Directors’ report and business review
Chairman’s statement
Chief Executive’s report
Corporate Social Responsibility
Key performance indicators
Corporate governance
Fixed assets
Directors and their interests
Substantial shareholdings
Authority to purchase shares
Auditors
8
13
20
25
26
32
32
33
33
35
Contents
Statement of directors’ responsibilities
Report of the independent auditors
Consolidated income statement
Consolidated statement of comprehensive income
Balance sheets
Statements of changes in equity
Statements of cashflows
Notes to the consolidated accounts
Directors’ remuneration report
36
37
39
39
40
41
43
45
77
3
The home of fresh baking
Greggs is the leading bakery retailer in the UK. Expert bakers for
the last 70 years, we serve delicious, freshly baked, quality food at
great value prices to a million customers each day, in over 1,400 shops
around the UK.
We take enormous pride in our food, hand making all our
sandwiches and baking all our savouries each day in our shops
to give our customers unrivalled freshness.
We have ten regional bakeries delivering daily to our shops with
our fleet of 375 vehicles. We also have 90 instore bakeries each with
their own dedicated skilled craft baker.
Greggs can be found on the UK’s high streets, local shopping
parades and, increasingly, retail, industrial and business parks,
airports, bus/rail interchanges, universities and other locations where
people live, work, travel and spend their leisure time.
We employ nearly 19,000 people and have ambitious plans for the
future. We plan to add 600 new shops in the coming years, creating up
to 6,000 new jobs.
Baking
since 1939
Financial highlights
2009
£m
658.2
0.8%
48.4
48.8
Pence
34.1
16.6
2008
Before
exceptional
items
£m
628.2
2008
After
exceptional
items
£m
628.2
4.4%
44.3
45.2
Pence
30.7
14.9
4.4%
48.6
49.5
Pence
33.6
14.9
Turnover
Like–for–like sales growth
Operating profit
Pre–tax profit
Earnings per share
Dividend per ordinary share
4
5
6
Our vision is to be the number one for sandwiches
and savouries from a united team who are
passionate about being the best in bakery.
For our customers
We offer a wide range of fresh, delicious, quality bakery food.
Every single sandwich we sell is handmade in our shops each day
by our highly trained staff, on our own bread from our bakery. All our
savouries are freshly baked in the ovens in our shops throughout the
day. In our bakeries we hand finish millions of products each week.
We believe we are different because we make and bake most of
our food from scratch. Our people are passionate about baking and
each product is carefully prepared to give our customers quality and
freshness at great value prices.
We never forget that it’s our people who make us a successful
company. That’s why we want all our people to feel individually valued
and looked after, and for each person to share in the Company’s
success. Ten per cent of our profits are shared with our people
through our profit share scheme, ensuring that the interests of our
shareholders and our people are aligned.
For our people
Our
vision
For our communities
We promise to continue to make a difference to people’s lives.
Through our award winning Greggs Breakfast Club scheme,
Children’s Cancer Runs, the Greggs Foundation and other fundraising
activities, we strive to make a positive impact on local communities in
the areas where we operate.
For our shareholders
We have a proven track record of success and return on
investment. Importantly, in today’s economic climate, more than ever,
we offer the assurance and commitment that our business is run with
integrity and that we are a responsible company. We are proud that
Greggs is a trusted, valued and respected business.
Our values
Greggs began as a family business and we have retained good,
honest family values as the business has grown.
Our values are our commitment to the way we treat each other.
We aspire to be a company that everyone is proud to shop with. Our
values apply to all our customers, our people, our shareholders and
our suppliers.
We will be enthusiastic and supportive in all that we do,
open, honest and appreciative, treating everyone with fairness,
consideration and respect.
7
Directors’ Report and Business Review for
the 53 weeks ended 2 January 2010
The directors have pleasure in presenting their annual report
and the audited accounts for the 53 weeks ended 2 January 2010.
The comparative period is the 52 weeks ended 27 December 2008.
The directors’ report and business review is set out on pages
8 to 35.
Chairman’s Statement
I am pleased to report a year of significant progress, in which
we have achieved our key objectives despite the pressures of a
harsh recession. We have delivered a record underlying operating
profit while completing a major programme of reorganisation to
create the right structure for future growth. Greggs enters the
expansion phase of our strategy with strong finances and a clear
vision for the future.
Recipe
for success
Results
Total Group sales for the 53 weeks ended 2 January 2010
increased by 4.8 per cent to £658 million (2008: £628 million),
including a 1.5 per cent contribution from the 53rd week. Like–for–like
sales increased by 0.8 per cent.
Operating profit grew by 9.3 per cent to £48.4 million (2008: £44.3
million excluding exceptional items). Operating margin on this basis
was 7.4 per cent (2008: 7.1 per cent). Net finance income was £0.3
million (2008: £0.9 million), reflecting low market interest rates.
Pre–tax profit was £48.8 million, an increase of 8.0 per cent on the
2008 profit of £45.2 million (excluding a net exceptional credit of £4.3
million relating to one–off property gains, restructuring costs and an
exceptional pension credit). Including the net exceptional credit last
year, pre–tax profit in 2008 was £49.5 million.
The Group tax charge for the year was 29.5 per cent (2008: 31.1
per cent), reflecting a reduction in the corporation tax rate and the
favourable settlement of prior year claims. Diluted earnings per share
were 34.0 pence (2008: 30.6 pence excluding the net exceptional
credit), an increase of 11.1 per cent. Including the net exceptional
credit last year, diluted earnings per share in 2008 were 33.5 pence.
8
In 2009, we were named No.1 British Bakery Retailer in the British Baker’s top 50 companies
Dividend
The Board recommends an increased final
dividend of 11.4 pence per share (2008: 10.0
pence). Together with the interim dividend of 5.2
pence (2008: 4.9 pence) paid in October 2009, this
makes a total for the year of 16.6 pence (2008: 14.9
pence), an increase of 11.4 per cent. This is covered
2.0 times by diluted earnings per share.
Subject to the approval of the Annual General
Meeting the final dividend will be paid on 21 May
2010 to shareholders on the register on 23 April
2010.
This is the 25th consecutive year of dividend
growth since Greggs floated on the stock market
in 1984; a record that few companies can match.
The Board remains committed to pursuing a
progressive dividend policy that pays due regard to
the growth of earnings per share over the medium
term, the cash generative nature of our growing
business and our continuing determination to deliver
value to our shareholders.
Business highlights
Key achievements during a year of major change
included the completion of our programme to make
the business more centrally driven, reorganising
from 11 bakery divisions to seven retail regions and
strengthening our central capabilities in a number of
key areas, including the creation of a new Trading
function.
We harmonised our product ranges across the
country; removed all artificial colours and HVOs
(hydrogenated vegetable oils) and trans fats from
our own products, and provided consumers with
nutritional information on our core ranges.
We rebranded almost two thirds of our Bakers
Oven shops to create a single Greggs brand
throughout the UK and withdrew from our small,
loss–making business in Belgium.
This would have constituted a very full year
of activity under any conditions; it has been a
remarkable accomplishment whilst also dealing
with the effects of the recession and keeping the
performance of the business on track. Our Chief
Executive, Kennedy McMeikan, comments on the
business performance and our strategy in more
detail in his report.
The Board
Iain Ferguson CBE (54) joined the Board as
an additional non–executive director on 31 March
2009. Iain was Chief Executive of Tate & Lyle PLC
from 2003 – 2009. He is a non–executive director
of Balfour Beatty and The Davis Service Group,
a member of the PricewaterhouseCoopers (UK)
Advisory Board, currently Honorary Vice–President
of the British Nutrition Foundation and a member
of Defra’s Council of Food Policy Advisers. His
extensive knowledge and experience of the food
industry, particularly in manufacturing, have made
him a most valuable addition to our Board.
In 2009 Sir Michael Darrington retired from
the Board at the Annual General Meeting after 26
years of distinguished service. Mike was also a
tremendous support to Kennedy McMeikan when
he joined as Chief Executive, ensuring a smooth and
effective handover, and I would like to wish him a
long and very happy retirement.
