Greggs plc

Annual
Report
2006

2

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

FINANCIAL  HIGHLIGHTS

Turnover

2006*
£’m
550.8

Earnings before interest and tax 38.7

2005
£’m
533.4

47.1

50.2

34.1

181.5

41.7

Pence

282.1

40.2

27.0

144.9

30.0

Pence

241.2

Pre-tax profits

Post-tax profits

Shareholders’ funds

Capital expenditure

Earnings per share

Dividend per
ordinary share

116.0

106.0

*Includes £3.5m restructuring costs

FINANCIAL  CALENDAR
Announcement of results and dividends
Half year
Full year

Early August
Early March

Dividends
Interim
Final

Mid October
Late May

Annual report posted to shareholders
Annual General Meeting

Early April
14 May 2007

EPS

DIVIDEND

Pence
290

280

270

260

250

240

230

220

210

200

190

180

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 2001

2002

2003 2004

2005 2006

CONTENTS

03 GREGGS THE BAKERS

04

TRIBUTE TO IAN GREGG AND MALCOLM SIMPSON 

06 DIRECTORS’ REPORT AND BUSINESS REVIEW

06

06

08

12

13

19

19

OUR BUSINESS

CHAIRMAN’S STATEMENT

MANAGING DIRECTOR’S REPORT

KEY PERFORMANCE INDICATORS

CORPORATE GOVERNANCE

FIXED ASSETS

DIRECTORS AND THEIR INTERESTS

20

20

20

22

24

SUBSTANTIAL SHAREHOLDINGS

28 CONSOLIDATED BALANCE SHEET

AUTHORITY TO PURCHASE SHARES

CORPORATE SOCIAL RESPONSIBILITY

AUDITORS

STATEMENT OF DIRECTORS RESPONSIBILITIES

29 PARENT COMPANY BALANCE SHEET

30 CONSOLIDATED STATEMENT OF CASHFLOWS

31

PARENT COMPANY STATEMENT OF CASHFLOWS

25 REPORT OF THE INDEPENDENT AUDITORS

32 NOTES TO THE CONSOLIDATED ACCOUNTS

27 CONSOLIDATED INCOME STATEMENT

58 DIRECTORS REMUNERATION REPORT

27 CONSOLIDATED STATEMENT OF RECOGNISED 

66 TEN YEAR HISTORY

INCOME AND EXPENSE

27

PARENT COMPANY STATEMENT OF RECOGNISED
INCOME AND EXPENSE

66 DIRECTORS & ADVISERS

67

SHOP ALLOCATION

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

3

Greggs the Bakers

OUR BUSINESS Greggs plc is the UK’s leading bakery

retailer, specialising in sandwiches, savouries and other

baker-fresh food on the go. From humble beginnings

as a single bakers shop, we now have over 1,300 shops

throughout the UK, trading under our Greggs and

Bakers Oven brands. Whilst our shops and products

have evolved over time, we have remained loyal in our

commitment to provide baker-fresh, quality food on

the go.

OUR VISION We will be Europe’s finest retail baker, growing,

highly profitable and operating with integrity, for the benefit

of our people, customers, shareholders and communities.

Our medium term targets for the UK include growing to more

than 1,700 shops; in the long term we believe that 2,000

shops is achievable.

A GREAT PLACE TO WORK We aspire to be a company

with good, honest values and a ‘can do’ culture, that everyone

is proud to work for.

■ Our Values: We will be enthusiastic and supportive in
all that we do, open, honest and appreciative, treating

everyone with fairness, consideration and respect.

■ Our Culture:  We are achievers! Working hard
together, in a friendly, informal way, where 

everyone matters.

■ Our Communities: We will be responsible neighbours

wherever we operate, supportive of our local communities

and continually improving our impact on the environment.

4

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Tribute to Ian Gregg 
and Malcolm Simpson by 
Sir Michael Darrington

The Greggs business was started by Ian’s parents in the

bit of an act of faith. However, I had met Ian on a number of

late 30s, selling yeast and eggs from a van. As a young

occasions and as we got to know each other I felt we shared

boy, after his parents bought their first shop and bakery

lots of ideas and had a lot of values in common and that Ian

in 1951, Ian found himself helping with all the tasks in

was somebody to be trusted.

the bakery, as well as studying. Just as Ian qualified as

a lawyer, his father died unexpectedly. 

Ian agreed to help his mother with the business for a

short period but, to his surprise, found he became

enthused by it. At that time, the business comprised

a bakery in Gosforth with one shop and seven delivery

vans and, in those days, the business was mainly

bread, rolls and cakes.

Ian progressively built the business over the next 20 years,

growing it both organically and by acquisition. He developed

the savoury business, putting ovens into all the shops and he

found himself working bakers’ hours. He also reintroduced 

the iconic Stottie Cake.

As those who know him understand, Ian loves working with

people and is excellent at choosing them, which has contributed

to the strong and stable team that was built. He has excellent

personal values which he built into the business in the early

days and which we have progressively developed as the business

has grown. He is remarkable in that he has the vision of an

The business floated on the London Stock Exchange in May

1984 and we carried on growing and improving the business.

Ian became progressively more non-executive in his Chairman’s

role. He retired as Chairman in 2002 but, fortunately for us,

agreed to stay on for a few more years. Ian was amazing in that

the understanding we had was that he would leave me to get

on with doing things my way rather than getting involved

himself. He did this even when, on a number of occasions, he

must have felt pretty uncomfortable. I doubt that anyone else

could have done this as well as Ian. 

Even during his most frenetic times, Ian found time for the

other passion in his life – salmon fishing. He has always been

very involved in conservation – including being the Chairman of

the River Tweed Commissioners and Tweed Foundation, for

which he was awarded an OBE. He is also very generous and

set up a significant charitable trust to help the disadvantaged.

He has a large number of achievements, both in and out of

the business, which have influenced a lot of people.

entrepreneur but was never happier than when he went in to

Ian is a very modest and unassuming man, with great strength

help out with a problem in the bakery.

of character. His retirement from Greggs is the end of an era.

In the early 80s, Ian decided he had done his bit in growing

The AGM also sees the retirement of another pillar of Greggs

Greggs, which was still a private business, and he asked me to

– Malcolm Simpson, who has been Financial Director of Greggs

join and to continue the improvement and expansion of the

since 1975. He was a great help to Ian in the early days and,

business. I came to Greggs as MD in 1983 from a large public

when I joined Greggs in 1983, Malcolm was particularly

company, joining a relatively small family business, which was a

welcoming and supportive in what was initially a challenging time.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

5

Ian Gregg

Malcolm Simpson

Malcolm steered us through our flotation in May 1984. 

I know that I, and many others, will miss them tremendously

He is a larger-than-life character who has had a wide-ranging

and would like to wish them every success and happiness in

involvement in most areas of our business and has made a

the future.

major contribution to our success over many years. He is

very strong minded and (most of the time!) I have appreciated

both his challenging approach as well as his supportiveness. 

Sir Michael Darrington

Managing Director

12 March 2007

Greggs have been very fortunate to have two such excellent

people giving such long-term commitment to the very

successful building of our business.

6

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Report and Business Review
for the 52 weeks ended 
30 December 2006

OUR BUSINESS The directors have pleasure in presenting

Net finance income was reduced by 50 per cent to £1.5 million

their annual report and the audited accounts for the 52 weeks

(2005: £3.0 million) as we returned surplus cash to our

ended 30 December 2006. The comparative period is the

shareholders through increased dividends and share buybacks.

52 weeks ended 31 December 2005.

The directors’ report and business review is set out on

pages 6 to 23.

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 1,300 retail outlets,

trading under the Greggs and Bakers Oven brands.

CHAIRMAN’S STATEMENT

As we had anticipated, 2006 proved to be a challenging

year for the Group. During the year we conducted a

In consequence, pre-tax profit before restructuring costs was

£43.7 million (2005: £50.2 million), a reduction of 12.8 per cent.

After the £3.5 million closure costs arising from the Bakers

Oven restructuring pre-tax profit was 19.8 per cent lower

than in 2005 at £40.2 million.

Before restructuring costs, diluted earnings per share were

262 pence (2005: 279 pence), a reduction of 6.2 per cent.

This compared favourably with the 10.4 per cent decrease in

operating profit, reflecting the benefit of share buybacks.

After the impact of restructuring costs, diluted earnings per

share were 240 pence (2005: 279 pence), a reduction of

14.0 per cent.

comprehensive review of the business, which confirmed

DIVIDEND The Board recommends a final dividend of 78.0

its fundamental strengths in terms of branding, shops,

pence per share (2005: 70.0 pence), an increase of 11.4 per cent.

products and people, but also identified opportunities

Together with the interim dividend of 38.0 pence (2005: 36.0

for improvement. We are therefore making changes to

enable us to become even more focused on our

customers, respond more rapidly to a fast-changing

and increasingly competitive market place, and facilitate

Greggs’ continuing development as a powerful and

innovative national brand.

RESULTS Total Group sales for the 52 weeks ended 

30 December 2006 increased by 3.3 per cent to £551 million

(2005: £533 million). After a flat first half, like-for-like sales

performance improved towards the end of the year. 

The like-for-like sales improvement during the second half 

(28 weeks) was 0.9 per cent, making an increase for the year

as a whole of 0.5 per cent. 

Operating profit, excluding the costs of restructuring the Bakers

Oven business in the North and Scotland, was £42.2 million

(2005: £47.1 million), a reduction of 10.4 per cent giving an

pence), paid in October 2006, this makes a total for the year of

116.0 pence (2005: 106.0 pence). This is a rise of 9.4 per cent,

making 2006 our twenty-second consecutive year of dividend

growth since Greggs came to the stock market in 1984. 

The increased dividend is covered 2.3 times by diluted

earnings per share before restructuring costs (2005: 2.6 times)

and is consistent with our previously stated intention to

progress towards cover of 2.0 times.

Subject to the approval of the Annual General Meeting, the final

dividend will be paid on 25 May 2007 to shareholders on the

register at close of business on 27 April 2007. 

As announced in the interim report, we believe that our

shareholders will benefit from a more efficient balance sheet.

In addition to delivering value through increased dividends, the

Company spent a total of £39.5 million during the year

purchasing 1,036,479 of its ordinary shares for cancellation, at an

operating margin of 7.7 per cent (2005: 8.8 per cent) for the

average price of £37.87 per share. The trustees of the Greggs

year. The principal factors here were the modest like-for-like

Employee Benefit Trust purchased a further 438,829 shares at a

sales progress, including a 2.5 per cent decline in core volumes,

cost of £16.4 million for the future satisfaction of employee share

and a £4.5 million increase in energy costs. These were mitigated

options. The combined effect of these purchases, totalling

to some extent by efficiency improvements and a continuing

£55.9 million, is seen in the reduction of net cash on our balance

effort to bear down on overheads.

sheet from £65.6 million to £19.6 million during 2006.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

7

Derek Netherton, 
Chairman

It is the Board’s intention to renew its authority to buy back

year he has served as an executive director in charge of our

shares at the Annual General Meeting, and to continue to buy

IT function. His contribution to the business cannot be

back shares when it is in the interests of our shareholders 

overestimated. Mike Darrington pays tribute to Ian and Malcolm

to do so.

on pages 4 and 5.

RESULTS OF STRATEGIC REVIEW During 2006 we

PEOPLE This has been a challenging year for all at Greggs, and

completed a thorough review, looking at all aspects of our

I would like to express the thanks of the Board to every member

business, to ensure that it continues to develop in line with our

of our team for their continued commitment to delivering

customers’ needs. In order to accelerate the implementation of

excellent customer service, and for their positive response to

initiatives to extend the appeal and availability of products under

the necessary changes we have made during the year.

the Greggs brand we are creating a new management structure.

Key priorities will include the improvement of our product range

to enhance its appeal as the mass market becomes more

aspirational, and the development of formats and opening hours

that can satisfy demand for food on the go throughout the day.

Action in these areas will be backed by significantly increased

investments in research, advertising and promotion, and in

improving the retail environment through refits and

refurbishments. This programme of change is intended to drive a

progressive acceleration of both top and bottom line growth.

Profitability is also expected to benefit in the medium term from

cost reductions as best practice is implemented across the

business. Mike Darrington discusses these changes in more detail

in his report on pages 8 to 11.

PROSPECTS The more positive sales trend which developed

in the final weeks of 2006 has continued in the current year

to date. Like-for-like sales in the nine weeks to 3 March 2007

have increased by 3.9 per cent, broadly in line with inflation.

Operating profit is in line with our budget and ahead of the

comparable period last year. In our programme to strengthen

and develop the Greggs brand, the emphasis this year will be

very much on evaluating and learning from the results of our

trials, along with the progressive adoption of best practice across

the business. Although we expect to see some near term

benefits from this work, its real objective is to enhance the

growth potential of the Group over the next two to three years.

While additional costs will be incurred as we reorganise and

develop the Greggs brand, overall we expect that 2007 will be a

THE BOARD Raymond Reynolds (47) was appointed to the

year of progress for the Group.

Derek Netherton, 

Chairman

12 March 2007

Board as an executive director in the new role of Retail Director

for the Greggs brand on 18 December 2006. He is charged with

the development of a stronger, more unified and customer-

focused Greggs brand throughout the UK.

Two directors who have made truly exceptional contributions to

the business will retire at our AGM in May. Ian Gregg (67), who

has continued to serve as a non-executive director since August

2002, was Executive Chairman and Managing Director from

1964-84, then Executive Chairman 1984-93 and Non-

Executive Chairman 1993-2002. Greggs is a unique business

in many ways, one of which is the integrity of its values and the

way in which these are embedded throughout the company. Ian

was the inspiration for this as well as many other strengths of

the business. On a personal note I am also very grateful for all

the help that he has given to me since I took over from him as

Chairman. Malcolm Simpson (65), retired as Financial Director in

May 2006 after 31 years on the Board in that role. For the last

8

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Report and Business Review
(continued)

MANAGING DIRECTOR’S REPORT

In 2006, we faced an exceptional increase in energy costs

We are significantly increasing our customer focus to

enable us to drive a stronger and more unified Greggs

brand that can respond more rapidly and effectively 

to changing needs and tastes. We are taking major

initiatives in the areas of management, customers,

products, shops and marketing. These actions will create

a more streamlined Group with the capability to deliver

progressively improving performance through a focus

on innovation and best practice.

TRADING PERFORMANCE Trading conditions during 2006

following the end of a long term electricity supply agreement

and significant hikes in gas and other power costs. In total,

the Group’s energy bill rose by £4.5 million compared with 2005,

and this was the largest single contributor to the £4.9 million

reduction in operating profit before restructuring costs.

Through forward buying we managed to avoid the peak of

the energy cost spike and, as a consequence, these costs in

2007 are likely to be at a similar level to 2006.

Advantageous forward buying also enabled us to mitigate the

effects of a significant increase in the market price of flour,

our most important ingredient, from autumn 2006, as poor

were the most demanding that we have encountered for well

harvests worldwide resulted in a shortage of good quality

over a decade, and these were reflected in our disappointing

milling wheat. Labour, our largest single cost, reflected underlying

like-for-like sales performance. The flat like-for-like sales trend

wage inflation of just under 4 per cent, partially offset by

of the first half (24 weeks) continued for longer than we had

improved scheduling of shop staff hours and a continued drive

expected in the second half, partly because of the effects of an

to enhance efficiency. We also robustly challenged all spending

exceptionally hot summer. Real improvements were achieved,

as part of a determined focus on tighter cost management

against progressively easier comparatives, in the final two

across the Group.

months of the year, with like-for-like sales in the six weeks to 

9 December growing by 2.0 per cent and in the final three

Greggs brand UK. The Greggs brand in the UK recorded a

like-for-like sales decline of 0.3 per cent in the first half and an

weeks to 30 December by 3.3 per cent. As the Chairman has

improvement of 1.2 per cent in the second half, making an

noted, these delivered an uplift of 0.9 per cent over the second

increase of 0.5 per cent for the year. Selling price inflation

half as a whole, making an increase of 0.5 per cent for the year.

averaged 3.1 per cent, once again reflecting improvements to

With our selling price inflation averaging 3.0 per cent, this

our product offer as well as the recovery of cost increases. 

represented a 2.5 per cent decline in core volumes year-on-year.

Bakers Oven brand. Like-for-like sales under the Bakers

The market in which we operate has become progressively

Oven brand grew by 0.8 per cent in the first half and recorded

more competitive, with the proliferation of high street

a marginal decline of 0.1 per cent in the second half, making

convenience formats operated by the major supermarket

an increase of 0.4 per cent for the year as a whole. Selling

groups, and the growth of numerous specialist takeaway food

price inflation averaged 2.6 per cent. 

chains. This has occurred at a time when high street footfall

Greggs Continental Europe. Our Belgian business is now

has in any case been under pressure. The high operational

trading from six shops in Antwerp and Leuven, which are

gearing of the business makes it sensitive to changes in like-

achieving good core sales growth. We plan to open at least

for-like sales.

two more shops in Belgium during 2007.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

9

Sir Michael Darrington
Managing Director

STRUCTURE AND STRATEGY: GREGGS As the

product contains less than 400 Kcalories, less than 10g of fat,

Chairman has noted, we have conducted a comprehensive

less than 4g of saturated fat and less than 2g of salt. The

review of our structure and strategy during 2006. Whilst

range is complemented by a healthy fruit salad pot. Together,

confirming the fundamental strengths of the business, it has

Healthier Options products already account for over 10 per

made us even more determined to drive harder in those

cent of our sandwich sales.

areas where there are opportunities for improvement.

