RNS Number:4194O
Greggs PLC
07 August 2003
7 August 2003
GREGGS plc
INTERIM RESULTS
FOR THE 24 WEEKS ENDED 14 JUNE 2003
Greggs is the UK's leading retailer specialising in sandwiches, savouries and
other bakery products, with a particular focus on takeaway food and catering.
It has over 1,200 retail outlets throughout the UK, trading principally under
the Greggs and Bakers Oven brands.
* Record interim pre-tax profit of #12.3 million - up 13.3 per cent
* Building on 11th consecutive year of profit, earnings and dividend
growth
* Diluted earnings per share up 13.7 per cent to 69.1 pence
* Interim dividend up 8.5 per cent to 25.5 pence per share
* Like-for-like sales up 4.7 per cent - 4.0 per cent adjusted for
Jubilee effect
* 33 new shops opened: net addition of nine to 1,211 units after
closures
* Major investments in additional bakery capacity
* Net cash balances of #26.8 million at end of first half
"We maintained satisfactory progress throughout the first 24 weeks ... We have
made a relatively slow start to the second half, reflecting comparison with an
excellent trading period last year and the impact of the unfavourably hot
weather. Like-for-like sales in the seven weeks to 2 August are up 1.5 per cent
whilst profits are below those of the comparable period in 2002 ... The final
outcome for the year will be affected by the timing of the recovery in sales
from the impact of the hot weather, but we believe that the strengths of our
brands, formats and people leave us well placed to maintain progress even in an
undoubtedly more challenging trading environment."
- Mike Darrington, Managing Director
ENQUIRIES:
Greggs plc Hudson Sandler
Mike Darrington, Managing Director Keith Hann / Wendy Baker
Malcolm Simpson, Financial Director Tel: 020 7796 4133
Tel: 020 7796 4133 on Thursday, 7 August only
0191 281 7721 thereafter
High resolution images are available for the media to view and download from
www.vismedia.co.uk
MANAGING DIRECTOR'S INTERIM STATEMENT
We maintained satisfactory progress throughout the first 24 weeks, with pre-tax
profit increasing by 13.3 per cent. This represents underlying profit growth of
some 8.3 per cent when adjusted for the impact of the extra Jubilee bank holiday
last year. Our progress continued to be driven by the main takeaway food
categories of savouries, sandwiches, sweet goods and drinks, and benefited from
our long-standing strategy of investment in our brands, shops, products,
factories and people.
Results
Sales in the first half (24 weeks) increased by 9.9 per cent to #201.1 million
(2002: #183.0 million). Like-for-like sales rose by 4.7 per cent, including
core volume growth of 3.0 per cent. Our like-for-like performance in the final
weeks of the period benefited from non-recurrence of the additional Jubilee bank
holiday held in June 2002. Adjusted for this, the underlying like-for-like
sales increase was 4.0 per cent.
Operating profit increased by a total of 14.3 per cent to #11.8 million (2002:
#10.3 million), including #0.5 million attributable to non-recurrence of last
year's extra bank holiday. The underlying increase, adjusted for this, was 9.0
per cent.
After interest receivable of #0.5 million, broadly in line with the comparable
period last year, pre-tax profit increased by 13.3 per cent to #12.3 million
(2002: #10.8 million) and diluted earnings per share rose by 13.7 per cent to
69.1 pence (2002: 60.8 pence).
Dividend
The Board has declared an increased interim dividend of 25.5 pence per share
(2002: 23.5 pence), a rise of 8.5 per cent. This will be paid on 3 October 2003
to shareholders on the register at the close of business on 5 September 2003.
We retain our long-established commitment to a progressive dividend policy that
provides shareholders with increases in their income broadly in line with the
growth of earnings per share over the medium term.
Trading highlights
We benefited from a generally benign trading climate throughout the first half,
with few periods of extreme weather and reasonable levels of customer footfall
on the high street. There were significant cost increases in wages and
insurance, with the rise in employers' National Insurance contributions also
impacting from the beginning of April. Ingredient costs were generally stable,
though those commodities linked to the strong euro are expected to increase in
price in the second half. We increased our retail prices by an average of 1.7
per cent, again reflecting our continuous programme of product upgrades as well
as the recovery of higher costs.