10
Kennedy McMeikan, Sir Michael Darrington and Ian Gregg receiving the Honorary Freedom of the City of Newcastle upon Tyne from the
Lord Mayor Cllr Mike Cookson.
Greggs in the community
In February 2010, Greggs plc was awarded
the Honorary Freedom of the City of Newcastle
upon Tyne in recognition of our contribution to the
North East economy and our charitable work in
local communities over the last 20 years. We are
most grateful to the City Council for bestowing
this rare honour, which particularly reflects the
consistent determination of Ian Gregg and Sir
Michael Darrington to build a business with sound
values and a real commitment to supporting the
communities in which we operate. I am delighted
that our Chief Executive, Kennedy McMeikan, and
indeed the whole Board, show a genuine passion
to continue this tradition.
People
Our people, and the pride and pleasure they
clearly take in their work, are a key point of difference
for Greggs. My colleagues and I have huge
admiration for the way in which they have continued
to provide cheerful and effective service to our
customers while coping with the pressures of the
general economic downturn and the implementation
of significant changes across our business.
On behalf of the Board, I would like to thank
every one of them for their contribution to another
successful year.
Prospects
The forthcoming election, and concerns about
job security and possible tax rises, only makes for
an uncertain outlook for consumer spending in the
current year. Greggs’ reputation for outstanding
value and great quality will remain an important asset
under these conditions. In this context we
have considered it sensible to plan for like–for–like
sales growth to be marginally positive this year
and to manage our costs so that they remain
consistent with this challenging trading environment.
The current outlook for ingredient costs is
reasonably benign and we expect further cost
benefits from the simplification of the business
completed during 2009. Total sales in the ten weeks
to 13 March 2010 have increased by 2.8 per cent
and like–for–like sales by 0.8 per cent.
Last year’s major changes have given us the
right platform to accelerate the rate of both new shop
openings and refurbishments in the current year,
supported by our recently announced investment
plans to increase the efficiency and capacity of
our bakeries. We have also begun a major new
marketing campaign designed to increase consumer
awareness of Greggs’ bakery heritage and of our
core proposition as “The home of fresh baking”.
Throughout the business, we remain focused on
raising our standards ever higher, whether in quality,
efficiency or customer service.
We look forward to bringing the unique Greggs
combination of freshness, quality, taste and value
to many more consumers as our expansion
programme gains pace, and believe that we are well
placed to achieve a year of further progress in 2010.
Derek Netherton
Chairman
18 March 2010
11
Chief Executive’s Report
I am delighted that the significant changes we introduced
throughout 2009 have put us in excellent shape to make Greggs
accessible to even more consumers through a faster programme
of shop openings. In the coming year we will be doubling the
number of shops we refurbish and also undertaking the previously
announced investment in our supply chain to maximise the many
opportunities we have identified for expansion across the UK.
The right
Ingredients
Trading performance
We stated in the last annual report that, in the light of the general
economic climate, we had budgeted for marginally positive like–for–
like sales during 2009, and the final outturn was very much as we had
anticipated. In the first 26 weeks, like–for–like sales increased by 1.5
per cent and were flat during the second half, giving an increase of 0.8
per cent over the year as a whole. An important factor in the slowing
like–for–like sales trend, seen across the food retailing industry, was a
reduction in selling price inflation year–on–year as input costs began to
stabilise following the major increases in ingredient and energy prices
during 2008.
Our operating margin improved to 7.4 per cent (2008: 7.1 per cent)
reflecting the initial benefits of centralisation, a reduction in waste and
sensible control of labour costs in a difficult trading environment.
13
All of this will free up our Retail teams to
concentrate on delivering excellent service and
raising standards still further in our shops. They will
also be working with our expanded Property team
to open more new shops and double the number of
refits we undertake.
We harmonised 80 per cent of our product
range throughout the country, while fulfilling our
commitments to remove all artificial colours, HVOs
(hydrogenated vegetable oils) and trans fats from the
products we make ourselves. By harmonising our
range, we have been able to provide customers with
nutritional information in store on our core range of
sandwiches, savouries and drinks.
We also created a single brand throughout
the UK by converting 60 per cent of our 164 Bakers
Oven shops to the Greggs fascia, with the remainder
scheduled for completion during 2010.
Preparing for accelerated growth
During the year we implemented considerable
changes which have made the business simpler and
more efficient to run. We are already seeing benefits
from the changes we have made to our operating
structure and the harmonisation of our product
range. Of fundamental importance was the creation
of a centrally run business and the significance
of these changes should not be underestimated.
We achieved this by:
• reorganising our previous 11 bakery divisions
into seven new retail regions;
• organising our 10 bakeries, 2 distribution
centres, transport teams and central savoury
production facility into a single Supply Chain
Function to concentrate on supporting
the planned growth in the business whilst
delivering significant efficiency improvements;
• strengthening our Central Support teams to
handle more of our accounting, administration
and IT support; and
• creating a Trading function under a
newly appointed Group Trading Director to
focus on range, new product development,
promotions, pricing, sourcing and margin.
14
Our customers
Our products
80 per cent of our product range is now
harmonised across our 1,400–plus shops. Critically
though, the remaining 20 per cent of the range
comprises regional and local specialities, which our
customers love and expect us to continue making
for them.
We increased the amount of new product
development, launching a total of 22 new products
during the year, compared with nine in 2008.
Following a successful trial in the North West,
our breakfast offer is now available across the whole
of the UK, comprising bacon or sausage in a fresh,
Greggs–baked roll. We believe that this presents
a good opportunity for sales growth in our quieter,
early morning period.
Greggs serves a million customers every day.
In a recessionary climate, with particular uncertainty
caused by fears of job losses and tax rises, our
customers naturally look to make their money go as
far as possible. We have maintained our focus on
delivering the outstanding value for which Greggs
has long been renowned whilst not compromising
on the quality of our products. This has undoubtedly
contributed to our ability to sustain like–for–like sales
growth throughout the recession.
We have also listened and responded to our
customers by increasing the pace of our product
innovation and offering even greater choice of range.
In addition we have also launched a much wider
range of sandwiches without mayonnaise, with a
third of our range now ‘mayo free’.
Our new marketing campaign, launched in
February 2010, promotes Greggs as “The home
of fresh baking”. This is very much a return to our
roots and reiterates what has always made Greggs
special: our people and our products, who together
fill the starring roles in our new generation of TV
commercials. By re–emphasising the freshness and
quality of our bread, rolls, savouries, sandwiches
and cakes, we aim to extend awareness of our key
proposition as the nation’s favourite retail baker.
Being a baker as well as a retailer gives Greggs
a real competitive advantage and our aim is to
communicate these key messages to an even wider
audience who may not know what makes Greggs
so special.
15
Our shops
Last year we opened 49 new shops and closed
39, making a net addition of 10 new shops and
giving us a total of 1,419 at the year–end. The rate
of shop closures was higher than usual as a result
of the sale of our 10 shops in Belgium and the
closure of 10 Bakers Oven shops as part of our
restructuring to a single brand. We also maintained
a firm approach to lease renewals, which we believe
makes sound business sense in the current retail
and property climate.
We are planning to open a net 50 – 60 new
shops during the current year, with around two
thirds of these openings due to take place during
the second half. The shop opening programme is
proceeding at a sensible pace, balanced by our
desire to only open in optimum locations. There are
positive signs of increasing realism about the value
of leases, though landlords continue to prefer to offer
incentives to new tenants rather than to improve their
headline terms.
Given the increasing proportion of empty retail
space on the high street, we continue to argue that
the existence of upward–only rent reviews imposes
an inappropriate pressure on retailers. In rent reviews
over the next 12 – 18 months, we expect to see
many rents frozen when they would have fallen in an
open market. We continue to urge the Government
to consider the enlightened example of the Irish
government in abolishing upward–only rent reviews.
We have identified opportunities to open new
shops right across the UK, from the south west
of England to the north east of Scotland, making
Greggs accessible to the more than 50 per cent
of the UK population who currently do not have a
Greggs shop near to them. In total, we see scope for
more than 600 new shops, and currently expect to
increase the pace of net new openings from 50 – 60
in the current year to 70–plus from 2011.
