More annual reports from Greggs:
2023 ReportPeers and competitors of Greggs:
George WestonGREGG S plc Greggs plc, Fernwood House, Clayton Road, Jesmond, Newcastle upon Tyne NE2 1TL. www.greggs.co.uk the main ingredient G R E G G S p l c a n n u a l r e p o r t a n d a c c o u n t s 2 0 0 0 GREGG S plc a n n u a l r e p o r t a n d a c c o u n t s 2 0 0 0 Greggs plc annual report and accounts 2000 Our Business Greggs plc is the UK’s leading retailer specialising in sandwiches, savouries and other bakery-related products, with a particular focus on takeaway food and catering. We continue to show significant growth and now have over 1,100 retail outlets, trading primarily under the Greggs and Bakers Oven brands. Our Vision We intend to be Europe’s finest bakery-related retailer, achieving our ambitious growth targets by attaining world-class standards in everything we do. Our purpose is the growth and development of a thriving business for the benefit and enjoyment of employees, customers and shareholders alike. We aim to achieve a turnover of £1billion by 2010. Our Values Greggs is a customer-focused business, seeking to provide excellent products and services that deliver enjoyment and value for money. We are committed to people development, within a considerate culture that combines autonomy and accountability, and maintains a strong focus on profitability. In all our activities, we aim to achieve excellence through continuous improvement. financial review Earnings per share & dividend EPS* DIVIDEND Pence 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 C O N T E N T S F I N A N C I A L C A L E N D A R F I N A N C I A L H I G H L I G H T S Announcement of results and dividends Half year Full year Dividends Interim Final Early August Turnover Early March Pre-tax profits Post-tax profits Mid October Shareholders’ funds Late May Capital expenditure Annual report to shareholders Early April 2000 £’m 1999 £’m 339.0 308.7 26.4 22.1 97.0 21.4 21.5 15.9 80.9 22.4 Pence Pence Annual General Meeting 9 May 2001 Earnings per share* 162.3 135.1 Dividend per ordinary share 55.0 45.0 *Adjusted earnings per share 1 2 6 12 14 16 17 18 19 20 21 22 23 37 39 40 40 Financial review Chairman’s statement Managing Director’s report Shop allocation Directors’ report Statement of directors’ responsibilities Report of the auditors Group profit & loss account Group balance sheet Parent company balance sheet Group cash flow statement Accounting policies Notes to the accounts Corporate governance Directors’ remuneration Ten year history Directors & advisers 1 Greggs plc annual report and accounts 2000 chairman’s statement I am pleased to report a year of Results Millennium bank holiday. Operating below normal at 16.0 per cent. Dividend with an increasing income, broadly in line excellent progress, as we began to Sales grew by 9.8 per cent to £339.0 profit increased by 20.1 per cent to This reduction in the effective tax rate The Board recommends an increased with the underlying growth of earnings realise the benefits of major past million, including like-for-like growth of £26.0 million, including a property profit has contributed to the increase in final dividend of 39.0 pence per share per share over the medium term. investments in our brands, shops, 6.8 per cent. The weather was better of £52,000, and pre-tax profit rose by basic earnings per share which grew (1999: 31.5 pence). Together with the bakeries, products and people. than average for our business across 22.5 per cent to £26.4 million. by 37.0 per cent to 185.1 pence. interim dividend of 16.0 pence per A substantial profit improvement the year as a whole. The second half Following the final agreement of several In order to provide a more accurate share paid in October, this makes a was driven by continued strong also benefited from a helpful pattern of years’ tax computations with the Inland guide to underlying performance we total dividend for the year of 55.0 pence core volume growth, particularly shop opening in the final two weeks, Revenue, the group tax charge reflects have also calculated an adjusted (1999: 45.0 pence), an increase of in takeaway food, aided by compared with longer closure periods in the release of over-provisions relating to earnings per share, excluding this prior 22.2 per cent. This reflects our long- Subject to the approval of the Annual General Meeting, the final dividend will be paid on 25 May 2001 to shareholders on the register at 20 April 2001. Business highlights favourable trading conditions 1999 when Christmas and New Year fell these earlier years. This has resulted in year tax credit, and this has increased standing commitment to a progressive The undoubted highlight of 2000 was throughout the year. at weekends and there was an additional an effective tax rate which is substantially by 20.1 per cent to 162.3 pence. dividend policy that provides shareholders the continued strength of core volume 2 3 Greggs plc annual report and accounts 2000 satisfied customers growth, which averaged 4.2 per cent over more detail in his report on pages 6 - 13. was appointed a non-executive director commitment and unflagging enthusiasm. for good food and excellent service. increase the rate of net shop openings, roll the year as a whole. This was again driven primarily by the success of our takeaway food ranges of sandwiches and savouries. It is particularly pleasing to see the Greggs brand achieving greater consumer recognition in the South, with both our London-based divisions now making valuable contributions to group profits. The Managing Director comments The Board Over the past two years, the Board has been reviewing what changes are required to its composition to ensure that it is appropriate to the future needs of the business and that it satisfies the increasing requirements of corporate governance and independence. in May 2000. This is an opportunity to congratulate Susan on her OBE in June 2000 for services to New Deal in the North East. At the AGM in May this year, my brother Colin will retire after 35 years’ service to the Company. I would like to put on record my appreciation for the part he has played in helping to develop the business from its No further changes are planned in the immediate future. I intend to continue in my current role for the time being, On behalf of the Board and our shareholders, out the new Greggs shop format and I would like to add my own thanks for their develop additional manufacturing capacity contributions to our continued progress. to support our growth. This investment will but a search has been started to identify Prospects a suitable successor. Staff Trading in 2001 started relatively slowly, primarily because of the pattern of New Year shop opening, but has gained momentum not contribute to profits in the short term, but is vital to the achievement of our vision of the future for the group. Overall, I expect another year of good progress. The success of the group is in itself a in the subsequent weeks. The current year Ian Gregg humble beginnings in Gosforth to an tribute to the hard work of our 14,700 staff will see a substantial increase in capital Chairman on trading and business development in As a result of this review, Susan Johnson important national company - and for his in meeting our customers’ requirements expenditure across the group, as we 9 March 2001 4 5 Greggs plc annual report and accounts 2000 managing director’s report We enjoyed a very successful year in Strategic development scope for the creation and testing of even business, incurring revenue costs now that years ahead. Since growth in savouries down the cost of implementing the new 2000 as our established strategy We have maintained our focus on the more enjoyable products, and for will deliver substantial benefits in the future. has exceeded our expectations, we will be design, and it is now being rolled out delivered its planned benefits. Our continuous improvement of our products, establishing best practice standards results were also boosted by our service, shops, brands and people. across the group. It will also help us to decision to restrain capital expenditure until we could be sure of Product and service excellence. The highlight of the year in our drive for reduce costs in all our production processes, maximise product safety, Our central savouries unit at Balliol Park progressed well, with its products proving investing in additional manufacturing across the business as part of our normal capacity in the near future. shop refurbishment cycle. The new Greggs extremely successful in all parts of the Retail environment. The eye-catching new touch-screen electronic point of sale business where they have been Greggs shop format has been very well system is currently being appraised and will achieving the optimum returns. We product excellence was the opening in experiment with new technologies and introduced. The quality and consistency of received by our customers, who appreciate be installed in some 300 shops by the end are now ready to embark on a further April of our £2 million group technical develop the most convenient shop layouts its output has contributed to the strength the improved display and accessibility of of 2001. This investment is being supported phase of investment designed to centre at Balliol Park, Newcastle upon for customers and staff alike. This project of our core volume growth, and I am sure our core takeaway food ranges and the by the implementation of a new business take us towards our goal as Europe’s Tyne. This invaluable research and is a good example of our long term that we will derive increasing benefits from livelier, faster-moving shopping experience intelligence system, which will deliver finest bakery-related retail business. development facility gives us much greater approach to the development of the this highly efficient production unit in the it offers. We have progressively engineered improved information to senior managers. 