Greggs Plc · LSE:GRG
Greggs — FY2012 Earnings Presentation
32 slides from Greggs's earnings presentation, February 2013
Slide 1: 2012 Preliminary Results
2012 Preliminary Results for the 52 weeks ended 29 December 2012
Slide 2: Agenda
Agenda • Welcome • Financial performance • Operational highlights • Outlook for 2013 2
Slide 3: Financial performance
Financial performance Richard Hutton 3
Slide 4: Highlights for 2012
Highlights for 2012 • Total sales up 4.8% to £735m • 100 net new shops opened • B2B sales contributed 2.8% points to sales growth • Like-for-like sales down 2.7% • Pre-tax profit* down 2.2% to £51.9m • Diluted EPS* up 0.5% to 39.0p • Dividend per share up 1.0% to 19.5p * Before exceptional items: 20
Slide 5: Group sales and profits
Group sales and profits 2012 2011 £m £m Sales 734.5 701.1 +4.8% Operating profit before exceptionals 51.8 53.0 -2.2% Exceptional items* 1.5 7.4 Operating profit inc. exceptionals 53.3 60.4 Finance income 0.0 0.1 Profit before taxation 53.3 60.5 *Exceptional item in 2012 includes £1.1m release of one
Slide 6: Sales growth driven by new shops and B2B
Sales growth driven by new shops and B2B New B2B +2.8% (+£19.6m) Net new shops +4.7% (+£32.7m) LFL -2.7% (-£18.9m) +4.8% total sales (£33.4m) • B2B growth from extension of Iceland ‘bake at home’ range and roll-out of 10 Moto franchises • Two years of rapid “own shop” growth – 84 net in 2011 and 90
Slide 7: Margin
Margin 2012 2011 £m £m Sales £734.5 £701.1 +4.8% Gross margin % 60.9% 61.4% Distribution & selling % 49.3% 48.9% Admin % 4.5% 5.0% Operating profit before exceptionals 51.8 53.0 -2.2% Operating margin % 7.1% 7.6% • Gross margin diluted by profitable extra B2B contribution (net margin enhancing) • Di
Slide 8: Cost inflation
Cost inflation 2012 cost inflation: 2013 outlook: • Ingredient inflation running at +4% • Neutral outlook on energy rates • Shop rents stable or falling but business rates continue to rise • Wages & salaries +2% • Currently circa 5 months forward cover 8
Slide 9: Continuing to reduce the cost base
Continuing to reduce the cost base £m Further benefits from centralisation: - Purchasing & product harmonisation 3.2 - Structural 1.0 Shop & other efficiency projects 1.2 2012 savings 5.4 + Supply chain productivity savings (see over) 3.4 9
Slide 10: Supply chain productivity plan still delivering
Supply chain productivity plan still delivering £m £10.2m £6.8m £1.4m Actual Original plan Against original objectives: Restructuring has reduced fixed cost base Continuing to see benefits from consolidation & automation Leveraging productivity through own shop and B2B growth On target for £15m annu
Slide 11: Tax, earnings and dividend
Tax, earnings and dividend 2012 2011 change Tax charge 24.0% 26.4% Diluted earnings per share 39.0p 38.8p +0.5% (excl. exceptional items) Dividend per share 19.5p 19.3p +1.0% Dividend cover 2.0x 2.0x • Effective tax rate reflects 2% reduction in headline Corporation Tax rate and revaluation of defer
Slide 12: From 2013: restatement of pension costs
From 2013: restatement of pension costs Guidance on impact of amendment to IAS19 (Employee Benefits): • Reduces investment return assumption to match discount rate • Expected £0.8m extra charge in 2013 • Will restate 2012 comparatives to reflect £1m extra charge: 2012 £m Operating profit as reported
Slide 13: Shop performance profile
Shop performance profile EBITDAR -ve EBITDA -ve • Limited number of loss-makers: ‒ 79 EBITDA -ve at shop level (but making a contribution to rent & rates) ‒ 11 EBITDAR -ve at shop level • All loss-makers have action plans including re-site or closure as opportunities arise 13
Slide 14: Rebalancing the capex programme
Rebalancing the capex programme • 2012 a record year for new shop openings • Successful new ‘local bakery’ format trial • Relatively little supply chain capacity investment In 2013: • Greater focus on LFL - ‘local bakery’ and FOTG refits More delivering returns (3 year payback) • Expect to commence
Slide 15: Capital expenditure
Capital expenditure 2013E 2012 2011 Refits and additional equipment 26.0 17.4 16.9 New shops and re-sites 12.0 17.7 14.7 Manufacturing capacity 5.0-15.0 2.2 16.2 Other 12.0 9.6 11.3 Total capital expenditure 55.0-65.0 46.9 59.1 Number of gross new shops opened 65-75 111 98 (excluding franchises) Num
Slide 16: Cash flow and balance sheet