As part of this expansion we will continue to
diversify our estate by opening more shops in
places where customers work and travel, as well
as in traditional high street and suburban locations.
Almost 30 per cent of our 49 new shops in 2009
were in non–traditional locations, such as industrial
estates, business parks, hospitals, universities,
garage forecourts, airports and bus stations. We
expect this proportion to increase to around 50
per cent of new shops as our opening programme
gathers pace in future years.
During the year we trialled three new concept
shops in the south of England. Key features of
these shops are that they provide more comfortable
browsing of our products, more of which are
available for self–selection rather than behind
counters in a traditional Greggs. Wherever possible
they also make more space available to our
customers and provide some seating. The results
have been encouraging, with sales increasing
as customers get to see more of our range. It is
also very pleasing that customers rate us even
higher for value in these concept shops. This is
extremely important to us as exceptional value has
always been a great strength of the Greggs offer.
The learning from these trials will be progressively
applied to a further 24 shops in London during
the year.
16
During 2010 we plan to double the overall
number of shop refurbishments with 120 refits
throughout the country. This acceleration has been
made possible by much hard work to identify and
refine a cost–effective refit formula that will allow us
to make our shops better for our customers and
simpler for our staff, but at a lower refit cost per shop
than in the past.
capacity for growth will begin in the second half of
this year when we start the building of new bakeries
in Newcastle and Penrith. We are also planning for
a new bakery in the south of England and expect
to have secured a site by the end of the year.
Further investment to extend our existing bakeries in
Glasgow, Leeds and Birmingham, and to replace our
bakery in Twickenham, is planned for 2011 – 2013.
Our supply chain
Capital expenditure
During 2009 we undertook a fundamental review
of our supply chain to establish how we could
achieve the optimal production and distribution
network for our planned growth to more than 2,000
shops in the UK. We re–evaluated the costs and
performance of our integrated bakery and logistics
model on a number of different bases, including
comparison with outsourced alternatives, and
concluded that continuing to make and bake our
own products contributes strongly to our profits
and gives us a distinct competitive advantage.
The review also highlighted the potential for us to
supply substantially more shops through our existing
bakeries, thus achieving significant efficiency
improvements.
As previously announced, our expansion
plans for the next five years require an increase in
investment in our supply chain to enable us to make
Greggs more accessible to consumers across the
UK. This capital expenditure will be funded from our
strong cash flow and will begin delivering benefits
from 2011, ultimately delivering efficiency benefits
to the bottom line of at least £10 million per annum
by 2014. Our programme of renewing our older
bakeries to improve quality, efficiency and their
Our total capital expenditure in 2009 was £30.3
million (2008: £33.3 million net of capital grant), £3
million below our original budget as we deferred
some investment, mainly in our bakeries, until we
had completed our supply chain review. In the
current year we are budgeting capital expenditure of
£45 – 50 million as we double our rate of new shop
openings and refits, and begin the first phase of
investment in our bakeries to support our plans for
shop growth.
Cash flow and balance sheet
The Group remains strongly cash generative
and we ended the year with net cash and cash
equivalents of £34.6 million (2008: £2.1 million)
on the balance sheet. This puts us in an excellent
position to fund increasing investment as we enter
the expansion phase of our strategy, and to take
advantage of other opportunities which may arise to
add value for our shareholders.
As the Chairman has stated, we are committed
to a progressive dividend policy. In addition, when
our plans indicate that we are holding surplus
cash, we look to return this to shareholders. Having
examined our current circumstances we believe that
17
Pudsey Bear joins the Greggs team as part of the fundraising efforts for BBC Children in Need 2009.
a cash return up to £15 million is appropriate and we
will progress this at a sensible pace using our share
buyback authority as we have done in the past.
Corporate Social Responsibility
Our Food. We have eliminated all artificial
colours and all HVOs (hydrogenated vegetable
oils) and trans fats from our own products. We have
already been removing artificial flavours from our
products during 2009 and expect to complete this by
the middle of 2010.
I am pleased that, as we previously committed,
we now have nutritional information about our
products available in all of our shops in order to
make it easy for customers to make informed dietary
choices. This is now available for our national range
of sandwiches, savouries and drinks, and will be
extended to our sweet products and bread and rolls
during 2010.
The Community. Even in a severe recession,
Greggs’ customers have again proved that they
have hearts of gold and helped us to raise £739,000
for the BBC Children in Need appeal during 2009.
This was more than double our contribution for
2008 and means that we have raised a total of £1.4
million during the four years of our involvement – a
fantastic achievement. Our customers again amazed
us with their generosity when they asked us to
provide collection points in our shops for the Haiti
earthquake appeal; their donations, combined with
a £25,000 donation from Greggs, generated a total
contribution of £186,000.
I am delighted with the continued good work of
the Greggs Foundation and the difference it makes
to lives across the UK. We have continued to make
substantial contributions to the Foundation which
supports a wide range of excellent causes through
grants to charitable and community organisations in
the areas where we operate.
We are very proud to continue supporting
the Greggs Breakfast Clubs in primary schools in
disadvantaged areas, where we know that they
make a huge contribution to children’s attention
and learning. I am also very pleased to report that
we have been successful in building partnerships
with other organisations to help us to open more
breakfast clubs. We have also supported the
ExpoChef roadshow to explain the importance of
healthy cooking and eating to children and their
parents in schools.
The Environment. Last year we achieved an
18 per cent reduction in the amount of food waste
being sent to landfill, and in 2010 we are setting
ourselves a range of stretching environmental
targets, including a 25 per cent reduction per shop in
our carbon emissions by 2015. We have introduced
reusable bags for sale in our shops and the profits
from these bags will be dedicated to providing
grants for environmental projects through the
Greggs Foundation.
In all areas of Corporate Social Responsibility I
am hugely impressed by our people’s determination
to apply Greggs’ values and to make a real
difference. I am grateful to all of them for the
phenomenal enthusiasm they have shown in helping
us to achieve so much during 2009.
These and other issues are covered in greater
depth in our Corporate Social Responsibility report
on pages 20 to 24.
18
We aim to meet consumer demand for our great
taste, freshness, quality and value by increasing
access to Greggs, at a faster rate, in new areas
throughout the UK. We will also make our products
even more accessible as we further improve the
shopping experience in our existing shops through
our accelerated and cost–effective refurbishment
programme.
The changes of the last year have put us in
a strong position to deliver the significant growth
opportunities that we have identified, and to fulfil our
vision of being the best in bakery. In doing so we
will realise further benefits for our staff, customers,
shareholders and local communities.
Kennedy McMeikan
Chief Executive
18 March 2010
Our people
In the face of the worst recession for many
years, our people have displayed quite extraordinary
determination and commitment, not only to deliver
continued sales growth, but also to implement the
many changes in the structure of the business and
in our ways of working which have established the
platform for our next phase of growth. It is a great
illustration of the dedication of our staff that only 15
of our 1,400–plus shops were closed for any length
of time during the severe blizzards which swept the
country in January.
Our people have done a truly fantastic job in
putting us in great shape for the coming year and
I am hugely grateful to them all. I am also delighted
that they will share in our success through Greggs’
profit sharing scheme. We look forward to creating
job opportunities for a further 6,000 people through
our future plans to grow our shop numbers to more
than 2,000 in the UK.
The future
Greggs is a business with a proud history,
strong values and a clear vision for the future: “to
be the number one for sandwiches and savouries,
from a united team who are passionate about being
the best in bakery”. We have a great reputation
that commands huge loyalty among our existing
customers, and the spirit of our people is absolutely
second to none. All this gives me a high level of
confidence in our ability to deliver our vision, as we
increase awareness of what we have to offer as
“The home of fresh baking”.
