For the 52 weeks ended 29 December 2018
2
Total sales up 7.2% to £1,029.3m • Company-managed shop like-for-like sales* up 2.9% • Operating profit excluding property profits** and exceptional items*** up • 9.1% to £89.1m Ordinary dividend per share up 10.5% to 35.7p • Strong cash generation supporting investment programme and shareholder • returns ‒ expect to declare special dividend with interim results Very strong start to 2019 • ‒ company-managed shop like-for-like sales up 9.6% in first seven weeks * like-for-like sales in Company- managed shops (excluding franchises) with a calendar year’s trading history ** freehold property disposal gains of £0.7m in 2018 (2017:£0.5m) *** exceptional pre-tax charge of £7.2m in 2018 (2017: £9.9m charge) 3
Richard Hutton 4
2018 2017 £m £m Sales Sales 1,029.3 1,029.3 960 960.0 .0 +7.2% +7.2% Op Operati erating ng profit t befo efore e property erty 89.1 89.1 81.7 81.7 +9.1% +9.1% & excepti & ex ceptional nal items tems Property disposal gains 0.7 0.5 EBIT BIT befo efore ex excepti ceptionals nals 89.8 89.8 82.2 82.2 +9.2% +9.2% Finance expense (0.0) (0.4) Net exceptional charge* (7.2) (9.9) Profit before taxation 82.6 71.9 Exceptional items relate mainly to major supply chain investment and restructuring * programme, and provision for the one-off costs of Guaranteed Minimum Pension equalisation. 5
10% 9% 8% H1 1.5% H2 4.2% 7% 6% 5% 4% 3% 2% 1% 0% Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Weeks 1-7 '19 6
2018 2017 Sales Sales £1,029 £1,029m £960m £960m Gross margin 63.7 % 63.7 % Distribution & selling costs (49.9)% (49.6)% Admin expenses (5.1)% (5.5)% EBI EBIT (b T (befo efore ex exce cepti ptiona onals ls) £89.8m £89.8m £82.2m £82.2m EBIT margin 8.7% 8.6% Steady gross margin as cost pressures mitigated/recovered • Distribution costs rising as new supply strategy implemented • Admin expenses reflect operational gearing and cost control • 7
£m £89.8m 90.0 £82.2m 80.0 70.0 60.0 50.0 40.0 2017* Cost inflation LFL growth** Cost savings Estate growth Other 2018* Excluding exceptional items in both years * ** Like-for-like growth in company-managed shop, franchised shop and wholesale sales 8
2018 2018 2017 £m £m £m Supp Supply chai ly chain n res estruc tructur turing ng: Costs of structural change 5.9 5.9 10.5 - Related property disposal gain (0.4) 5.9 5.9 10.1 Other: Other: 1.7 1.7 GMP* equalisation - Settlement of prior year costs (0. (0.4) 4) (0.2) Net Net ex excepti ceptional nal char charge 7.2 7.2 9.9 “Guaranteed Minimum Pension” - expected one-off impact of gender equalisation of guaranteed minimum pensions * ("GMPs") for the Company’s legacy defined benefit pension scheme. A UK High Court ruling in October 2018 requires equalisation between men and women for the effect of unequal GMPs accrued between 1990 and 1997 9
Latest expected phasing of cash and non-cash exceptional charges in respect of investment programme to reshape supply chain operations: £m £m 2018 2018 Total tal 2016 2017 2019 2020 Cash change costs 4.5 9.2 5.2 3.9 2.0 24.8 24.8 4.5 4.5 Non-cash (asset-related) charges 1.9 1.3 0.7 0.4 0.2 Exc xcepti eptional nal P&L &L char charge 6.4 6.4 10.5 10.5 5.9 5.9 4.3 4.3 2.2 2.2 29.3 29.3 Phasi hasing ng of ex expect ected ed cash f cash flo low 3.8 3.8 1.9 1.9 9.0 9.0 7.4 7.4 2.7 2.7 24.8 24.8 Expected charge through to 2020 remains largely in line with previous guidance Be Benefit nefits - £3m of the ultimate £7m net margin benefit delivered as at 2018 - no margin benefit in 2019, further £4m annual benefit by 2021 10
3.6% overall wage & • 6% 12% salary inflation in 2018, 4% 40% plus £2m additional c.3% ingredient • pensions inflation in 2018, weighted to H1 Expect 4.1% in 2019, • 29% plus £3.3m additional Substantial energy cost • 9% for pensions auto increases, H2 enrolment increase particularly 6 months forward • covered on food inputs People costs Shop occupancy Food & packaging Energy/fuel and energy Depreciation Other Physical stock positions • taken on key imports (not possible for fresh produce) Expect 2-3% overall • Good rent reductions in traditional locations at lease renewal • food input inflation in 2019 Generally taking on larger new shops – average new rent in 2018 • £40k vs estate average £33k 11