6 7 Greggs plc annual report and accounts 2000 serving up success We have further refined and developed in 1999, has proved increasingly course of the year and eliciting very investigation of new market opportunities the autumn fuel crisis, and finally we Core volumes grew by 3.4 per cent in the the new Bakers Oven seated catering successful and contributed to a good positive feedback. for the group. benefited from the most favourable first half and 4.8 per cent in the second, format, and have continued our controlled performance in both businesses this year. roll-out of the concept in new locations The brand was supported by television and in stores scheduled for refurbishment. advertising in both regions, with positive There were 29 such openings during results, and further campaigns were also People. The business has benefited from Trading performance the progressive strengthening of both We made good sales progress throughout central and divisional management, which the year, with group turnover increasing by has enhanced our ability to understand 9.8 per cent to £339.0 million. As the possible pattern of Christmas opening, giving an increase of 4.2 per cent for the which minimised the numbers of trading year. Product upgrades were again the main days lost as a result of bank holiday reason that total like-for-like sales advanced closures. This contrasted sharply with the even more strongly than core volumes. 2000, giving us a total of 87 new format catering outlets at the year end. undertaken in the North East and and respond to our customers’ needs. Chairman has noted, the weather over pattern in 1999, and contributed to an The strong sales performance, Scotland. The flagship Bakers Oven outlet Recruitment continued during the year, the year as a whole was better than improvement in like-for-like sales from improved efficiencies and a benign raw Brand awareness. The adoption of the at the Millennium Dome fulfilled all our and in January 2001 we appointed a average for our business, and the overall 6.0 per cent in the first half to 7.5 per cent material pricing climate all contributed Greggs brand in our Yorkshire and marketing objectives, exposing the brand new group development director, pattern of retail trading was also positive. in the second, making an increase of to the 22.5 per cent increase in group Midlands divisions, which was completed to around 800,000 customers in the whose responsibilities will include the We suffered no perceptible damage from 6.8 per cent for the year as a whole. pre-tax profit to £26.4 million. 8 9 Greggs plc annual report and accounts 2000 the taste of things to come Greggs. Core volumes in the nine additional sites for the brand in central buoyant takeaway food sector, partly Product profile The proportion of our business attributable Capital investment Greggs divisions, including Birketts, London. Greggs of the Midlands also accounts for the different rates of core The main drivers of our continued core to bread and rolls continued to decline. Capital expenditure was some £2 million grew by 5.3 per cent over the year, produced an outstanding result, following volume growth under our two fascias. and total like-for-like sales increased by its successful re-branding, while Greggs Profits advanced, helped by a significant 7.9 per cent. Both our London divisions, of Scotland maintained its long record of contribution from our outlet at the based in Enfield and Twickenham, excellent performance. Millennium Dome, although this had volume growth were again the major Retail profile below our original budget at £21.4 million, takeaway food categories of sandwiches We opened 47 new shops during the year compared with £22.4 million in the and savouries, which once more and closed 26, giving us a net increase of previous year. This principally reflected a increased their share of our total sales. 21 to 1,105 outlets at the year end. These slightly slower rate of new store openings made excellent progress. We were Bakers Oven. Core volumes in the four been conceived essentially as a brand Cakes and confectionery products comprised 858 Greggs and 247 Bakers than we had originally planned. It has particularly pleased to open our first shop Bakers Oven divisions increased by promotion exercise. Towards the end of maintained a fairly stable share of our Oven shops, compared with 825 and 259 always been our policy to restrain capital in the City of London during the year; 1.4 per cent, and total like-for-like sales by the year we made a number of changes trade, with the long-term decline in ‘at respectively in 1999. We completed 59 expenditure until we are sure of obtaining this unit, in Eastcheap, is trading strongly 3.9 per cent. The slower progress of the to the senior management of Bakers home’ consumption balanced by the comprehensive shop refurbishments and the best possible returns, but we now and we are working hard to find suitable catering market, compared with the very Oven to strengthen the business. growth of takeaway snack purchases. 19 minor refits during the year. believe that it is right to increase the pace 10 11 Greggs plc annual report and accounts 2000 nationwide coverage G R E G G S B I R K E T T S B A K E R S OV E N of investment and expansion. Plans are achieve high standards, whether in the Outlook therefore in place for capital expenditure of preparation and handling of food or in The takeaway food markets in which we some £30 million in 2001. This will include individual customer service. We also specialise are growing strongly, and there some 65 new store openings (a net addition of 35 after planned closures) and 110 refurbishments, as well as investment to raise standards across the group and to provide additional manufacturing capacity. Cash flow and balance sheet The group continued to generate a strong cash flow and we ended the year with a substantially increased net cash position of £18.9 million, compared with £8.9 million at the end of 1999. Our strong balance sheet provides seek to promote a culture in which is considerable scope to increase our everyone can enjoy what they do. brand presence in many parts of the UK. We have again increased our investment We therefore intend to increase the pace in staff training at all levels across the of net shop openings in 2001 and group, including the establishment of new subsequent years, with the aim of senior management development centres. expanding the business from 1,105 to Standards over 1,700 units during the next ten years. We remain strongly supportive of high Based on our site finding analyses, standards. In the year 2000, we applied resource to the detailed implementation of the Turnbull Report’s recommendations. we believe that there is potential for at least 2,000 Greggs and Bakers Oven shops within the UK. In addition, we intend within the next few years to explore the potential for our brands in mainland Europe. the ideal platform for our ambitious We intend to change emphasis in the investment programme, which we intend current year and devote increased to fund entirely from our own resources. resources to the development of a group S H O P N U M B E R S Scotland Gosforth Yorkshire North West Midlands Treforest Enfield Twickenham Birketts GREGGS Bakers Oven Scotland Bakers Oven North Bakers Oven Midlands Bakers Oven South Olivers BAKERS OVEN TOTAL 2 0 0 0 115 109 98 115 109 73 88 100 51 858 25 51 89 70 12 247 1,105 1 9 9 9 114 109 94 111 104 68 81 94 50 825 26 51 91 78 13 259 1,084 Employees environmental policy that will bring together We are a customer-focused business and and extend the policies already in place at the vast majority of our employees are in divisional level. This will help us to ensure direct contact with those customers every fulfilment of our long-standing commitment Mike Darrington Managing Director 9 March 2001 day. Nothing is more important to our to high standards of environmental success than ensuring that all our staff responsibility in all our operations. 