19
Corporate Social Responsibility
Greggs is a company that our customers and shareholders can
rely on to do the right thing. At Greggs we care about giving our
customers quality, fresh bakery food they can trust at affordable prices
while minimising our impact on the environment around us. We care
that our people are looked after and treated well, and that we provide
a great place for them to work. We also want to continue to use our
success to help make a difference to those in our communities who
face difficulties and challenges, by supporting them wherever we can.
Greggs
cares
We are pleased to report significant
achievements in 2009:
• We removed all artificial colours from the products we
make ourselves.
• We removed all added trans fats and hydrogenated vegetable
oils (HVOs) from the products we make ourselves.
• We provided nutritional information for our national sandwich,
savoury and drinks ranges, to help customers make informed
choices about the food they eat.
• In 2009, we opened an additional eight Greggs Breakfast Clubs.
We now give over 6,000 primary school children a nutritious
breakfast each day.
• We raised an incredible £739,000 for BBC Children in Need,
double the amount raised in 2008, thanks to the enthusiasm of
our people and the generosity of our customers.
• We helped raise and distribute £1.3 million in 2009 through the
Greggs Foundation.
• We diverted 18% of our total food waste away from landfill.
• Our people participated in 11 Big Tidy Up Events in partnership
with Keep Britain Tidy across England and Scotland, clearing
litter from local communities.
• We reduced the number of carrier bags issued by 18%, building
on the 20% reduction achieved in 2008.
20
In 2009, we reduced the salt content of our bread by more than 10 %
Quality, fresh bakery food our customers can trust
Our 2009 targets and commitments:
✔ By the end of June 2009, we will have removed all added trans fats, hydrogenated fats and oils from
all the products that we make ourselves.
✔ We will roll out our national product range so that, by the end of 2009, nutritional information will be
available to all our customers in our shops for our savoury, sandwich and drinks ranges.
✔ By the end of 2009 we will have removed all artificial colours from the products we make.
✔ We will make significant progress towards removal of all artificial flavours from the products we make
and achieve this completely by the middle of 2010.
✔ We will continue to assess the recipes for all our products, working towards the Food Standards
Agency’s recommended salt and fat targets for each type of food.
Our targets and commitments for 2010:
• We will remove all artificial flavours from the products we make by the middle of 2010.
• By the end of 2010, nutritional information will be available for our national bread and rolls and
confectionery ranges, thus completing the provision of nutritional information for our entire national
product range.
• We will reduce the salt, fat and saturated fat content for our products, working towards the Food
Standards Agency’s 2012 targets.
A great place to work
Our 2009 targets and commitments:
✔ By the end of 2009, 100% of employees will have access to private medical treatment for any
accidents that may occur in the workplace.
✔ We are committed to continuing our Employee Assistance Programme for everyone who works
at Greggs.
✔ We are committed to maintaining at least 75% of all new shop and area management appointments
from internal promotion.
✔ We are committed to maintaining 25 bakery apprenticeships through 2009.
Our targets and commitments for 2010:
• In the 2010 Employee Opinion Survey our target is that 75% of our employees participate in the survey
and we improve on our 2008 engagement score of 72%.
• Through opening 50–60 net new shops in 2010 we will create circa 500–600 new jobs.
• We will move to a national profit share scheme to ensure every person working at Greggs has an
equal opportunity to share in the Company’s success.
• We will enhance our management skills and development by delivering a ‘coaching skills’ programme
and a ‘high performing teams’ programme in 2010.
• We will review and improve our apprentice scheme and aim to have 30 bakery apprenticeships in
place by the end of 2010.
22
Making a difference to our communities
Our 2009 targets and commitments:
✔ In 2009, we will continue to invest £225,000 in our 124 Breakfast Clubs and will work to develop
partnerships with other organisations to expand the scheme.
✔ In 2009, we will maintain our commitment to community grant making through the Greggs
Foundation, providing support from our people and donating £300,000.
✔ In 2009, we will aim to exceed the £360,000 we raised in 2008 and develop the relationship with
BBC Children in Need to continue to engage our staff and customers.
✔ In 2009, we will continue to sponsor the North East Children’s Cancer Run and hold runs in five
other divisions for local children’s cancer charities.
✔ We will develop our work with Fareshare (and other organisations) to donate more of our unsold
food to local charities.
✔ 2009 is the third year of our sponsorship of The Sage Gateshead’s Children’s Room, established as
a tribute to the contribution to the business over many years of Ian Gregg and Malcolm Simpson.
✔ 2009 is the third year of our investment in a five year North East Enterprise Bond, encouraging new
business start ups across the North East.
Our targets and commitments for 2010:
Greggs Breakfast Clubs
• We will grow the number of Breakfast Clubs to at least 150, providing a free, nutritious breakfast
to more than 7,000 pupils each school day.
• We will develop partnerships with other organisations to enable further growth of the Breakfast
Club scheme.
• We will sponsor Expochef Healthy Food events in 60 Breakfast Club schools in order to promote
better understanding of healthy diets amongst pupils and their families.
Support the work of Greggs Foundation in our communities
• We will donate at least 1% of profits to the grant–making and Breakfast Club programmes
of Greggs Foundation.
• We will run our first ever national fundraising initiative for Greggs Foundation.
BBC Children in Need appeal
• For the fifth year we will engage our staff and customers in a major national fundraising campaign
to support the BBC Children in Need appeal.
Employability
• We will pilot initiatives to use our skills as a major employer to help break the cycle of unemployment
for marginalised groups in our communities.
Reducing our impact on the world around us
Our 2009 targets and commitments:
✔ We will aim to divert more of our waste away from landfill.
✘ We will aim to reduce our total energy consumption.
✔ We will aim to increase the amount of our packaging that is made from sustainable sources.
✘ We will seek to make reductions in our overall carbon footprint against our 2008 baseline.
✔ We will help to tackle litter by further encouraging our customers to dispose of their packaging
responsibly, including installing additional signage in our shops and talking to staff and customers
to get their ideas on what more we could do.
✔ We will continue to work towards increasing the proportion of cardboard, paper and plastic that we
recycle from our shops, bakeries and offices.
In 2009 we achieved four of our environmental targets. We trialled a number of ways to reduce energy
consumption across our shops to determine the most impactful way of doing this. The trials were completed
in quarter 3 hence we were not able to achieve reductions in our total energy consumption for the year.
This also meant we were unable to achieve reductions in our overall carbon footprint in 2009. In 2010
we plan to roll out an extensive shop energy reduction programme and have set a stretch target of a
5% reduction per shop for the year. This forms part of a wider carbon management plan through which
we will aim to achieve a 25% reduction per shop in our carbon footprint by 2015.
Our targets and commitments for 2010:
• We will aim to achieve a 25% reduction of our carbon footprint by 2015 (measured in tonnes
of CO2 per shop).
• We will aim to achieve a 5% reduction in energy usage per shop against our 2009 consumption.
• We will aim to achieve a 2.5% reduction in carbon generated by our distribution activity.
• We will aim to reduce our bakery waste by 10%.
• We will aim to divert an additional 10% of waste from landfill, building on the 18% diversion achieved
in 2009 and the 20% diversion achieved in 2008.
• We will continue to work with Keep Britain Tidy to encourage responsible disposal of litter.
In line with Our Values, Greggs is committed to operating our business responsibly and being a brand
our customers and shareholders can trust. We will continue to report our progress against our social
responsibility targets annually to our shareholders.
24
Key performance indicators
KPI
Definition
2005
2006
2007
2008
2009
Total sales growth
Like–for–like sales growth
Growth in net shop numbers
Capital expenditure
Operating profit
Operating margin
Earnings per share (basic)
(adjusted for ten for one share
split which took place in 2009)
(a)
(b)
(c)
(d)
(e)
(f)
(g)
5.8 %^
4.0 %
4.4 %
£41.7 m
£47.1 m
8.8 %
28.2 p
3.3 %
0.5 %
1.3 %
£30.0 m
£42.2 m*
7.7 %*
26.3 p*
6.4 %
5.3 %
2.4 %
£42.3 m
£47.7 m~
8.1 %~
32.2 p~
7.1 %
4.4 %
3.0 %
£40.8 m
£44.3 m§
7.1 %§
30.7 p§
4.8 %^
0.8 %
0.7 %
£30.3 m
£48.4 m
7.4 %
34.1 p
Performance
is key
Definitions
(a)
(b)
(c)
(d)
(e)
(f)
(g)
^
*
~
§
Total sales growth is the percentage year–on–year change in total sales for the Group.
