Greggs PLC Preliminary Results ended January 2021
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· Multi-channel development strategy accelerated: delivery and wholesale channels providing alternative routes to access Greggs products, with delivery contributing an increasing proportion of total sales. Click & Collect rolled out across entire estate and delivery made available from more than 600 shops
· Shop opening pipeline reactivated: demonstrating confidence in long-term growth opportunity.84 new shops opened in 2020, 56 closures (28 net openings); 2,078 shops as at 2 January 2021. P lanning circa 100 net new shops for 2021
· Covid-secure operating model established: shop and supply chain operations adapted to safeguard team members and customers while operating during Covid-19
· Resilience through breadth of shop estate and customer base: variety and reach of shop estate, with relatively modest exposure to workplaces and public transport, in locations accessible to customers who need to be away from the home
· Investment in supply chain and systems: benefits of upgrade programmes to modernise the core business processes and IT systems evident as programmes near completion
· The Greggs Pledge launched: ten sustainability commitments to continue to develop the business in a responsible manner over the next five years and beyond
Full year financial performance
· Total sales were £811.3m* (2019: £1,167.9m)
· Like-for-like sales** in company-managed shops down 36.2% on 2019 level
· Progressive recovery in sales levels through second half of year
· Pre-tax loss £13.7m, including government support for job retention and relief from business rates (2019: £108.3m profit)
· Positive cash position at end of year and additional liquidity available under new £100m revolving credit facility
* 53 weeks ended 2 January 2021 (2019: 52 weeks ended 28 December 2019)
** like-for-like sales in company-managed shops (excluding franchises) with a calendar year's trading history
· Positive sales trend, better-than-expected start to 2021 given the extent of lockdown conditions
· Shops in Scotland temporarily closed to walk-in customers for the majority of the year to date
· Company-managed shop like-for-like sales down 28.8% year-on-year in the ten weeks to 13 March 2021
· Outside of Scotland, company-managed shop like-for-like sales in the rest of the UK estate were down 22.4% year-on-year
· Delivery sales particularly strong, at 9.6% of total company-managed shop sales in the first ten weeks of 2021
"Greggs has made a better-than-expected start to 2021 given the extent of lockdown conditions and is well placed to participate in the recovery from the pandemic. It has a clear strategy to extend its digital capabilities and to grow further in new locations, channels and dayparts. These opportunities will benefit all of its stakeholders in the years to come.
"In a year like no other I believe that the Covid crisis has in many ways demonstrated the strength of Greggs. It has shown the resilience of our business model, but most of all the strength of our people who have worked hard throughout to maintain an essential service providing takeaway food to customers unable to work from home, many of whom were themselves key workers. I would like to take this opportunity to thank all of our people, who can be proud of the part we played in our nation's time of need."
Greggs has risen to the most formidable of challenges in 2020 and, while it has faced setbacks, is recovering well. We have worked hard to do the right thing by our people, communities and other stakeholders, and have been given great support in return. Strategic plans have, if anything, accelerated and as lockdowns ease we are now looking towards growth again with an emerging multi-channel offering. Our colleagues have shown remarkable resilience and tenacity whilst ensuring we have provided the best possible customer service in very difficult conditions. We move into 2021 with optimism and ambition.
2020 was not the year that any of us planned for, and has required the Board and Executive team to work together to protect the business and the interests of its many stakeholders. Greggs started the year performing very strongly but temporarily closed the shop estate in March 2020 as a consequence of the Covid outbreak. Greggs sought debt financing to support its short-term liquidity requirements, which was forthcoming from both government and commercial sources due to the financial strength of the business and its significant contribution to the UK economy. Loans from the Bank of England under the CCFF facility were fully repaid by the end of the year and the business finished the year with net cash in the bank.
The Company's trading performance since reopening its shops in the middle of 2020 has been strong in the context of prevailing mobility restrictions. Greggs has a broad base of shops in locations that have remained accessible to customers who rely on us when they need to be away from the home. For those at home we have accelerated our digital offering, with delivery now making a significant contribution to company-managed shop sales.