Cash flow and balance sheet • Continued strong cash generation – £85m EBITDA before exceptionals – £71m free cash flow • New wholesale and franchise business consumed £7m working capital • Net cash at year end £19.4m (2011: £19.5m) • Expect to invest in frozen manufacturing in 2013/14 • Financing re
Slide 17: Operational Highlights
Operational Highlights Roger Whiteside 17
Slide 18: Market Background
Market Background • Market conditions very challenging • Our response has been: • Offer great value for money • Make Greggs more convenient • Access new markets • Total sales growth but LFL decline • Improving LFL performance key priority for 2013 18
Slide 19: Our strategic priorities
Our strategic priorities • Meeting evolving customer needs • Investing in the right shops, locations and formats • Accessing new markets • Delivering competitive advantage through our supply chain • Keeping people, communities & values at the heart of our business 19
Slide 20: Meeting evolving customer needs
Meeting evolving customer needs • Focus on value • Grow sales in breakfast, coffee and healthy options • Grow customer engagement 20
Slide 21: Focus on value
Focus on value • Value for money more important then ever • Cost reduction focus to mitigate commodity inflation pressure • Continued investment in promotions 21
Slide 22: Grow sales in breakfast, coffee & healthy options
Grow sales in breakfast, coffee & healthy options • Strong growth in trading 7-9am • Bacon breakfast roll now our biggest selling sandwich • Further breakfast product development • Hot drinks is fastest growing drinks category • Learning from “Greggs moment” trials • Increasing our range of healthie
Slide 23: Grow customer engagement
Grow customer engagement • Over 660,000 Facebook fans • Over 40,000 Twitter followers • Voted the most popular brand in fast food sector in Youth 100 survey 2012 • Further opportunities in 2013: • new loyalty scheme this year • 8 part Greggs documentary on Sky1HD 23
Slide 24: Investing in the right shops, locations and formats
Investing in the right shops, locations and formats • Success of format trials now enables a greater focus on core estate refits - FOTG - Local bakery • “Greggs moment” format trial is on-going • New shop openings continue at pace, focused on locations where people live, work & travel 24
Slide 25: New shops
New shops • Focus has been on FOTG locations • Target 20% ROC • New shops performing well • Maturity in 2-3 years • Shop closures typically at lease break • Very few existing stores are loss making • Plan for net 50-60 new shops per annum 25
Slide 26: Format Development
Format Development Food on the go Local bakery Coffee shop • c.1200 of existing • 11 local bakery refits in 2012 • 5 completed to date locations are FOTG • c.400 of existing shops are • 3 opening in Q2 2013 • 260 in latest format local bakery locations • Continue to develop coffee • Roll out 150 ref
Slide 27: Accessing new markets
Accessing new markets • Wholesale and franchise are optimum routes to new markets • ‘Bake at home’ products selling well in over 750 Iceland stores • Range increased from 11 to 20 lines in February 2013 • Net margin enhancing • 15 Motorway services shops via Moto franchise • Rollout to at least 30 s
Slide 28: Competitive advantage through supply chain
Competitive advantage through supply chain • Greater supply chain efficiency through centralisation and benefits of automation • Success in wholesaling bringing forward capacity plans • £30m investment in factory in the East Midlands 28
Slide 29: Keeping people, communities and values at the heart of our business
Keeping people, communities and values at the heart of our business • 10% of profits shared with our people • Another £1m raised for Children in Need • 220 breakfast Clubs, feeding over 10,000 children • Good progress with our CSR objectives • Ian Gregg book 29
Slide 30: Current Trading
Current Trading • Consumers remaining cautious • First 11 weeks: − Total sales up 4.2% − LFL sales down 4.0% − LFL sales show improving trend: Jan -5.7%, Feb -2.0% 30
Slide 31: Outlook for 2013
Outlook for 2013 • Challenging conditions expected to continue • Continued investment in promotions • Reshaped investment plans to focus on core estate • Continued growth through new shop openings and wholesaling • Bringing forward investment in new frozen manufacturing facility • Continuing focus o
Slide 32: QUESTIONS
QUESTIONS GREGGS The lowe of fresh baking”