Shops. The strategic review has confirmed the fundamental

Management. We operate in an increasingly fast-moving

strength of our retail property portfolio. We are now seeking

market place, and it is essential that we have the capacity 

to develop our range of outlets and opening times so that

to react quickly to changing consumer demands and tastes.

they are appropriately geared to each meal occasion and to

Following our review, the Board concluded that the previous

local demand for food on the go. In developing our retail

management structure, which allowed considerable autonomy

estate, we will progressively focus on new types of locations

to the eight Greggs divisions in the UK, could no longer meet

where there is demand for high quality takeaway food, as

this key requirement. Raymond Reynolds was therefore

well as on the traditional high street. We will also put increasing

appointed Retail Director in December 2006 to unify the

emphasis on capital investment devoted to enhancing the appeal

Greggs brand and to drive an improvement programme based

of our existing shops through refits and refurbishments.

on an even greater understanding of our customers and

their needs.

Customers. Our market research has confirmed the great

loyalty of the million customers who visit Greggs each day. It

has also highlighted clear opportunities to strengthen

Marketing. All these changes will be supported by a

significant increase in our marketing expenditure, including a

campaign to promote awareness of the Greggs brand. We

will place particular emphasis on the freshness, quality and

enjoyability of our products, including the excellent provenance

engagement with our existing customers and to extend our

of our ingredients. 

appeal to new groups of consumers. Our objective is to develop

As our new structure becomes established, we will speed

the Greggs brand to deliver quality food on the go to customers

up the adoption of best practice throughout the Greggs

throughout the day, with a range that is capable of satisfying

business, both in the product range we offer and in the way

their varying lifestyles and preferences. 

Products. While maintaining our focus on delivering great taste

and enjoyment at competitive prices, we will develop our offer

it is produced and sold. This will help us to drive down costs

as well as building Greggs’ reputation as a consistent,

national brand.

to cater for more aspirational demands. We will continue to

STRUCTURE AND STRATEGY: BAKERS OVEN In August

offer iconic bakery products such as our sausage rolls and

we announced the restructuring of Bakers Oven in the North

doughnuts. These will be complemented by more

and Scotland, involving the closure of these two divisions and

adventurous new products and by further expansion and

the transfer of 49 of their shops either to the Greggs brand

development of our Healthier Options range of wraps, rolls

or the successful Bakers Oven Midlands operation. A further

and sandwiches, which currently comprises seven lines. Each

14 poorly performing shops were closed. These changes have

10

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Report and Business Review
(continued)

MANAGING DIRECTOR’S REPORT
CONTINUED

CAPITAL INVESTMENT Capital expenditure during the

year was £30.0 million (2005: £41.7 million). This was

been implemented in accordance with our plans, and will

significantly below our original budget of £40 million,

deliver the projected profit enhancement of £1.25 million per

principally as the result of site problems which delayed the

annum from 2007. 

We incurred total restructuring costs of £3.5 million, slightly

below our revised estimate but exceeding our original budget

start of work on our new Glasgow bakery, and the scaling

back of planned shop openings. We plan to invest some £39

million in the business during 2007, which will include the

of £2.5 million owing to higher than expected property costs.

Glasgow bakery construction; the completion of a smaller

Since the beginning of the current year we have completed

scale expansion of our South Wales facility; and a substantial

the sale of the Carricks bakery site in Newcastle upon Tyne,

increase in our expenditure on shop refits and

formerly the headquarters of Bakers Oven North. As we have

refurbishments.

previously disclosed, the property profit on this sale will help

to mitigate the costs of closure.

CASH FLOW AND BALANCE SHEET The business

remains consistently highly cash generative, underpinning the

Bakers Oven in the South and Midlands remains a successful

Board’s strategic decision to maintain our long-established,

and profitable business, delivering good returns on our

progressive dividend policy, reduce dividend cover and conduct

investment, and we remain committed to its future growth

a continuing share buyback programme. During the year the

and development.

RETAIL PROFILE We opened 48 new shops during the year

and closed 31, giving us a net increase of 17 units to a total of

1,336 at 30 December 2006. There were a larger number of

closures than usual as a result of the restructuring of Bakers

Company and the Greggs Employee Benefit Trust together

spent £55.9 million on the purchase of shares; the Company

paid dividends to shareholders totalling £12.1 million; and we

made an additional contribution of £5.5 million to our main

pension scheme, reducing its deficit under IAS19 to £1.9 million

Oven in the North and Scotland. Following these changes, our

at 30 December 2006 (2005: £9.7 million).

portfolio at the year end comprised 1,165 shops (2005: 1,098)

under the Greggs brand in the UK, an increase of 67; 165

(2005: 216) under the Bakers Oven brand, a reduction of 51;

and six under the Greggs brand in Belgium, an increase of one. 

We completed 29 comprehensive shop refurbishments and

24 minor refits during the year.

Despite these substantial outlays, we ended the year with net

cash on the balance sheet of £19.6 million, a reduction of

£46.0 million since our previous year end.

COMMUNITY AND ENVIRONMENT We are proud to

have maintained our commitment to the communities in

which we operate during 2006, both through the Company’s

During 2007, we expect to add a net 20 – 25 new shops to

continued charitable donations and the efforts of our employees.

our portfolio, after a continuing programme of action to weed

In total Greggs gave £548,000 to charities during the year

out underperforming outlets. As part of our drive to enhance

(2005: £609,000), amounting to 1.3 per cent of our pre-tax

the customer appeal of our stores, we will accelerate the

profit. This was directed principally through the Greggs

pace of our programme of refurbishments and refits during

Trust and our Greggs Breakfast Clubs scheme, where the

the year.

number of clubs operating in primary schools in

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

11

disadvantaged areas rose from 113 to 124. In addition to this

THE FUTURE We are taking clear steps to address the

our staff helped to raise £345,000 for children’s cancer charities

difficulties we encountered in 2006, and have initiated a

through regional fun runs and over £70,000 for the BBC

programme of change that will build on the enormous

Children In Need appeal. 

We have maintained our drive to improve energy efficiency

and reduce carbon emissions through our SEBA (Save Energy

Be Aware) initiative in all our shops and bakeries. I am pleased

to report that this delivered a 10 per cent reduction in our

energy usage in production during 2006. We have also

continued to pursue various initiatives to increase recycling

and reduce the amount of food waste going to landfill.

PEOPLE Our excellent people have again demonstrated

fundamental strengths of the Group. This will help us to develop

an even more responsive and cost-effective business that can

satisfy the needs of customers, employees and shareholders

alike. We will do so without compromising our core values or

our commitment to delivering excellent products and service.

I am confident that this will provide the most solid of foundations

for the delivery of our vision of long term growth as Europe’s

finest bakery-related retailer.

their dedication to the business, and have worked hard to

Sir Michael Darrington

overcome the challenges created by a more demanding

Managing Director

market place. I would like to record my special appreciation

12 March 2007

of the way those affected by the restructuring of Bakers Oven

pulled together to help us to make those changes as quickly

and smoothly as possible. I would also like to thank and send

our good wishes for the future to two senior members of

our management team who retired this year after long

periods of service: Ian Edgeworth, who had been Personnel

Director at our Group head office in Newcastle upon Tyne

since 1983; and Peter Rossi, who joined the business in 1988

and had been Managing Director of Greggs of Yorkshire since

1997. In addition we have two other significant retirements

coming in 2007 and, as the Chairman has noted, a personal

tribute from me to Ian Gregg and Malcolm Simpson appears

on pages 4 and 5.

12

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Report and Business Review
(continued)

KEY PERFORMANCE INDICATORS

KPI

Definition

2002

2003

2004

2005

2006

Like for like sales growth

Total sales growth

Total number of shops

Capital expenditure

Earnings before interest and tax (EBIT)

Earnings per share (basic)

(a)

(b)

(c)

(d)

(e)

(f)

6.4%

3.3%

5.1%

4.0%

0.5%

11.9%

8.1%

10.3%

5.8%

3.3%

1,202

1,231

1,263

1,319

1,336

£42.1m

£32.4m

£25.1m

£41.7m

£30.0m

£35.3m

£39.2m

£44.7m

£47.1m

£42.2m*

209.2p

230.5p

270.5p

282.1p

263.0p†

DEFINITIONS:

(a) Like-for-like sales growth compares year-on-year cash

(e) EBIT reflects the performance of the business before

sales in our ‘core’ shops, i.e. it is not distorted by shop

financing and taxation impacts.

openings or closures. Refitted shops are included in 

the like-for-like comparison unless there has been a

(f) Earnings per share is calculated by dividing profit

significant change in the trading space. Like-for-like sales

attributable to shareholders (i.e. profit after taxation) by

growth includes selling price inflation.

the weighted average number of ordinary shares

outstanding during the year after adjusting for the effect

(b) Total sales growth is the percentage year-on-year

of own shares held.

change in total sales for the Group.

(c) Total number of shops represents the total number of

shops in operation at the end of the year.

*

†

Before cost of Bakers Oven restructuring (£3.5m), 2006

EBIT after restructuring £38.7m

2006 earnings per share after restructuring costs 241.2p

(d) Capital expenditure is the total cash spent in the year

on investment in tangible fixed assets.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

13

CORPORATE GOVERNANCE 

The Board recognises the importance of, and is

committed to, high standards of corporate governance

and to integrity and high ethical standards in all of its

business dealings.

Richard Hutton FCA (Finance Director), 38, was appointed

to the Board on 13 March 2006. He qualified as a Chartered

Accountant with KPMG and gained career experience with

Procter & Gamble before joining Greggs in 1998. He was

appointed Finance Director on 10 May 2006. Richard is also a

non-executive director of Northern Recruitment Group plc.

The Board considers that it has complied, throughout the

year under review, with the principles of governance set out

Malcolm Simpson FCA (IT Director), 65, qualified as a

Chartered Accountant with what is now known as KPMG.

in Section 1 of the Combined Code on corporate governance

He then worked for eight years within the finance department

published by the Financial Reporting Council (the “Combined

of Procter and Gamble. He joined the Company in 1973 and

Code”) effective during the financial year. 

was appointed Finance Director in 1975. He stepped down

The following statements, together with the Directors'

Remuneration Report on pages 58 to 64, describe how the

from this role in May 2006 and is now responsible for the IT

operations of the Company.

relevant principles and provisions of the Combined Code

Raymond Reynolds (Retail Director), 47, was appointed

were applied to the Company in 2006 and will be relevant

to the Company for the 2007 financial year. 

THE BOARD

Composition

The Board currently comprises the Chairman, 4 executive

and 5 non-executive directors as follows:

Derek Netherton (Chairman), 62, spent his career in

investment banking and retired in 1996 from his position as

joint head of corporate finance at J Henry Schroder & Co

Limited. He is a non-executive director of Next plc and 

St James’s Place plc. He was appointed to the Board on 1 March

2002 and was appointed Chairman in August of the same

year. There have been no significant changes to the Chairman’s

other commitments during 2006. He is Chairman of the

Nominations Committee.

Sir Michael Darrington FCA (Managing Director), 65,

qualified as a Chartered Accountant and then spent 17 years

to the Board on 18 December 2006. He joined Greggs in

retail management in 1986. During the late 1990s, as General

Manager he built a significant new business for Greggs in the

Edinburgh region, and in 2002 he was appointed Managing

Director of Greggs of Scotland.

Stephen Curran, 63, joined the Board in 1981. He was

Chairman of Candover Investments plc from 1999 to 2006,

having previously been Chief Executive of Candover since

January 1991. Prior to joining Candover in May 1981, he was a

managing consultant with Coopers & Lybrand Associates

and then an investment manager with what is now Cinven.

He remains a director of Candover Investments plc and is a

non-executive director of Copthorne Holdings Limited, O.X.I.P.

and the Dakota, Minnesota and Eastern Railroad Corporation.

In 2004 he was appointed as the Senior Independent 

Non-Executive Director. 

Ian Gregg OBE, 67, 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

with United Biscuits, latterly in General Management. During

from a single-shop operation to a multi-divisional specialist

this time he attended the PMD course at Harvard Business

retailer with almost 300 shops by the time of its successful

School. He joined Greggs in 1983 and was appointed Managing

flotation in 1984. Following the appointment of 

Director in January 1984.

Mike Darrington as Managing Director in January 1984,

14

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Report and Business Review
(continued)

CORPORATE GOVERNANCE CONTINUED

Sir Ian Gibson CBE, 60, was appointed to the Board on 

Ian continued in the role of Executive Chairman until July 1993.

He was then invited to become non-executive Chairman,

1 April 2006. He was Chief Executive of Nissan Europe N.V.,

Senior Vice President of Nissan Motor Company (Japan),

which role he handed over to Derek Netherton in 

Deputy Chairman of Asda Group and Chairman of BPB plc.

August 2002.

Bob Bennett, 59, was appointed to the Board in December

He is now a non-executive director of Northern Rock plc

and GKN plc and Chairman of Trinity Mirror plc.

2003. He trained as a Chartered Accountant with Spicer &

Effectiveness 

Pegler and was Group Finance Director of Northern Rock plc

from 1993 until his retirement at the end of January 2007. 

He has been Chairman of the Audit Committee since 2004.

Julie Baddeley, 55, was appointed to the Board in March

2005. She has held senior executive roles in the Woolwich

plc (where she was responsible for Information Technology

and Human Resources), Accenture and Sema Consulting. Julie

is a non-executive director of Yorkshire Building Society,

Computerland UK and is an Associate Fellow of the Said

Business School, Oxford. Julie was appointed as Chair of the

Remuneration Committee in 2005.

The Board, under the chairmanship of Derek Netherton, meets

regularly to discharge its duties. At these meetings, it reviews

Group strategy, performance, resources, risk management

procedures and other matters reserved for the Board. Whilst

the executive responsibility for running the Company’s business

rests ultimately with the Managing Director, Mike Darrington,

the non-executive directors ensure that the strategies proposed

by the executive directors are fully discussed and critically

examined prior to adoption. During 2006, the Board met

five times and the number of meetings attended by each

director was as follows:

Main Board

Audit Committee

Remuneration Committee Nominations Committee

Number of meetings held

Derek Netherton

Mike Darrington

Malcolm Simpson

Richard Hutton
(appointed 13 March 2006)

Raymond Reynold
(appointed 18 December 2006)

Ian Gregg
(retired from the Remuneration Committee 9 March 2006)

Stephen Curran

Julie Baddeley

Ian Gibson
(appointed 1 April 2006, appointed to the 
Remuneration Committee 10 May 2006 )

Bob Bennett

Susan Johnson
(resigned 30 September 2006)

5

5

5

5

4

-

5

4

5

4

5

3

3

-

-

-

-

-

-

2

3

2

3

2

6

-

-

-

-

-

1

5

6

4

6

-

2

2

2

-

-

-

2

2

2

1

2

1

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

15

The Board has adopted a paper identifying the separation of

■ Ian Gregg is a member of the Company’s pension

the roles of the Chairman and the Managing Director. The

scheme and a former employee, Managing Director and

Chairman sets the agenda for Board meetings and ensures

Chairman of the Company.

that the Board is supplied in a timely manner with information

in a form and of a quality appropriate to enable it to discharge

■ Stephen Curran and Ian Gregg have both served on the
Board for more than nine years from the date of their

its duties. The Board considers that it effectively leads and

first election.

controls the Company. All directors take decisions objectively

and in the interests of the Company. The non-executive

directors scrutinise the performance of management in meeting

agreed goals and objectives and monitor the reporting of

performance. All directors receive induction training on joining

the Board and regularly update and refresh their knowledge

through reading, attendance on relevant courses and/or activities

outside the Company. 

The Board meets with the senior management at a different

operating division each year. In addition, as part of the process

of maintaining an awareness of the Company’s activities and

assessing the ability of the management team, several members

of the senior management team are invited to attend Board

meetings and/or to present papers to the Board. This process

also affords senior managers the opportunity to bring matters

to the attention of the Board. 

The Board is satisfied that a strategy is in place for orderly

succession to the Board and to positions of senior management

so as to maintain an appropriate balance of skills and experience

within the Company and on the Board. 

After carefully reviewing the guidance in the Combined Code,

all of the non-executive directors are considered by the Board

to be independent in character and judgement and to be free

from any business or other relationship or circumstance which

is likely to affect or to interfere with the exercise of their

independent judgement. The following relationships might

appear to be capable of affecting the individual non-executive

director’s independence. However, having considered these

relationships carefully, the Board is of the view that they do

not and that the individuals concerned are of sufficient

strength of character to avoid allowing their independence

to be so compromised:

The Board is grateful for the continued involvement of Ian

and Stephen, who bring considerable experience and insight

to Board discussions. Both are now required by the Company’s

Articles of Association to seek re-election to the Board by

shareholders annually (see below).

The Company’s Articles of Association require that all directors

must retire and seek re-election at the first AGM following

appointment. Thereafter, one half of the directors (other than

those appointed since the last AGM) being those who have

been in office longest since last re-election and any other

director who has not been elected or re-elected at either of

the two preceding AGMs must seek re-election at each AGM.

Any non-executive director who has served on the Board for

more than nine years must seek re-election annually.

All directors are able to receive training and to take

independent professional advice at the expense of the Company.

They also have direct access to the Company Secretary, who

is responsible for advising the Board, through the Chairman,

on all governance matters. 

During the year, the Chairman met with the non-executive

directors without the executive directors present. The Senior

Independent Director meets the non-executive directors

without the Chairman present annually to appraise the

Chairman's performance. The performance of the Board, its

Committees and of all directors is evaluated annually by a

formal and rigorous process. Each director completes a

questionnaire. The results are fed back to the Chairman and

the Senior Independent Director and then to the Board for

discussion. These discussions are used to identify actions to

improve effectiveness and also to identify individual and

collective training needs.