The main driver of the business remained takeaway food, with savouries making
strong progress and sandwiches also showing further growth, albeit at a slightly
lower rate than in the recent past. The complementary categories of drinks,
cakes and confectionery products also performed well, while the proportion of
our business generated by bread and rolls continued to decline.
Greggs. The Greggs brand remained the main generator of Group profits.
Like-for-like sales during the first half grew by 5.4 per cent, including a core
volume increase of 3.7 per cent. Our business in Scotland continued to perform
strongly. However, the results of the recently merged South East division were
disappointing, partly as the result of disruption caused by a major bakery
redevelopment in Enfield, which will increase its capacity by over 50 per cent.
Our first two Greggs shops outside the UK opened early in 2003 at Antwerp and
Leuven in Belgium, and sales there have grown steadily after a slow start. Our
local team are working hard to refine our concept and build consumer awareness,
and we expect to open up to two more shops in Belgium during the next six
months.
Bakers Oven. The Bakers Oven divisions achieved a small increase in their
profit contribution to the Group. Like-for-like sales increased by 2.4 per
cent, including core volume growth of 0.6 per cent. This improved performance,
compared with a like-for-like volume decline last year, was driven predominantly
by the Midlands and South divisions.
Retail profile
We opened 33 new shops during the first half and closed 24. Seven of these
closures were re-sites, and the remainder were mainly Bakers Oven units. This
gave us a net increase of nine to 1,211 shops at 14 June. We now expect to add
a net total of some 35 shops during the current year. We completed 29 shop
refurbishments during the current half, continuing our roll-out of the new
Greggs format. However, we are temporarily slowing the pace of these
conversions as we refine the format to re-emphasise our bakery heritage, and
examine opportunities to drive down costs.
Investment and finance
Capital expenditure during the first half was #14.7 million (2002: #14.0
million). In addition to the redevelopment of our Enfield bakery, we are
investing to expand our production capacity at Birmingham, Edinburgh, Manchester
and Leeds, to keep pace with the recent and planned growth of our retail
portfolio. Capital expenditure for the current year is now estimated at around
#36 million, compared with our original budget of #40 million.
Operating cash flow remained strong and we continue to enjoy a very robust
balance sheet with net cash at the end of the first half of #26.8 million. This
compares with #28.6 million at the end of our financial year in December 2002,
and #29.8 million at the end of the previous first half.
People
The continued growth of the business has created more than 1,000 new jobs over
the last 12 months, and we now employ over 17,600 people. We depend on them all
to deliver products that are safe, tasty and enjoyable, and to provide levels of
friendly service that keep our customers coming back day after day. Our
recognition of the importance of our people is reflected in our mission
statement, which has making Greggs 'A Great Place to Work' as the first of our
strategic objectives. We have continued to make progress in developing our
culture, raising our standards, and creating the widest possible range of
opportunities for individual training and development.
Outlook
We have made a relatively slow start to the second half, reflecting comparison
with an excellent trading period last year and the impact of the unfavourably
hot weather. Like-for-like sales in the seven weeks to 2 August are up 1.5 per
cent whilst profits are below those of the comparable period in 2002. Cost
inflation will be higher in the second half than the first, with increasing
pressure on some ingredient prices from the strengthening of the euro as well as
a full 28 weeks of additional National Insurance contributions. The final
outcome for the year will be affected by the timing of the recovery in sales
from the impact of the hot weather, but we believe that the strengths of our
brands, formats and people leave us well placed to maintain progress even in an
undoubtedly more challenging trading environment. We intend to provide a
further update on our sales performance in October.
