Greggs plc Annual Report 2000

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FY2000 Annual Report · Greggs plc

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GREGG S
plc

Greggs plc, Fernwood House, Clayton Road, Jesmond, Newcastle upon Tyne NE2 1TL.
www.greggs.co.uk

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plc

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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

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

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

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

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

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

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.

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.

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

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.

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

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

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

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

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

407

16,125

80,896

97,021

707

11,311

69,585

80,896

Note

£’000

30 December

2000

£’000

Fixed assets

Tangible assets

Investments

Current assets

Stocks

Debtors

Cash at bank and in hand

113,285

3,563

116,848

5,636

11,893

20,015

37,544

Creditors: amounts falling due within one year

(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

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

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

Fixed assets

Tangible assets

Investments

Current assets

Stocks

Debtors

Cash at bank and in hand

86,641

8,753

95,394

5,268

32,362

19,289

56,919

Creditors: amounts falling due within one year

(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

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)

267

(425)

(13)

312

(5,604)

(171)

(6,668)

(22,403)

974

(21,016)

(5,593)

(21,373)

(4,949)

720

(36)

(102)

(1,789)

(1,547)

9,983

(1,207)

158

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

(46)

113

(25)

23,780

21,785

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

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

April 1999

2098p

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).

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

(Trustee holding with

(Beneficial interest)

no beneficial interest)

2000

1999

2000

1999

I.D. Gregg OBE (non-executive)

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

18,000

199

27,900

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

Date

from

which

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.

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

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

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

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

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

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

1999

£’000

2,039

1,929

2000

£’000

1,425

1999

£’000

889

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

6,501

3,761

7,311

4,590

6,024

3,761

55,227

49,755

51,557

45,923

Bank loan

Deferred government grants

Group

Parent Company

2000

£’000

133

1999

£’000

2,023

157

2,180

2000

£’000

133

1999

£’000

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

1999

£’000

1,929

2,023

3,952

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

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

2,388

2,375

2,397

2,388

Group and

Parent Company

£'000

9,151

407

9,558

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

Other 30 December

Changes

£’000

2000

£’000

20,015

(1,140)

18,875

1 January

2000

£’000

Cash

Flow

£’000

8,892

11,123

(1,140)

8,892

(2,023)

(1,929)

(40)

9,983

(3,992)

1,953

4,900

11,936

2,023

1,913

(2,023)

(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

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

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