Like–for–like sales growth compares year–on–year cash sales in our ‘core’ shops, i.e. it is not distorted by shop openings or closures.
Refitted shops are included in the like–for–like comparison unless there has been a significant change in the trading space. Like–for–like
sales growth includes selling price inflation.
Growth in net shop numbers represents the percentage increase in number of shops in operation at the end of the year.
Capital expenditure is the total cash spent in the year on investment in tangible fixed assets.
Operating profit reflects the performance of the Group before financing and taxation impacts.
Operating margin shows the operating profitability of the Group as a percentage of its sales.
Earnings per share is calculated by dividing profit attributable to shareholders (i.e. profit after taxation) by the weighted average number
of ordinary shares outstanding during the year after adjusting for the effect of own shares held.
2004 and 2009 were both 53 week years, impacting on total sales growth for those years and the years immediately following.
Like–for–like sales growth is unaffected by a 53 week year.
Before cost of Bakers Oven restructuring (£3.5m), 2006 EBIT after restructuring £38.7m. Earnings per share after restructuring
costs is 24.1p.
Excludes one–off property gains of £2.2m included in the statutory operating profit in the income statement. Earnings per share including
these gains is 34.3p.
Excludes exceptional credit of £4.3m included in the statutory operating profit in the income statement – £1.1m profit on disposal of
properties, £6.9m curtailment gain relating to the defined benefit pension scheme and a restructuring charge of £3.7m. Earnings per share
after exceptional items is 33.7p.
25
Roger Whiteside
Raymond Reynolds
Iain Ferguson
Julie Baddeley
Corporate Governance
Derek Netherton (Chairman), 65
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.
The Board considers that it has complied,
throughout the year under review, with the principles
of governance set out in Section 1 of the Combined
Code on corporate governance published by the
Financial Reporting Council (the “Combined Code”)
effective during the financial year. The only exception
is that Sir Michael Darrington, formerly Managing
Director of the Company, remained on the Board as
a non–executive director until May 2009 to assist with
the transition to a new Chief Executive, appointed
from outside the Company. This resulted in there
being less than half of the Board (excluding the
Chairman) comprising independent non–executive
directors, contrary to Code provision A.3.2 until
March 2009, when Iain Ferguson was appointed as
an additional non–executive director.
The following statements, together with the
Directors’ Remuneration report on pages 77 to
88, describe how the relevant principles and
provisions of the Combined Code were applied to
the Company in 2009 and will be relevant to the
Company for the 2010 financial year.
During 2009, Sir Michael Darrington retired from
the Board, after 26 years of distinguished service,
and Iain Ferguson joined the Board.
The Board
The Board currently comprises the Chairman,
three executive and four non–executive directors
as follows:
26
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 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 2009. He is
Chairman of the Nominations Committee.
Kennedy McMeikan (Chief Executive), 44
Joined the Board on 1 June 2008 and became
Chief Executive of the Company on 1 August 2008.
Kennedy was Retail Director of J Sainsbury Plc from
2005-2008. Prior to this, he had spent 14 years at
Tesco. Appointed Chief Executive of Tesco in Japan
in 2004, he had previously been Chief Executive of
Europa Foods convenience store business following
its acquisition by Tesco in 2002. He began his career
at Sears UK in 1986, after five years service in the
Royal Navy from 1981 to 1986.
Richard Hutton, FCA
(Finance Director), 41
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.
Bob Bennett
Derek Netherton
Kennedy McMeikan
Richard Hutton
Raymond Reynolds (Retail Director), 50
Roger Whiteside, 51
Was appointed to the Board as Retail Director
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.
Bob Bennett
(Senior Independent Director), 62
Was appointed to the Board in December 2003.
He trained as a Chartered Accountant with Spicer &
Pegler and was Group Finance Director of Northern
Rock plc from 1993 until his retirement at the end of
January 2007. He is a member of the Nominations
and Remuneration Committees; he has been
Chairman of the Audit Committee since 2004 and
became the Senior Independent Director in 2008.
Julie Baddeley, 58
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 Camelot Group plc, the Department of Health,
Chrysalis VCT plc, Spice Plc and is an Associate
Fellow of the Said Business School, Oxford. Julie is
a member of the Nominations and Audit Committees
and has been Chair of the Remuneration Committee
since 2005.
Joined the Board on 17 March 2008. Roger is
Managing Director of the Leased division of Punch
Taverns plc. He was Chief Executive of the Thresher
Group off–licence chain from 2004 to 2007. Prior to
this, he was one of the founding team of Ocado, the
innovative online grocer operating in partnership with
Waitrose, and served as Joint Managing Director
from 2000 to 2004. He began his career at Marks
& Spencer, where he spent 20 years, ultimately
becoming head of its Food Business. Roger is a
member of the Nominations, Remuneration and
Audit Committees of the Board.
Iain Ferguson, 54
Joined the Board on 31 March 2009. Iain was
Chief Executive of Tate & Lyle PLC until October
2009. Previously, he worked for Unilever where
he held a number of senior positions including
Executive Chairman of Birds Eye Walls and
Senior Vice President, Corporate Development.
He is a non–executive director of Balfour Beatty
and The Davis Service Group, a member of the
PricewaterhouseCoopers (UK) Advisory Board,
a former Commissioner on the UK Government’s
Policy Commission on the Future of Farming and
Food and also a former President of the Institute of
Grocery Distribution. He was, until 31 December
2008, President of the UK Food and Drink Federation
and is Honorary Vice President of the British Nutrition
Foundation and a member of Defra’s Council
of Food Policy Advisors. Iain is a member of the
Nominations, Remuneration and Audit Committees
of the Board.
27
Effectiveness
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 and
other matters reserved for the Board. Whilst the
executive responsibility for running the Company’s
business rests ultimately with the Chief Executive,
Kennedy McMeikan, the non–executive directors
ensure that the strategies proposed by the executive
directors are fully discussed and critically examined
prior to adoption. During 2009, the scheduled
Board and Committee meetings and the number
of meetings attended by each current director
were as follows:
of the management team, 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 process 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
Main Board
Audit Committee Remuneration
Committee
Nominations
Committee
7
7
7
7
7
7
7
7
4
–
–
–
–
4
4
4
5
–
–
–
–
5
5
5
1
1
–
–
–
1
1
1
5 (5)
1 (2)
2 (3)
– (–)
Number of meetings held
Derek Netherton
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Julie Baddeley
Bob Bennett
Roger Whiteside
Iain Ferguson (appointed
31 March 2009 therefore
could have attended)
In addition, the non–executive directors meet
for two formal meetings each year and from time to
time, as required.
The Board has a policy on the separation of
the roles of the Chairman and the Chief Executive.
The Chairman sets the agenda for Board meetings
and ensures that the Board is supplied, in a timely
manner, with information in a form and of a quality
appropriate to enable it to discharge its duties.
The Board considers that it effectively leads and
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.
As part of the process of maintaining an awareness
of the Company’s activities and assessing the ability
business or other relationship or circumstance which
is likely to affect or to interfere with the exercise of
their independent judgement.
The Company’s articles of association require
that all directors must retire and seek re–election at
the first AGM following appointment. Thereafter, any
non–executive director who has served on the Board
for more than nine years must seek re–election
annually. One half of the remaining directors, 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.
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.
The Chairman meets with the non–executive
directors at least annually without the executive
directors present. The Senior Independent
Director meets the non–executive directors without
28
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. In 2009, each director completed a written
questionnaire and participated in a “one to one”
telephone interview with the Company Secretary.
In addition to covering the effectiveness of the Board,
its committees and each individual director, the
process also included a review of the performance
of the Board against the objectives it set for itself
at the start of the year and whether the Board had
operated in accordance with the Company’s values
at all times. 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, to identify
individual and collective training needs and to set
objectives for the Board for the next year.