16

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Report and Business Review
(continued)

CORPORATE GOVERNANCE CONTINUED

The Remuneration Committee currently consists entirely

Board Committees 

The Board delegates some of its activities to the following

committees, each of which has written terms of reference,

which are available on the Company’s website. The Company

Secretary acts as secretary to each of these Committees.

The Audit Committee currently consists of four

independent non-executive directors (Bob Bennett - Chairman,

Stephen Curran, Julie Baddeley and Ian Gibson). 

The Committee’s main functions are to endeavour (i) to ensure

that the accounting and financial policies of the Company

are proper and effective; (ii) to monitor the integrity of the

accounts and information published by the Company; (iii) to

review the internal financial controls and the Group’s approach

to risk management; and (iv) to monitor compliance with

the Listing Rules and the recommendations of the

Combined Code. 

of independent non-executive directors (Julie Baddeley –

Chair, Stephen Curran, Bob Bennett and Ian Gibson). The

Committee’s main duties are to determine the basic salary,

benefits in kind, terms and conditions of employment,

performance-related bonuses, share options and pension

benefits of the executive directors and the Chairman on

behalf of the Board. The Committee is also responsible for

the operation of the Company’s share option schemes and,

when requested by the Board or by the Managing Director,

for monitoring and making recommendations in respect of

the level and structure of remuneration for senior management.

A separate Executive Director Committee sets, after

discussion with the Chairman, the fees for the non-executive

directors so as to ensure that no director is involved in setting

his or her own remuneration. The Directors’ Remuneration

Report is set out on pages 58 to 64 of this Annual Report. 

The Committee, in performing these functions, reviews the

The Nominations Committee currently comprises Derek

annual and interim accounts issued to shareholders, compliance

Netherton - Chairman, all of the non-executive directors and

with financial reporting standards and the size and remit of the

Mike Darrington. The Committee’s main functions are to

internal audit function. The Committee also considers and

review the balance and constitution of the Board; to advise

makes recommendations to the Board in relation to the

the Board as to whether directors retiring by rotation should

independence and objectivity of the external auditors (including

the impact of any non-audit work undertaken by them) and

their suitability for re-appointment. The Audit Committee

determines the scope of the external audit in discussion with

the external auditors and agrees their fees in respect of the

audit. The Committee normally meets with the Finance

Director and the external auditors in attendance, although time

is set aside annually for discussion between the Committee and

be nominated for re-election by the members; and to approve

and manage the process for setting the specification for all

Board appointments, identifying candidates who meet that

specification and making recommendations to the Board on

the basis of merit and compliance with objective criteria in

respect of all new Board appointments. 

Each of the Committees is provided with sufficient resources

the external auditors and with the internal auditors, in each

to undertake its duties.

case in the absence of all executive directors, and the Committee

has the power to engage outside advisers if it sees fit. The

Committee also monitors and reviews the effectiveness of the

internal audit activities.

RELATIONS WITH SHAREHOLDERS The Chairman

ensures that there is effective communication with individual

and institutional shareholders through the announcement of

regular trading updates, as well as general presentations after

The Combined Code requires the Board to be satisfied that

announcement of the interim and preliminary results and the

at least one member of the Audit Committee has recent 

posting of results on the Company’s website. The Board receives

and relevant financial experience – the Board is satisfied in

reports on any comments received from shareholders

this respect.

following these presentations.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

17

The Board considers that the AGM is the main forum for

Board of Directors

communication with investors, with the Chairmen of the Board

The Board takes a proactive approach to the management

and its Committees available to answer any issues raised

and any newly appointed directors being available to meet

shareholders. In addition, the Company Secretary and the

Company’s Brokers draw the attention of the Board to all

of all forms of risk, and views risk management as a vital

constituent of its role. At each Board meeting, the

effectiveness of the controls relating to the most significant

risks (i.e. those which may restrict the Company’s ability to

meet its objectives) are monitored and reviewed. The Audit

relevant shareholder communications. The Board also

Committee, on behalf of the Board, conducts a formal review

reviews briefings and comments by analysts in order to maintain

of risks and risk management procedures and reports its

an understanding of market perceptions of the Company.

The Senior Independent Director is available to shareholders

if they have concerns which contact through the normal channels

of the Chairman, Managing Director or Finance Director have

failed to resolve, or for which such contact is not appropriate.

At the AGM, the balance of proxy votes cast for and against

each resolution and the number of abstentions is displayed.

All substantial issues, including the receipt of the annual report

findings to the Board. Remedial action is determined where

appropriate. For some key risks, where it is felt necessary,

specialist advice is sought from external agencies and

professional advisers. The Board also reviews, at least annually,

the level and scope of insurance cover maintained within the

business. The Board receives reports from management on

significant changes in the business and external environment

which might affect the risk profile. It has also set in place a

system of regular hierarchical reporting, which provides for

relevant details and assurances on the assessment and control

and accounts, are proposed at the AGM as separate resolutions.

of risks to be given to it.

RISK MANAGEMENT The Board is ultimately responsible

for the Group’s system of internal control, which covers all

aspects of the business, and for reviewing its effectiveness.

Operating Board

The Operating Board, answerable directly to the Managing

Director, is responsible for implementing decisions of the

However, any such system can only be designed to manage,

Main Board and providing protection against the major risks

rather than eliminate, the risk of failure to achieve the

by various techniques, including sharing best practice,

Company’s objectives and, therefore, is only able to provide

monitoring, supervision and training.

reasonable, and not absolute, assurance against material

misstatement or loss. The directors regularly review the risks

Risk Committee

A Risk Committee, consisting of the heads of each management

to which the Company is exposed, as well as the operation

function within the business, has responsibility for analysing,

and effectiveness of the system of internal controls. This is

assessing, measuring and understanding the Company’s risk

an ongoing process which accords with the guidance in the

environment, as well as devising a sound risk management

Turnbull report, involving the identification, evaluation and

management of the significant risks faced by the Company.

Key elements of the internal control system, which have

been in place during the whole of the year under review and

up to the date of approval of this Annual Report and

accounts, are:

strategy for review and approval by the Board. The Risk

Committee reports its findings and important changes to the

Board on a regular basis through personal presentation,

narrative reports and key performance indicators (internal and

external to the organisation) and through the Audit Committee.

The Risk Committee also feeds the results of its assessments

back into the business planning process at least annually.

18

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Report and Business Review
(continued)

CORPORATE GOVERNANCE CONTINUED

Health and Safety

The risks are assessed on a regular basis across all functional

areas but, in particular, the areas of food safety, health and

The Company is committed to improving continuously the

working environment with the objective that accidents and

safety, information flow, asset protection and regulatory

work related ill health should progressively be reduced. An

requirements.

The Board considers the key risks to the Group to be as follows:

External factors

Changes in the retail trading environment or in customer

preferences will clearly have an effect on the business. The

Company continually monitors market trends, the performance

of its competitors and the performance of its own products

and retail formats. Consumer research is carried out and key

market reports are monitored.

Operational

occupational health strategy has been produced with Health

and Safety Officers and Occupational Nurses appointed in

every division. Targets are set and programmes are devised

to implement them. This approach involves a rigorous health

assessment, during which hazards are identified, risks assessed,

control measures applied and improvement actions agreed

to manage residual risks.

Financial Reporting

The Company operates a comprehensive financial control

system that incorporates Divisional Financial Controllers who

The safety of our products, employees and customers is

have responsibility for implementation of the Company’s

paramount. Detailed systems are in place to ensure that we

financial management policies within each division. Each

are operating safely and these systems are subject to regular

Divisional Financial Controller works closely with their

audit to ensure compliance. High priority is given to

implementing any resulting recommendations.

respective Divisional Managing Director to monitor

performance at Divisional Board level as against planned and

Detailed plans are in place for all our major production facilities

prior year comparatives. In addition, assets and liabilities are

to maintain business continuity in the event of any potentially

disruptive occurrence. 

Organisational

The success of the Company is dependent upon the efforts

scrutinised at several levels on a regular basis and remedial

action taken where required. A comprehensive annual planning

process is carried out which determines expected levels of

performance for all aspects of the business. Each Divisional

and abilities of its employees. The Company has established

Financial Controller also reports directly to the Finance

remuneration packages that will attract, retain and motivate

Director on technical matters.

individuals with appropriate skills and experience. A senior

management executive training programme is in place together

Whistle Blowing

with group-wide processes for the training and development

The Company has adopted “whistle blowing” procedures

of all employees. 

Policies and Procedures

Policies and procedures, covering control issues across

appropriate aspects of the business, are defined and

communicated to the respective managers and staff at all levels.

Adherence is monitored and reported upon on an ongoing basis.

enabling employees to bring matters to the attention of the

senior management and for the confidential, proportionate

and independent consideration and follow-up of any matter so

raised. The “whistle blowing” procedures are reviewed

regularly by the Audit Committee.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

19

Internal Audit

are set out in note 26 to the accounts. Details of directors’

The internal audit function visits every division on an annual

share options are set out in the Directors’ Remuneration

basis and reviews performance of the division across a

Report on pages 58 to 64.

range of financial and non-financial requirements, reporting

findings to the relevant senior managers and direct to the

Audit Committee.

On 13 March 2006, 1 April 2006 and 18 December 2006

Richard Hutton, Sir Ian Gibson and Raymond Reynolds were

respectively appointed as additional directors and on 

The Board confirms that it has reviewed the effectiveness of

30 September 2006, Susan Johnson retired as a non-

the system of internal control (covering all material controls,

executive director.

including financial, operational, compliance and risk

management systems) during the year under review and up

to the date of approval of the annual report and accounts.

ACCOUNTABILITY, AUDIT AND GOING CONCERN

The Board acknowledges its responsibility to present a

balanced and understandable assessment of the Company’s

In accordance with the Company’s Articles of Association,

Stephen Curran, Ian Gregg, Raymond Reynolds, 

Derek Netherton, Malcolm Simpson, Richard Hutton and 

Bob Bennett retire from the Board. All, except Ian Gregg

and Malcolm Simpson who have decided not to seek re-

election, being eligible, offer themselves for re-election. 

position and prospects. This is fulfilled by the statements

DIRECTORS’ INDEMNITIES As at the date of this report,

contained in the Chairman’s statement and Managing Director’s

indemnities are in force under which the Company has agreed

report, which supplement the statutory accounts themselves.

to indemnify the directors, to the extent permitted by law, 

A statement of directors’ responsibilities in respect of the

in respect of losses arising out of or in connection with the

preparation of accounts is given on page 24. A statement of

execution of their duties, powers or responsibilities as

auditors’ responsibilities is given in the report of the auditors

directors of the Company. The indemnities do not apply in

on page 25.

situations where the relevant director has been guilty of fraud

or wilful misconduct.

After making enquiries, the directors have a reasonable

expectation that the Group has 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.

FIXED ASSETS 

In the opinion of the directors the market value of all of the

Group’s properties is not significantly different from their

historical net book amount.

DIRECTORS AND THEIR INTERESTS

The names of the directors in office during the year together

with their relevant interests in the share capital of the Company

(as defined in the Companies Act 1985) at 30 December 2006

and 31 December 2005 (or at date of appointment if later)

20

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Report and Business Review
(continued)

SUBSTANTIAL SHAREHOLDINGS 

At 12 March 2007, the only notified interests of substantial

shareholdings in the issued share capital of the Company were:

Number of
shares held

Percentage 
of issued
share capital

Aberforth Partners LLP

1,231,091 

11.03% 

A.J. Davison (as trustee of 
various settlements)

Baillie Gifford & Co

Schroders

949,763 

873,700 

572,421 

Aegon Asset Management UK plc

541,950 

F.K. Deakin*

Prudential plc

Standard Life

FMR Corporation

F.M.E. Nicholson*

Aviva plc

Legal and General Investment 
Management Limited

Mrs G.V. Richardson and family

529,036 

487,516 

459,141 

446,509 

375,868 

363,975 

395,527 

360,449 

8.51% 

7.83% 

5.13% 

4.86% 

4.74% 

4.36% 

4.11% 

4.00% 

3.37% 

3.26% 

3.54% 

3.23% 

* Each of F.K. Deakin and F.M.E. Nicholson holds 375,868 shares

jointly with A.J. Davison as trustees of various settlements

within the numbers noted above. Various other trustees jointly

CORPORATE SOCIAL RESPONSIBILITY
Greggs plc believes that as a major employer, a provider of

food products to the public, and a plc with obligations to its

shareholders, the Company has a responsibility to conduct

its business with integrity, to act responsibly, to address the

impacts of our business on the environment, and to give

something back to the wider communities in which we operate.

This responsibility is delivered through the following:

OUR CUSTOMERS, PEOPLE AND SUPPLIERS

“Our Values” are embraced by the Board and expected of

all colleagues:

“We will be enthusiastic and supportive in all that we do,

open, honest and appreciative, treating everyone with

fairness, consideration and respect.”

Our Values are a basis for all of our activities. Our employees

are expected to use them in their relationships with each

other and with customers and suppliers. Our Values are our

‘code of conduct’ and are the framework within which the

business manages its activities and operates.

EMPLOYMENT POLICIES We are committed to promoting

policies which are designed to ensure that employees and

those who seek to work for us are treated equally,

regardless of sex, marital status, creed, colour, race or

hold shares with A.J. Davison above, some of whom, by reason

ethnic origin.

of such joint holdings and other holdings in their own name,

have declarable interests as follows: K.C. McCann (3.66%

jointly held with A.J. Davison and others) and N.A. Instone

(3.66% jointly held with A.J. Davison and others).

It is our policy to give full and fair consideration to applications

for employment by people who are disabled, to continue

wherever possible the employment of staff who become

disabled and to provide equal opportunities for the career

AUTHORITY TO PURCHASE SHARES

development of disabled employees.

At the AGM on 10 May 2006, the shareholders passed a

The number and dispersion of the Group’s operating locations

resolution authorising the purchase by the Company of its

own shares to a maximum of 1,219,521 ordinary shares of

20p each. That authority has been used as to 676,479 shares

as at 30 December 2006. The balance remains in force until

make it difficult, but essential, to communicate effectively with

employees. Communication with our shop staff is principally

through the operational structure of shop area and divisional

management.

the conclusion of the AGM in 2007 or 8 August 2007,

We communicate with our bakery staff by regular briefings and

whichever is the earlier.

letters. All staff receive a copy of divisional and Group gazettes.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

21

The Group operates Profit Sharing and Savings Related Share

including provision of fresh bread from local Greggs or

Option Schemes to encourage its employees to identify with

Bakers Oven shops, together with the necessary equipment.

its corporate objectives.

Food Safety and Health & Safety are at the forefront of how

we operate. We insist on providing our customers with good

quality food products and assurances of food safety. Our robust

systems also seek to protect the health & safety of Greggs’

customers and its employees.  

PAYMENTS TO SUPPLIERS Supplier credit is an important

Greggs and Bakers Oven staff work with school teachers to

encourage parents, grandparents and other volunteers to run

the clubs, including serving the breakfasts, thereby helping

them to help others in their own communities. In 2006, the

number of Breakfast Club schemes increased from 113 to 124.

The concept has been validated by external independent

research, which has shown that Breakfast Club attendance

encourages children to get to school on time and increases

factor in the success of the Group. Whilst the Group does

attentiveness in class. 

not follow any code or standard on payment practice,

payments to suppliers are made in accordance with the

Group’s normal terms and conditions of business except

where varied terms and conditions are agreed with individual

The Greggs Cancer Run is an annual event which has raised

over £3 million since its inception in 1983. In 2006, Cancer

Runs took place in six divisions raising a total of £345,000.

suppliers, in which case these prevail. Where disputes arise

The Company’s five year investment in the Newcastle

we attempt to resolve them promptly and amicably to

Employment Bond matured in the summer of 2006 after

ensure delays in payment are kept to a minimum.

The average creditor payment period for the Company

and the Group at 30 December 2006 was 36 days (2005:

39 days).

helping hundreds of people into jobs and creating many

successful new enterprises. The investment of £500,000 has

been rolled over into the North East Enterprise Bond for a

further five year period. This bond is also secured as to

repayment by Northern Rock plc. The investment is at zero

WIDER COMMUNITIES In 2006, Greggs plc directly

rate interest, with the interest foregone to be used to fund 

donated 1.3% of pre-tax profit to charity. 

Greggs Trust is a registered charity, founded by Ian Gregg in

1987. Its main objective is the alleviation of the effects of

a major private sector initiative to trigger and encourage

new business start-ups and to evoke a change in the enterprise

culture over the long-term across the North East.

poverty and social deprivation in the areas where the Company

On a nationwide basis, Greggs made charitable donations of

trades. Its income in 2006 was £760,484, derived from the

£548,000 in 2006, a significant proportion of which was directed

Greggs plc donation, from employees under the Give As

through the Greggs Trust.

You Earn Scheme and staff fund raising activities. The balance

was received in the form of donations from major

shareholders and income from investments (including shares

in Greggs plc) held by the Trust. Funds are distributed by

the Trustees and via staff Charity Committees operating across

the country, offering support to good causes within our

trading areas.

In addition to the schemes listed above, Greggs plc staff

throughout the country participate voluntarily in a wide range

of charity fund raising, which makes an additional meaningful

contribution to the wider communities in which we operate.

By their dedication and devotion, our employees are a true

credit to the Greggs and Bakers Oven names, and the real

benefits of what they achieve are inestimable. It is thanks to

The Greggs Breakfast Club scheme is designed to get children

these employees and their efforts that as a Company we are

in selected primary schools off to a better start by providing

able to make a significant contribution to the communities in

them with free breakfasts. Greggs funds a nutritious breakfast,

which we operate.