Mike Darrington
Managing Director
GROUP PROFIT AND LOSS ACCOUNT
FOR THE 24 WEEKS ENDED 14 JUNE 2003
24 weeks to 24 weeks to 52 weeks to
14 June 15 June 28 December
2003 2002 2002
#'000 #'000 #'000
TURNOVER 201,117 182,973 422,600
_______ _______ _______
OPERATING PROFIT 11,814 10,337 35,334
Net interest receivable 465 504 1,332
_______ _______ _______
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 12,279 10,841 36,666
Taxation (4,015) (3,545) (11,980)
_______ _______ _______
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION 8,264 7,296 24,686
Dividends (3,077) (2,824) (8,570)
_______ _______ _______
RETAINED PROFIT FOR THE PERIOD 5,187 4,472 16,116
======= ======= =======
Basic earnings per share 70.0p 61.9p 205.5p
Diluted earnings per share 69.1p 60.8p 202.0p
GROUP BALANCE SHEET AT 14 JUNE 2003
14 June 2003 15 June 2002 28 December
#'000 #'000 2002
#'000
FIXED ASSETS
Tangible assets 154,398 130,582 148,184
Investments 5,047 3,563 3,561
_______ _______ _______
159,445 134,145 151,745
CURRENT ASSETS
Stocks 6,306 6,047 6,330
Debtors 15,507 14,155 11,740
Cash at bank and in hand 29,467 32,480 28,635
_______ _______ _______
51,280 52,682 46,705
CREDITORS: amounts falling due within one year (70,872) (65,883) (64,943)
_______ _______ _______
NET CURRENT LIABILITIES (19,592) (13,201) (18,238)
_______ _______ _______
TOTAL ASSETS LESS CURRENT LIABILITIES 139,853 120,944 133,507
CREDITORS: amounts falling due after more
than one year (115) (109) (119)
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation (13,904) (12,589) (13,423)
_______ _______ _______
125,834 108,246 119,965
======= ======= =======
CAPITAL AND RESERVES
Called up share capital 2,413 2,404 2,404
Share premium account 10,758 10,010 10,085
Profit and loss account 112,663 95,832 107,476
_______ _______ _______
Equity shareholders' funds 125,834 108,246 119,965
======= ======= =======
SUMMARISED GROUP CASH FLOW STATEMENT
FOR THE 24 WEEKS ENDED 14 JUNE 2003
24 weeks to 24 weeks to 52 weeks to
14 June 15 June 28 December
2003 2002 2002
#'000 #'000 #'000 #'000 #'000 #'000
Operating profit 11,814 10,337 35,334
Depreciation 8,442 7,468 16,813
Loss / (profit) on disposal of 63 (99) 260
fixed assets
Release of government grants (3) (3) (7)
Decrease / (increase) in stocks 24 228 (55)
(Increase) / decrease in debtors (3,767) (1,749) 666
Increase in creditors 7,528 5,380 2,544
_____ _____ _____
Net decrease in working capital 3,785 3,859 3,155
_____ _____ _____
NET CASH INFLOW FROM
CONTINUING OPERATING
ACTIVITIES 24,101 21,562 55,555
Returns on investments and
servicing 465 504 1,332
of finance
Taxation paid (5,101) (3,535) (9,474)
Capital expenditure and financial
investments (16,205) (13,828) (41,132)
Equity dividends paid (5,772) (5,123) (7,968)
Net cash inflow from financing 682 220 295
_____ _____ _____
Net decrease in cash (1,830) (200) (1,392)
===== ===== =====
NOTES
1. The interim results are unaudited.
2. The comparative figures for the 52 weeks ended 28 December 2002 are not
the Company's statutory accounts for that financial year. Those accounts have
been reported on by the Company's auditors and delivered to the Registrar of
Companies. The report of the auditors was unqualified and did not contain a
statement under Section 237(2) or (4) of the Companies Act 1985.
3. The interim report is being posted to all shareholders and copies are
available on application to the Secretary, Greggs plc, Fernwood House, Clayton
Road, Jesmond, Newcastle upon Tyne, NE2 1TL.
This information is provided by RNS
The company news service from the London Stock Exchange
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