12 13 Greggs plc annual report and accounts 2000 directors’ report The directors have pleasure in presenting given in the Chairman’s statement and re-election to the Board. Mr. M. Simpson Employment policies with its corporate objectives. the Trust in pursuance of its main their annual report and the audited Managing Director’s report on pages 2 to 13. has a service agreement determinable by accounts for the 52 weeks ended 30 December 2000. The comparative period is the 52 weeks ended 1 January 2000. Fixed assets In the opinion of the directors the market value of all of the Group’s properties is Principal activities not significantly different from their The principal activities of the Group are historical net book amount. the manufacture of bread, flour confectionery, sandwiches and savoury products, the sale of these products through the Group’s own retail shops and catering within those shops. Directors and their interests The names of the directors in office during the year together with their not less than two years’ notice from the Company, or not less than six months’ notice from Mr. M. Simpson. Mr. I.D. Gregg OBE and Miss S.I.L. Elkin OBE do not have service agreements (in common with the other non-executive directors). On 2 March 2000 Mrs. S. Johnson OBE was appointed a non-executive director. relevant interests in the share capital of Corporate governance the Company (as defined in the A separate report on corporate We are committed to promoting policies Payments to suppliers which ensure that employees and those Supplier credit is an extremely important who seek to work for us are treated factor in the success of the Group. Whilst objective to alleviate the effects of poverty and social deprivation in the areas where the Company trades. equally regardless of sex, marital status, creed, colour, race or ethnic origin. It is our policy to give full and fair consideration to applications for the Group does not follow any code or During the year the Group invested standard on payment practice, payments £500,000 in the Newcastle Employment to suppliers are made in accordance with Bond for a five year period which is the Group’s normal terms and conditions secured as to repayment by Northern employment by people who are disabled, of business except where varied terms and Rock plc. This investment is at a zero rate to continue wherever possible the conditions are agreed with individual of interest. The purpose of the investment employment of staff who become suppliers in which case these prevail. is to allow the interest foregone to be disabled and to provide equal Where disputes arise we attempt to resolve used to help tackle long term Results and dividends Companies Act 1985) at 30 December governance is set out on pages 37 to 38. opportunities for the career development them promptly and amicably to ensure unemployment in the area. Sales for the financial year excluding VAT 2000 and 1 January 2000 and details of were £339,008,000, an increase of directors’ share options are set out in £30,330,000 or 9.8% over the previous note 7 to the accounts. Substantial shareholdings At 9 March 2001 the only notified interests of substantial shareholdings in the issued financial year. Group profit before taxation amounted to £26,356,000, an increase of 22.5% over the previous financial year. Trustee holdings of ordinary shares with no share capital of the Company, other than beneficial interest include 214,655 shares directors referred to in note 7, were: held by the Greggs Employee Benefit Trust An interim dividend of 16.0p per ordinary to which certain directors are trustees. Percentage of issued share capital % CGNU plc 11.81 share was paid on 6 October 2000 and the directors propose a final dividend of 39.0p payable on 25 May 2001 leaving profit for the financial year to be retained of £15,709,000 (1999: £10,591,000). In accordance with the Company’s Articles A.J. Davison (as trustee of of Association, Mr. M. Simpson, various settlements) Mr. I.D. Gregg OBE, Miss S.I.L. Elkin OBE Prudential plc and Mr. C.S. Gregg retire from the Board 3i plc by rotation. Mr. M. Simpson, Mr. I.D. Gregg J.A. Wardropper (as trustee Business review OBE and Miss S.I.L. Elkin OBE, being with A.J. Davison) 9.14 6.61 5.73 5.45 of disabled employees. delays in payment are kept to a minimum. Auditors The number and dispersion of the The Group’s average creditor payment In accordance with Section 384 of the Group’s operating locations make it period at 30 December 2000 was 47 days Companies Act 1985, a resolution for the difficult, but essential, to communicate (1999: 44 days). re-appointment of KPMG Audit Plc as effectively with employees. Communication with our shop staff is principally through the operational structure of shop area and divisional management. We communicate with our bakery staff by regular briefings and letters to employees. All staff receive a copy of divisional and Group gazettes. Charitable contributions The Group is a member of the ‘Per Cent’ auditors of the Company will be proposed at the forthcoming Annual General Meeting. Club. Charitable donations of £272,000 By order of the Board were made by the Group during the year ANDREW DAVISON including £208,000 to Greggs Trust Secretary (of which Mr. I.D. Gregg OBE is a trustee). Greggs plc (CRN 502851) The Trust also received donations from Fernwood House employees under Give As You Earn of Clayton Road The Group operates Profit Sharing and £40,000, from major shareholders of Jesmond A review of the business during the year eligible, offer themselves for re-election. Mrs. G.V. Richardson and Family 4.66 Savings Related Share Option Schemes £130,000 and income from investments Newcastle upon Tyne NE2 1TL and an outline of future developments are Mr. C.S. Gregg will not be seeking Standard Life 3.75 to encourage its employees to identify of £136,000. These funds were used by 9 March 2001 14 15 Greggs plc annual report and accounts 2000 statement of directors’ responsibilities report of the auditors to the members of Greggs plc The directors are required by company The directors have responsibility for We have audited the accounts on pages 37 reflects the Company’s compliance accounts, and of whether the accounting law to prepare accounts for each financial ensuring that the Company keeps 18 to 36. with the seven provisions of the policies are appropriate to the Group’s year which give a true and fair view of the accounting records which disclose with state of affairs of the Company and the reasonable accuracy at any time the Group at the end of the financial year and financial position of the Company and which of the results for that period. enable them to ensure that the accounts The directors consider that in preparing comply with the Companies Act 1985. the accounts on pages 18 to 36, The directors have general responsibility the Company has used appropriate for taking such steps as are reasonably accounting policies, consistently open to them to safeguard the assets of applied and supported by reasonable the Group and to prevent and detect and prudent judgements and estimates, fraud and other irregularities. and that all accounting standards which they consider to be applicable have been followed. The accounts have been prepared on a going concern basis on the presumption that the Group will continue in business. Respective responsibilities of directors and auditors The directors are responsible for preparing the Annual Report. As described on page 16 this includes responsibility for preparing the accounts in accordance with applicable United Kingdom law and accounting standards. Our responsibilities, as independent auditors, are established in Combined Code specified for our review circumstances, consistently applied and by the Financial Services Authority, and adequately disclosed. we report if it does not. We are not required to consider whether the board’s statements on internal control cover all risks and controls, or form an opinion on the effectiveness of the Group’s corporate We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable governance procedures or its risk and assurance that the accounts are free from control procedures. material misstatement, whether caused by fraud or other irregularity or error. In the United Kingdom by statute, the Auditing We read the other information contained in Practices Board, the Listing Rules of the the Annual Report, including the corporate forming our opinion we also evaluated the Financial Services Authority and by our governance statement and consider overall adequacy of the presentation of profession’s ethical guidance. whether it is consistent with the audited information in the accounts. We report to you our opinion as to whether accounts. We consider the implications for Opinion the accounts give a true and fair view and are properly prepared in accordance with the Companies Act. We also report to you our report if we become aware of any In our opinion the accounts give a true apparent misstatements or material and fair view of the state of affairs of the inconsistencies with the accounts. Company and the Group as at 30 if, in our opinion, the directors’ report is not Basis of audit opinion consistent with the accounts, if the We conducted our audit in accordance December 2000 and of the profit of the Group for the 52 weeks then ended and Company has not kept proper accounting with Auditing Standards issued by the have been properly prepared in records, if we have not received all the Auditing Practices Board. An audit accordance with the Companies Act 1985. information and explanations we require includes examination, on a test basis, for our audit, or if information specified by law or the Listing Rules regarding directors’ remuneration and transactions with the Group is not disclosed. of evidence relevant to the amounts and KPMG Audit Plc disclosures in the accounts. It also Chartered Accountants includes an assessment of the significant Registered Auditor estimates and judgements made by the Newcastle upon Tyne We review whether the statement on page directors in the preparation of the 9 March 2001 16 17 Greggs plc annual report and accounts 2000 group profit and loss account for the 52 weeks ended 30 December 2000 group balance sheet At 30 December 2000 Turnover Cost of sales Gross profit Distribution and selling costs Administrative expenses Operating profit Net interest receivable/(payable) and other income/(similar charges) Profit on ordinary activities before taxation Taxation on profit on ordinary activities Profit on ordinary activities after taxation Dividends paid and proposed Retained profit for the financial year Adjusted earnings per share Basic earnings per share Diluted earnings per share Note 2000 £’000 1999 £’000 1 2 2 2 3 4 10 11 12 25 13 13 13 339,008 308,678 (131,197) (123,535) 