22

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Report and Business Review
(continued)

CORPORATE SOCIAL RESPONSIBILITY
CONTINUED

THE ENVIRONMENT The Company recognises the

importance of protecting our environment for future

generations and is committed to carrying out its activities

with due consideration for the environmental impacts of its

operations and in line with Our Values.

PROGRESS DURING 2006 Over the past 12 months we

have made good progress against our environmental policy

and commitment. Carbon reduction through our SEBA energy

efficiency drive has led to achieving our business plan target

of 10% reduction in energy usage from production operations.

Partnership work has been carried out with the Carbon Trust

to identify carbon reduction measures in both production sites

ENVIRONMENT POLICY We are committed to an on-going

and shops and as a result of this work monitoring and targeting

programme of continual reduction of any adverse impacts of

systems are being trialled in two parts of the country as an

our operations in achieving our long-term business objectives.

introduction to full energy targeting. 

To manage this, the Company is continuing to progress the

following:

Recognised externally trained environmental managers are

now in place across the business and this has led to

■ compliance with all relevant environmental legislation,

increased activity across the Group relating to recycling and

regulation and other requirements applicable to the

waste reduction. For example, the Greggs of Yorkshire

Company or to which the Company subscribes;

■ reduction of waste at source via the efficient use of

resources and encourage reuse and recycling of waste;

■ increasing energy efficiency at all its sites; 

recycling centre in Leeds has led to a reduction in waste to

landfill (£45,000 annual saving) and resulted in fewer collections

at shop level also assisting in reducing damage via transport

emissions. We are exploring the possibility of waste to energy

technology, and how we might develop this in the future. 

■ monitoring and improving the performance of vehicles

AUDITORS

owned by Greggs plc; 

■ working towards ensuring that policies and procedures

AUDITOR INDEPENDENCE AND POLICY ON THE

USE OF THE AUDITORS FOR NON-AUDIT WORK

are in place so that accidents/incidents with potential

The Audit Committee has reviewed whether, and is satisfied

adverse environmental impact are controlled as far as is

that, the Company’s auditors, KPMG Audit Plc, continue to

reasonably practicable;

■ progressively making employees aware of the

environmental issues relevant to their role within 

Greggs plc;

■ taking into account the adverse impact on the environment

of any capital expenditure project.

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 (non-audit fees amounted to £78,000

during 2006 and related to taxation compliance services and

pensions advice). The Audit Committee's policy to ensure that

the auditor's objectivity is not impaired by non-audit work is

that the Company should be able to incur fees of up to

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

23

£100,000 per year on non-audit work (inclusive of tax

compliance advice). Any fees in excess of this must be

discussed in advance with the Chairman of the Audit

Committee. The Company’s internal audit function assists 

in the monitoring of systems of control and augments the

examination carried out by the external auditors.

DISCLOSURE OF INFORMATION TO AUDITORS

Each of the directors who held office at the date of approval

of this directors' report confirms that, so far as he/she is

individually aware, there is no relevant audit information of

which the Company's auditors are unaware; and that he/she

has taken all the steps that he/she ought to have taken as a

director to make himself/herself aware of any relevant audit

information and to establish that the Company's auditors are

aware of that information.

In accordance with Section 384 of the Companies Act 1985,

a resolution for the re-appointment of KPMG Audit Plc as

auditors of the Company will be proposed at the forthcoming

Annual General Meeting.

By order of the Board

Andrew Davison

Secretary 

Greggs plc (CRN 502851) 

Fernwood House

Clayton Road

Jesmond

Newcastle upon Tyne

NE2 1TL

12 March 2007

24

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Statement of Directors’ 
responsibilities in respect of the 
annual report and accounts

The directors are responsible for preparing the annual report

The directors are responsible for keeping proper accounting

and the accounts, in accordance with applicable law and

records that disclose with reasonable accuracy at any time the

regulations.

Company law requires the directors to prepare group and

parent company accounts for each financial year. Under that

law they are required to prepare the group accounts in

accordance with IFRSs as adopted by the EU and applicable

financial position of the parent company and enable them to

ensure that its accounts comply with the Companies Act 1985.

They have a general responsibility for taking such steps as are

reasonably open to them to safeguard the assets of the Group

and to prevent and detect fraud and other irregularities.

law and have elected to prepare the parent company accounts

Under applicable law and regulations, the directors are also

on the same basis.

The group and parent company accounts are required by law

and by IFRSs as adopted by the EU to present fairly the financial

responsible for preparing a Directors’ Report, Directors’

Remuneration Report and Corporate Governance Statement

that comply with that law and those regulations.

position of the group and parent company and the performance

The Directors are responsible for the maintenance and

for that period; the Companies Act 1985 provides in relation

integrity of the corporate and financial information included

to such accounts that references in the relevant part of that

on the Company’s website. Legislation in the UK governing

Act to accounts giving a true and fair view are references to

the preparation and dissemination of accounts may differ from

their achieving a fair presentation. 

legislation in other jurisdictions.

In preparing each of the group and parent company accounts,

the directors are required to:

■ select suitable accounting policies and then apply 

them consistently;

■ make judgements and estimates that are reasonable 

and prudent;

■ state whether they have been prepared in accordance

with IFRSs as adopted by the EU.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

25

Independent auditors’ report 
to the members of Greggs plc

We have audited the group and parent company accounts

opinion, the information given in the Directors’ Report is

(the “accounts”) of Greggs plc for the 52 weeks ended 30

consistent with the accounts.

December 2006 which comprise the consolidated income

statement, the consolidated and parent company balance

sheets, the consolidated and parent company cashflow

statements, the consolidated and parent company statements

of recognised income and expense and related notes. The

accounts have been prepared under the accounting policies

set out therein. We have also audited the information in the

Directors’ Remuneration Report that is described as having

been audited.

This report is made solely to the Company’s members, as

a body, in accordance with section 235 of the Companies

Act 1985. Our audit work has been undertaken so that we

might state to the Company’s members those matters we

are required to state to them in an auditor’s report and for

no other purpose. To the fullest extent permitted by law,

we do not accept or assume responsibility to anyone other

than the Company and the Company’s members as a body,

for our audit work, for this report, or for the opinions we

have formed.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS

AND AUDITORS The directors’ responsibilities for preparing

the Annual Report, the Directors’ Remuneration Report and

the accounts in accordance with applicable law and

International Financial Reporting Standards (IFRSs) as adopted

by the EU are set out in the Statement of Directors’

responsibilities on page 24.

Our responsibility is to audit the accounts and the part of

the Directors’ Remuneration Report to be audited in

accordance with relevant legal and regulatory requirements

and International Standards on Auditing (UK and Ireland).

In addition we report to you if, in our opinion, the Company

has not kept proper accounting records, if we have not received

all the information and explanations we require for our audit,

or if information specified by law regarding directors’

remuneration and other transactions is not disclosed.

We review whether the Corporate Governance Statement

reflects the Company’s compliance with the nine provisions

of the 2003 Combined Code specified for our review by the

Listing Rules of the Financial Reporting Authority, and 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 governance procedures or its risk and

control procedures.

We read the other information contained in the Annual Report

and consider whether it is consistent with the audited accounts.

We consider the implications for our report if we become

aware of any apparent misstatements or material

inconsistencies with the accounts. Our responsibilities do not

extend to any other information.

BASIS OF AUDIT OPINION We conducted our audit in

accordance with International Standards on Auditing (UK and

Ireland) issued by the Auditing Practices Board. An audit

includes examination, on a test basis, of evidence relevant

to the amounts and disclosures in the accounts and the part

of the Directors’ Remuneration Report to be audited. It also

includes an assessment of the significant estimates and

judgements made by the directors in the preparation of the

accounts, and of whether the accounting policies are appropriate

to the Group’s and parent company’s circumstances,

We report to you our opinion as to whether the accounts give

consistently applied and adequately disclosed. 

a true and fair view and whether the accounts and the part

of the Directors’ Remuneration Report to be audited have

been properly prepared in accordance with the Companies

Act 1985 and, as regards the group accounts, Article 4 of

the IAS Regulation. We also report to you whether, in our

26

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Independent auditors’ report 
to the members of Greggs plc (continued)

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 assurance that the accounts and the part of the

Directors’ Remuneration Report to be audited are free from

material misstatement, whether caused by fraud or other

irregularity or error. In forming our opinion we also evaluated

the overall adequacy of the presentation of information in the

accounts and the part of the Directors’ Remuneration Report

to be audited.

OPINION

In our opinion:

■ the Group accounts give a true and fair view, in accordance
with IFRSs as adopted by the EU, of the state of the

Group’s affairs as at 30 December 2006 and of its profit

for the 52 weeks then ended;

■ the parent company accounts give a true and fair view,
in accordance with IFRSs as adopted by the EU as applied

in accordance with the Companies Act 1985, of the state

of the parent company’s affairs as at 30 December 2006;

■ the accounts and the part of the Directors’ Remuneration
Report to be audited have been properly prepared in

accordance with the provisions of the Companies Act 1985

and, as regards the group accounts, Article 4 of the IAS

Regulation; and

■ the information given in the Directors’ Report is consistent

with the accounts.

KPMG Audit Plc

Chartered Accountants

Registered Auditor 

Newcastle upon Tyne

12 March 2007

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

27

Consolidated Income Statement

for the 52 weeks ended 30 December 2006

(2005: 52 weeks ended 31 December 2005)

Revenue

Cost of sales

Gross profit

Distribution and selling costs

Administrative expenses

Operating profit

Finance income

Finance expenses

Profit before tax

Income tax

Profit for the financial year attributable to equity holders of the parent

Basic earnings per share 

Diluted earnings per share 

Note

1

2

2

2

6

7

3-5

9

10

10

2006
£’000
Excluding 
Bakers Oven
restructuring 
costs

550,849

(209,455)

341,394

2006
£’000
Total 

2005
£’000
Total 

2006
£’000
Bakers Oven
restructuring
costs
(Note 4) 

-

550,849

533,435 

(68)

(68)

(209,523)

(203,346) 

341,326

330,089

(262,917)

(2,947)

(265,864)

(247,188)

(36,232)

(483)

(36,715)

(35,758)

42,245 

(3,498)

38,747 

47,143

1,579 

(87)

- 

- 

1,579 

3,106

(87)

(90)

43,737 

(3,498)

40,239 

50,159

(14,227)

1,049 

(13,178)

(16,085)

29,510 

(2,449)

27,061

241.2p

239.9p

34,074 

282.1p

278.9p

Consolidated Statement of Recognised Income and Expense

for the 52 weeks ended 30 December 2006

(2005: 52 weeks ended 31 December 2005)

Actuarial gains / (losses) on defined benefit pension plans

Tax on items taken directly to equity

Net income /(expense) recognised directly in equity

Profit for the financial year

Total recognised income and expense for the financial year
attributable to equity holders of the parent

Note

21

9

22 

2006

£’000

2,741

(822)

1,919

27,061

2005

£’000 

(2,345)

704

(1,641)

34,074

28,980

32,433

Parent Company Statement of Recognised Income and Expense

for the 52 weeks ended 30 December 2006

(2005: 52 weeks ended 31 December 2005)

Actuarial gains / (losses) on defined benefit pension plans

Tax on items taken directly to equity

Net income / (expense) recognised directly in equity

Profit for the financial year 

Total recognised income and expense for the financial year

Note

21

9

8

22

2006

£’000

2,741

(822)

1,919

26,332

28,251

2005

£’000 

(2,345)

704

(1,641)

34,226

32,585

28

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Consolidated Balance Sheet

at 30 December 2006

(2005: 31 December 2005)

ASSETS

Non-current assets

Property, plant and equipment

Current assets

Inventories

Trade and other receivables

Cash and cash equivalents

Asset held for sale

Total assets

LIABILITIES

Current liabilities

Trade and other payables

Current tax liabilities

Non-current liabilities

Defined benefit pension liability

Other payables

Deferred tax liability

Total liabilities

Net assets

EQUITY

Capital and reserves

Issued capital

Share premium account

Capital redemption reserve

Retained earnings

Total equity attributable to equity holders of the parent

Note

2006

£’000

2005

£’000 

11

14

15

16

17

18

19

21

20

13

22

22

22

22

184,325

180,826

8,429

16,026

19,585

275

44,315

228,640

(61,295)

(5,467)

(66,762)

(1,883)

(90)

(15,014)

(16,987)

(83,749)

144,891 

2,232 

13,533 

207 

128,919 

144,891 

7,713

15,861

65,602

-

89,176

270,002

(58,686)

(8,086)

(66,772)

(9,730)

(98)

(11,927)

(21,755)

(88,527)

181,475

2,439

13,440

-

165,596

181,475

The accounts on pages 27 to 57 were approved by the Board of Directors on 12 March 2007 and were signed on its behalf by

M.J. Darrington } Directors

R.J. Hutton

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

29

Parent Company Balance Sheet

at 30 December 2006

(2005: 31 December 2005)

Note

2006

£’000

2005

£’000 

ASSETS

Non-current assets

Property, plant and equipment

Investments

Current assets

Inventories

Trade and other receivables

Cash and cash equivalents

Total assets

LIABILITIES

Current liabilities

Trade and other payables

Current tax liabilities

Non-current liabilities

Defined benefit pension liability

Other payables

Deferred tax liability

Total liabilities

Net assets

EQUITY

Capital and reserves

Issued capital

Share premium account

Capital redemption reserve

Retained earnings

Total equity attributable to equity holders

11

12

14

15

16

18

19

21

20

13

22

22

22

22

154,994

5,190 

160,184 

8,429 

38,920 

19,036

66,385 

226,569 

(61,284)

(5,546)

(66,830)

(1,883)

(90)

(8,315)

(10,288)

(77,118)

149,451 

2,232 

13,533 

207 

133,479 

149,451 

150,922

5,190

156,112

7,713

38,006

65,823

111,542

267,654

(58,686)

(7,524)

(66,210)

(9,730)

(98)

(4,852)

(14,680)

(80,890)

186,764

2,439

13,440

-

170,885

186,764

The accounts on pages 27 to 57 were approved by the Board of Directors on 12 March 2007 and were signed on its behalf by

M.J. Darrington } Directors

R.J. Hutton

30

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Consolidated Statement of Cashflows

for the 52 weeks ended 30 December 2006

(2005: 52 weeks ended 31 December 2005)

Operating activities

Cash generated from operations (see below)

Income tax paid

Net cash inflow from operating activities

Investing activities

Acquisition of property, plant and equipment

Proceeds from sale of property, plant and equipment

Interest received

Net cash outflow from investing activities

Financing activities

Defined benefit pension scheme special contribution

Interest paid

Proceeds from issue of share capital

Sale of own shares

Purchase of own shares

Shares purchased and cancelled

Dividends paid

Net cash outflow from financing activities

Net (decrease) / increase in cash and cash equivalents

Cash and cash equivalents at the start of the year

Cash and cash equivalents at the end of the year

Cash flow statement – cash generated from operations

Profit for the financial year

Depreciation

Loss on sale of property, plant and equipment

Release of government grants

Share-based payment expenses

Finance income

Finance expenses

Income tax expense

Increase in inventories

Increase in debtors

Increase / (decrease) in creditors

Increase in pension liability

Cash from operating activities

Note

2006

£’000

66,185 

(13,600)

52,585 

11

(30,023)

1,599 

1,579 

(26,845)

(5,500)

(74)

93 

1,809 

(16,436)

(39,544)

(12,105)

(71,757)

(46,017)

65,602 

19,585 

2006

£’000

27,061 

23,884 

753 

(8)

687 

(1,579)

87 

13,178 

(716)

(165)

2,609 

394 

66,185 

22

22

22

22

22

16

Note

11

21

6

7

9

2005

£’000 

67,689 

(14,625)

53,064 

(41,687)

2,171 

3,106 

(36,410)

(4,000)

(90)

1,234 

3,695 

(2,173)

- 

(12,319)

(13,653)

3,001

62,601 

65,602 

2005

£’000 

34,074 

22,038

484 

(7)

557 

(3,106)

90 

16,085 

(430)

(1,912)

(517)

333 

67,689 

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

31

Parent Company Statement of Cashflows

for the 52 weeks ended 30 December 2006

(2005: 52 weeks ended 31 December 2005)

Operating activities

Cash generated from operations (see below)

Income tax paid

Net cash inflow from operating activities

Investing activities

Acquisition of property, plant and equipment

Proceeds from sale of property, plant and equipment

Interest received

Net cash outflow from investing activities

Financing activities

Defined benefit pension scheme special contribution

Interest paid

Proceeds from issue of share capital

Sale of own shares

Purchase of own shares

Shares purchased and cancelled

Dividends paid

Net cash outflow from financing activities

Net (decrease) / increase in cash and cash equivalents

Cash and cash equivalents at the start of the year

Cash and cash equivalents at the end of the year

Cash flow statement – cash generated from operations

Profit for the financial year

Depreciation

Loss on sale of property, plant and equipment

Release of government grants

Share-based payment expenses

Finance income

Finance expenses

Income tax expense

Increase in inventories

(Increase) / decrease in debtors

Increase / (decrease) in creditors

Increase in pension liability

Cash from operating activities

Note

2006

£’000

62,385 

(12,536)

49,849 

11

(29,414)

1,518

3,017 

(24,879)

(5,500)

(74)

93 

1,809 

(16,436)

(39,544)

(12,105)

(71,757)

(46,787)

65,823 

22

22

22

22

22

16

19,036  

Note

11

21

2006

£’000

26,332

22,938 

873 

(8)

687 

(3,017)

87 

13,131 

(716)

(914)

2,598 

394 

62,385 

2005

£’000 

67,726 

(13,153)

54,573  

(41,682)

1,101 

3,103  

(37,478)

(4,000)

(90)

1,234 

3,695 

(2,173)

- 

(12,319)

(13,653)

3,442 

62,381  

65,823 

2005

£’000 

34,226 

21,118 

507  

(7)

557 

(4,549)

90 

14,224  

(430)

2,174 

(517)

333 

67,726

32

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

Significant accounting policies 

Greggs plc (“the Company”) is a company incorporated and domiciled in the UK. The Group accounts consolidate those of the Company and its subsidiaries (together
referred to as the “Group”). The parent company accounts present information about the Company as a separate entity and not about its Group.

