2013 Interim Results 2013 Interim Results for the 26 weeks ended 29 June 2013
Agenda • First half financial performance • Strategy • Outlook • Questions 2 2
First half headlines • Total sales up 3.4% to £362m: - 19 net new shops opened - B2B sales contributed 2.0% to sales growth - Like-for-like sales down 2.9% • Pre-tax profit down £4.6m to £11.4m • Pre-tax profit down £4.6m to £11.4m • Diluted EPS down 3.4p to 8.5p • Good cash generation • Dividend per share maintained at 6.0p 3 3
Financial performance Richard Hutton, Finance Director Richard Hutton, Finance Director 4 4
Group sales and profits 2013 2012 £m £m Sales £361.7 £349.7 +3.4% Operating profit* 11.5 16.2 Finance expense Finance expense (0.1) (0.1) (0.2) (0.2) Profit before taxation 11.4 16.0 Diluted earnings per share* 8.5p 11.9p Dividend per share 6.0p 6.0p * Restated to reflect amendment to IAS19 (Employee Benefits): - Additional charge in H1 2013 £0.1m (H1 2012: £0.5m) - Expected additional charge for full year 2013 £0.2m (2012: £1.0m) 5 5
Sales growth driven by new shops and B2B Net new shops +4.3% (+£15.3m) New B2B +2.0% (+£6.8m) LFL -2.9% (-£10.1m) +3.4% total sales (+£12.0m) • B2B growth from annualising of Iceland ‘bake at home’ range extension • Further Moto franchises, now in 21 locations (June 2012; 2) • Own shop numbers up 67 vs. June 2012 6 6
H1 LFL - an improving trend Wet weather ’12 & Diamond Jubilee Tough start to ‘13 7 7
Significant Q1 profit impact profit £m pro Incl. impact of Incl. benefit of earlier Easter Diamond Jubilee comps 8 8
First half operating profit bridge 9 9
First half margin 2013 2012 £m £m Sales £361.7 £349.7 Gross margin % 59.0% 60.6% Distribution & selling % 51.0% 51.0% Admin % Admin % 4.8% 4.8% 5.0% 5.0% Operating profit 11.5 16.2 Operating margin % 3.2% 4.6% • GM change: 0.6% mix impact from B2B growth plus increase in promotional participation & input costs • D&S costs supported by efficiency projects & one less public holiday • Admin expenses well controlled 10 10
Input costs First half cost inflation: 2013 H2 outlook: • Protein & dairy prices driving additional 30bps overall inflation in H2 • Flour position largely open pending wheat harvest • Business rates increases continue to offset rent reductions • Currently circa 5 months forward cover 11 11
Cost savings on target • In recent years savings have averaged c.£8m annually due to: ‒ Supply chain productivity plan (£15m cumulative annual savings target by 2015) ‒ Step change cost reduction activity • 2013 on track for similar full year savings • 2013 on track for similar full year savings • H1 examples: ‒ Simplifying shop operations £0.5m ‒ Better buying £0.8m ‒ Refrigeration maintenance £0.5m 12 12
Tax and dividend 2013 2012 H1 tax charge 23.8% 25.3% Diluted earnings per share 8.5p 11.9p Dividend per share Dividend per share 6.0p 6.0p 6.0p 6.0p Taxation: • Effective tax rate reflects 1.25% reduction in headline Corporation Tax rate • Guidance for full year now 23.8%, falling to 22.0% from 2016 13 13
First half capital expenditure 2013 2012 £m £m Refits and additional equipment 7.5 8.0 New shops and re-sites 3.5 5.1 Manufacturing capacity 0.2 0.9 Other Other 7.9 7.9 6.4 6.4 Total capital expenditure 19.1 20.4 Full year capex now expected to be circa £50m Number of gross new shops opened 25 35 (excluding franchises) Number of refits 90 64 14 14
Cash flow and balance sheet • Net cash of £12.0m at half year (2012: £1.8m) • Good capital discipline in H1 • Net £24.7m cash generated from operating activities (2012: £14.2m) • Continuing to fund investment from cash generation • Continuing to fund investment from cash generation 15 15
Strategy Roger Whiteside, Chief Executive Roger Whiteside, Chief Executive 16 16
Agenda • Executive summary • Market context • Greggs performance • Strategic changes • Impact of strategic changes on 2013 • Impact of strategic changes on 2013 17 17
Executive summary • Greggs must complete the transition from traditional bakery retailer to the growing ‘food on the go’ (FOTG) market • Focus must be on core FOTG customer and core operations • Medium term priority is to improve quality of the estate: - Increased rate of shop relocations - One `Bakery FOTG’ shop format - - Limited net shop additions for 2-3 years Limited net shop additions for 2-3 years • Scope to increase efficiency and capacity of existing supply network – new savoury plant build postponed • Developing new markets not a short term priority • Major investment in processes and systems required to complete centralisation program • Re-shaping the business over the next 2-3 years as we build a platform to deliver long term sustainable growth 18 18