2018 2018 2017 20 20.2% .2% Tax charge* 20.7% - expect 20.75% charge for 2019, continuing thereafter at c.1.75% above headline rate Underlying diluted earnings per share* 70 70.3 .3p 63.5p +10.7% 71.1p 71 .1p Underlying basic earnings per share* 64.5p +10.3% Full year ordinary dividend per share 35.7p 5.7p 32.3p +10.5% Interim ordinary dividend set at 1/3 of previous year’s total ordinary dividend • Full year dividend 2x covered by underlying earnings • Special dividends if material surplus cash • * Includes property disposal gains but excludes exceptional items impact 12
2018 2018 £m £m 2019 2017 Plan Ac Actual tual Actual New shops and relocations (fitting & equipment) 20.0 19.4 19.4 18.1 Shop fitting – refurbishment 4.0 5.9 5.9 8.8 7.8 7.8 Shop equipment (additional and replacement) 13.0 13.9 Supply chain 46.0 32.9 2.9 23.4 6.8 6.8 I.T. 6.0 4.4 Other 1.0 0.2 0.2 1.8 £73.0 £73.0 Total capit ital expendit iture c.£90.0 .0 £70.4 .4 Sh Shop op nu numb mber ers Number of gross new shops @ c.£220k* c.90 87 87 86 (incl. relocations, excl. franchises) 89 89 Number of shop refits @ c.£65k^ c.55 132 * Shop fitting and equipment cost ^ Shop fitting cost only 13
£m 100 90 80 70 60 50 40 30 20 10 0 2016 2017 2018 2019 plan 2020 plan 2021 plan 2022 plan Retail IT & other Supply chain New company- 88 86 87 c.90 c.95 c.95 c.95 managed shops Company-managed 207 132 89 c.55 c.80 c.160 c.180 refits 14
£’000 per shop (annual) Company- Franchise managed Aver verage ge sho hop income i p income in n 20 2018 18 568 568 211 211 Shop-level cash contribution 113 42 Allocation of support costs (29) (16) Shop contrib ibutio ion net of su support costs 84 84 26 26 Shop capital investment 200 - Allocation of supply chain capital employed 80 80 Working capital impact per shop* (54) 9 Total ca capit ital employed per sh shop 226 226 89 89 Average cash return 37% 29% * Company-managed shops generate a working capital inflow, whereas income from franchised stores is received on credit terms 15
£136.2m net cash inflow from operating activities (2017: £116.9m) • Capital expenditure, dividends and exceptional costs all funded from • internally-generated cash flow £88.2m net cash at year end (2017: £54.5m), reflects strength of performance, • some short-term changes to working capital and the phasing of capex Looking forward, target = net cash position of c.£40m at year end • Strong cash position sensible given current political and economic • uncertainties. Additional stocks of key ingredients and equipment currently being held Keeping plans under active review, currently expect to declare special • dividend at the time of our interim results (July 2019) 16
Purely an accounting change, no impact on cash flows or how we manage the • business Balance sheet asset and corresponding liability have been created for relevant • leases Income statement rent costs being replaced by depreciation on the asset and • interest on the reducing liability H1 2019 will be the first accounting period to be reported under IFRS16, no • restatement of prior periods £270m of assets and liabilities added to balance sheet at start of 2019 • 2019 net profit expected to decrease by £4.2m as rental charge is replaced by • depreciation and interest charges No cash impact • 17
Roger Whiteside OBE 18
19
• Breakfast-on-the-go continues to grow strongly • Hot drinks - reputation for quality, value and service continues to build • Options for customers widening - adding gluten-free and vegan products alongside Balanced Choice range • Beginning hot food cabinet roll out 20
• “The Greggs Way” best practice programme releasing more time to serve customers • Beginning roll out of ‘click and collect’ and home delivery • Marketing driving customer reappraisal 21
• Launch built on progressive increase in advertising awareness* throughout 2018 • Customer insight** suggests 1 in 8 vegan sausage roll buyers are new customers • Prompting customer reappraisal of the brand and frequency of visits • Resulting ad awareness* at a seven-year high * Source: YouGov BrandIndex ** Source: Greggs research & Greggs Rewards data 22
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