2017 Preliminary Results: For the 52 weeks ended 30 December 2017

Transcription

1 2017 Preliminary Results: For the 52 weeks ended 30 December

2 Agenda Highlights Financial performance Strategic progress Current trading & outlook 2

3 2017: good growth and further strategic progress Total sales up 7.4% to 960.0m Company-managed shop LFL sales* up 3.7% Operating profit excluding property profits** and exceptional items*** up 4.6% to 81.7m Ordinary dividend per share up 4.2% to 32.3p Strong cash generation supporting investment programme for further growth 3 * 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)

4 Financial performance Richard Hutton

5 Group sales and profit 2017 m 2016 m Sales % Operating profit before property & exceptional items % Property disposal gains EBIT before exceptionals % Finance expense (0.4) (0.0) Net exceptional charge* (9.9) (5.2) Profit before taxation * Exceptional items relate mainly to major supply chain investment programme resulting in closure of some bakery manufacturing sites and restructuring of manufacturing activity across others.

6 Exceptional charge Supply chain restructuring: 2017 m 2016 m Costs of structural change Related property disposal gain (0.4) - Other: Support function restructuring Settlement of prior year costs (0.2) (1.6) See following page for detail and guidance on phasing Net exceptional charge

7 Detail - supply chain restructuring charges Latest expected phasing of 25m cash and 5m non-cash exceptional charges in respect of investment programme to reshape supply chain operations: m Total Redundancy costs Transfer of operations Property-related Cash costs charged to P&L Depreciation and asset write-offs Property disposal gains - (0.4) TBC (0.4) Net P&L charge Phasing of expected cash flow

8 Continued growth in LFL sales 7% Quarterly company-managed shop LFL sales growth 6% 2 5% 4% 1 3% 2% 1 2 1% 0% Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Weeks 1-8 '18 1 Underlying LFL level excluding Christmas & New Year trading pattern 2 Reported level 8

9 Net margin (before exceptionals) Sales 960m 894m Gross margin 63.7 % 63.7 % Distribution & selling costs (49.6)% (49.5)% Admin expenses (5.5)% (5.5)% Operating margin before property gains 8.6% 8.7% Property disposal gains 0.0% 0.3% EBIT (before exceptionals) 82.2m 80.3m EBIT margin 8.6% 9.0% 9 Ingredient cost pressure on gross margin mitigated by cost reductions Distribution & selling costs reflect increased wage rates and training costs, mitigated by operational gearing impact of sales growth Admin expenses increasing with systems investment Property gains insignificant this year, unusually high level in 2016

10 EBIT bridge mitigating significant inflation headwind m m 82.2m * Excluding exceptional items in both years

11 Significant cost inflation in 2017, now easing Wage & salary inflation Ingredient inflation 7.0% 7.0% 6.0% 6.0% 5.0% 5.0% 4.0% 3.0% 4.0% 3.0% range 2.0% 2.0% 1.0% 1.0% 0.0% -1.0% E % -1.0% E % -2.0% People costs Food & packaging inputs 3.1% overall wage & salary inflation in 2017 (2016: 3.5%) Significant, largely currency-driven ingredient inflation in expected to be 3.6% including impact of National Living Wage Additional costs from Apprenticeship Levy in 2017 (+ 1.2m) and Pensions in 2018 (+ 2.0m) Proteins & dairy most affected 2018 inflationary, but at a lower level Currently hold 5-6 months forward cover 11

12 Tax, earnings and dividend Tax charge* - expect 21.25% charge for 2018, continuing thereafter at c.2% above headline rate 20.7% 22.5% Underlying diluted earnings per share* 63.5p 60.8p +4.4% Underlying basic earnings per share* 64.5p 62.0p +4.0% Full year ordinary dividend per share 32.3p 31.0p +4.2% Distribution approach Interim ordinary dividend set at 1/3 level of previous year s total ordinary dividend Full year dividend 2x covered by underlying earnings Special dividends if material surplus capital * Includes property disposal gains but excludes exceptional items impact 12