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, Julie Baddeley, Roger
Whiteside and Iain Ferguson). The Committee’s
main functions (which it discharged during the year)
are to endeavour (i) to ensure that the accounting
and financial policies of the Company are proper
and effective; (ii) to assist the Board in fulfilling its
oversight responsibilities by monitoring 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;
(iv) to monitor compliance with the Listing Rules
and the recommendations of the Combined Code;
and (v) to maintain an appropriate relationship with
the Company’s external auditors and review the
effectiveness and objectivity of the audit process.
During the year, the Committee, in performing
these functions, reviewed the annual and interim
accounts issued to shareholders; compliance with
financial reporting standards and the size and
remit of the internal audit function. The Committee
also considered and made recommendations to
the Board in relation to the 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 reviewed the scope of the external audit
in discussion with the external auditors and agreed
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 the external auditors
and with the internal auditors, in each case in the
absence of all executive directors. 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 and risk
management process.
The Combined Code requires the Board to
be satisfied that at least one member of the Audit
Committee has recent and relevant financial
experience – the Board is satisfied in this respect
and is confident that the collective experience of the
members enables them to act effectively as an Audit
Committee. The Committee also has access to the
Group financial team and to its auditors and can
seek further professional advice, at the Company’s
cost, if required.
The Remuneration Committee currently
consists entirely of independent non–executive
directors (Julie Baddeley – Chair, Bob Bennett,
Roger Whiteside and Iain Ferguson).
The Committee’s main duties (which it discharged
during the year) 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 for
monitoring the framework for, broad policy in respect
of, and levels of remuneration of the Company’s
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 77 to 88
of this annual report.
The Nominations Committee currently
comprises Derek Netherton – Chairman, and all of
the non–executive directors. The Committee’s main
functions (which it discharged during the year) are
to review the balance and constitution of the Board;
to advise the Board as to whether directors retiring
by rotation should 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.
In recruiting additional directors the Nominations
Committee defines the role and uses external
consultants to assist in identifying suitable
candidates from which the Committee selects
a short list and conducts interviews. The final
29
candidate is then subject to formal recommendation
by the Committee and approval by the Board.
This process was adopted for the selection of Iain
Ferguson as a new non–executive director.
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:
Each of the Committees is provided with
Board of Directors
sufficient resources to undertake its duties.
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 announcement of the interim and preliminary
results and the posting of results on the Company’s
website. The Board receives reports on any
comments received from shareholders following
these presentations.
The Board considers that the AGM is the main
forum for communication with investors, with
the chairmen of the Board 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 relevant shareholder communications.
The Board also reviews briefings and comments
by analysts in order to maintain 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, Chief Executive
or Finance Director has 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 and
accounts, are proposed at the AGM as separate
resolutions.
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. However, any such system can only
be designed to manage, rather than eliminate, the
risk of failure to achieve the Company’s objectives
and, therefore, is only able to provide reasonable,
and not absolute, assurance against material
misstatement or loss. The directors regularly review
the risks to which the Company is exposed, as well
as the operation and effectiveness of the system
of internal controls. This is an ongoing process
which involves the identification, evaluation and
management of the significant risks faced by the
Company. Key elements of the internal control
The Board takes a proactive approach to
the management 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
and consideration is given as to whether any new
material risks have emerged. The Audit Committee,
on behalf of the Board, conducts a formal review
of risks and risk management procedures and
reports its 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 major
risks facing the business and 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 of risks to be given to it.
Operating Board
The Operating Board, answerable directly to
the Chief Executive, is responsible for implementing
decisions of the Main Board and providing
protection against the major risks by various
techniques, including strategic planning, monitoring,
supervision and training.
Risk Committee
The Risk Committee, chaired by the Chief
Executive and consisting of the heads of each
management function within the business, has
responsibility for analysing, assessing, measuring
and understanding the Company’s risk environment,
as well as devising a sound risk management
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 Operating Board’s
business planning process at least annually.
The risks are assessed on a regular basis across
all functional areas but, in particular, the areas
30
Financial Reporting
The Company operates a comprehensive
financial control system. Divisional Financial
Controllers have responsibility for implementation
of the Company’s financial management policies
within each operating division. Each Divisional
Financial Controller works closely with their divisional
General Managers to monitor performance against
plan. This is then consolidated and reviewed further
at Company level. In addition, assets and liabilities
are scrutinised at several levels on a regular basis
and remedial action is 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 Financial Controller can also report
directly to the Group Finance Director on matters of
financial control. In 2009 a new accounting system
was introduced with some responsibility for financial
management being passed to a shared service
centre. Financial control will be centralised further
in 2010.
Whistle Blowing
The Company has “whistle blowing” procedures
in place, which enable 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.
of food safety, health and safety, competitive
environment, information flow, asset protection
and regulatory requirements.
The Board considers the key risks to the
Group to be as follows:
Organisational
The success of the Company is dependent
upon the efforts and abilities of its employees.
The Company has established remuneration
packages that will attract, retain and motivate
individuals with appropriate skills and experience.
Organisational structure is regularly reviewed and
there are group–wide processes for the training
and development of all employees.
External factors
Changes in the retail trading environment
or in customer preferences could clearly have a
significant 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 regularly and key market reports
are monitored.
Operational
The safety of our products, employees and
customers is paramount. Detailed systems are in
place to ensure that we are operating safely and
these systems are subject to regular audit to ensure
compliance. High priority is given to implementing
any resulting recommendations.
Detailed plans are in place for all our major
production facilities to maintain business continuity
in the event of any potentially disruptive occurrence.
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.
Health and Safety
The Company is committed to improving
continuously the working environment, with the
objective that accidents and work related ill health
should progressively be reduced. Health and Safety
Officers and Occupational Nurses are appointed
across the business and operational policies and
procedures are subject to both internal and external
audit. 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.
31
Internal Audit
The internal audit function visits every division
on an annual basis and reviews performance of
the Division across a range of financial and non–
financial requirements, reporting findings to senior
management and direct to the Audit Committee.
The Board confirms that it has reviewed the
effectiveness of the system of internal control
(covering all material controls, 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 position and
prospects. This is fulfilled by the statements
contained in the Chairman’s statement and Chief
Executive’s report, which supplement the statutory
accounts themselves. A statement of directors’
responsibilities in respect of the preparation of
accounts is given on page 36. A statement of
auditors’ responsibilities is given in the report of the
auditors on page 37.
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 (see basis of preparation on page 45).
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 at 27 December 2008 and
2 January 2010 (or at date of appointment if later)
are set out in note 25 to the accounts. Details of
directors’ share options are set out in the Directors’
Remuneration report on pages 77 to 88.
In accordance with the Company’s articles of
association, Julie Baddeley, Richard Hutton, Roger
Whiteside and Bob Bennett will retire from the Board
at the AGM. All, being eligible, offer themselves for
re–election.
Directors’ Indemnities and conflicts
As at the date of this report, indemnities are
in force under which the Company has agreed
to indemnify the directors, to the extent permitted
by law, in respect of losses arising out of or in
connection with the execution of their duties, powers
or responsibilities as directors of the Company.
The indemnities do not apply in situations where
the relevant director has been guilty of fraud or
wilful misconduct.
Under the authority granted to them in the
Company’s Articles of Association, the Board
has considered carefully any situation declared
by any director pursuant to which he/she has
or might have a conflict of interest and, where it
considers it appropriate to do so, has authorised
the continuation of that situation. In exercising its
authority, the directors have had regard to their
statutory and other duties to the Company.
32
Substantial shareholdings
At 18 March 2010, the only notified holdings of substantial voting rights in respect of the issued
share capital of the Company (which may have altered since the update of such notification, without any
requirement for the Company to have been informed) were:
Number of
shares held
Percentage of
issued share capital
Aberforth Partners LLP
A.J. Davison (as trustee of various settlements)*
Schroders plc
Legal and General Investment Management Limited
F&C Asset Management plc
Norges Bank
10,383,890
6,768,018
5,021,221
4,107,434
3,862,618
3,133,000
9.98
6.51
4.83
3.94
3.71
3.01
*Various other trustees jointly hold shares with A.J. Davison above, some of whom, by reason of such
joint holdings and other holdings in their own name, have declarable interests as follows: N.A. Bailey (3.26%
jointly held with A.J. Davison and others).