With lower-than-normal sales levels Greggs made a loss in 2020; the first time in its history as a listed business. Government support has been essential to mitigate the impact of Covid and protect as many jobs as possible through this period. Shareholders have made a significant contribution, forgoing dividends and accepting reduced investment in the business, and there has been terrific support from our employees. The Board has been very focused on balancing the needs of all the Company's stakeholders as it has made decisions this year and I am proud of the manner in which it has done so. We have also balanced the short-term tactical needs of the business with protecting our long-term ambition and adapting our strategy to market changes.
Our people and values
This crisis has, inevitably, put great pressure on the whole Greggs team. The collegiate nature of our people has come to the fore, standing by each other and the communities that we serve. There have been many sacrifices, but we have stayed true to the values that underpin the great culture that exists within Greggs.
From the initial closure period until the half year we maintained full pay for our furloughed colleagues. I am grateful to the management team, who went without their pay award, and to the Executive and my Board colleagues who volunteered reductions in their salaries and fees to protect the business in the most difficult period of 2020.
The communities that we rely on have needed additional support in 2020 and the Greggs Foundation has played a leading role, increasing its investment in the provision of hardship relief grants and offering extra help to hard-hit community organisations. The Trustees of the Greggs Foundation have drawn on its reserves to do so, and this has leveraged additional funding from others who recognise the team's ability to deliver help to the heart of communities.
Our colleagues have proved, once again, what a wonderful team they are. However it has been sad to say goodbye to some as we made reductions in the number employed to reflect the reality of the trading environment and to ensure that Greggs maintains its competitive edge. To them, and to those who continue to provide great service to our customers every day, I would like to say "thank you" on behalf of the Company and its shareholders.
We have been fortunate to have a period of stability on the Board at a time when experience of the business was of great importance to our stewardship role. The Board has provided its support to the executive, who had to make many difficult decisions, often in areas that have been new to most of us.
Like so many we have adapted to communicating virtually. This has worked well, making it easier to be in regular contact with management. The normal processes by which we listen to the views of employees have been challenged by the inability to meet in person, but we have found virtual forums to be a good alternative under the circumstances.
Risk management has clearly been a critical area for the Board in 2020. In addition to the Covid-related risks the Board scrutinised the Company's developments in digital channels and reviewed its preparedness for the possibility of a 'no deal' exit from the European Union. Further details of the Board's work are included in the governance and committee sections of the annual report.
Greggs supports diversity and inclusion initiatives across the business and on the Board and we expect to see tangible progress during 2021 as we develop our plans to grow as a diverse company that is representative of the communities we serve.
We continue to plan for succession for both Executive and Non-Executive directors. Normally, under the UK Corporate Governance Code, I would have been expected to step down in 2020 but the Board has asked me to remain in place to provide continuity of leadership during a period when we are likely to address CEO succession as Roger Whiteside (62) approaches retirement age. We are grateful to Roger for his willingness to be flexible regarding his retirement date to ensure the best possible succession and transition process.
The planned final dividend for 2019 was a casualty of the need to preserve cash in the spring of 2020 and it has not been possible or appropriate to pay any further dividends since. In order to recommence a dividend distribution, the Company will need to return to a level of profitability and cash generation sufficient to support its investment programme whilst maintaining appropriate liquidity.
Greggs is a business which has proved itself agile and adaptable to operating in times of great uncertainty whilst continuing to make strategic progress. Digital channels are increasingly contributing to the recovery of sales levels and opportunities for estate growth appear to be as good, if not better, than they were a year ago.
A year ago we anticipated the publication of 'The Greggs Pledge', our vision of how we will continue to develop the business in a responsible manner. This was delayed by the need to focus on the immediate challenges of 2020 but I am delighted that it has now been launched. It describes our targets for responsible business over the longer term and will be an important part of Greggs' competitive positioning and contribution to society in the years ahead. Our Chief Executive Roger Whiteside outlines the key elements of this in his report.
Greggs is a great business and we are confident for the future.