Greggs PLC – Preliminary Results

2018 Financial highlights

·    Total sales up 7.2% to £1,029.3m (2017: £960.0m)

·    Company-managed shop like-for-like sales* up 2.9% (2017: 3.7%)

·    Operating profit excluding property profits** and exceptional items*** up 9.1% to £89.1m (2017: £81.7m)

·    Pre-tax profit excluding exceptional items*** £89.8m (2017: £81.8m)

·    Pre-tax profit £82.6m (2016: £71.9m)

·    Strong cash generation supporting investment programme and shareholder returns

·    Total ordinary dividend per share up 10.5% to 35.7p (2017: 32.3p)

·    Currently expect to declare special dividend with interim results

Strategic progress

·    Shop estate and product offer transformed over the last five years

·    Further developments in growth categories such as healthier options, hot drinks, breakfast and hot food

·    Brand reputation growing, driving reappraisal

·    149 new shops opened, 50 closures (99 net openings); 1,953 shops trading at 29 December 2018

·    Good progress investing in consolidated manufacturing operations, building logistics capacity to support around 2,500 shops

Current trading

·    Very strong start to the year

·    Company-managed shop like-for-like sales up by 9.6% in the seven weeks to 16 February 2019

·    Exceptional sales performance helped in part by publicity surrounding launch of the vegan-friendly sausage roll

Chairman's statement

In 2018 Greggs once again demonstrated its resilience and capacity for growth, delivering record profits in a challenging retail environment, heavily impacted by extreme weather conditions.  Alongside the robust trading performance, we continued to invest in our internal supply chain and systems, laying a strong foundation for further growth and efficiency.  I am proud that Greggs carries out its business in a responsible manner, aiming to deliver sustainable long-term growth for the benefit of all stakeholders.

Overview

Over the year as a whole Greggs performed robustly in 2018.  Sales were well ahead of last year, profit was above our expectations and the Company ended the year with a healthy cash balance.  This was achieved in a very uncertain economic environment with significant cost pressures and challenging trading conditions, whilst managing a major reorganisation and change programme in the internal supply chain. Trading conditions in the first half of the year were negatively affected by extremes of weather.  In the second half our performance picked up and we ended the year very strongly.

Dividend

Our progressive dividend policy targets an ordinary dividend that is two times covered by earnings, with further surplus cash being returned to shareholders as appropriate.  Our Finance Director, Richard Hutton, outlines the expected application of the distribution policy in more detail in the financial review.   We currently expect to be in a position to declare a special dividend at the time of our interim results in July.

In line with its progressive ordinary dividend policy, the Board intends to recommend at the Annual General Meeting a final dividend of 25.0 pence per share (2017: 22.0 pence), giving a total ordinary dividend for the year of 35.7 pence (2017: 32.3 pence), an increase of 10.5 per cent.

Looking ahead

It is hard to report on the performance of Greggs without reference to the vegan sausage roll, launched in early 2019 to an enthusiastic reception from our customers.  The extraordinary level of social and general media coverage that followed has attracted additional visits to our shops, offering a great opportunity to showcase the many improvements that have been made to our shops and product offering in recent years.

At a time of unprecedented political and economic uncertainty for the food industry and for the UK, Greggs continues to demonstrate its resilience.  Whilst we cannot be immune to the impact that this uncertainty may have on the economy as a whole, we are in a strong financial position and are investing for further growth and increased competitiveness in the years ahead.

Ian Durant

Chairman

7 March 2019

Sales

Total Group sales for the 52 weeks ended 29 December 2018 were £1,029.3 million (2017: £960.0 million), an increase of 7.2 per cent.  Sales in company-managed shops with more than one calendar year's trading history ('like-for-like') grew by 2.9 per cent to £876.3 million (2017: £851.7 million).

Profit

Operating profit before exceptional items was £89.8 million (2017: £82.2 million).  This included a £0.7 million contribution from property disposals (2017: £0.5 million).  Excluding the impact of property profits from both years, the underlying growth in operating profit was 9.1 per cent.

Pre-tax profit before exceptional items was £89.8 million (2017: £81.8 million).  Including exceptional items, pre-tax profit was £82.6 million (2017: £71.9 million).

Earnings per share

Diluted earnings per share before exceptional items were 70.3 pence (2017: 63.5 pence), an increase of 10.7 per cent.  Basic earnings per share before exceptional items were 71.1 pence (2017: 64.5 pence).  Including exceptional items diluted earnings per share were 64.5 pence (2017: 55.7 pence) and basic earnings per share were 65.2 pence (2017: 56.6 pence).

Dividend

The Board recommends a final ordinary dividend of 25.0 pence per share (2017: 22.0 pence).  Together with the interim dividend of 10.7 pence (2017: 10.3 pence) paid in October 2018, this makes a total ordinary dividend for the year of 35.7 pence (2017: 32.3 pence), an increase of 10.5 per cent.  This is covered two times by diluted earnings per share before exceptional items in line with our progressive dividend policy.  Our policy on special distributions is outlined below under 'Cash flow and capital structure'.

Subject to the approval of shareholders at the Annual General Meeting, the final dividend will be paid on 30 May 2019 to shareholders on the register on 26 April 2019.