Authority to purchase shares
At the AGM on 13 May 2009, the shareholders
passed a resolution authorising the purchase
by the Company of its own shares to a maximum
of 10,350,000 ordinary shares of 2p each.
That authority has not been used as at 2 January
2010. The balance remains in force until the
conclusion of the AGM in 2010 or 12 August 2010,
whichever is the earlier. It is the Board’s intention
to seek approval at the AGM for the renewal of
this authority.
Additional information
Following the implementation of the European
Directive on Takeover Bids by certain provisions of
the Companies Act 2006, the Company is required
to disclose certain additional information in the
directors’ report. This information is set out below.
• The Company has one class of share in issue
being ordinary shares of 2p each. As at
18 March 2010, there were 103,990,470 such
ordinary shares in issue. There are no shares
in the Company that grant the holder special
rights with regard to control of the Company.
• At general meetings of the Company, on a
show of hands, every shareholder present in
person or by proxy has one vote only and, in
the case of a poll, every shareholder present
in person or by proxy has one vote for every
share in the capital of the Company held
by him.
• The Company’s articles of association set
out the circumstances in which shares may
become disenfranchised. No shareholder
is entitled, unless the directors otherwise
determine, in respect of any share held by
him to be present or vote at a general meeting
either personally or by proxy (or to exercise
any other right in relation to meetings of
the Company) in respect of that share in
certain circumstances if any call or other
sum is payable and remains unpaid, if the
shareholder is in default in complying with
a duly served notice under section 793(1)
of the Companies Act 2006 (CA 2006) or if
the shareholder has failed to reply to a duly
served notice requiring him to provide a
written statement stating he is the beneficial
owner of shares.
• A notice convening a general meeting can
contain a statement that a shareholder is
not entitled to attend and vote at a general
meeting unless his name is entered on the
register of members of the Company at a
specific time (not more than 48 hours before
the meeting) and if a shareholder’s name is
not so entered he is not entitled to attend
and vote.
33
At each Annual General Meeting, any director
appointed by the Board since the last Annual
General Meeting plus a proportion of the other
directors must retire from office but each is
eligible for re–election by the shareholders.
Under the CA 2006 and the Company’s
articles of association, a director can be
removed from office by the shareholders in a
general meeting.
• The Company’s articles of association set
out the powers of the directors. The business
of the Company is to be managed by the
directors who may exercise all the powers
of the Company and do on behalf of the
Company all such acts as may be exercised
and done by the Company and are not by any
relevant statutes or by the Company’s articles
of association required to be exercised or
done by the Company in a general meeting,
subject to the provisions of any relevant
statutes and the Company’s articles of
association and to such regulations as
may be prescribed by the Company by
special resolution.
• Under the CA 2006 and the Company’s
articles of association, the directors’
powers include the power to allot and
buy back shares in the Company. At each
Annual General Meeting, resolutions are
proposed granting and setting out the limits
on these powers.
• The Company is not party to any significant
agreements which take effect, alter or
terminate upon a change of control of the
Company, following a takeover bid.
• There are no agreements between the
Company and its directors or employees
providing for compensation for loss of office
or employment (whether through resignation,
purported redundancy or otherwise) that
occurs because of a takeover bid. Details of
the directors’ service agreements and terms
of appointment are set out in the Directors
Remuneration report on pages 77 to 88.
However, provisions in the employee share
plans operated by the Company may allow
options to be exercised on a takeover.
• Under the Company’s articles of association
the directors may, in their absolute discretion,
refuse to register the transfer of a share
in certified form in certain circumstances
where the Company has a lien on the share
(provided that the directors do not exercise
their discretion so as to prevent dealings in
partly–paid shares from taking place on an
open and proper basis), where a shareholder
has failed to reply to a duly–served notice
under section 793(1) CA 2006 or if a transfer
of a share is in favour of more than four
persons jointly. In addition, the directors
may decline to recognise any instrument
of transfer unless it is in respect of only one
class of share and is deposited at the address
at which the register of members of the
Company is held (or at such other place as
the directors may determine) accompanied by
the relevant share certificate(s) and such other
evidence as the directors may reasonably
require to show the right of the transferor to
make the transfer. In respect of shares held
in uncertificated form the directors may only
refuse to register transfers in accordance with
the Uncertificated Securities Regulations 2001
(as amended from time to time).
• Under the Company’s Code on dealings
in securities in the Company, persons
discharging managerial responsibilities and
some other senior executives may in certain
circumstances be restricted as to when they
can transfer shares in the Company.
• There are no agreements between
shareholders known to the Company which
may result in restrictions on the transfer of
shares or on voting rights.
• Details of the significant holders of the
Company’s shares are set out on page 33.
• Where, under an employee share plan
operated by the Company, participants
are the beneficial owners of shares but not
the registered owner, the voting rights are
normally exercised by the registered owner at
the direction of the participant.
• The Company’s articles of association may
only be amended by special resolution at a
general meeting of the shareholders.
• The Company’s articles of association set out
how directors are appointed and replaced.
Directors can be appointed by the Board or
by the shareholders in a general meeting.
34
Payments to suppliers
Good relationships with our suppliers are
an important factor in the success of the Group.
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 suppliers, in which case
these prevail. Where disputes arise, we attempt
to resolve them promptly and amicably to ensure
delays in payment are kept to a minimum.
The average creditor payment period for the
Company and the Group at 2 January 2010 was
41 days (2008: 33 days).
Significant relationships
The Group does not have any contractual or
other relationships with any single party which are
essential to the business of the Group and, therefore,
no such relationships have been disclosed.
amounted to £112,000 and principally related
to taxation compliance services and pension
scheme audits.
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.
Reappointment of auditors
In accordance with Section 489 of the
Companies Act 2006, 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
18 March 2010
Auditors
Auditor independence and policy on the use of
the auditors for non–audit work.
The Audit Committee keeps under review all
non–audit services provided by the external auditors
in order to seek to ensure that their independence
and objectivity cannot be compromised.
The Committee recognises that there are situations
where it is in the Company’s best interests to use
the services of its external auditors for non–audit
work but manages such appointments and will
not allow any non–audit work that might, in the
Committee’s opinion, impair the auditors’ objectivity
or independence. In addition, the Audit Committee
ensures that the external auditors have their own
policies and are subject to professional standards
designed to safeguard their independence as
auditors. The Audit Committee has adopted a policy
under which all use of the external auditors for
non–audit work must be reported to and approved
by the Committee and the aggregate of such fees
will normally be less than 100% of the audit fee.
In circumstances where the Committee believes
that it is right to authorise non–audit fees in excess
of this limit the Committee will approve such
expenditure in advance of it being committed and
provide an explanation to shareholders in the next
directors’ report.
The Audit Committee has reviewed whether,
and is satisfied that, the Company’s auditors,
KPMG Audit Plc, continue to be objective and
independent of the Company. KPMG Audit Plc does
perform non–audit services for the Group but the
Audit Committee is satisfied that its objectivity is not
impaired by such work. In 2009, non audit fees paid
to KPMG Audit Plc and related KPMG operations
35
The directors confirm that to the best of
their knowledge:
• the accounts, prepared in accordance with
the applicable set of accounting standards,
give a true and fair view of the assets,
liabilities, financial position and profit of the
Company and the undertakings included in
the consolidation taken as a whole and;
• the directors’ report, which incorporates
the Chairman’s statement, the Chief
Executive’s report and the Corporate Social
Responsibility statement include a fair review
of the development and performance of the
business and the position of the Company
and the undertakings included in the
consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face.
Statement of directors’
responsibilities in respect of the
Annual Report and Accounts
The directors are responsible for preparing
the Annual Report and the Group and Parent
Company accounts in accordance with applicable
law and 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 law
and have elected to prepare the Parent Company
accounts on the same basis.
