2017 Financial highlights
· Total sales up 7.4% to £960.0m (2016: £894.2m)
· Company-managed shop like-for-like sales* up 3.7% (2016: 4.2%)
· Operating profit excluding property profits** and exceptional items*** up 4.6% to £81.7m (2016: £78.1m)
· Pre-tax profit excluding exceptional items*** £81.8m (2016: £80.3m)
· Pre-tax profit £71.9m (2016: £75.1m)
· Strong cash generation supporting investment programme for further growth
· Total ordinary dividend per share up 4.2% to 32.3p (2016: 31.0p)
* like-for-like sales in company-managed shops (excluding franchises) with a calendar year's trading history
** freehold property disposal gains of £0.5m in 2017 (2016: £2.2m)
*** exceptional pre-tax charge of £9.9m in 2017 (2016: £5.2m charge)
Strategic progress
· Further improvements to product range, with specific focus on hot drinks and hot food
· Healthier options growing strongly, 'Balanced Choice' range accounts for more than £100m of sales
· 131 new shops opened, 41 closures (90 net openings); 1,854 shops trading at 30 December 2017
· Continued investment to consolidate manufacturing operations and expand logistics capacity
· New shop replenishment system successfully rolled out and supply chain solution piloted
Current trading
· Encouraged by the start to the year
· Company-managed shop like-for-like sales up by 3.2% in eight weeks to 24 February 2018
“In 2017 we delivered another strong performance in challenging economic circumstances as rising inflation impacted both our own costs and customers' disposable income. At the same time we continued to make good progress with our business transformation programme.
“Whilst the UK consumer outlook remains challenging, we are encouraged by the start to the year. 2018 will be the peak year for investment in our supply chain as we create the platforms for further growth. We also plan to open a record number of new shops as we implement our plan to grow Greggs as a leading food-on-the-go brand.”
– Roger Whiteside, Chief Executive
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ENQUIRIES: Roger Whiteside, Chief Executive Richard Hutton, Finance Director Tel: 0191 281 7721 |
Wendy Baker / Hattie O'Reilly Tel: 020 7796 4133 |
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An audio webcast of the analysts' presentation will be available to download later today at http://corporate.greggs.co.uk/ |
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Chairman's statement
Greggs performed well in 2017, delivering further like-for-like sales growth as well as expanding its estate of shops. This was achieved despite significant inflationary headwinds and alongside continued major investment in line with our strategic plan. These investments are creating the platform for us to deliver sustainable long-term growth for the benefit of all stakeholders.
Overview
Greggs once again demonstrated the resilience of its people and business model, delivering a solid trading and financial performance in the face of increased cost inflation and a strategic change programme. The development of our products and shop formats has opened up additional opportunities for growth in shop numbers and we expect this expansion to continue in the year ahead. We are investing significantly in our supply chain to enable this growth, whilst continuing to make improvements to our processes and systems that will deliver enhanced capability and efficiency to compete in the fast-moving food-on-the-go market.
Our people and values
In 2017 we began the investment in our supply chain that will enable us to deliver growth whilst remaining competitive in terms of the quality and price of our products. As I reported last year this involved taking some difficult decisions, particularly regarding the organisation of our manufacturing and logistics operations. We have worked hard over the last year to carry out the necessary changes in line with our values. There has been much challenge and dialogue but the whole team has worked together with the best interests of the business in mind, and I would like to extend my thanks to all involved.
Greggs has a long history of conducting its business in a responsible manner. We have made great strides in environmental management in recent years and are working with others in our industry to make further improvements. This includes finding solutions to increase the proportion of packaging that can be recycled and ensuring that more of our surplus food is channelled to those who need it most.
We have a strong reputation for sharing our success with the communities where we operate and direct much of this support through the Greggs Foundation, which celebrated its 30th anniversary in 2017. Representatives of the Foundation attended a Board meeting in the year to explain how they work with the Company and other partners. The Foundation makes a real difference to the lives of people in our communities and is given tremendous assistance by staff throughout Greggs. It is a great charity and one that we are very proud to support.
I would like to thank everyone who has worked for Greggs during the past year and contributed to the positive impact that it has had on all of its stakeholders.
The Board
As we announced last year, our Retail Director Raymond Reynolds stepped down from the Board at the AGM in May 2017 but remains a key member of the Company's Operating Board in his new role as Property and Business Development Director. Raymond was a member of the Board for ten years and I would like to thank him for his important contribution throughout that time.
Otherwise the composition of the Board was unchanged in 2017. We continued to spend a significant amount of time overseeing the major programmes of change that support the Company's strategic plan, particularly the investments under way in our internal supply chain. Other reviews included emerging risk areas, including the uncertainties around exiting the European Union, and examination of customer preferences and behaviours and our resulting plans.
The Board also visited Northern Ireland in the year to see for itself the progress that Greggs has made establishing a presence there. It was pleasing to see the same levels of enthusiasm and commitment to doing business the right way that we experience in more established trading areas.
Directors continue to be encouraged to visit different areas of the business and experience it through the eyes of our colleagues and customers. This helps to ensure that Non-Executive Directors' contributions to Board discussions are well informed, supporting open and constructive dialogue with the management team. This year I also spent time with an employee panel, a particularly helpful experience given the significant changes that we are making in our supply chain.
Further details of the Board's work are included 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 22.0 pence per share (2016: 21.5 pence), giving a total ordinary dividend for the year of 32.3 pence (2016: 31.0 pence), an increase of 4.2 per cent.
Looking ahead
Greggs continues to demonstrate its resilience in the face of economic uncertainty. This environment seems unlikely to change in the short term as the UK negotiates its exit from the European Union, with the associated risks to consumer confidence and further cost inflation. We are alive to these risks and working hard to mitigate the possible impacts where we can.
Looking beyond this we remain optimistic about the growth potential for Greggs and are currently investing to support this. The benefits of our major change programmes are beginning to show and will give us much greater capability and capacity for further growth in the years ahead.
Greggs continues to be a strong business with a great team. I am confident that we will make further progress in the year ahead.
Ian Durant
Chairman
27 February 2018