Greggs Plc · LSE:GRG
Greggs — H1 2011 Earnings Presentation
27 slides from Greggs's earnings presentation, August 2011
Slide 1: Interim results for 26 weeks ended 2 July 2011
Interim results for 26 weeks ended 2 July 2011 August 2011
Slide 2: Agenda
Agenda • Introduction • Financial performance • Progress in first half • Outlook for 2nd half • Q&As 2
Slide 3: Highlights
Highlights • Sales up 4.2% • Like-for-like sales up 0.4% • Two additional public holidays - £2m profit impact • Underlying operating profit up £0.8m* • 39 net new shops opened • Two new bakeries completed on time and on budget • Dividend per share up 5.5% to 5.8p *before exceptional items and impact
Slide 4: First half performance
First half performance Richard Hutton Finance Director 4
Slide 5: Sales and profits (unadjusted)
Sales and profits (unadjusted) 2011 2010 change £m £m Sales £334.7 £321.3 +4.2% Operating profit pre exceptional items 17.3 18.5 -6.5% Exceptional items* 7.4 - Operating profit including exceptional items 24.7 18.5 Finance income 0.0 0.1 Profit before taxation 24.7 18.6 +33% *Exceptional items are a
Slide 6: Underlying sales and profit progress
Underlying sales and profit progress 2011 2011 2010 Underlying Reported Underlying* Actual * change £m £m £m 4.7% Sales £334.7 £336.5 £321.3 Gross margin % 61.1% 61.2% 61.2% Distribution & selling % 50.3% 49.8% 49.7% Admin % 5.6% 5.6% 5.7% 4.3% Operating profit 17.3 19.3 18.5 Operating margin % 5.2%
Slide 7: Commodity cost pressure – year on year
Commodity cost pressure – year on year 1st half impact 2nd half outlook 30% Flour better 3 – 30% Meats similar 5 – 10% Dairy similar 15 – 30% Energy worse 0% Packaging better 7
Slide 8: Driving business efficiencies
Driving business efficiencies • Continuing to drive purchasing savings from: – centralising range – e-auctions • Supply chain strategy delivering greater savings than originally planned: – more new shops through existing bakery network – modernisation and automation investments paying back • Reducin
Slide 9: Earnings and dividend growth
Earnings and dividend growth 2011 2010 % change Diluted earnings per 12.7p 12.7p 0.0% share (excl exceptional items) Dividend per share 5.8p 5.5p + 5.5% Tax charge (incl exceptional items) 26.3% 30.0% Tax charge benefits from headline rate reduction and revaluation of deferred tax Full year tax char
Slide 10: Capital expenditure £m
Capital expenditure £m 2011 2010 New shops and re-sites 6.0 3.2 Shops refits and equipment 7.0 3.5 Supply chain capacity 13.2 0.3 Other expenditure 5.2 5.4 Total capital expenditure 31.4 12.4 Gross number of new shops opened 45 26 Full year capex expectation remains circa £60m 10
Slide 11: Investment returns
Investment returns • Strong start for new shops: – 39 net new shops in first half, double the historic rate – running 3% ahead of our first year ROC target – continue to expect 80 net new shops over full year • Additional equipment investment supporting further growth in coffee and hot sandwich sale
Slide 12: Cash flow and balance sheet
Cash flow and balance sheet • Net cash at half year £8.8m (2010: £24.6m) • Cash level reduced through buybacks in 2010 and increased capital investment for growth • Continued strong cash generation enables increased investment to be self-funded 12
Slide 13: Progress in first half of 2011
Progress in first half of 2011 Ken McMeikan Chief Executive 13
Slide 14: First half review
First half review • Sales highlights • New shops and refits • Modernising our supply chain • Update on major change programmes 14
Slide 15: Sales highlights
Sales highlights • Good top line sales growth • Like-for-like sales in line with expectations – Better than expected April – Worse than expected May – Marginally positive like-for-likes in June and July • Continued growth in breakfast market • Some switching from sandwich purchases to savouries • Lo
Slide 16: Growth in breakfast market
Growth in breakfast market • Breakfast rolls still up 35% annualised • Broader breakfast range: – Croissant – Pain au chocolat – Porridge – Cheese & bacon wrap • Sales pre-9.00am up 12% yr on yr 16
Slide 17: Hot sandwich rollout
Hot sandwich rollout • 6 varieties of hot sandwich • Prices £1.95 - £2.35 • 364 shops (270 shops December 2010) +35% increase • Further 350 shops planned by year end 17
Slide 18: Freshly ground coffee roll out
Freshly ground coffee roll out • Completed roll out to all shops by half year – Extra 400 shops since January • A growing opportunity for Greggs • Great value versus coffee operators – Greggs’ small latte: £1.45 - £1.60 – 25-30% lower than other high street coffee chains 18
Slide 19: Widening our choice on health
Widening our choice on health • Fruit pots: – 80g 99p – 150g £1.49 • Pasta pots (300g): – Spicy chicken £1.80 – Cheese & tomato £1.45 • Launched early June 19
Slide 20: Investment in promotions
Investment in promotions • Promotion driven market – *39% of grocery shopping is via promotions • Greggs Meal Deals in first half: – Bread pack Meal Deal £1.99 and £2.99 – Bloomer Meal Deal £2.99 and £3.99 – Breakfast Meal Deal £2.09 and £2.40 • Promotional spend up circa £2m * source: British Retai
Slide 21: Marketing
Marketing • Increasing importance of social media – Facebook – Over 260,000 fans – Royal Wedding street party campaign – Breakfast campaign • Focus on print media and radio vs TV advertising – e.g. Daily Star promotion – Our most successful newspaper campaign to date – 10% of their customers redeemi
Slide 22: New shops and refits
New shops and refits • Growth towards 2000+ shops on track • 1500th shop opened in York – February 2011 • Net 39 new locations including: – Newcastle railway station platform kiosk – Swansea and Bristol bus stations – Peterborough Retail Park • 102 refits completed, including 17 concept shop refits
Slide 23: York Newcastle Swansea
Swansea «| GREGGS The home of fresh baking”
Slide 24: New bakeries
New bakeries Penrith: Newcastle: • Confectionery bakery • Replacement bakery • 25,000 sq. ft • 86,000 sq. ft • £4.5m investment • £16.2m investment • Supplying shops nationally • Potential to supply 200-250 shops • Will be commissioned in • Will be commissioned September 2011 September/October 2011
Slide 25: Update on major change programmes
Update on major change programmes • 12 key cross functional projects: – 7 projects focused on top line sales – 5 projects to deliver cost and efficiency savings • Sales projects focused on: – Take home and off peak trading times – Local ranges – 2 new shop concepts • Cost projects focused on reducin
Slide 26: Outlook for 2nd half
Outlook for 2nd half • Anticipating tough trading conditions • Continuing pressure from high commodity prices • Increasing contribution from cost efficiency initiatives • 2 new bakeries operational in September/October • Like-for-like sales growth for full year achievable • On track for 80 net new s
Slide 27: Q&As
Q&As GREGGS The lowe of fresh baking” a