207,811 185,143 (158,327) (143,211) (23,440) (20,241) 26,044 21,691 312 (171) 26,356 21,520 (4,225) (5,602) 22,131 15,918 (6,422) (5,327) 15,709 162.3p 185.1p 183.7p 10,591 135.1p 135.1p 134.2p The Group’s operating profit for both the current and preceding financial period derives from continuing operations. There are no recognised gains or losses during the current and previous period other than the profit for the period. RECONCILIATION OF MOVEMENT IN CONSOLIDATED SHAREHOLDERS’ FUNDS Profit on ordinary activities after taxation Dividends Retained profit for the financial year New share capital - nominal value - share premium Net addition to shareholders’ funds Opening shareholders’ funds Closing shareholders’ funds 2000 £’000 1999 £’000 22,131 15,918 (6,422) (5,327) 15,709 10,591 9 407 16,125 80,896 97,021 13 707 11,311 69,585 80,896 Note £’000 30 December 2000 £’000 £’000 Fixed assets Tangible assets Investments Current assets Stocks Debtors Cash at bank and in hand 113,285 3,563 116,848 14 16 17 18 5,636 11,893 20,015 37,544 Creditors: amounts falling due within one year 19 (55,227) 5,983 9,751 8,892 24,626 (49,755) 1 January 2000 £’000 108,786 1,430 110,216 Net current liabilities (17,683) (25,129) Total assets less current liabilities Creditors: amounts falling due after more than one year Provision for liabilities and charges Deferred taxation Capital and reserves Called up share capital Share premium account Profit and loss account Equity shareholders’ funds 20 22 23 24 25 99,165 (133) (2,011) 97,021 2,397 9,558 85,066 97,021 85,087 (2,180) (2,011) 80,896 2,388 9,151 69,357 80,896 The accounts on pages 18 to 36 were approved by the Board of directors on 9 March 2001 and were signed on its behalf by M.J. Darrington M. Simpson } Directors 18 19 Greggs plc annual report and accounts 2000 parent company balance sheet At 30 December 2000 group cash flow statement for the 52 weeks ended 30 December 2000 Note £’000 30 December 2000 £’000 £’000 Fixed assets Tangible assets Investments Current assets Stocks Debtors Cash at bank and in hand 86,641 8,753 95,394 15 16 17 18 5,268 32,362 19,289 56,919 Creditors: amounts falling due within one year 19 (51,557) 5,506 31,873 8,280 45,659 (45,923) 1 January 2000 £’000 79,130 6,620 85,750 Net current assets/(liabilities) 5,362 (264) Total assets less current liabilities Creditors: amounts falling due after more than one year Provision for liabilities and charges Deferred taxation Capital and reserves Called up share capital Share premium account Profit and loss account Equity shareholders’ funds 20 22 23 24 25 100,756 (133) (1,657) 98,966 2,397 9,558 87,011 98,966 85,486 (157) (1,657) 83,672 2,388 9,151 72,133 83,672 The accounts on pages 18 to 36 were approved by the Board of directors on 9 March 2001 and were signed on its behalf by M.J. Darrington M. Simpson } Directors Operating profit Depreciation charges Loss/(profit) on disposal of fixed assets Release of government grants Decrease/(increase) in stocks (Increase)/decrease in debtors Increase/(decrease) in creditors Net increase/(decrease) in working capital Net cash inflow from continuing operating activities CASH FLOW STATEMENT £’000 347 (2,142) 4,844 2000 £’000 26,044 14,162 222 (46) 3,049 43,431 £’000 (103) 176 (165) 1999 £’000 21,691 13,035 (83) (25) (92) 34,526 Net cash inflow from continuing operating activities 43,431 34,526 Returns on investments and servicing of finance Interest received Interest paid Interest element of finance lease payments Net cash inflow/(outflow) from returns on investments and servicing of finance Taxation paid Capital expenditure and financial investments Purchase of tangible fixed assets Disposal of tangible fixed assets (Purchase)/sale of investments Net cash outflow for capital expenditure and financial investments Equity dividends paid Financing Issue of ordinary share capital Redemption of loan notes Capital element of finance lease payments Loan repayments Government grants received Net cash outflow from financing Net increase in cash in the period Further details regarding cash flows are given in note 27 to the accounts. 622 (301) (9) (21,397) 2,514 (2,133) 416 (32) (40) (1,913) 22 267 (425) (13) 312 (5,604) (171) (6,668) (22,403) 974 56 (21,016) (5,593) (21,373) (4,949) 720 (36) (102) (1,789) - (1,547) 9,983 (1,207) 158 20 21 Greggs plc annual report and accounts 2000 accounting policies The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group’s accounts. (a) Basis of accounting The accounts are prepared under the historical cost accounting rules and in accordance with applicable accounting standards. The requirements of all new accounting standards and pronouncements adopted during the past year have been implemented where relevant. (b) Consolidation The consolidated accounts include the results of Greggs plc and its subsidiary undertakings for the period of 52 weeks ended 30 December 2000. The comparative period is the 52 weeks ended 1 January 2000. (c) Depreciation Depreciation is provided on the cost of tangible fixed assets before deducting government capital grants and after taking the estimated residual value into consideration. Freehold and long leasehold properties are depreciated by equal instalments over a period of 40 years. No depreciation is provided on freehold land. Depreciation of other tangible fixed assets is provided on a straight line basis as follows: Short leasehold properties 10% Plant: General Computers Motor vehicles Delivery trays Shop fixtures and fittings: General Electronic equipment 10% 20% - 331/3% 20% - 25% 331/3% 10% 20% (d) Government grants Grants received in respect of specific capital items are credited to deferred income and transferred to the profit and loss account in equal instalments over the estimated average life of the relevant fixed assets. Grants which are related to the fulfilment of certain conditions or to the expiry of a period of time are also credited to deferred income and are transferred to the profit and loss account in equal instalments over a period from the commencement of the project until these conditions are met. (e) Stocks Stocks are stated at the lower of cost and net realisable value. (f) Deferred taxation Deferred taxation is provided on accelerated capital allowances and other timing differences except when the tax benefit can be expected with reasonable probability to be retained for the foreseeable future. Provision is made under the liability method. (g) Goodwill Purchased goodwill arising in respect of acquisitions before 1 January 1998, when FRS 10: “Goodwill and Intangible Assets” was adopted was written off to reserves in the year of acquisition. When a subsequent disposal occurs any related goodwill previously written off to reserves is written back through the profit and loss account as part of the profit or loss on disposal. Purchased goodwill (representing the excess of the fair value of the consideration given over the fair value of the separable net assets acquired) arising in respect of acquisitions since 1 January 1998 is capitalised. Positive goodwill is amortised to nil by equal annual instalments over its estimated useful life. Negative goodwill arising in respect of acquisitions since 1 January 1998 is included within fixed assets and released to the profit and loss account in the periods in which the fair values of the non-monetary assets purchased on the same acquisition are recovered whether through depreciation or sale. (h) Leased assets Assets acquired under finance leases are capitalised and depreciated over their estimated useful lives in accordance with Group policy for owned assets. The obligation to repay the capital element of the lease is included in creditors. Finance interest is charged to the profit and loss account over the period of the lease to reflect the outstanding capital commitment. The rental costs of properties and other assets acquired under operating leases are charged to the profit and loss account on a straight line basis over the term of the lease. (i) Pension costs The Group operates defined benefit and defined contribution schemes for its employees. The assets of these funds are held by the Trustees of the schemes and are entirely separate from those of the Group. The amount charged to the profit and loss account is based on actuarial estimates and is calculated to spread the cost of pensions over employees’ working lives with the Group. notes to the accounts 1. Turnover Turnover represents sales to customers less value added tax. The turnover arises from the Group’s principal activity and relates wholly to sales within the United Kingdom. 