The accounts were authorised for issue by the directors on 12 March 2007.

(a) Statement of compliance

Both the parent company accounts and the Group accounts have been prepared and approved by the directors in accordance with International Financial Reporting Standards as
adopted by the EU (“adopted IFRSs”). On publishing the parent company accounts here together with the Group accounts, the Company is taking advantage of the exemption
in s230 of the Companies Act 1985 not to present its individual income statement and related notes that form a part of these approved accounts.

(b) Basis of preparation

The accounts are presented in pounds sterling, rounded to the nearest thousand, and are prepared on the historical cost basis. Non-current assets held for resale are stated at
the lower of carrying amount and fair value less cost to sell.

The Group chose not to restate business combinations prior to the transition date on an IFRS basis, as no significant acquisitions had taken place during the previous 10 years.
The Group’s policy up to and including 1997 was to eliminate goodwill arising upon acquisitions against reserves. Under IFRS 1 and IFRS 3, such goodwill remains eliminated
against reserves.

The preparation of financial information in conformity with adopted IFRSs requires management to make judgements, estimates and assumptions that affect the application of
policies and reported amounts of assets and liabilities, income and expenses. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the year in which the estimate is revised if the revision affects only that year, or in the year of revision and future years if the revision affects both
current and future years.

In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount
recognised in the accounts are described in the following notes:

• Note 21 – measurement of defined benefit obligation

• Note 21 – measurement of share-based payments

• Note 24 – lease classification

The accounting policies set out below have been applied consistently to all years presented in these consolidated accounts and are unchanged from previous years.

The accounting policies have been applied consistently throughout the Group.

(c) Basis of consolidation

The consolidated accounts include the results of Greggs plc and its subsidiary undertakings for the 52 weeks ended 30 December 2006. The comparative period is the 52 weeks
ended 31 December 2005.

(i) Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists where the Company has the power, directly or indirectly, to govern the financial and operating policies
of an entity so as to obtain benefits from its activities. The accounts of subsidiaries are included in the consolidated accounts from the date control commences until the
date that control ceases.

(ii) Transactions eliminated on consolidation

Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated accounts.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

33

(d) Foreign currency

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
at the balance sheet date are translated at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate at the date of the transaction. Foreign exchange differences arising on translation are recognised in the income statement.

(e) Classification of financial instruments issued by the Group

Financial instruments issued by the Group are treated as equity (i.e. forming part of shareholders’ funds) only to the extent that they meet the following conditions:

(i) they include no contractual obligations upon the Company (or Group) to deliver cash or other financial assets or to exchange financial assets or financial liabilities with
another party under conditions that are potentially unfavourable to the Company; and

(ii) where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no contractual obligation to deliver
a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company’s exchanging a fixed amount of cash or other financial
assets for a fixed number of its own equity instruments.

To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal form of the Company’s
own shares, the amounts presented in these accounts for called up share capital and share premium exclude amounts in relation to these shares.

Where a financial instrument that contains both equity and financial liability components exists these components are separated and accounted for individually under the above
policy. The finance cost of the financial liability component is correspondingly higher over the life of the instrument.

Finance payments that are associated with financial instruments that are classified as equity are dividends and are recorded directly in equity.

(f) Property, plant and equipment

(i) Owned assets
Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation (see below) and impairment losses (see accounting policy (j)).
The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads.

(ii) Subsequent costs
The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when the cost is incurred if it is
probable that the future economic benefits embodied within the item will flow to the Group and its cost can be measured reliably. All other costs are recognised in
the income statement as incurred.

(iii) Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated useful economic lives of each part of an item of property, plant and equipment.
Freehold and long leasehold properties are depreciated by equal instalments over a period of 40 years. Land is not depreciated. The depreciation rates are as follows:

Short leasehold properties
Plant:
General
Computers
Motor vehicles
Delivery trays
Shop fixtures and fittings:
General
Electronic equipment

10%

10%
20% - 331/3%
20% - 25%
331/3%

10%
20%

Depreciation methods, useful lives and residual values (if not insignificant) are reassessed annually.

(iv) Assets in the course of construction

Depreciation on these assets commences when the assets are brought into use.

34

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

Significant accounting policies (continued)

(g) Investments
Investments in subsidiaries are carried at cost less impairment.

(h) Inventories
Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs
of completion and selling expenses. The cost of inventories is based on the weighted average cost formula.

(i) Cash and cash equivalents
‘Cash and cash equivalents’ comprises cash balances and call deposits with an original maturity of three months or less. Bank overdrafts that are repayable on demand and form
an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

(j) Impairment
The carrying amounts of the Group’s assets, other than inventories and deferred tax assets are reviewed at each balance sheet date to determine whether there is any
indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. Impairment losses are recognised in the income statement.
Impairment losses recognised in prior years are assessed at each reporting date and reversed if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation, if no impairment loss had been recognised.

(k) Non-current assets held for sale
Non-current assets that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before classification
as held for sale, the assets are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets are measured at the lower of their carrying
amount and fair value less cost to sell.

(l) Share capital

(i) Repurchase of share capital

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable costs, is recognised as a deduction from
equity. Repurchased shares that are held in the Employee Share Ownership Plan are classified as treasury shares and are presented as a deduction from total equity.

(ii) Dividends

Dividends are recognised as a liability in the year in which they are approved by the shareholders.

(m) Employee share ownership plan
The Group and parent company accounts include the assets and related liabilities of the Greggs Employee Benefit Trust (“EBT”). In both the Group and parent company
accounts the shares held by the EBT are stated at cost and deducted from shareholders’ funds.

(n) Segment reporting

The consolidated entity operates in one business segment being that of retailing of sandwiches, savouries and other bakery related products (primary segment). As a result
no additional business segment information is required to be provided. The consolidated entity operates principally in one geographic segment (secondary segment), the
United Kingdom.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

35

(o) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement when they are due.

(ii) Defined benefit plans

The Group’s obligation in respect of defined benefit post-employment plans, including pension plans, is calculated by estimating the amount of the future benefit that
employees have earned in return for their service in the current and prior years. That benefit is discounted to determine its present value and any unrecognised past
service costs, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date on AA credit rated bonds that have maturity dates
approximating to the terms of the Group’s obligations. The calculation is performed by a qualified actuary using the projected unit credit method.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised as an expense in the income statement
on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately
in the income statement.

The Group recognises actuarial gains and losses in full in the year in which they occur in the statement of recognised income and expense.

(iii) Share-based payment transactions

The share option programme allows Group employees to acquire shares of the Company. The fair value of share options granted is recognised as an employee expense
with a corresponding increase in equity. The fair value is measured at grant date, using an appropriate model, taking into account the terms and conditions upon which
the share options were granted, and is spread over the period during which the employees become unconditionally entitled to the options. The amount recognised as an
expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting.

For options granted before 7 November 2002 the recognition and measurement principles of IFRS 2 have not been applied in accordance with the transitional provisions
in IFRS 1. In addition, deferred taxation has not been recognised on these options.

(p) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow
of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to the liability.

(i) Restructuring
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has
been announced publicly. Future operating costs are not provided for.

(q) Revenue

(i) Goods sold
Revenue from the sale of goods is recognised as income on receipt of cash.

36

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

Significant accounting policies (continued)
(r) Government grants
Government grants are recognised in the balance sheet initially as deferred income when there is a reasonable assurance that they will be received and that the Group will comply
with the conditions attaching to them. Grants that compensate the Group for expenses incurred are recognised in the income statement on a systematic basis in the same
periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are recognised in the income statement over the useful life of the asset.

(s) Expenses

(i) Operating lease payments
Payments under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in
the income statement as an integral part of the total lease expense over the term of the lease.

(t) Finance income and expense

(i) Finance income
Finance income comprises interest receivable on funds invested and foreign exchange gains relating to those funds. Interest income is recognised in the income statement
as it accrues using the effective interest method.

(ii) Finance expenses 
Finance expenses comprise interest payable on borrowings and related foreign exchange losses. 

(u) Income tax
Income tax comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in
which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to
tax payable in respect of previous years. 

Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. The amount of deferred tax recognised is based on the expected manner of realisation or settlement of the
carrying amounts of assets and liabilities, using tax rates that are expected to apply when the temporary differences reverse, based on rates enacted or substantively enacted at
the balance sheet date.

Temporary differences relating to the initial recognition of assets or liabilities that affect neither accounting nor taxable profit are not provided for, other than in a business
combination, to the extent that they will probably not reverse in the foreseeable future.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are
reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related deferred tax benefit will be realised.

(v) IFRSs available for early adoption not yet applied
The following standards and amendments to standards which will have an impact for the Group, were available for early adoption but have not been applied in these accounts:

• Amendment to IAS 1: Presentation of Financial Statements applicable for years commencing on or after 1 January 2007; 

• IFRS 7: Financial instruments: Disclosure applicable for years commencing on or after 1 January 2007; and

• IFRIC 8: Scope of IFRS 2 Share-based Payment applicable for years commencing on or after 1 May 2006.

The application of Amendment to IAS 1 and IFRS 7 in the current year would not have affected the balance sheets or income statement as the standards are concerned only
with disclosure. The Group plans to apply these standards and amendments to standards in 2007.

All other amendments to standards and interpretations that are available for early adoption currently have no impact for the Group.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

37

1. Segment analysis 
Business is the basis of the Group’s primary segmentation. The Group operates in one business segment being the retailing of sandwiches, savouries and other bakery related
products. As a result no additional business segment information is required to be provided. The Group’s secondary segment is geography. It operates in one geographical
segment, the United Kingdom, as the Group has no material operations outside the UK, and, therefore, no additional geographical segment information is required to be provided.

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. Profit before tax

Profit before tax is stated after charging/(crediting):

Depreciation on owned property, plant and equipment

Loss on disposal of fixed assets

Release of government grants

Payments under operating leases – property rents

Auditors’ remuneration 

Audit of these accounts

Audit of subsidiaries’ accounts pursuant to legislation

Other services pursuant to such legislation

Audit of pension schemes’ accounts

Other services relating to taxation

All other services

2006

£’000

1,299 

2,852 

711 

4,862 

2005 

£’000 

1,445 

3,320 

672 

5,437 

2006

£’000

2005 

£’000 

23,884 

22,038 

753 

(8)

484

(7)

35,650 

32,568 

153

146 

5 

5 

10 

51 

17

5 

43 

9 

48 

41 

Amounts paid to the Company’s auditor in respect of services to the Company, other than the audit of the Company’s accounts, have not been disclosed as the information is
required instead to be presented on a consolidated basis.

4. Bakers Oven restructuring costs

During the year the Bakers Oven divisions in the North of England and Scotland were restructured to integrate them with the Greggs brand. The costs of this restructuring
have been presented separately on the face of the consolidated income statement in order to show separately the underlying trading performance of the Group. 

The restructuring costs incurred relate to the costs of closing 14 shops and the transfer of 49 shops from Bakers Oven to other divisions within the Group. 

38

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

5. Personnel expenses

The average number of persons employed (including directors) during the year was as follows:

Management

Administration

Production

Shop

The aggregate personnel costs of these persons were as follows:

Wages and salaries

Compulsory social security contributions

Pension costs - defined contribution plans

Pension costs - defined benefit plans

Equity settled transactions

6. Finance income

Interest income

7. Finance expenses

Interest expense

Foreign exchange loss

Note

21

21

21

Group and parent company

2006

Number

671 

367 

2,851 

15,085 

18,974 

2005 

Number 

687 

355

2,766

15,296 

19,104

Group and parent company

2006

£’000

2005 

£’000

205,024 

199,208 

15,856

14,951 

1,780 

2,116

687 

1,598 

2,133 

557 

225,463 

218,447

2006

£’000

1,579

2005 

£’000

3,106

2006

£’000

(62)

(25)

(87)

2005

£’000

(50)

(40)

(90)

8. Profit attributable to Greggs plc

Of the Group profit for the year, £26,332,000 (2005: £34,226,000) 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 income statement.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

39

2006

£’000

2005 

£’000

13,372 

15,729 

(194)

- 

13,178 

15,729 

201 

(201)

- 

937 

(581) 

356 

13,178 

16,085

2006

2006

£’000

40,239 

2005

2005 

£’000

50,159 

30.0%

12,072 

30.0% 

15,048 

0.9%

2.8%

(1.0%)

361 

1,140 

(395)

1.2% 

2.0% 

(1.1%)

613 

1,005 

(581)

32.7%

13,178 

32.1% 

16,085 

2006

2006

Current tax

Deferred tax

£’000

(247)

(1,950)

- 

(2,197)

£’000

315 

1,950 

822 

3,087 

2006

Total

£’000

68 

- 

822 

890 

2005 

Total

£’000

(892)

- 

(704)

(1,596)

9. Income tax expense

Recognised in the income statement

Current tax expense

Current year

Adjustment for prior years

Deferred tax expense

Origination and reversal of temporary differences

Adjustment for prior years

Total income tax expense in income statement

Reconciliation of effective tax rate

Profit before tax

Income tax using the domestic corporation tax rate

Non-deductible expenses

Non-qualifying depreciation

Adjustment for over provision in prior years

Total income tax expense in income statement

Tax recognised directly in equity

Relating to equity-settled transactions

Relating to defined benefit plans

- special contribution (SORIE)

- actuarial gains / (losses) (SORIE)

40

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

10. Earnings per share

Basic earnings per share

Basic earnings per share for the year ended 30 December 2006 is calculated by dividing profit attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year ended 30 December 2006 as calculated below.

Diluted earnings per share

Diluted earnings per share for the year ended 30 December 2006 is calculated by dividing profit attributable to ordinary shareholders by the weighted average number of ordinary
shares, adjusted for the effects of all dilutive potential ordinary shares (which comprise share options granted to employees) outstanding during the year ended 30 December 2006 as
calculated below.

Adjusted earnings per share

Basic and diluted earnings per share have been calculated for the year ended 30 December 2006 which exclude the effect of the Bakers Oven restructuring costs. These have
been calculated by dividing profit attributable to ordinary shareholders excluding Bakers Oven restructuring costs by the relevant weighted average number of ordinary shares as
calculated below.

Profit attributable to ordinary shareholders

Profit for the financial year attributable to equity holders of the parent

Basic earnings per share

Diluted earnings per share

Weighted average number of ordinary shares

Issued ordinary shares at start of year

Effect of own shares held

Effect of shares issued

Effect of shares purchased and cancelled

Weighted average number of ordinary shares during the year

Effect of share options on issue

Weighted average number of ordinary shares (diluted) during the year

2006
Excluding 
Bakers Oven
restructuring
costs
£’000

29,510 

263.0p 

261.6p 

2006
Bakers Oven
restructuring
costs

2006
Total

2005 
Total

£’000

£’000

£’000

(2,449)

(21.8p)

(21.7p)

27,061 

241.2p 

239.9p 

34,074 

282.1p 

278.9p 

2006

Number

2005 

Number

12,193,957  12,141,892 

(347,535) 

(79,333) 

2,142

17,967 

(628,071)

- 

11,220,493  12,080,526  

60,409

135,274 

11,280,902  12,215,800 

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

41

11. Property, plant and equipment

Group

Cost

Balance at 2 January 2005

Additions

Disposals

Reclassification

Land and

buildings

£’000

Plant and

equipment

£’000

Fixtures

Under

and fittings

construction

£’000

£’000

Total 

£’000

77,220 

71,192 

109,093 

- 

257,505 

1,040 

11,460 

18,218 

10,969 

41,687 

(1,236)

(4,499)

(3,458)

(187)

180 

7 

- 

- 

(9,193)

- 

Balance at 31 December 2005

76,837 

78,333 

123,860 

10,969 

289,999 

Balance at 1 January 2006

76,837 

78,333 

123,860 

10,969 

289,999 

Additions

Disposals

Reclassification

Transfer to assets held for sale

Effect of movements in exchange rate

Balance at 30 December 2006

Depreciation

Balance at 2 January 2005

Depreciation charge for the year

Disposals

Balance at 31 December 2005

Balance at 1 January 2006

Depreciation charge for the year

Disposals

Transfer to assets held for sale

Balance at 30 December 2006

Carrying amounts

At 2 January 2005

At 31 December 2005

At 1 January 2006

At 30 December 2006

3,923 

(193)

8,659 

(400)

- 

9,467 

12,995 

3,638 

30,023 

(4,539)

(4,666)

- 

(9,398)

1,815 

495 

(10,969)

- 

- 

- 

(13)

- 

- 

- 

(400)

(13)

88,826 

85,076 

132,671 

3,638 

310,211 

13,928 

39,941 

1,587 

(185)

8,051 

(3,401)

39,804 

12,400 

(2,952)

15,330 

44,591 

49,252 

15,330 

44,591 

1,640 

8,704 

49,252 

13,540 

(106)

(125)

(3,799)

(3,141)

- 

- 

16,739 

49,496 

59,651 

- 

- 

- 

- 

- 

- 

- 

- 

- 

93,673 

22,038 

(6,538)

109,173

109,173 

23,884 

(7,046)

(125)