13 Capital expenditure m 2018 Plan New shops and relocations (fitting & equipment) Shop fitting refurbishment Shop equipment (additional and replacement) Supply chain I.T Other Total capital expenditure c Number of gross new c. 205k* (incl. relocations, excl. franchises) Number of shop c. 60k^ c c * Shop fitting and equipment cost ^ Shop fitting cost only 13

14 Supply chain investment entering peak phase m 100 Latest plan plan 2019 plan 2020 plan Retail IT & other Supply chain 14

15 Supply chain investment programme return on capital Expected investment phasing: m Capital investment One-off change costs Expected cash phasing Expected offset from disposal proceeds (c. 20m) Expected P&L phasing: One-off change costs Asset-related charges Expected exceptional charges Cumulative net benefit to P&L Gross investment 100m Alternative for same capacity - 50m Expected disposal proceeds - 20m Net incremental investment 30m Ongoing annual cash benefit 10m Incremental depreciation 3m Net P&L benefit 7m 15

16 Managing retail return on capital k New shop payback k Relocated shop payback Yr 1 Yr 2 Yr 3 Yr Yr 1 Yr 2 Yr 3 Yr 4 Cumulative shop contribution Cumulative shop contribution Shop capital payback achieved Shop capital payback achieved Shop + supply chain payback Shop + supply chain payback Shop relocations mature quickly and grow catchment profitability Shop investments targeted with ROI hurdles designed to reflect vertical integration equates to 25% cash return on shop capex Strong performance currently new shops maturing faster and giving higher returns than historically 16

17 Cash flow and balance sheet Continued strong cash generation in 2017: m net cash inflow from operating activities (2016: 117.6m) - Capital expenditure, dividends and exceptional costs all funded from internally-generated cash flow Strong balance sheet position: m net cash at year end (2016: 46.0m) - Looking forward target = net cash position of c. 40m at year end - Expect to meet this in 2018 whilst funding record capital expenditure, ordinary dividends and outlays in respect of exceptional costs - Board continues to consider capital structure appropriate given leverage in leasehold estate and obligations to all stakeholders 17

18 18 Strategic progress Roger Whiteside

19 PURPOSE: Making good, freshly prepared food accessible to everyone VISION: Customers favourite for food-on-the-go 19

20 Breakfast-on-the-go remains fastest growing daypart. Hot drinks reputation for quality, service and outstanding value continues to build. Healthier options increasingly popular with Balanced Choice over 100m of sales. Hot food sales growing well. Greggs offers customers food they can trust. 20

21 Continued investment to help our shop teams deliver fast and friendly service. Greggs Rewards growing rapidly. Increased shop numbers targeting convenient locations and new territory including Devon and further shops in Northern Ireland. 90 net shops opened in nd Franchise shop opened. New Drive-Thru format opened. 21

22 Flexing shop formats for different locations 22

23 Reshaping the estate shop estate 1,671 shops (20% travel & workplace) +319 new co. shops -333 shop closures +197 new franchises 2017 shop estate 1,854 shops (34% travel & workplace) Franchise Travel & workplace High street 2018 plan - aim to open net new shops: new company-managed shops c.70 new franchise stores closures

24 Good start in 2017 with our supply chain investment programme. Completed transfer of our Edinburgh operations to our Glasgow facility to create a centre of excellence for Yum Yum production. Extended our Leeds bakery to create a centre of excellence for cake and muffin production a peak year of investment. 24

25 Successful deployment of our largest ever systems roll out. Already seen benefits in improved product availability for customers. Pilots in both logistics and manufacturing deployed, roll out programme starting this year. Work has begun on our human resources, payroll and property management systems. 25

26 Having a positive impact on people s lives Customer health We encourage healthier food-on-the-go choices Responsible sourcing We care about where our products come from Community We share our success with the community around us Environment We aim to use energy efficiently and minimise waste People We are committed to creating a great place to work 26

27 Current trading & outlook Encouraged by the start to the year: total sales up 6.2% in first 8 weeks of 2018 company-managed shop LFL sales up by 3.2% 2018 will be the peak year for investment in our supply chain as we create the platforms for further growth 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 27

28 Questions