2. Employee profit sharing scheme The total amount paid out under the Group’s employee profit sharing scheme is contained within the main cost categories as follows: Cost of sales Distribution and selling costs Administrative expenses 3. Net interest receivable/(payable) and other income/(similar charges) Interest receivable Interest payable on bank loans Interest payable on finance leases 4. Profit on ordinary activities before taxation This is stated after charging/(crediting): Depreciation on tangible fixed assets: owned held under finance leases Release of government grants Auditors’ remuneration: audit services non-audit fees paid to the auditor and its associates - corporation tax compliance - other taxation services - pension schemes audit - IT consultancy Payments under operating leases: property rents 2000 £’000 922 1,942 374 3,238 2000 £’000 622 (301) (9) 312 1999 £’000 735 1,521 316 2,572 1999 £’000 267 (425) (13) (171) 2000 £’000 1999 £’000 14,111 12,922 51 (46) 113 (25) 81 20 10 8 10 80 14 11 7 3 23,780 21,785 22 23 Greggs plc annual report and accounts 2000 notes to the accounts continued 5. Directors’ emoluments (a) Directors’ remuneration excluding pensions Executives M.J. Darrington M. Simpson Non-executives I.D. Gregg OBE S.W. Curran S.I.L. Elkin OBE C.S. Gregg S. Johnson OBE Further details of directors’ remuneration are shown on page 39. Details of directors’ share options are shown in note 7. (b) Directors’ pension information (i) Defined benefit scheme Salary and fees £ Benefits £ Annual bonus and profit share £ Total 2000 £ Total 1999 £ 250,000 167,000 10,213 10,957 80,102 340,315 287,984 53,494 231,451 194,459 68,000 19,250 20,250 19,250 16,042 - - - - - - - - - - 68,000 19,250 20,250 19,250 16,042 65,000 18,500 18,500 18,500 - 559,792 21,170 133,596 714,558 602,943 6. Share options Contingent rights to the allotment of Ordinary Shares in the Company at future dates exist under the terms of the Company’s Savings Related Share Option Scheme and its Executive Share Option Schemes. Details of these options at 30 December 2000 are as follows: Executive Share Option Scheme 4 Executive Share Option Scheme 5 Granted upon appointment to senior managers: Executive Share Option Scheme 6 Savings Related Share Option Scheme 4 Executive Share Option Scheme 7 Date of grant Price 2000 1999 exercisable Options outstanding at the end of the year Dates September 1993 700p 17,600 47,050 September 1996 1355p 52,500 68,000 April 1997 1340p - 3,000 March 1999 26871/2p 100,250 100,250 April 1999 2098p 229,153 229,153 March 2000 17011/2p 150,200 - Three to ten years after September 1993 Three to ten years after September 1996 Three to seven years after April 1997 Three to seven years after March 1999 June 2004 to December 2004 Three to seven years after March 2000 In addition, options over nil (1999: 3,000) Ordinary Shares have been granted by the Company on shares currently held by the Greggs Employee Benefit Trust (see note 16). Executive M.J. Darrington M. Simpson Date of birth Date service commenced Accrued Accrued annual pension annual pension entitlement at age 65 as at 1 Jan 2000 £ entitlement at age 65 as at 30 Dec 2000 £ 8/3/42 15/8/83 15/10/41 24/4/73 72,763 74,412 68,363 71,723 Increase in accrued pension entitlement for the year £ 3,648 1,900 Transfer value of increase in entitlement for the year £ 48,359 24,964 Note 1 The pension entitlement shown is that which would be paid annually on retirement based on service to the end of the year, but excluding any statutory increases which would be due after the year end. Note 2 The increase in accrued pension during the year excludes any increase for inflation. The inflation rate used is that published by the Secretary of State for Social Security in accordance with Schedule 3 of the Pension Schemes Act 1993. The inflation rate for the year to 31 December 2000 was 1.1%. (ii) Defined contribution schemes During the year contributions were made to defined contribution schemes in respect of M.J. Darrington of £66,390 (1999: £63,380) and M. Simpson of £8,350 (1999: £8,000). 24 25 Greggs plc annual report and accounts 2000 notes to the accounts continued 7. Directors’ share interests 8. Pension schemes The directors who served during the year and who were still in office at the end of the year and their interests in the share capital of the Company are as follows: Ordinary shares of 20p Ordinary shares of 20p (Trustee holding with (Beneficial interest) no beneficial interest) 2000 1999 2000 1999 I.D. Gregg OBE (non-executive) 257,500 257,500 429,655 333,155 M.J. Darrington M. Simpson C.S. Gregg (non-executive) S.W. Curran (non-executive) S.I.L. Elkin OBE (non-executive) S. Johnson OBE (non-executive) 70,397 77,309 86,944 3,700 900 - 64,459 214,655 124,665 69,840 243,256 146,256 86,944 180,000 3,700 900 - - - - - - - - The executive directors have a potential beneficial interest in the Greggs Employee Benefit Trust (note 16). The directors held options as follows: Number of options During the year At 1/1/00 Granted Exercised At 30/12/00 M.J. Darrington M. Simpson 5,000 5,000 18,000 199 - - - - - 27,900 3,500 3,500 12,000 199 - - - - - 18,600 5,000 - - - - 3,500 - - - - Exercise price £ 7.00 13.55 - 5,000 18,000 26.875 199 20.98 27,900 17.015 - 3,500 7.00 13.55 12,000 26.875 199 20.98 18,600 17.015 Market price at date Gain on Date from which exercise exercise exercisable £ £ Expiry date 23.675 83,375 Sep-96 Aug-03 - - - - - - - - Sep-99 Aug-03 Mar-02 Mar-06 Jun-04 Dec-04 Mar-03 Mar-07 23.675 58,362 Sep-96 Aug-03 - - - - - - - - Sep-99 Aug-03 Mar-02 Mar-06 Jun-04 Dec-04 Mar-03 Mar-07 The Group operates a defined benefit scheme for management employees, the assets of which are held in a separate trustee-administered fund. The pension cost relating to the scheme is assessed in accordance with the advice of an independent qualified actuary using the attained age method. Actuarial valuations are carried out triennially and the latest actuarial assessment of this scheme was at 6 April 1999. The assumptions which have the most significant effect on the results of the valuation are those relating to the rate of return on investments and the rate of increase in salaries. It was assumed that the investment return would exceed salary increases by 2.0% per annum. At the date of the latest actuarial valuation, the market value of the scheme’s assets was £26,344,300. The actuarial value of the scheme’s assets represented 109% of the benefits that had accrued to members, after allowing for expected future increases in earnings. It is the intention of the Group that any surplus arising will be applied in giving discretionary pension increases or other benefits to retired members of the scheme. The total pension cost to the Group of this scheme was £1,248,000 for the year (1999: £1,166,000). The Group also operates defined contribution schemes for other eligible employees. The assets of the schemes are held separately from those of the Group. The pension cost represents contributions payable by the Group and amounted to £537,000 in the year (1999: £410,000). There were no material amounts outstanding to the schemes at the year end. 9. Employees The average number of persons employed by the Group (including directors) during the year was as follows: Management Administration Production Shop The aggregate payroll costs of these persons were as follows: Wages and salaries Social security costs Other pension costs 2000 No’s 576 259 2,433 11,447 14,715 1999 No’s 547 283 2,366 10,839 14,035 2000 £’000 1999 £’000 125,347 119,011 8,414 1,785 7,971 1,576 135,546 128,558 In 1999 the aggregate gains on exercise of share options were £55,282, including £55,282 in respect of the highest paid director. There have been no changes since 30 December 2000 in the directors’ interests noted above. The mid-market price of a Greggs plc ordinary share on 30 December 2000 was £24.00. The mid-market high and low price during the year was £24.90 and £15.075 respectively. 26 27 Greggs plc annual report and accounts 2000 notes to the accounts continued 10. Taxation on profit on ordinary activities 14. Group statement of tangible fixed assets Corporation tax at 30.0% (1999: 30.25%) - current year - previous years 2000 £’000 1999 £’000 6,950 (2,725) 4,225 5,841 (239) 5,602 The previous years’ credit amounting to £2,725,000 reflects the release of over provisions following the final agreement of several years’ tax computations with the Inland Revenue. 11. Profit attributable to Greggs plc Of the profit attributable to shareholders, £21,300,000 (1999: £14,927,000) is dealt with in the accounts of the Parent Company. The Company has taken advantage of the exemption permitted by Section 230 of the Companies Act 1985 from presenting its own profit and loss account. 12. Dividends On ordinary shares of 20p Interim paid: 16.0p (1999: 13.5p) Final proposed: 39.0p (1999: 31.5p) Less: dividends paid to Employee Benefit Trust (now waived) Total dividends: 55.0p (1999: 45.0p) 13. Earnings per share 2000 £’000 1999 £’000 1,832 4,590 - 1,617 3,761 (51) 6,422 5,327 Cost At 1 January 2000 Additions Disposals Reclassification At 30 December 2000 Depreciation At 1 January 2000 Charged in year Disposals Reclassification At 30 December 2000 Net book amount At 30 December 2000 At 1 January 2000 Land and buildings £’000 Plant and Shop fixtures machinery and fittings £’000 £’000 Total £’000 50,489 48,086 64,519 163,094 1,636 (1,695) (58) 7,269 12,492 21,397 (2,464) (1,145) (4,740) (8,899) 1,203 - 50,372 51,746 73,474 175,592 8,901 1,191 (388) (193) 23,442 21,965 5,889 7,082 54,308 14,162 (1,604) (4,171) (6,163) (495) 688 - 9,511 27,232 25,564 62,307 40,861 24,514 47,910 113,285 41,588 24,644 42,554 108,786 Included in land and buildings is an amount of £1,218,000 (1999: £1,641,000) in respect of freehold land which is not depreciated. Included in plant and machinery is an amount of £12,000 (1999: £63,000) representing assets held under finance leases. The net book amount of land and buildings comprises: Basic earnings per share are calculated on earnings after taxation of £22,131,000 (1999: £15,918,000) divided by the weighted average number of shares in issue for which consideration is receivable during the year, 11,956,166 (1999: 11,783,960). In order to provide a more accurate guide to underlying performance an adjusted earnings per share has been calculated for 2000, which uses the same weighted average number of shares as for the basic earnings per share calculation. However, the earnings are adjusted to eliminate the effect of the large prior year tax credit of £2,725,000 (see note 10). Hence the earnings figure used for the current period is £19,406,000 and this reduces the earnings per share by 22.8p to 162.3p Diluted earnings per share are calculated using a weighted average number of shares of 12,044,814 (1999: 11,861,045). This number includes 88,648 (1999: 77,085) shares being the dilutive effect of the share options in place at the year end. Freehold property Long leasehold property Short leasehold property Shops Bakeries Other Bakeries Shops £’000 13,673 21,696 5,699 £’000 13,773 21,231 5,170 2000 £’000 40,174 158 529 40,861 1999 £’000 41,068 143 377 41,588 28 29 Greggs plc annual report and accounts 2000 notes to the accounts continued 15. Parent Company statement of tangible fixed assets Cost At 1 January 2000 Additions Intra Group transfers Disposals Reclassification At 30 December 2000 Depreciation At 1 January 2000 Charged in year Intra Group transfers Disposals Reclassification At 30 December 2000 Net book amount At 30 December 2000 At 1 January 2000 Land and buildings £’000 Plant and Shop fixtures machinery and fittings £’000 £’000 Total £’000 18,351 45,823 61,590 125,764 1,546 238 (382) (58) 6,952 1,207 (2,413) (1,145) 12,197 20,695 1,771 3,216 (4,729) (7,524) 1,203 - 19,695 50,424 72,032 142,151 433 193 - 3,094 22,541 20,999 5,583 600 6,858 930 46,634 12,874 1,723 (1,553) (4,168) (5,721) (193) (495) 688 - 3,527 26,676 25,307 55,510 16,168 23,748 46,725 86,641 15,257 23,282 40,591 79,130 Included in land and buildings is an amount of £nil (1999: £423,000) in respect of freehold land which is not depreciated. Included in plant and machinery is an amount of £12,000 (1999: £63,000) representing assets held under finance leases. The net book amount of land and buildings comprises: Freehold property Long leasehold property Short leasehold property Shops Bakeries Other Bakeries Shops £’000 4,945 5,366 5,180 2000 £’000 15,491 158 519 16,168 £’000 4,037 5,105 5,663 1999 £’000 14,805 143 309 15,257 16. Investments Group Investments relate to shares in Greggs plc held by the trustees of the Greggs Employee Benefit Trust. This trust was established during 1988 to act as a repository of issued Company shares which can be purchased either on the exercise of an option by employees under the Greggs Executive Share Option Schemes or by the trustees of the Greggs Employee Share Scheme. None of the shares held by the trust are currently under option to employees (1999: 3,000). The trust holds 214,655 shares in Greggs plc (1999: 118,155). The only movement in the year was a purchase of 96,500 shares. These are shown in the accounts at cost of £3,563,000 (1999: £1,430,000) and have a market value at 30 December 2000 of £5,152,000 (1999: £2,260,000). 2000 £’000 1999 £’000 5,828 (638) 5,190 3,563 8,753 5,828 (638) 5,190 1,430 6,620 Parent Company Interest in subsidiary undertakings Shares at cost Less: Amounts written off Employee Benefit Trust The Company’s subsidiary undertakings, which are all wholly owned, are as follows: Charles Bragg (Bakers) Limited Greggs (Leasing) Limited Thurston Parfitt Limited Non-trading Non-trading Dormant Greggs Properties Limited Property holding Olivers (UK) Limited Olivers (UK) Development Limited * Birketts Holdings Limited J R Birkett & Sons Limited * Greggs Trustees Limited *held indirectly Non-trading Dormant Non-trading Retail bakers Trustee 30 31 Greggs plc annual report and accounts 2000 notes to the accounts continued 17. Stocks 20. Creditors: amounts falling due after more than one year Raw materials and consumables Work in progress 18. Debtors Trade debtors Amounts owed by subsidiary undertakings Other debtors, including value added tax Prepayments and accrued income All amounts fall due within one year. 19. Creditors: amounts falling due within one year Bank overdraft (unsecured) Loan notes Bank loan (see note 20) Obligations under finance leases Trade creditors Corporation tax Other taxes and social security costs Other creditors Accruals Proposed final dividend Deferred government grants 2000 £’000 4,536 1,100 5,636 2000 £’000 508 - 5,909 5,476 11,893 Group Parent Company 1999 £’000 4,851 1,132 5,983 2000 £’000 4,291 977 5,268 1999 £’000 4,508 998 5,506 Group Parent Company 1999 £’000 709 2000 £’000 182 1999 £’000 108 - 21,093 23,110 3,143 5,899 9,751 5,728 5,359 3,149 5,506 32,362 31,873 Group Parent Company 2000 £’000 1,140 42 1999 £’000 - 74 2,039 1,929 - 40 2000 £’000 1,425 42 - - 1999 £’000 889 74 - 40 19,658 17,387 18,836 15,810 1,964 3,030 3,343 3,004 1,762 2,886 3,197 2,811 15,103 13,692 14,681 13,293 7,637 4,590 24 6,501 3,761 24 7,311 4,590 24 6,024 3,761 24 55,227 49,755 51,557 45,923 Bank loan Deferred government grants Group Parent Company 2000 £’000 - 133 133 1999 £’000 2,023 157 2,180 2000 £’000 - 133 133 1999 £’000 - 157 157 The bank loan is repayable over five years and bears interest at a fixed rate of 7.38%. 21. Financial assets and liabilities The Group’s activities are financed by cash at bank and short term investments which comprise cash placed on deposit. The Group’s borrowings comprise a fixed rate, fixed term bank loan. The Group’s treasury policy has as its principal objective the achievement of the maximum rate of return on cash balances whilst maintaining an acceptable level of risk. Other than mentioned above there are no financial instruments, derivatives or commodity contracts used. Given the low level of borrowing within the Group it is considered that the interest rate risk is not significant. For the purposes of the following disclosures, short-term debtors and creditors have been excluded, as permitted by FRS13. The Group’s financial assets comprise cash at bank. At 30 December 2000 the average interest rate earned on the temporary closing cash balance was 5.7% (1999: 5.0%). The Group’s financial liabilities comprise a bank loan in the amount of £2,039,000 (1999: £3,952,000) bearing interest at a fixed rate of 7.38%. The Group has an overdraft facility of £10,000,000 of which £8,860,000 was undrawn at 30 December 2000 (1999: £10,000,000 undrawn). The maturity profile of the Group’s financial liabilities at 30 December 2000 was as follows: In one year or less In more than one year but not more than two years The fair value of the Group’s other financial assets and liabilities is not materially different from their book values. 2000 £’000 2,039 - 2,039 1999 £’000 1,929 2,023 3,952 32 33 Greggs plc annual report and accounts 2000 notes to the accounts continued 22. Deferred taxation 25. Profit and loss account The provision is in respect of: Accelerated capital allowances The unprovided liability for deferred taxation calculated at 30% (1999: 30%) is: Group Parent Company 2000 £’000 1999 £’000 2000 £’000 1999 £’000 2,011 2,011 1,657 1,657 At 1 January 2000 Add: Retained profit for the year At 30 December 2000 Group Parent Company 2000 £’000 69,357 15,709 85,066 1999 £’000 58,766 10,591 69,357 2000 £’000 72,133 14,878 87,011 1999 £’000 62,533 9,600 72,133 Group Parent Company Cumulative goodwill written off resulting from acquisitions made prior to 1 January 1998 amounts to £3,275,000 (1999: £3,275,000). Accelerated capital allowances Roll-over relief 23. Share capital Authorised: 25,000,000 ordinary shares of 20p Issued and fully paid: Number of shares 11,939,607 44,950 11,984,557 At 1 January 2000 Issued in respect of share options At 30 December 2000 Details of outstanding share options are given in note 6. 24. Share premium account At 1 January 2000 Premium arising on issue of shares in respect of share options At 30 December 2000 2000 £’000 8,852 175 9,027 1999 £’000 6,113 175 6,288 2000 £’000 8,852 128 8,980 1999 £’000 5,190 128 5,318 26. Commitments (a) Capital commitments Outstanding commitments for capital expenditure at 30 December 2000 not provided for in the accounts are as follows: Contracted for (b) Leasing commitments Group Parent Company 2000 £’000 1999 £’000 2000 £’000 1999 £’000 1,284 1,802 1,284 1,758 At 30 December 2000 the Group had annual commitments under operating leases on land and buildings as set out below: Operating leases which expire: Within one year In the second to fifth years inclusive After more than five years 2000 £’000 1999 £’000 723 5,101 14,846 20,670 748 4,870 13,315 18,933 The Group’s business is carried on through retail outlets which are subject to operating leases which include clauses for periodic rent reviews. The property commitments above are stated at current rents. 