125,886 

63,292 

61,507 

61,507 

72,087 

31,251 

33,742 

33,742 

35,580 

69,289 

74,608 

74,608 

73,020 

- 

163,832 

10,969 

180,826 

10,969 

180,826 

3,638 

184,325 

42

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

11. Property, plant and equipment (continued)

Parent company

Cost

Balance at 2 January 2005

Additions

Intra group transfers

Disposals

Reclassification

Land and

buildings

£’000

Plant and

equipment

£’000

Fixtures

Under

and fittings

construction

£’000

£’000

Total 

£’000

36,613 

71,725 

109,581 

- 

217,919 

1,035 

11,460 

18,218 

10,969 

41,682 

43 

(18)

(187)

- 

- 

(4,499)

(3,458)

180 

7 

- 

- 

- 

43 

(7,975)

- 

Balance at 31 December 2005

37,486

78,866 

124,348 

10,969 

251,669 

Balance at 1 January 2006

Additions

Intra-group transfers

Disposals

Reclassification

Effect of movements in exchange rate

Balance at 30 December 2006

Depreciation

Balance at 2 January 2005

Depreciation charge for the year

Disposals

Balance at 31 December 2005

Balance at 1 January 2006

Depreciation charge for the year

Disposals

Balance at 30 December 2006

Carrying amounts

At 2 January 2005

At 31 December 2005

At 1 January 2006

At 30 December 2006

37,486 

78,866 

124,348 

10,969 

251,669 

3,314 

9,467 

12,995 

3,638 

29,414 

(24) 

- 

- 

(193)

(4,539)

(4,666)

- 

- 

8,659

1,815 

- 

- 

495 

(13)

(10,969)

- 

(24) 

(9,398)

- 

(13)

49,242 

85,609 

133,159 

3,638 

271,648 

5,590 

40,211 

667 

(14)

8,051 

(3,401)

40,195 

12,400 

(2,952)

6,243 

44,861 

49,643 

6,243 

44,861 

49,643 

13,540 

8,704 

(3,799)

(3,141)

6,846 

49,766 

60,042 

694 

(91)

- 

- 

- 

- 

- 

- 

- 

- 

85,996 

21,118 

(6,367)

100,747 

100,747 

22,938 

(7,031)

116,654 

31,023 

31,243 

31,243 

42,396 

31,514 

34,005 

34,005 

35,843 

69,386 

74,705 

74,705 

73,117 

- 

131,923 

10,969 

150,922 

10,969 

150,922 

3,638 

154,994 

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

43

Land and buildings

The carrying amount of land and buildings comprises:

Freehold property

Shops

Bakeries

Other

Long leasehold property

Bakeries

Short leasehold property

Shops

Group

Parent company

2006

£’000

12,924 

49,295

8,680

2005

£’000

13,252 

41,798 

5,559 

2006

£’000

2005 

£’000

7,888 

7,449

25,507 

17,978 

8,773

5,652

70,899 

60,609 

42,168 

31,079

1,070 

118 

751 

147 

110 

118

17 

147 

72,087 

61,507 

42,396 

31,243 

Property, plant and equipment under construction

Assets under construction at 30 December 2006 comprise a new bakery and an extension to an existing bakery.

Shares in 

subsidiary

undertakings

£’000

5,828

638

5,190

12. Investments

Parent company

Cost

As at 2 January 2005, 31 December 2005 and 30 December 2006 

Impairment

As at 2 January 2005, 31 December 2005 and 30 December 2006

Carrying amount

As at 2 January 2005, 31 December 2005 and 30 December 2006

The Company’s subsidiary undertakings, which are all wholly owned, are as follows:

Charles Bragg (Bakers) Limited

Greggs (Leasing) Limited

Thurston Parfitt Limited

Greggs Properties Limited

Olivers (U.K.) Limited

Olivers (U.K.) Development Limited*

Birketts Holdings Limited

J.R Birkett and Sons Limited*

Greggs Trustees Limited

* held indirectly

Principal activity

Non-trading

Dormant

Non-trading

Property holding

Dormant

Non-trading

Dormant

Non-trading

Trustees

Country of incorporation

England and Wales

England and Wales

England and Wales

England and Wales

Scotland

Scotland

England and Wales

England and Wales

England and Wales

44

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

13. Deferred tax assets and liabilities

Group

Deferred tax assets and liabilities are attributable to the following:

Property, plant and equipment

Employee benefits

Short term temporary differences

Tax (assets) / liabilities

Assets

Liabilities

Net

2005

£’000

2006

£’000

2005

£’000

2006

£’000

2005 

£’000

- 

17,440

17,376 

17,440 

17,376 

2006

£’000

- 

(1,741)

(4,645)

(685)

(804)

-

- 

- 

- 

(1,741)

(4,645)

(685)

(804) 

(2,426)

(5,449)

17,440 

17,376 

15,014 

11,927 

The movements in temporary differences during the year ended 31 December 2005 were as follows:

Property, plant and equipment

Employee benefits

Short term temporary differences

The movements in temporary differences during the year ended 30 December 2006 were as follows:

Property, plant and equipment

Employee benefits

Short term temporary differences

Balance at

2 January

2005

£’000

15,949 

(3,486)

- 

12,463 

Balance at

1 January

2006

£’000

17,376 

(4,645)

(804) 

11,927 

Recognised

Recognised

Balance at 

in income

in equity

31 December

£’000

1,427 

(267) 

(804)

356 

£’000

2005

£’000

- 

17,376 

(892)

(4,645)

-

(804)

(892)

11,927 

Recognised

Recognised

Balance at

in income

in equity

30 December

£’000

2006

£’000

- 

17,440 

3,087 

(1,741)

- 

(685)

£’000

64 

(183)

119 

- 

3,087 

15,014 

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

45

Parent company

Deferred tax assets and liabilities are attributable to the following:

Property, plant and equipment

Employee benefits

Short term temporary differences

Tax (assets) / liabilities

Assets

Liabilities

Net

2005

£’000

2006

£’000

2005

£’000

2006

£’000

2005 

£’000

- 

10,741 

10,301 

10,741 

10,301 

2006

£’000

- 

(1,741)

(4,645)

(685)

(804)

- 

- 

- 

- 

(2,426)

(5,449)

10,741 

10,301 

(1,741)

(4,645)

(685)

8,315 

(804)

4,852 

The movements in temporary differences during the year ended 31 December 2005 were as follows:

Property, plant and equipment

Employee benefits

Short term temporary differences

The movements in temporary differences during the year ended 30 December 2006 were as follows:

Property, plant and equipment

Employee benefits

Short term timing differences

Balance at

2 January

2005 

£’000

9,302 

(3,486)

- 

5,816 

Balance at

1 January

2006

£’000

10,301 

(4,645)

(804)

4,852 

Recognised

Recognised

Balance at

in income 

in equity 

31 December

£’000

999 

(267)

(804)

(72)

£’000

2005

£’000

- 

10,301 

(892)

(4,645)

- 

(892)

(804)

4,852 

Recognised

Recognised

Balance at

in income

in equity

30 December

£’000

440 

(183)

119 

376 

£’000

2006

£’000

- 

10,741 

3,087 

(1,741)

- 

3,087 

(685)

8,315 

46

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

14. Inventories

Raw materials and consumables

Work in progress

15. Trade and other receivables

Trade receivables

Amounts owed by subsidiary undertakings

Other receivables

Prepayments

All amounts fall due within one year.

16. Cash and cash equivalents

Bank balances

Call deposits

Cash and cash equivalents in the cash flow statements

17. Asset held for sale

2006

£’000

5,825 

2,604 

8,429 

2006

£’000

888 

-

4,233 

10,905 

16,026 

Group

Parent company

2005

£’000

5,289 

2,424 

7,713 

2006

£’000

5,825

2,604 

8,429 

2005 

£’000

5,289 

2,424 

7,713 

Group

Parent company

2005

£’000

514 

2006

£’000

888 

2005 

£’000

514 

- 

22,902 

22,204 

4,747 

10,600 

15,861 

4,225 

10,905 

38,920

4,688 

10,600 

38,006 

Group

Parent company

2006

£’000

2005

£’000

2006

£’000

2005 

£’000

19,585 

59,192 

19,036

59,413 

-

6,410 

- 

6,410 

19,585 

65,602 

19,036 

65,823

The asset held for sale at 30 December 2006 is the Carricks bakery in Newcastle upon Tyne. Contracts were exchanged for the disposal of this property before the end of the year,

conditional upon the purchaser being granted planning permission to redevelop the site. This permission was granted in February 2007 and the disposal was completed then.

18. Trade and other payables

Trade payables

Other taxes and social security

Other payables

Accruals and deferred income

Group

Parent company

2006

£’000

2005

£’000

2006

£’000

2005 

£’000

24,835 

25,599 

24,835 

25,599 

6,208 

16,620 

13,632 

61,295

5,862 

15,220 

12,005 

58,686 

6,208 

16,609 

13,632 

61,284 

5,862 

15,220 

12,005 

58,686 

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

47

19. Current tax liability

The current tax liability of £5,467,000 in the Group and £5,546,000 in the parent company (2005: Group £8,086,000, parent company £7,524,000) represents the amount
of income taxes payable in respect of current and prior years.

20. Other payables

Deferred government grants

21. Employee benefits

Defined benefit plan

Group

Parent company

2006

£’000

90 

2005

£’000

98 

2006

£’000

90 

2005 

£’000

98 

The Group makes contributions to a defined benefit (final salary) plan that provides pension benefits for employees upon retirement.

Present value of funded obligations

Fair value of plan assets

Recognised liability for defined benefit obligations

Liability for defined benefit obligations

Changes in the present value of the defined benefit obligation are as follows:

Opening defined benefit obligation

Service cost

Interest cost

Actuarial (gains) / losses

Benefits paid

Contributions by employees

Group and parent company

2006

£’000

2005 

£’000

(74,823)

(69,538)

72,940 

59,808 

(1,883)

(9,730)

Group and parent company

2006

£’000

2005 

£’000

69,538 

58,283 

2,919 

3,466 

(180)

2,144

3,194 

6,414

(1,749)

(1,402)

829 

905 

74,823 

69,538

48

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

21. Employee benefits (continued)

Changes in the fair value of plan assets are as follows:

Opening fair value of plan assets

Expected return

Actuarial gains

Contributions by employer

Contributions by employee

Benefits paid

Closing fair value of plan assets

The amounts recognised in the income statement are as follows:

Current service cost

Interest on obligation

Expected return on plan assets

Total included in employee benefit expense

The expense is recognised in the following line items of the income statement:

Cost of sales

Distribution and selling costs

Administrative expenses

Group and parent company

2006

£’000

2005 

£’000

59,808 

47,231

4,269 

2,561 

7,222 

829 

3,205

4,069

5,800 

905

(1,749)

(1,402)

72,940 

59,808 

Group

Group

2005 

£’000

2,144

3,194

(3,205)

2,133 

2005 

£’000

400

772

961 

2,133 

2006

£’000

2,919 

3,466 

(4,269)

2,116 

2006

£’000

450

642

1,024

2,116

Cumulative actuarial gains and losses reported in the statement of recognised income and expenses since 28 December 2003, the transition date to adopted IFRSs, for the
Group and the parent company are £507,000 (2005: £3,248,000).

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

49

The fair value of the plan assets and the return on those assets were as follows:

Equities

Bonds

Property

Cash/other

Actual return on plan assets

Group and parent company

2006

£’000

2005 

£’000

55,774 

46,324 

1,837 

799 

14,530 

72,940 

1,641

552

11,291

59,808

6,830 

7,274

The plan assets include ordinary shares issued by the Company with a fair value of £2,258,000 (2005: £2,468,000).

The expected rates of return on plan assets are determined by reference to relevant indices. The overall expected rate of return is calculated by weighting the individual rates
in accordance with the anticipated balance in the plan’s investment portfolio.

Principal actuarial assumptions (expressed as weighted averages):

Discount rate

Expected rate of return on plan assets

Future salary increases

Future pension increases

Mortality rate assumptions have been taken from the A92 pre-retirement and AP92c2025 post-retirement tables.

History of plan

The history of the plan for the current and prior years is as follows:

Present value of defined benefit obligation

Fair value of plan assets

Deficit

Group and parent company

2006

5.2% 

6.4% 

4.4%

2.5%

2005

4.9% 

6.8% 

4.1% 

2.5% 

Group and parent company

2006

£’000

2005

£’000

2004

£’000

(74,823)

(69,538)

(58,283)

72,940 

59,808 

47,231

(1,883)

(9,730)

(11,052)

50

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

21. Employee benefits (continued)

Experience adjustments

Experience adjustments on plan liabilities

Experience adjustments on plan assets

Net actuarial experience adjustments

2006 

2005

2004

Group and parent company

£’000

180 

2,561 

2,741

0.2%

3.5%

£’000

(6,414)

4,069 

(2,345)

9.2%

6.8%

£’000

(2,613)

1,710

(903)

4.5%

3.6%

The Group expects to contribute £1,300,000 to its defined benefit plan in 2007.

Defined contribution plan

The Company 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 £1,780,000 (2005: £1,598,000) in the year.

Share-based payments – Group and parent company

The Group has established a Savings Related Share Option Scheme, which granted options in April 2003, September 2004, September 2005 and September 2006 and an
Executive Share Option Scheme, which granted options in September 2003, March 2004, August 2004, September 2004 and August 2006.

Both of these schemes also made grants of options prior to 7 November 2002. The recognition and measurement principles of IFRS 2 have not been applied to these grants
in accordance with the transitional provisions in IFRS 1 and IFRS 2.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

51

The terms and conditions of the grants are as follows, whereby all options are settled by physical delivery of shares:

Date of

grant

Employees

entitled

Exercise

price

Number

of shares

granted

Vesting

conditions

Executive Share
Option Scheme 5

September
1996

Senior
employees

1355p

115,000

Three years’ service and EPS growth of 2-4%
over RPI on average over those three years

Executive Share
Option Scheme 6

Executive Share
Option Scheme 7

Savings Related Share
Option Scheme 5

Executive Share
Option Scheme 8

Savings Related Share
Option Scheme 6

March
1999

March
2000

April
2002

April
2002

April
2003

Senior
employees

Senior
employees

26871/2p

100,250

Three years’ service and EPS growth of 2-4%
over RPI on average over those three years

17011/2p

150,200

Three years’ service and EPS growth of 2%
over RPI on average over those three years

All employees

2821p

126,949

Three years’ service

3.5 years

Senior
employees

3526p

8,800

Three years’ service and EPS growth of 2-4%
over RPI on average over those three years

7 to 10 years

All employees

2700p

58,315

Three years’ service

Executive Share
Option Scheme 9

September
2003

Senior
employees

31041/2p

8,250

Three years’ service and EPS growth of 2%
over RPI on average over those three years

Executive Share
Option Scheme 10

Executive Share
Option Scheme 11

March
2004

August
2004

Senior
employees

Senior
employees

3388p

7,500

Three years’ service and EPS growth of 2%
over RPI on average over those three years

3400p

93,000

Three years’ service and EPS growth of 3-5%
over RPI on average over those three years

September
2004

Senior
employees

3485p

2,400

Three years’ service and EPS growth of 3-5%
over RPI on average over those three years

Savings Related Share
Option Scheme 7

September
2004

Savings Related Share
Option Scheme 8

September
2005

Executive Share Option 
Scheme 12

August
2006

Savings Related Share 
Option Scheme 9 

September
2006

All employees

3098p

71,796

Three years’ service

All employees

4116p

64,148

Three years’ service

Senior employees 4077p

102,800

Three years’ service and EPS growth of 3-5%
over RPI on average over those three years

All employees

3713p

66,277

Three years’ service

Contractual

life

7 to 10 years

7 to 10 years

7 to 10 years

3.5 years

10 years

7 years

10 years

10 years

3.5 years

3.5 years

10 years

3.5 years

52

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

21. Employee benefits (continued)

The number and weighted average exercise price of share options is as follows:

Outstanding at the beginning of the year

Lapsed during the year

Exercised during the year

Granted during the year

Outstanding at the end of the year

Exercisable at the end of the year

2006

Weighted

Number of

average

options

exercise price

Weighted

average

exercise price

2005

Number of 

options

3151p

2312p

2297p

3934p

3642p

2597p

335,288

(20,724)

2785p

2014p

474,964 

(13,172)

(83,072)

2569p

(190,652)

169,077 

400,569 

19,617

4116p

3151p

1951p

64,148 

335,288 

50,942 

The options outstanding at 30 December 2006 have an exercise price in the range of £17.015 to £41.160 and have a weighted average contractual life of 5.62 years.
The options exercised during the year had a weighted average market value of £38.58 (2005: £45.96).

The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the
services received is measured based on the Black-Scholes model. The contractual life of the option is used as an input into this model. 

2006

Executive
Share Option

Savings
Related Share
Scheme 12 Option Scheme 9
September 2006

August 2006

2005

Savings Related

Share Option

Scheme 8

September 2005

Fair value at grant date

Share price

Exercise price

Expected volatility

Option life

Expected dividends

Risk-free rate

£7.74

£8.19

£9.87

£42.00

£40.77

19.3%

5 years

2.7%

4.8%

£41.60

£37.13

19.3%

£47.00

£41.16

17.3%

3 years

3.25 years

2.7%

4.8%

2.1%

4.1%

The expected volatility is based on historic volatility, adjusted for any expected changes to future volatility due to publicly available information. The historic volatility is calculated
using a weekly rolling share price for the three-year period immediately prior to the option grant date.

Share options are granted under a service condition and, for grants to senior employees, a non-market performance condition. Such conditions are not taken into account in
the grant date fair value measurement of the services received. There are no market conditions associated with the share option grants.

