included
as a liability in these accounts.
2016 2015
GBP'000 GBP'000
2014 final dividend - 16,090
2015 interim dividend - 7,463
2015 special dividend - 20,161
2015 final dividend 21,326 -
2016 interim dividend 9,610 -
________ ________
30,936 43,714
======= =======
7. Related parties
The Group has a related party relationship with its
subsidiaries, associates and its Directors and executive
officers.
There have been no related party transactions in the year which
have materially affected the financial position or performance of
the Group. There have been no related party transactions in the
year which have materially affected the financial position or
performance of the Group.
8. Events after the reporting period
As noted in the Chief Executive's report above, in January 2017
the Company communicated further restructuring proposals to staff
relating to the previously communicated investment in its supply
chain. This communication included the planned impact of
consolidating manufacturing operations and announced a consultation
with trade unions and employee representatives over the detail of
the proposals.
The total one-off exceptional costs of this major change
programme are expected to be in the region of GBP25 million. This
includes GBP6.4 million charged in 2016 (see note 3) and we expect
to charge a further GBP12 million in 2017, of which GBP6 million
will be a cash cost.
9. Principal risks and uncertainties
The Board has carried out a robust assessment of the principal
risks facing the company, including those that would threaten its
business model, future performance, solvency and liquidity. These
risks are described below, together with a brief description of
mitigating activity.
Greggs is exposed to a wider range of risks than those listed.
However, these are the risks which are considered to be the most
important to the business' future development, performance or
position. The risks identified are those to which the Board
considers there is a disproportionate exposure, relative to the
food-on-the-go sector. The impact of these risks occurring has been
considered in developing the scenarios tested as part of the
financial viability statement.
The risks are not set out in any particular order.
Area of principal Mitigating actions Risk
risk or uncertainty and controls rating
------------------------------- --------------------------- -----------
Business change - The project delivery Increasing
Greggs is implementing is overseen by the
a strategic plan to Operating Board,
transform the business under the guidance
from a decentralised of a project sponsor,
traditional bakery providing robust
to a centralised modern governance. Regular
food-on-the-go brand. updates are provided
This is a major programme to the Board, to
of business change monitor progress
involving restructuring, against clearly defined
new systems, significant timelines and financial
capital investment forecasts.
and a major overhaul
of every aspect of
the business, particularly
supply chain.
Progress may not be
in line with plans,
disruption could occur
and financial returns
may fall short of
expectation.
------------------------------- --------------------------- -----------
Product quality and Procedures are in No change
safety - Greggs is place throughout
unusual in the food-on-the-go our operations to
sector in that it ensure that food
is vertically integrated, safety is maintained.
owning its own manufacturing These procedures
and supply chain operations. are supported by
In addition, we freshly robust audit processes,
prepare food on our both internally,
retail premises. and by regulatory
This exposes us to bodies.
greater risk in ensuring
good food safety than
many of our competitors.
------------------------------- --------------------------- -----------
Food scare - Greggs The majority of products No change
may suffer from a for sale in our shops
loss of customer confidence have been manufactured
due to a major food by our staff in our
scare beyond its control. bakeries. Checks
Dependent upon the are carried out to
nature of this, it confirm the integrity
may have a disproportionate of our products and
impact on Greggs. ingredients as part
of routine processes.
------------------------------- --------------------------- -----------
Loss of production Contingency plans No change
- Some of our products are in place for
are produced in one our supply sites,
location and distributed and these are regularly
nationwide. Any disruption tested. Our property
to supply would have insurers carry out
a significant impact annual site inspections,
on our customers. which help to protect
our facilities from
loss. We have alternative
supply sources for
key products, and
these are periodically
tested.
------------------------------- --------------------------- -----------
9. Principal risks and uncertainties (continued)
Market pressures - Greggs operates a No change
Changing shopping leasehold shop estate
habits driven by new with typically five-year
customer channels break provisions,
such as the internet allowing us to change
may have a greater locations in line
impact on Greggs due with customer traffic
to our historical trends. In addition,
bias to shops located new shops are predominantly
on high streets. opened in locations
away from the high
street to offer our
services to customers
away from home for
reasons other than
shopping. The nature
of our franchise
partners also provide
mitigation.
------------------------- ----------------------------- ----------
Consumer trends - We have a proactive No change
Increasing customer programme to improve
concern with health the nutritional qualities
and nutrition may of our traditional
affect demand for products where possible
some of our traditional without impacting
bakery product ranges. taste. In addition
we are extending
range choice to include
healthier options
branded `Balanced
Choice` which is
growing rapidly.
------------------------- ----------------------------- ----------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAPAXADNXEFF
(END) Dow Jones Newswires
February 28, 2017 02:00 ET (07:00 GMT)
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