2000 £’000 1999 £’000 5,000 5,000 2,388 2,375 9 13 2,397 2,388 Group and Parent Company £'000 9,151 407 9,558 34 35 Greggs plc annual report and accounts 2000 notes to the accounts continued corporate governance 27. Notes to the Group Cash Flow Statement (a) Reconciliation of net cash flow to movement in net funds Increase in cash in the period Cash outflow from decrease in debt and decrease in lease financing Movement in net funds in the period Net funds at 1 January 2000 Net funds at 30 December 2000 (b) Analysis of net funds Cash in hand and at bank Bank overdraft Debt due after 1 year Debt due within 1 year Finance leases Total 2000 £’000 9,983 1,953 11,936 4,900 16,836 1999 £’000 158 1,891 2,049 2,851 4,900 At Other 30 December Changes £’000 - - - 2000 £’000 20,015 (1,140) 18,875 At 1 January 2000 £’000 Cash Flow £’000 8,892 11,123 - (1,140) 8,892 (2,023) (1,929) (40) 9,983 40 (3,992) 1,953 4,900 11,936 - 2,023 - 1,913 (2,023) (2,039) - - - - (2,039) 16,836 In June 1998, the Stock Exchange published the identifying and evaluating the significant risks Thus the Board feels it has effectively led and Principles of Good Governance and Code of affecting the business and the policies and controlled the Company. The Board considers Best Practice (“the Combined Code”) which procedures by which these risks are managed. that with five non-executive and two executive embraces the work of the Cadbury, Greenbury and Hampel Committees. Management is responsible for the identification and evaluation of significant risks applicable to The Group is committed to high standards of their areas of business together with the design corporate governance. This statement and operation of suitable internal controls. describes how the relevant principles of These risks are assessed on a continual basis governance are applied to the Company. covering all functional areas but in particular the The Board has complied throughout the year with the Combined Code apart from the provisions relating to the length of executive directors’ notice periods. areas of Food Safety, Health and Safety, Information flow, Asset protection and Regulatory Requirements. In addition management is responsible for providing protection against these significant risks by The Board has not set as an objective the various techniques, including putting in place reduction of directors’ service contract periods adequate insurance cover. Management also to one year or less. The Board does not wish to reports to the Board on significant changes in reduce the service contract period below the the business and external environment which current level of two years as it feels this is the affect this risk profile. minimum appropriate to retain the services of key executives in a competitive environment. Internal control The Board is ultimately responsible for the The Board has set in place a system of regular hierarchical reporting which provides for relevant details and assurances on the assessment and control of risks to be given to it. Group’s system of internal control and for The continuing role of the Board is regularly to reviewing its effectiveness. However, any such review the key risks inherent in the business, system can only be designed to manage rather the operation of the system of control necessary than eliminate the risk of failure to achieve to manage such risks and its effectiveness and members the balance is suitable and complies with recommendations regarding the level of non-executives. The non-executive directors fulfil a vital role in corporate accountability. They ensure that the strategies proposed by executive directors are fully discussed and critically examined. Directors’ C.V.s Executive directors Mike Darrington, 58, qualified as a Chartered Accountant and then spent 17 years with United Biscuits, latterly in General Management. During this time he attended the PMD course at Harvard Business School. He joined Greggs in 1983 and was appointed Managing Director in January 1984. Malcolm Simpson, 59, qualified as a Chartered Accountant with what is now KPMG and then worked for eight years within the finance department of Procter and Gamble Limited. He joined the Company in 1973 and was appointed Financial Director in 1975. business objectives, and can provide only satisfy itself that all reasonable steps are being Non-executive directors reasonable and not absolute assurance against taken in mitigation of these risks. material misstatement or loss. The following statements show how Following publication of guidance for directors the Company has applied the principles of the on internal control, Internal Control: Guidance for Combined Code:- Directors on the Combined Code (the Turnbull guidance), in 2000 the Board The Board and Directors initiated measures to consolidate and develop Whilst the executive responsibility for the the existing risk management, assurance and running of the Company’s business rests compliance processes into a group wide ultimately with the Managing Director, Mike Ian Gregg OBE, 61, Chairman, qualified as a solicitor before joining the Company as Executive Chairman and Managing Director on the death of his father in 1964. He built the business up from a single-shop operation to a multi-divisional specialist retailer with almost 300 shops by the time of its successful flotation in 1984. Following the appointment of Mike Darrington in January 1984, Ian continued in the system of internal control which is an ongoing Darrington, the Board, under the non-executive role of Executive Chairman until July 1993. process for identifying, evaluating and Chairmanship of Ian Gregg, meets regularly to He was then invited to become non-executive managing the significant risks faced by the discharge its duties. At these meetings, Chairman in order that the Board can avail itself Group. This process is regularly reviewed by it reviews Group strategy, performance and of his unequalled experience of both the the Board and accords with the guidance. matters reserved for the Board. industry and the Company. The Board has reviewed the effectiveness of the The Board is supplied in a timely manner with Colin Gregg, 59, is a member of the family system of internal control. In particular, it has information in a form and of a quality which founded the business and has been a reviewed and updated the process for appropriate to enable it to discharge its duties. member of the Board since 1964. He currently 36 37 Greggs plc annual report and accounts 2000 corporate governance continued directors’ remuneration runs his own consultancy business and is a The Audit Committee consists of three non- The directors believe that the Annual General Introduction Benefits in Kind Pensions director of Peacocks Limited, a manufacturer executive directors (Miss S.I.L. Elkin OBE – Meeting provides an excellent forum for and retailer of surgical appliances. He has Chairman, Mrs. S. Johnson OBE and Mr. S.W. communication with investors with the previous career experience in education and Curran). It meets twice a year and, as its main Chairman of the Board and its sub-committees administration, including a period as function, reviews the annual and interim available to answer any issues raised. Administrator of the Children’s Foundation – a financial statements issued to shareholders, registered charity which raised £12 million for compliance with financial reporting standards, child health in the North of England. internal financial controls, the scope of the Stephen Curran, 57, joined the Board in 1981. external audit and the report of the auditors. He was appointed Chairman of Candover The Remuneration Committee consists entirely of Investments plc in May 1999, having previously non-executive directors (Mr. I.D. Gregg OBE – At the Annual General Meeting the balance of proxy votes cast for or against each resolution are indicated after it has been dealt with on a show of hands. All substantial issues including the adoption of the annual report and accounts are proposed at the Annual General Meeting as been Chief Executive of Candover since Chairman, Mr. S.W. Curran, Miss S.I.L.Elkin OBE separate resolutions. January 1991. Prior to joining Candover in May and Mr. C.S. Gregg). Its main duties are to review 1981, he was a managing consultant with and make recommendations to the Board on the Coopers & Lybrand Associates and then an basic salary, benefits in kind, terms and investment manager with what is now Cinven. conditions of employment including performance- The Company intends to comply with the Combined Code and give 20 working days notice of the Annual General Meeting. He is a non-executive director of Jarvis Hotels related bonuses, share options and pension Accountability and audit plc and a number of unquoted companies. benefits of executive directors. In order to assist Sonia Elkin OBE, 68, is a former CBI Director, responsible for its Regional organisation and with these duties the Committee has used the services of a leading specialist consultancy. policy in relation to Smaller Firms. She was a The Board report on directors’ remuneration is Commissioner of the Manpower Services included on page 39 of this Annual Report. Commission and served on a DTI committee on This provides an indication of how the principles deregulation. She is a member of the Review of the Combined Code have been applied. Committee of the Institute of Chartered Accountants. She joined the Board in 1992, is Chairman of the Audit Committee and has been appointed the senior independent non-executive. The Nominations Committee comprises the Chairman, Managing Director, Miss S.I.L. Elkin OBE and Mr. C.S. Gregg. An alternate is appointed in the event of any member of the committee Susan Johnson OBE, 43, was appointed to standing for re-election. Its duty is to ensure that the Board in March 2000. She obtained an there is a formal and transparent procedure for MBA in 1993 after which she pursued a career the appointment of new directors and the in sales and marketing before being reappointment of existing directors to the Board. appointed as Chief Executive of the Northern Business Forum. She is now an Executive Going concern The Board acknowledges its responsibility to present a balanced and understandable assessment of the Company’s position and prospects. This is fulfilled by the statements contained in the Managing Director’s and Chairman’s statements which supplement the statutory accounts themselves. The procedures regarding internal controls and the operation of the Audit Committee are outlined above. The Company does not have a full time internal audit function. However the Board periodically reviews the need for such a function and has done so during the year. The Board continues to conclude that, for the time