The costs charged to the income statement relating to share based payments were as follows:

Share options granted in 2003

Share options granted in 2004

Share options granted in 2005

Share options granted in 2006

Total expense recognised as employee costs

2006

£’000

31 

333 

210 

113 

687 

2005

£’000 

155 

367 

35 

- 

557 

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

53

22. Capital and reserves

Reconciliation of movement in capital and reserves attributable to equity holders of the parent

Group

Balance at 2 January 2005

Shares issued in the year

Total recognised income and expense

Purchase of own shares

Sale of own shares

Share-based payments

Dividends

Tax items taken directly to reserves

Balance at 31 December 2005

Balance at 1 January 2006

Shares issued in the year

Shares purchased and cancelled

Total recognised income and expense

Purchase of own shares

Sale of own shares

Share-based payments

Dividends

Tax items taken directly to reserves

Balance at 30 December 2006

Issued 

capital 

Share

Capital 

premium 

redemption

Retained

earnings 

Total

£’000 

£’000 

2,428 

12,217 

11 

1,223 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

2,439 

13,440 

reserve

£’000 

- 

- 

- 

- 

- 

- 

- 

- 

- 

£’000 

£’000 

142,511 

157,156 

- 

1,234 

32,433 

32,433 

(2,173)

3,695 

557 

(2,173)

3,695 

557 

(12,319)

(12,319)

892 

892 

165,596 

181,475 

Issued 

capital 

Share

Capital 

premium 

redemption

Retained

earnings 

Total

£’000 

£’000 

2,439 

13,440 

- 

(207)

- 

- 

- 

- 

- 

- 

93 

- 

- 

- 

- 

- 

- 

- 

reserve

£’000 

- 

- 

£’000 

£’000 

165,596 

181,475 

- 

93 

207 

(39,544)

(39,544)

- 

- 

- 

- 

- 

- 

28,980 

28,980 

(16,436)

(16,436)

1,809 

687 

1,809 

687 

(12,105)

(12,105)

(68)

(68)

2,232 

13,533 

207 

128,919

144,891 

54

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

22. Capital and reserves (continued)

Parent company

Balance at 2 January 2005

Shares issued in the year

Total recognised income and expense

Purchase of own shares

Sale of own shares

Share-based payments

Equity dividends

Tax items taken directly to reserves

Balance at 31 December 2005

Balance at 1 January 2006

Shares issued in the year

Shares purchased and cancelled

Total recognised income and expense

Purchase of own shares

Sale of own shares

Share-based payments

Equity dividends

Tax items taken directly to reserves

Balance at 30 December 2006

Share capital and share premium

In issue and fully paid at start of year

Issued for cash

Purchased and cancelled

In issue and fully paid at the end of the year

Issued 

capital 

Share

Capital 

premium 

redemption

Retained

earnings 

Total

£’000 

£’000 

2,428 

12,217 

11 

1,223 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

2,439 

13,440 

reserve

£’000 

- 

- 

- 

- 

- 

- 

- 

- 

- 

£’000 

£’000 

147,648 

162,293 

- 

1,234 

32,585 

32,585 

(2,173)

3,695 

557 

(2,173)

3,695 

557 

(12,319)

(12,319)

892 

892

170,885 

186,764 

Issued 

capital 

Share

Capital 

premium 

redemption

Retained

earnings 

Total

£’000 

£’000 

2,439 

13,440 

- 

(207)

- 

- 

- 

- 

- 

- 

93 

- 

- 

- 

- 

- 

- 

- 

reserve

£’000 

- 

- 

£’000 

£’000 

170,885 

186,764 

- 

93 

207 

(39,544)

(39,544)

- 

- 

- 

- 

- 

- 

28,251 

28,251 

(16,436)

(16,436)

1,809 

687 

1,809 

687 

(12,105)

(12,105)

(68)

(68)

2,232 

13,533 

207 

133,479 

149,451 

Ordinary shares

2006

Number

2005

Number 

12,193,957  12,141,892 

4,085 

52,065 

(1,036,479)

-

11,161,563  12,193,957 

At 30 December 2006 the authorised share capital comprised 25,000,000 ordinary shares (2005: 25,000,000) with a par value of 20p each.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

55

During the year 1,036,479 shares, with a nominal value of £207,000 were purchased for cancellation for a consideration of £39,544,000. A further 439,829 shares, with a
nominal value of £88,000, were purchased by the trustees of the Greggs Employee Benefit Trust (see below). The maximum number of shares held by the trustees during the
year was 472,753, having a nominal value of £95,000.

Own shares held

Deducted from retained earnings is £15,892,000 (2005: £1,265,000) in respect of own shares held by the Greggs Employee Benefit Trust. The Trust, which was established
during 1988 to act as a repository of issued Company shares, holds 409,745 shares (2005: 48,924 shares) with a market value at 30 December 2006 of £17,619,000 (2005:
£2,299,000) which have not vested unconditionally in employees.

The shares held by the Greggs Employee Benefit Trust can be purchased either by employees on the exercise of an option under the Greggs Executive Share Option
Schemes or by the trustees of the Greggs Employee Share Scheme. The trustees have elected to waive the dividends payable on these shares.

Dividends

The following tables analyse dividends when paid and the year to which they relate:

2004 final dividend

2005 interim dividend

2005 final dividend

2006 interim dividend

2006

Per share

pence

- 

- 

70.0p

38.0p

2005

Per share

pence

66.0p

36.0p

-

-

108.0p

102.0p

The proposed final dividend in respect of 2006 amounts to 78.0 pence per share (£8,706,000). This proposed dividend is subject to approval at the Annual General Meeting
and has not been included as a liability in these accounts..

2004 final dividend

2005 interim dividend

2005 final dividend

2006 interim dividend

2006

£’000

- 

-

8,013 

4,092

2005

£’000 

7,959 

4,360 

-

-

12,105

12,319 

56

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Notes to the Consolidated Accounts

continued

23. Financial instruments

Group and parent company

All the Group’s surplus cash is invested as cash placed on deposit.

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 below there are no financial instruments, derivatives or commodity contracts used.

Financial assets and liabilities
The Group’s main financial asset comprises cash and cash equivalents. Other financial assets include trade receivables arising from the Group’s activities.

Other than trade and other payables, the Group had no financial liabilities within the scope of IAS 39 as at 30 December 2006 (2005: £nil). The Group has an overdraft facility
of £10,000,000 of which £10,000,000 was undrawn at 30 December 2006 (2005: £10,000,000 undrawn).

Fair values
The fair value of the Group’s financial assets and liabilities is not materially different from their carrying values. 

Interest rate, credit and foreign currency risk
The Group has not entered into any hedging transactions during the year and considers interest rate, credit and foreign currency risks not to be significant.

Effective interest rates
In respect of income-earning financial assets the following table indicates their effective interest rates at the balance sheet date.

Cash and cash equivalents

24. Operating leases

Total amounts payable under non-cancellable operating lease rentals are payable as follows:

Operating leases which expire:

In less than one year

Between one and five years

After more than five years

Group

2006

2005

Effective

£’000

interest rate

£’000

Effective

interest rate

4.75%

19,585

4.5%

65,602

2006

£’000

898 

2005

£’000

762 

28,431 

23,528 

128,014 

139,442 

157,343 

163,732 

The Group leases the majority of its shops under operating leases. The leases typically run for a period of 10 years, with an option to renew the lease after that date. Lease payments
are generally increased every five years to reflect market rentals. For a small number of the leases the rental is contingent on the level of turnover achieved in the relevant unit.

The inception of the shop leases has taken place over a long period of time and many date back a significant number of years. They are combined leases of land and buildings. It is
not possible to obtain a reliable estimate of the split of the fair values of the lease interest between land and buildings at inception. Therefore, in determining lease classification the
Group evaluated whether both parts are clearly an operating lease or a finance lease. Firstly, land title does not pass. Secondly, because the rent paid to the landlord for the buildings is
increased to market rent at regular intervals, and the Group does not participate in the residual value of the building it is judged that substantially all the risks and rewards of the
building are with the landlord. Based on these qualitative factors it is concluded that the leases are operating leases.

25. Capital commitments

During the year ended 30 December 2006, the Group entered into contracts to purchase property, plant and equipment for £11,736,000 (2005: £8,067,000). These
commitments are expected to be settled in the following financial year.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

57

26. Related parties

Identity of related parties

The Group has a related party relationship with its subsidiaries (see note 12) and its directors and executive officers.

Trading transactions with subsidiaries - Group

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are therefore not disclosed.

Trading transactions with subsidiaries - Parent company

Rent paid

Interest received

2006

£’000

2005

£’000

2006

£’000

2005

£’000

Greggs Properties Limited

(3,015)

(3,122) 

1,413 

1,105 

Amounts owed by

related parties

Amounts owed to

related parties

2006

£’000

- 

2005

£’000

2006

£’000

2005

£’000 

- 

29,318

28,620

Dormant subsidiaries

-

-

-

-

6,416

6,416

- 

- 

Transactions with Greggs Properties Limited are carried out at arms’ length.

The Greggs Trust is also a related party and during the year the Company made a donation to the Greggs Trust of £265,000 (see Corporate Social Responsibility on pages 
20 to 22).

Transactions with key management personnel

The directors are the key management personnel of the Group. The interests of the directors who served during the year (including those of their immediate families but
excluding interests in shares pursuant to unexercised share options) in the share capital of the Company, according to the register of directors’ interests are as follows:

Mike Darrington

Malcolm Simpson

Richard Hutton (appointed 13 March 2006)

Raymond Reynolds (appointed 18 December 2006)

Ian Gregg (non-executive)

Stephan Curran (non-executive)

Susan Johnson (non-executive) (resigned 30 September 2006)

Derek Netherton (non-executive)

Bob Bennett (non-executive)

Julie Baddeley (non-executive)

Ian Gibson (non-executive) (appointed 1 April 2006)

Ordinary Shares of 20p

Ordinary shares of 20p

(Beneficial interest)

2006

2005
(or date of 
appointment 
if later)

(Trustee holding with 

no beneficial interest)

2006

2005
(or date of 
appointment 
if later)

61,470 

57,970 

-

- 

10,010 

40,010 

8,000 

13,000 

911

848 

215,000 

215,000 

2,808 

2,808 

133,535 

144,835 

3,700 

3,700 

- 

1,000 

- 

- 

522 

- 

- 

- 

- 

- 

- 

-

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Details of directors’ share options, emoluments, pension benefits and other non-cash benefits can be found in the Directors’ Remuneration Report on pages 58 to 64. Total
remuneration is included in personnel expenses (see note 5).

There have been no changes since 30 December 2006 in the directors’ interests noted above.

58

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Remuneration Report

INTRODUCTION

in a manner that will align the interests of executive directors with those of

This report has been prepared in accordance with the Directors’ Remuneration

Report Regulations 2002 (the “Regulations”). This report also meets the relevant

shareholders. The Committee has the ability to consider corporate performance

on environmental, social and governance issues when setting the remuneration 

requirements of the Listing Rules of the Financial Services Authority and describes

of executive directors.

how the Board has applied the Principles of Good Governance relating to

Remuneration packages for executive directors are designed so as to reward them

directors’ remuneration.

fairly for their contributions within the range of benefits offered by other UK

The Regulations require the auditors to report to the Company’s members on

companies of equivalent size, to recognise the unusually complex nature of the

the “auditable part” of the Directors’ Remuneration Report and to state whether,

combined retail, manufacturing and distribution operations of the Greggs

in their opinion, that part of the report has been properly prepared in accordance

business and so as to take into account levels of remuneration paid to others

with the Companies Act 1985 (as amended by the Regulations). This report has,

within the Company.

therefore, been divided into separate sections for audited and unaudited information.

UNAUDITED INFORMATION

Basic salaries for executive directors are set to reflect the complexities of our

business in combining areas of retail, manufacturing and distribution and are based

The Remuneration Committee of the Board (the "Committee") sets the

on the ability to attract and retain the skills necessary successfully to manage this

remuneration and terms of appointment of the executive directors and the

range of operations. The target salary is set broadly at the median level for an

Chairman on behalf of the Board. The names of the directors who have served

individual who is well established and demonstrating the full range of skills and

on the Committee during the year are Julie Baddeley (Chair), Stephen Curran,

experience necessary, whilst newly appointed executive directors’ salaries are set

Ian Gregg (who retired from the Committee in March 2006), Ian Gibson (who

joined the Committee in May 2006) and Bob Bennett. Mike Darrington,

Andrew Davison (the Company Secretary) and Nicola Instone (the Company's

People Director) have assisted the Committee in their deliberations. The Committee

received independent external advice from Monks Partnership (who were

appointed by the Committee). Monks Partnership also assisted the Executive

on a range starting below the median level, providing the opportunity for future

salary growth linked to establishment and experience in post. Salaries and benefits

are regularly benchmarked by external consultants using appropriate size and sector

comparators and this exercise was undertaken in 2006 on the basis of advice

provided by Monks Partnership.

Directors’ Committee by producing comparative information to assist in determining

Executive directors should also participate in bonus arrangements. The Committee

the fees payable to non-executive directors and assisted the Company generally 

seeks to structure those bonus arrangements so as to encourage long term

in determining the remuneration of its senior management team, but otherwise

sustainable growth in the Company’s profits and, therefore, is satisfied that the

had no connection with the Company.

structure will not raise environmental, social or governance risks by inadvertently

General Policy on Directors’ Remuneration

The Committee's policy is to establish competitive remuneration packages that

encouraging irresponsible behaviour. 

The bonus arrangements comprise:

will attract, retain and motivate individuals with appropriate skills and experience

(a) An All Employee Profit Sharing Scheme, which distributes 10% of profits

and will best serve the interests of the Company, its shareholders and its employees.

half yearly to all employees on the basis of a formula related to the

Where possible, the Committee will also seek to structure bonus arrangements 

profitability of their relevant division, length of service and salary level.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

59

(b) A scheme which (when combined with the All Employee Profit Sharing

The Committee’s policy is that bonus payments to executive directors should

Scheme) could, subject to Remuneration Committee discretion, deliver 

not be pensionable. Whereas, in the past, the executive directors’ entitlement

a non-pensionable cash bonus up to a maximum of 95% of basic salary

to profit share under the all employee profit sharing scheme has counted

for Mike Darrington and 70% of basic salary for other executive directors.

towards pensionable salary, this arrangement has been terminated during the

For 2006 the target for Mike Darrington and Malcolm Simpson comprised

year in respect of all future profit share entitlements.

corporate profit performance only, whilst the targets for Richard Hutton

There have also been occasional grants to the executive directors of options

comprised corporate profit performance combined with an element based

over shares in the Company, pursuant to one or more of the share option

on personal performance, measured through delivery against key set

schemes operated through the Committee. These include both Inland Revenue

objectives. The targets for Raymond Reynolds comprised corporate profit

approved and unapproved long-term share incentive schemes, designed to

performance combined with an element based on divisional profit

encourage the executive directors and other employees to hold shares in the

performance and an element based on personal performance, measured

Company and to enhance share values.

through delivery against key set objectives. For 2007 the targets for all

executive directors will include elements relating to corporate profit, strategic

and personal performance designed to encourage achievement of common

objectives as well as personal development.

(c) A new Long Term Incentive Plan (“LTIP”) was approved by shareholders

at the AGM in 2006. Under this scheme the Remuneration Committee

will select employees (including executive directors) to participate. No

executive director will receive a grant of executive share options in the

same financial year in which he/she is selected to participate in the LTIP.

If selected, the Committee will invite the participants to utilise a proportion

(not more than 50% for the first award) of their annual bonus to acquire

shares in the Company and will then grant nil cost options to participants

In accordance with institutional investor guidelines, the total number of new shares

and shares held in treasury over which the Company may grant options is limited and

the Company has chosen to allocate a significant proportion of the shares available

to the Company’s Savings Related Share Option Scheme open to all employees,

including executive directors. This has restricted the number of new shares or shares

held in treasury available to be allocated under the discretionary Senior Executive

Share Option Schemes under which the last grant of options was made in August

2006. Any future grants of executive share options to executive directors will be

based upon the need to secure individuals of appropriate calibre, having regard 

to prevailing market conditions at the date of appointment or to help to align the

interests of executive directors with those of shareholders, especially if the LTIP is not

available to a particular individual, or where the Committee considers it appropriate. 

to match the number of shares purchased. These nil cost options will be

Unless granted pursuant to the all-employee Savings Related Share Option Scheme

exercisable normally after three years and only if certain performance criteria,

(under which options may be offered at a discount to market price), the Committee

set by the Remuneration Committee at the time of grant, have been satisfied.

intends that all options granted to executive directors in respect of shares in the

For the initial award, due to be made in 2007, performance targets will 

be set as growth in earnings per share of 3% above the retail prices index

Company (except those relating to "matching" shares under the LTIP) will be at

exercise prices at least equal to the market price of a share as at the date of grant.

for a 1:1match and 7.5% above the retail prices index for a 2:1 match,

The above policies enable the executive directors to receive potentially significant

with a straight line graph indicating the relevant match for performance

benefits in addition to their basic salaries, but only if value has been created for

in between.

shareholders. The Committee considers that, although the non-performance

60

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Remuneration Report

continued

related elements of the executive directors’ remuneration packages are substantial,

Performance criteria in relation to the performance based annual cash bonuses

the performance related elements are significant in terms of providing motivation

payable to the executive directors are set by the Committee each year in

to the executive directors to improve shareholder value.

accordance with the general remuneration policy set out above. The Committee

In order to ensure that no director is involved in deciding his/her own remuneration,

the fees payable to non-executive directors (other than the Chairman) are set, after

consultation with the Chairman, by a committee of the Board consisting only of

will offer participation in the LTIP to a number of senior executives in the Company

including Richard Hutton and Raymond Reynolds in 2007 on the basis of the

performance criteria policy referred to above.

executive directors (Mike Darrington, Malcolm Simpson, Richard Hutton and

Policy on Service Contract Notice Periods and Payments on Early Termination

Raymond Reynolds) who periodically seek advice from external consultants as to

The Company’s policy on the duration of directors’ contracts is that:

the appropriate market rates applicable. Such advice was obtained in 2006 from

Monks Partnership. 