Market context • Greggs is pre-eminent in specialist bakery market but this market is migrating to Grocers 1. Specialists made up of Independents and Craft Bakers. Source: BB75; Mintel, Company Reports; 19 19
Market context • Greggs has therefore moved to compete in the FOTG market, with the majority of customer visits now ‘on the go’ ‘on the go’ 1. Other visits include food to be consumed later, or destination food visits Source: Allegra Strategies: Eating Out in the UK 2012, OC&C Consumer Survey June 2013, OC&C analysis 20 20
Market context • The FOTG market is in growth but Greggs has lost market share Market Value: FOTG 1 vs Eating Out 2 , 2007-12 Indexed vs 2007 Market Value = 100 1. Based on coffee shop, sandwich shop and fast food chain purchases 2. Based on restaurant and pub purchases Source: Allegra Strategies: Easting Out in the UK 2012, BRC 21 21
Greggs’ performance Greggs performance Greggs sales mix relative to the FOTG market has been impacted by a number of factors: • Rapidly expanding new entrants and existing competitor shop competitor shop numbers • Exposure to declining traditional bakery categories such as bread • Exposure to locations unsuitable for FOTG • Recent impact from Iceland sales 22 22
Strategic changes - focus on core FOTG market • • Replaced by… Accessing new markets no longer a priority Keeping people, communities and values at the heart of the business Meeting consum sumer needs Investing in ou n our shops Bakery Food on the Go Improving operatio rational effectiveness ess Competitive advan vantage through supply ch y chain 23
Investing in our shops Strategic changes: • Long term opportunity to increase shop numbers • Medium term focus on improving quality not growing shop numbers • Long term consumer trends require re-shaping of estate 24 24
1 2 More investment in successful ‘Bakery food on the go’ format 1 Faster rate of relocation to stronger locations 2 = Overall shop numbers to be relatively stable over the next 2-3 years 25 25
Investing in our shops Strategic changes: • Long term opportunity to increase shop numbers • Medium term focus on improving quality not growing shop numbers growing shop numbers • Long term consumer trends requires re-shaping of estate • Simplify refits into one format ‘Bakery Food on the Go’ 26 26
2. Investing in our shops Before Strategic changes Before • Simplify refits into one format ‘Bakery Food on the Go’ 27 27
2. Investing in our shops Before Strategic changes Before • Simplify refits into one format ‘Bakery Food on the Go’ 28 28
2. Investing in our shops After Strategic changes Before • Simplify refits into one format ‘Bakery Food on the Go’ 29 29
Investing in our shops Strategic changes: • Long term opportunity to increase shop numbers • Medium term focus on improving quality not growing shop numbers • Long term consumer trends requires re-shaping of estate • Simplify refits into one format ‘Bakery Food on the Go • Simplify refits into one format ‘Bakery Food on the Go • Better use of space and flow to create ‘Greggs with seats’ 30 30
31 31
Investing in our shops Strategic changes: • Long term opportunity to increase shop numbers • Medium term focus on improving quality not growing shop numbers • Long term consumer trends requires re-shaping of estate • Simplify refits into one format ‘Bakery Food on the Go • Simplify refits into one format ‘Bakery Food on the Go • Better use of space and flow to create ‘Greggs with seats’ • Strong sales from new formats (130 planned for second half) 32 32
Investing in our shops Strategic changes: • Long term opportunity to increase shop numbers • Medium term focus on improving quality not growing shop numbers • Long term consumer trends requires re-shaping of estate • Simplify refits into one format ‘Bakery Food on the Go • Simplify refits into one format ‘Bakery Food on the Go • Better use of space and flow to create ‘Greggs with seats’ • Strong sales from new formats (130 planned for second half) • Moto franchise going well and to be extended 33 33
Recommend
More recommend