being, such a function is unnecessary given the internal monitoring of systems of control and the Director of Yorkshire Forward. After making enquiries, the directors have a examination carried out by external audit to the reasonable expectation that the Group has extent necessary to arrive at their audit opinion. After carefully considering the guidance in the Combined Code, all of the non-executive directors are considered to be independent of management and free from any business or other relationship which would materially interfere with adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts. the exercise of their independent judgement. Relations with shareholders To facilitate the effective administration of the There is regular dialogue with individual institutional The Audit Committee is satisfied that the Company’s auditors, KPMG Audit Plc continue to be objective and independent of the Company. KPMG Audit Plc does perform non audit services for the Group but the Audit Committee is satisfied that its objectivity is not impaired by such work. The Board is pleased to present this report to These are the use of a company car, private Mr. M.J. Darrington and Mr. M. Simpson are shareholders for the 52 week period ended medical cover and permanent health insurance. members of the Greggs 1978 Retirement and 30 December 2000. Annual Bonus The remuneration packages of the executive directors are determined, on behalf of the Board, by the Remuneration Committee, consisting of four non-executive directors, Mr. S.W. Curran, Miss S.I.L. Elkin OBE, Mr. C.S. Gregg and myself as Chairman. None of the Committee members have a personal financial interest, other than as shareholders, in the matters to be decided. There are no conflicts of interest arising from cross-directorships and no day-to-day involvement in the running of the business. The remuneration of the executive directors consists of a basic salary, benefits in kind, an annual performance-related bonus, profit share, long-term incentive schemes and The annual bonus is directly determined by reference to the level of achieved net profit before tax in relation to the budget approved by the Board. The relationship between level of bonus and variance from budget is set by the Remuneration Committee. Profit Share The executive directors participate in the overall Company Profit Share Scheme, in which 10% of Company profits are distributed half-yearly to all employees on a formula related to service and salary level. This profit share can be taken in the form of shares in the Company purchased by the Trustees of the Employee Share Scheme. a contribution to Company pension schemes. Long-Term Incentive Schemes Details of the amounts of each element are set out in notes 5 and 7 to the accounts. The Company operates both Inland Revenue approved and unapproved long-term share The remuneration of the non-executive directors incentive schemes to encourage the executive is determined by the executive directors. directors and employees to hold shares in the Objectives The aim of the Committee is to ensure that the Company has competitive remuneration packages in place, in order best to serve the interests of the Company, the shareholders and employees. In order to assist in meeting this aim on an informed basis, the Committee commissioned a report by an independent consultant in 1998. Salaries Company and to enhance share values. In accordance with the Joint Statement from the Investment Committees of the Association of British Insurers and the National Association of Pension Funds, the total number of shares on which the Company may grant options is limited and the directors have chosen to allocate most of the number available to S.A.Y.E. schemes open to all employees. This has restricted the number of shares available to be allocated under the Senior Executive Share Option Scheme. This has Death Benefit Scheme and, in accordance with the Combined Code recommendations, only their basic salary is pensionable. The scheme, which requires a contribution of 5.7% of pensionable salary from members, provides for up to two-thirds of final pensionable salary, dependent on length of service. Mr. M.J. Darrington is the sole member of the Greggs Bakeries (MJD) Retirement Benefit Scheme which is a defined contribution scheme, the cost of which is met by the Company. Mr. M. Simpson is a member of the Greggs Senior Executive Pension Scheme which is a defined contribution scheme. The Company contributes 5% of basic salary to the Scheme and members may also make contributions. Service contracts Mr. M.J. Darrington and Mr. M. Simpson have service contracts which are terminable by the Company on two years’ notice, this being the minimum considered appropriate by the Board to retain the services of key executives in a competitive environment, or by the individual on not less than six months’ notice. Base salaries reflect job responsibilities, been in existence since 1987 and the last grant their market value and the level of individual of options was made in 2000. Options have performance. The Company sets base salaries been granted on a discretionary basis to senior On behalf of the Board of Greggs plc around the upper quartile relative to comparator executives and managers, as well as to I.D. GREGG OBE companies, reflecting the level of its executive directors. The Savings Related Share Chairman of the Board Group’s affairs, the Board has established sub- shareholders as well as general presentations after A statement of directors’ responsibilities in respect achievements over a sustained period and its Option Schemes are an all-employee committees as follows: the interim and preliminary results. of the preparation of accounts is given on page 16. desire to secure these for the future. arrangement, including executive directors. 9 March 2001 38 39 4 0 J e s m o n d l C a y t o n R o a d F e r n w o o d H o u s e N E 2 1 T L N e w c a s t l e u p o n T y n e A n d r e w J o h n D a v s o n i , S o l i c i t o r C o l i n G r e g g ( N o n - e x e c u t i v e ) † Ø l i l M a c o m S m p s o n F C A ( F n a n c a l ) i i i M k e D a r r i n g o n F C A ( t M a n a g n g ) i Ø S E C R E T A R Y A N D R E G I S T E R E D O F F I C E l i S o n a E k n O B E ( i N o n - e x e c u t i v e ) * † Ø S u s a n J o h n s o n O B E ( N o n - e x e c u t i v e ) * S t e v e n C u r r a n F C C A ( N o n - e x e c u t i v e ) * † * M e m b e r o f A u d i t C o m m i t t e e † M e m b e r o f R e m u n e r a t i o n C o m m i t t e e Ø M e m b e r o f N o m n a t i i o n s C o m m i t t e e i D e s g n e d a n d p r o d u c e d b y R o b s o n B r o w n , N e w c a s t l e u p o n T y n e A u d i t o r s 1 1 0 Q u a y s d e i i Q u a y s d e H o u s e K P M G A u d i t P c l N E 1 3 D X N e w c a s t l e u p o n T y n e L o n d o n E C 3 N 4 S G 4 1 T o w e r H i l l S G H a m b r o s M e r c h a n t B a n k e r s G o s f o r t h i 1 4 9 H g h S t r e e t N E 3 1 H A N e w c a s t l e u p o n T y n e i C o r p o r a t e F n a n c e A d v s o r y i S u n A l l i a n c e H o u s e C a p i t a I R G p c l B o u r n e H o u s e 3 4 B e c k e n h a m R o a d B e c k e n h a m , K e n t B R 3 4 T U i R e g s t r a r s l 3 5 M o s e y S t r e e t N e w c a s t l e u p o n T y n e N E 1 1 X X E v e r s h e d s S o l i c i t o r s N e w c a s t l e u p o n T y n e N E 1 6 R Q 3 9 P i l g r i m S t r e e t L o n d o n E C 2 M 2 P A i 1 F n s b u r y A v e n u e C o m m e r c a i l i U n o n H o u s e l i B r e w n D o p h n S e c u r i t i e s i L t d I a n G r e g g O B E ( N o n - e x e c u t i v e C h a i r m a n ) † Ø N a t i o n a l W e s t m n s t e r i B a n k P L C W a r b u r g D i l l o n R e a d A c q u s i t i i o n o f ' B a k e r s O v e n D I R E C T O R S B a n k e r s S t o c k b r o k e r s ' ( £ 0 0 0 ) N u m b e r o f s h o p s i n o p e r a t i o n a t y e a r e n d 4 7 4 4 8 5 4 9 9 9 3 0 9 6 7 1 , 0 3 2 1 , 0 5 7 1 , 0 7 2 1 , 0 8 4 1 , 1 0 5 - - - , 1 9 5 4 7 - - - - - - ' ( £ 0 0 0 ) , 8 7 6 0 , 5 0 4 6 , 5 6 4 3 , 1 5 0 0 8 , 1 1 9 3 1 1 5 , 6 6 9 2 4 , 3 6 4 2 6 , 2 0 4 2 2 , 4 0 3 2 1 , 3 9 7 C a p i t a l c a p i t a l e x p e n d i t u r e e x p e n d i t u r e ) , 1 1 0 6 6 , 1 1 4 6 6 , 1 4 6 7 0 , 2 5 2 5 1 , 2 0 8 3 8 2 4 , 9 5 5 3 0 , 4 0 8 3 4 , 9 0 2 3 4 , 5 2 6 4 3 , 4 3 1 b y o p e r a t i o n s ( £ 0 0 0 ) ' ( b e f o r e d v d e n d s , i i t a x a n d G r e g g s p l c a n n u a l r e p o r t a n d a c c o u n t s 2 0 0 0 S h a r e h o d e r s l ' f u n d s i i D v d e n d p e r s h a r e ( p e n c e ) C a s h g e n e r a t e d . 1 4 1 2 5 1 5 0 . 1 8 0 . 2 3 0 . 2 6 0 . 3 2 . 0 3 7 . 0 4 1 . 0 4 5 . 0 5 5 . 0 j A d u s t e d e a r n n g s p e r s h a r e i ( p e n c e ) 3 6 8 . 4 0 6 . 5 3 0 . 7 1 0 . 7 9 0 . 9 5 . 8 1 1 1 . 2 1 2 2 . 8 1 3 5 . 1 1 6 2 . 3 ( p e n c e ) i E a r n n g s p e r s h a r e 3 6 8 . 4 0 6 . 5 3 0 . 7 1 0 . 7 9 0 . 9 5 . 8 1 2 1 . 1 1 2 2 . 8 1 3 5 . 1 1 8 5 . 1 ' ( £ 0 0 0 ) , 2 3 2 7 8 , 2 6 3 1 4 , 3 0 4 7 5 , 3 6 5 9 1 , 4 1 2 1 9 4 8 , 1 0 7 5 8 , 3 8 4 6 9 , 5 8 5 8 0 , 8 9 6 9 7 , 0 2 1 t a x a t i o n ( £ 0 0 0 ) ' a c t i v i t i e s b e f o r e P r o f i t o n o r d n a r y i T u r n o v e r ' ( £ 0 0 0 ) 1 0 Y E A R H I S T O R Y , 6 0 7 4 , 6 9 6 7 , 9 0 1 9 , 1 2 0 1 7 , 1 3 0 5 6 1 5 , 6 7 3 1 8 , 0 3 5 2 0 , 2 1 4 2 1 , 5 2 0 2 6 , 3 5 6 , 9 5 5 4 0 1 0 0 9 9 0 , 1 1 0 4 2 6 , , 1 6 7 8 5 1 , 2 1 9 5 1 4 2 3 8 , 4 6 5 2 6 5 , 9 4 1 2 9 1 , 4 2 0 3 0 8 , 6 7 8 3 3 9 , 0 0 8 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0
Continue reading text version or see original annual report in PDF format above