Policy on Performance Conditions

• existing executive directors should have service contracts terminable on

one year’s notice served by the Company or by six months’ notice served

by the director; 

The performance conditions attaching to share options granted to the executive

• future executive directors will be engaged on terms necessary to secure

directors under the Company’s Senior Executive Share Option Schemes have

individuals of appropriate calibre, having regard to prevailing market

varied according to the date of grant. Such conditions are set by the Committee

conditions at that time;

to set challenging performance objectives linked to shareholder return. The

Committee intends that performance conditions will continue to be settled on

this basis and applied to any future grants of options to executive directors under

the discretionary Senior Executive Share Option Schemes. Details of the performance

conditions for options currently outstanding are set out in the section headed

‘Share Options’ below.

• non-executive directors are appointed subject to the Company’s Articles of

Association, which require them to retire and to seek re-election at the first

AGM after appointment. Thereafter, one half of the Board (other than those

appointed since the last AGM), being those who have been longest in office

since last re-election, and any other director who has not been elected or 

re-elected at either of the two preceding AGMs, must retire and seek re-

Whether performance conditions attached to share options have been met is

election. Any non-executive director who has served on the Board for over

tested by the Committee, which compares the actual performance of the Company

nine years must seek re-election annually. The Nominations Committee

with relevant published statistics and, if necessary, obtains advice from external

advises the Board as to whether a particular director, whose turn it is to retire

consultants in order to reach its conclusion. 

by rotation, should be nominated for re-election.

No performance conditions have been attached to options granted pursuant to

The policy on termination payments for executive directors is that the Company

the Company’s Savings Related Share Option Scheme, which is available for all

does not normally make payments beyond its contractual obligations, including

employees. The principal purpose of this scheme is to encourage employees at

any payment in respect of notice to which a director is entitled. In exceptional

all levels within the Company to participate in, and to understand better, the

circumstances, an additional ex-gratia payment may be considered, based on factors

growth in value of the Company and the rules of that scheme require that all

including the director’s past contribution and the circumstances of the

options granted must be on the same terms.

director’s departure.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

61

Non-executive directors would not normally be entitled to compensation for early

All cash bonuses are subject to confirmation by the Remuneration Committee.

termination of their appointments prior to the date on which they would next

Non-executive Directors

be due to retire by rotation, or if not re-appointed at such time.

Directors’ service contracts

The non-executive directors do not have service contracts with the Company.

However, each of them does have a letter of appointment. The terms of

Details of the directors’ service contracts or letters of appointment are as follows:

appointment of each non-executive director require that they seek re-election

Executive Directors

Mike Darrington has a service contract with the Company dated 7 March 2003. His

continuous period of service with the Company commenced on 15 August 1983.

on a regular basis in accordance with the Articles of Association of the Company

(see above). The fees payable to the non-executive directors cover all normal

duties. In exceptional circumstances, where significant additional time commitment

is required, the Board (or a duly authorised committee) may award additional fees.

Richard Hutton has a service contract with the Company dated 7 April 2006. His

No right of compensation exists where the office is terminated, for whatever reason.

continuous period of service with the Company commenced on 1 January 1998.

Performance graph

Malcolm Simpson has a service contract with the Company dated 7 March 2003.

His continuous period of service with the Company commenced on 

24 April 1973.

The graph below shows a comparison of the total shareholder return for the

Company’s shares for each of the last five financial years against the total shareholder

return for the companies comprised in the FTSE Mid 250 Index (excluding investment

Raymond Reynolds has a service contract with the Company dated 18 December

Trusts) and the FTSE 350 (excluding Investment Trusts).

2006. His continuous period of service with the Company commenced on 

These indices were chosen for this comparison because they include companies

1 December 1986.

of broadly similar size to the Company.

Each of Mike Darrington, Richard Hutton, Malcolm Simpson and Raymond Reynolds

have provisions in their contracts which enable them to be terminated by the

Company on 12 months’ notice or by the executive on six months’ notice.

Malcolm Simpson has agreed to retire as a director and employee with effect

from the Company’s AGM in 2007. In addition to their basic salaries, each is

entitled to participate in the Company’s profit sharing scheme available to all

employees and to a performance based cash bonus. They are also entitled to

additional benefits including the use of a motor car, private medical insurance,

life assurance, permanent health insurance and a contribution towards

telephone expenses. 

In addition to the above arrangements, for 2007, the executive directors will

receive a performance based cash bonus based on the policy set out above. 

250

200

150

100

50

0

FTSE 350
(ex-Invst Trusts)

Greggs

FTSE Mid 250
(ex-Invst Trusts)

2
0
0
2
/
1
0
/
1
0

2
0
0
2
/
7
0
/
1
0

3
0
0
2
/
1
0
/
1
0

3
0
0
2
/
7
0
/
1
0

4
0
0
2
/
1
0
/
1
0

4
0
0
2
/
7
0
/
1
0

5
0
0
2
/
1
0
/
1
0

5
0
0
2
/
7
0
/
1
0

6
0
0
2
/
1
0
/
1
0

6
0
0
2
/
7
0
/
1
0

6
0
0
2
/
0
1
/
1
0

62

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Remuneration Report

continued

AUDITED INFORMATION

Directors’ emoluments and compensation

The following table sets out details of the emoluments and compensation received or receivable by each director (excluding pension contributions, details of which are set
out below).

Salary / fees

Salary / fees

of benefits

profit share

Estimated

Annual 

value

bonus and

Executive 

Mike Darrington

Malcolm Simpson

Richard Hutton (appointed 13 March 2006)

set for 2007

paid in 2006

£

£

462,000 

420,000

150,000 

189,230

200,000 

132,717 

2006 

£

23,401 

18,805 

11,106 

2006

£

Total 2006

Total 2005

£

£ 

27,649 

471,050 

477,565 

11,568 

219,603

286,985 

40,749 

184,572 

Raymond Reynolds (appointed 18 December 2006)

175,000 

6,233 

374 

2,202 

8,809 

- 

-

Chairman

Derek Netherton

Non-executive

Stephen Curran

Ian Gregg

Susan Johnson (resigned 30 September 2006)

Bob Bennett

Julie Baddeley

Ian Gibson (appointed 1 April 2006)

Total

105,000 

101,000 

35,000 

33,000 

- 

37,000 

37,000 

33,000 

31,000 

27,500 

20,625 

34,000 

33,000 

21,750 

- 

- 

- 

- 

- 

- 

-

- 

- 

- 

- 

- 

- 

-

101,000 

95,125 

31,000 

27,500 

20,625 

34,000 

33,000 

21,750

25,000 

26,167 

25,000 

28,000 

22,500 

- 

1,267,000

1,017,055

53,686 

82,168 

1,152,909 

986,342 

From May 2006 Malcolm Simpson reduced his working hours on relinquishing his responsibility as Finance Director.

The fees for Stephen Curran for the period 1 January 2006 to 31 March 2006 were paid to a third party.

The fees payable to the non-executive directors reflect their respective membership and chairmanship of the relevant Board Committees and, in the case of Stephen Curran,
his role as Senior Independent Director.

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

63

Share options

The following table sets out details of the share options (all of which were granted at a nominal or nil cost to the executive director concerned) held by, or granted to, each
director during the year, according to the register of directors’ interests:

Number of options during year

At 1 January 2006

or date of 

appointment

Number

At

30 December

Exercise

Granted

Number

Exercised

Number

2006

Number

price

£

Market

price at

date of

exercise

£

Gain on

exercise

£

Date from

Date of

which

grant

exercisable

Expiry

date

Scheme

Mike Darrington

12,000 

6,000}

6,000}

- 

17.015

37.60 

123,510 

Mar 00

Mar 03

Mar 07

Executive

40.80 

142,710 

- 

6,000

- 

6,000

40.770

- 

- 

Aug 06

Aug 09

Aug 16

Executive

Malcolm Simpson

10,000 

Richard Hutton

2,000 

Raymond Reynolds

-

48 

41 

- 

170 

1,500 

2,500 

4,000 

48 

41 

45 

- 

- 

4,000 

- 

- 

45 

- 

- 

- 

- 

- 

- 

- 

10,000 

- 

17.015

37.60 

205,850 

Mar 00

Mar 03

Mar 07

Executive

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

2,000 

34.000

4,000 

40.770

48 

41 

45 

30.980

41.160

37.130

170 

26.875

1,500 

34.880

2,500 

34.000

4,000 

40.770

48 

41 

45 

30.980

41.160

37.130

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

- 

Aug 04

Aug 07

Aug 14

Executive

Aug 06

Aug 09

Aug 16

Executive

Sept 04

Nov 07

Apr 08

SAYE

Sept 05

Nov 08

Apr 09

SAYE

Sept 06

Nov 09

Apr 10

SAYE

Mar 99

Mar 02

Mar 09

Executive

Mar 04

Mar 07

Mar 11

Executive

Aug 04

Aug 07

Aug 14

Executive

Aug 06

Aug 09

Aug 16

Executive

Sept 04

Nov 07

Apr 08

SAYE

Sept 05

Nov 08

Apr 09

SAYE

Sept 06

Nov 09

Apr 10

SAYE

The aggregate gains on exercise of share options were £472,070 (2005: £1,065,950), including £266,220 (2005: £777,686) in respect of the highest paid director.

The executive directors also have a potential beneficial interest in the Greggs Employee Benefit Trust.

On each of the grants awarded under the Senior Executive Share Option Scheme, the exercise of the options granted was made conditional upon the growth in the Company’s
basic earnings per share over a three year period. For options granted in 1999, 2000 and in March 2004, earnings per share growth must be greater than 2% per annum
above growth in the Retail Prices index. On each of the grants awarded in August 2004 and in 2006, the exercise of the options granted was made conditional upon the average
annual growth in the Company’s basic earnings per share over the three years from grant being greater than the average annual growth in the Retail Price Index over the three
years. If earnings per share growth exceeds RPI growth by 3% then half of the options will be exercisable, if earnings per share growth exceeds RPI growth by 5% then all of
the options will be exercisable and if earnings per share growth exceeds RPI growth by between 3% and 5% the number of options exercisable is pro-rated on a 
straight line basis.

No non-executive director has any options to acquire shares in the Company.

The mid-market price of ordinary shares in the Company as at 30 December 2006 was £43.00. The highest and lowest mid-market prices of ordinary shares during the
financial year were £47.74 and £34.75 respectively.

Pensions

Each of the executive directors earned pension benefits under the Greggs 1978 Retirement and Death Benefit Scheme, the Company’s defined benefit scheme, during the
year under review. This scheme, which currently requires a contribution of 6.6% of pensionable salaries from members, provides for up to two-thirds of final pensionable salary,
dependant on length of pensionable service. Certain executive directors also received contributions into the Company’s money purchase defined contributions pension schemes
during the year under review. No pension benefits were earned or accrued in respect of any non-executive director. 

64

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

Directors’ Remuneration Report

continued

Defined benefit scheme

The following table sets out the change in each director’s accrued pension in the Company’s defined benefit scheme during the year and his accrued benefits in the scheme at
the year end:

Accrued annual 
pension 
entitlement at
age 65 as at
30 December
2006 
£

Accrued annual
pension
entitlement at
age 65 as at
31 December
2005
£

Increase in
accrued
pension
entitlement
for the year
£

Increase in
accrued
pension
entitlement for
the year net of
inflation of 2.7%
£

Transfer value
of increase
in accrued 
pension
entitlement
for the year
£

Date of
birth

Date service
commenced 

8/3/42

3/6/68

15/10/41

4/11/59

15/8/83

1/1/98

24/4/73

1/12/86

140,503

14,865 

125,995

42,392

132,370 

11,170

125,591 

35,168

8,133 

3,695

404 

7,224

4,559

3,393

(2,986)

6,274

37,581

13,908

-

31,918

Executive Director

Mike Darrington

Richard Hutton

Malcolm Simpson

Raymond Reynolds

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 inflation rate of 2.7% shown in the table above is that published by the Secretary of State for Social Security in accordance with Schedule 3 of the Pensions
Schemes Act 1993.

Executive Director

Mike Darrington

Richard Hutton

Malcolm Simpson

Raymond Reynolds

Cash equivalent Cash equivalent
transfer
value as at
30 December
2006
£
2,103,546 
103,444 
* 
385,414 

transfer
value as at
1 January
2006
£
1,982,373 
69,649
1,838,511 
297,924 

Increase in the
cash equivalent
transfer
value since
1 January
2006
£
31,756 
7,631 
* 
23,991 

Increase in the
cash equivalent
transfer
value since
date of
appointment
£
n/a 
11,883 
n/a
792 

* A transfer value is not available at 30 December 2006 for Malcolm Simpson since he was older than the normal retirement age under the scheme.

Note: cash equivalent transfer values have been calculated in accordance with Actuaries Guidance Note GN11 and the increase is stated net of contributions made by the director.
The transfer values disclosed above do not represent a sum paid or payable to the individual director. Instead they represent a potential liability of the pension scheme.

Money purchase schemes

The Company has paid the contributions set out below to two of the Company’s money purchase schemes (the Greggs Bakeries (MJD) Retirement Benefit Scheme and the
Greggs Senior Executive Pension Scheme) for the benefit of executive directors during this financial year. 

Executive Director 

Mike Darrington

Richard Hutton

Malcolm Simpson

Raymond Reynolds

Approval by Shareholders

Contribution
in respect
of 2006
£
-
10,664
72,938 
258 

Contribution
in respect
of 2005
£

3,333 

-

60,500 

-

At the Annual General Meeting of the Company to be held on 14 May 2007, a resolution approving this report is to be proposed as an ordinary resolution.

This report was approved by the Board on 12 March 2007

Signed on behalf of the Board

Julie Baddeley 

Director

Chair of Remuneration Committee

12 March 2007

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

65

Notes

66

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

10 Year History

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006†

(as restated)*

Turnover  (£'000)

265,941 

291,420 

308,678 

339,008 

377,556 

422,600 

456,978 

504,186 

533,435 

550,849

Earnings before interest 
and tax (£’000)

Profit on ordinary activities
before taxation (£'000)

18,015

20,215

21,691

26,044

31,597

35,334

39,167

45,763

47,143

38,747

18,035 

20,214 

21,520 

26,356 

32,742 

36,666 

40,472 

47,751 

50,159 

40,239

Shareholders' funds (£'000)

58,384 

69,585 

80,896 

88,169 

103,554 

119,965 

134,150 

157,156 

181,475 

144,891

Earnings per share (pence)

121.1

Dividend per share (pence)

37.0

122.8

41.0

135.1

45.0

162.3

55.0

190.2

65.0

209.2

72.5

230.5

80.0

270.5

96.0

282.1

106.0

241.2

116.0

Capital expenditure (£'000)

24,364 

26,204 

22,403 

21,397 

27,385 

42,143 

32,361 

25,090 

41,687 

30,023

Net book value of 
fixed assets (£’000)

Number of shops in
operation at year end

86,239

100,309

108,786

113,285

124,123

148,184

160,704

163,110

180,826

184,325

1,057 

1,072 

1,084 

1,105 

1,144 

1,202 

1,231 

1,263 

1,319 

1,336

*restated for the transition to IFRSs

†includes £3.5m Bakers Oven restructuring costs

DIRECTORS

Derek Netherton (Non-executive chairman)ø

Mike Darrington FCA (Managing)ø

Richard Hutton FCA (Finance)

Malcolm Simpson FCA (IT)

Raymond Reynolds (Retail)

Ian Gregg OBE (Non-executive)ø

Steven Curran FCCA (Non-executive)*†ø

Bob Bennett (Non-executive)*†ø

Julie Baddeley (Non-executive)*†ø

Ian Gibson CBE (Non-executive)*†ø

*Member of Audit Committee 

† Member of Remuneration Committee

ø Member of Nominations Committee

SECRETARY AND REGISTERED OFFICE

Andrew John Davison, Solicitor

Fernwood House

Clayton Road

Jesmond

Newcastle upon Tyne

NE2 1TL

Bankers

Stockbrokers

Royal Bank of Scotland plc

UBS

149 High Street

Gosforth

Newcastle upon Tyne

NE3 1HA

Auditors

KPMG Audit Plc

Quayside House

110 Quayside

Newcastle upon Tyne

NE1 3DX

Solicitors

Robert Muckle LLP

Norham House

12 New Bridge Street West

Newcastle upon Tyne

NE1 8AS

1 Finsbury Avenue

London

EC2M 2PA

Brewin Dolphin Securities Ltd

Commercial Union House

39 Pilgrim Street

Newcastle upon Tyne

NE1 6RQ

Registrars

Capita Registrars

Bourne House

34 Beckenham Road

Beckenham

Kent

BR3 4TU

GREGGS plc ANNUAL REPORT AND ACCOUNTS 2006

67

Nationwide Coverage

GREGGS

SHOP NUMBERS

2006

2005

Scotland

North East

Cumbria

Yorkshire

North West

Midlands

South West

South East

GREGGS

163

138

47

136

136

159

110

276

147

117

46 

128

133 

153

107

267 

BAKERS OVEN

SHOP NUMBERS

Bakers Oven Scotland

Bakers Oven North

Bakers Oven Midlands

Bakers Oven South

2006

2005

0

0

99

66

18 

48

85 

65 

BAKERS OVEN

165

216 

Greggs Belgium

6

5 

1,165

1,098

TOTAL

1,336

1,319

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