Under company law the directors must not
approve the accounts unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and Parent Company and of their profit or
loss for that period. 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 judgments and estimates that are
reasonable and prudent;
• state whether they have been prepared in
accordance with IFRSs as adopted by the EU;
and
• prepare the accounts on the going concern
basis unless it is inappropriate to presume
that the Group and the Parent Company will
continue in business.
The directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Parent Company’s
transactions and disclose with reasonable accuracy
at any time the financial position of the Parent
Company and enable them to ensure that its
accounts comply with the Companies Act 2006.
They have 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.
Under applicable law and regulations, the
directors are also responsible for preparing a
Directors’ Report, Directors’ Remuneration Report
and Corporate Governance Statement that comply
with that law and those regulations.
The directors are responsible for the
maintenance and integrity of the corporate and
financial information included on the Company’s
website. Legislation in the UK governing the
preparation and dissemination of accounts may
differ from legislation in other jurisdictions.
36
Independent auditors’ report to
the members of Greggs plc
We have audited the accounts of Greggs plc
for the 53 weeks ended 2 January 2010 set out on
pages 39 to 76. The financial reporting framework
that has been applied in their preparation is
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the EU and, as
regards the Parent Company accounts, as applied
in accordance with the provisions of the Companies
Act 2006.
This report is made solely to the Company’s
members, as a body, in accordance with
Chapter 3 of Part 16 of the Companies Act 2006.
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
auditors’ 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
As explained more fully in the Directors’
Responsibilities Statement set out on page 36, the
directors are responsible for the preparation of the
accounts and for being satisfied that they give a
true and fair view. Our responsibility is to audit the
accounts in accordance with applicable law and
International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the
Auditing Practices Board’s (APB’s) Ethical Standards
for Auditors.
Scope of the audit of the accounts
A description of the scope of an audit of
accounts is provided on the APB’s website at
www.frc.org.uk/apb/scope/UKP.
Opinion on accounts
In our opinion:
• the accounts give a true and fair view of
the state of the Group’s and of the Parent
Company’s affairs as at 2 January 2010 and of
the Group’s profit for the year then ended;
• the Group accounts have been properly
prepared in accordance with IFRSs as
adopted by the EU;
• the Parent Company accounts have been
properly prepared in accordance with
IFRSs as adopted by the EU and as applied
in accordance with the provisions of the
Companies Act 2006; and
• the accounts have been prepared in
accordance with the requirements of the
Companies Act 2006 and, as regards
the Group accounts, Article 4 of the IAS
Regulation.
Opinion on other matters prescribed by
the Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report
to be audited has been properly prepared in
accordance with the Companies Act 2006;
• the information given in the directors’ report
for the financial year for which the accounts
are prepared is consistent with the accounts.
Matters on which we are required to
report by exception
We have nothing to report in respect of the
following:
Under the Companies Act 2006 we are required
to report to you if, in our opinion:
• adequate accounting records have not been
kept by the Parent Company, or returns
adequate for our audit have not been received
from branches not visited by us; or
• the Parent Company accounts and the part
of the Directors’ Remuneration Report to
be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of directors’ remuneration
specified by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Under the Listing Rules we are required to
review:
• the directors’ statement, set out on page 36,
in relation to a going concern; and
• the part of the Corporate Governance
Statement on page 26 relating to the
Company’s compliance with the nine
provisions of the June 2008 Combined
Code specified for our review.
Nick Plumb (Senior Statutory Auditor)
for and on behalf of KPMG Audit Plc,
Statutory Auditor
Chartered Accountants
Quayside House
110 Quayside
Newcastle upon Tyne
NE1 3DX
18 March 2010
37
Consolidated income statement
for the 53 weeks ended 2 January 2010 (2008: 52 weeks ended 27 December 2008)
Note
1
5
5
5
6
3–6
8
9
9
9
9
Revenue
Cost of sales
Gross profit
Distribution and selling costs
Administrative expenses
Other income
Operating profit
Finance income
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
Non GAAP measures
Adjusted basic earnings per share
Adjusted diluted earnings per share
2009
£’000
Total
2008
2008
Restated
£’000
£’000
Excluding Exceptional
items
(Note 4)
exceptional
items
658,186
628,198
(252,284)
(241,939)
405,902
386,259
–
–
–
2008
Restated
£’000
Total
628,198
(241,939)
386,259
(321,686)
(306,450)
(3,285)
(309,735)
(35,783)
(35,514)
(430)
(35,944)
–
48,433
346
48,779
–
44,295
857
45,152
(14,405)
(14,033)
8,033
4,318
–
4,318
(1,342)
8,033
48,613
857
49,470
(15,375)
34,374
31,119
2,976
34,095
34.1p
34.0p
34.1p
34.0p
–
–
–
–
–
–
–
–
33.6p
33.5p
30.7p
30.6p
Consolidated statement of comprehensive income
for the 53 weeks ended 2 January 2010 (2008: 52 weeks ended 27 December 2008)
Profit for the financial year
Other comprehensive income
Actuarial losses on defined benefit pension plans
Tax on items taken directly to equity
Other comprehensive income for the financial
year, net of income tax
Total comprehensive income for the
financial year
Note
20
8
Group
2009
£’000
34,374
(6,920)
1,938
(4,982)
2008
£’000
34,095
(12,614)
3,532
(9,082)
29,392
25,013
39
Balance sheets
at 2 January 2010 (2008: 27 December 2008)
ASSETS
Non–current assets
Intangible 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
Provisions
Non–current liabilities
Defined benefit pension liability
Other payables
Deferred tax liability
Long term provisions
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
Group
2009
£’000
Parent Company
2008
£’000
2009
£’000
2008
£’000
10
11
12
14
15
16
17
18
21
20
19
13
21
22
22
579
211,155
–
211,734
11,886
21,206
34,619
67,711
279,445
(71,738)
(8,857)
(857)
(81,452)
(12,332)
(8,830)
(9,298)
(3,296)
(33,756)
(115,208)
164,237
686
210,455
–
211,141
12,152
22,698
4,433
39,283
250,424
(62,761)
(8,337)
(2,843)
(73,941)
(5,733)
(8,221)
(12,154)
(2,428)
(28,536)
(102,477)
147,947
579
211,748
4,987
217,314
11,886
21,206
34,619
67,711
285,025
(79,545)
(8,857)
(857)
(89,259)
(12,332)
(8,830)
(8,559)
(3,296)
(33,017)
(122,276)
162,749
686
211,048
5,190
216,924
12,152
22,698
4,433
39,283
256,207
(70,568)
(8,337)
(2,843)
(81,748)
(5,733)
(8,221)
(11,415)
(2,428)
(27,797)
(109,545)
146,662
2,080
13,533
359
148,265
2,080
13,533
359
131,975
2,080
13,533
359
146,777
2,080
13,533
359
130,690
164,237
147,947
162,749
146,662
The accounts on pages 39 to 76 were approved by the Board of directors on 18 March 2010 and were
signed on its behalf by:
K. McMeikan
R.J. Hutton
Company Registered Number 502851
40
Statements of changes in equity
for the 53 weeks ended 2 January 2010 (2008: 52 weeks ended 27 December 2008)
Group
52 weeks ended 27 December 2008
Attributable to equity holders of the Company
Note
Issued
capital
Share
premium
Capital
redemption
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
2,127
13,533
312 129,622
145,594
–
–
–
(47)
–
–
–
–
(47)
–
–
–
–
–
–
–
–
–
–
–
–
34,095
34,095
(9,082)
(9,082)
25,013
25,013
47
(9,738)
(9,738)
–
–
–
–
698
698
1,047
1,047
(14,535)
(14,535)
(132)
(132)
47
(22,660)
(22,660)
2,080
13,533
359 131,975
147,947
2,080
13,533
359 131,975 147,947
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34,374
34,374
(4,982)
(4,982)
29,392
29,392
1,182
1,182
982
982
(15,339)
(15,339)
73
73
(13,102)
(13,102)
2,080
13,533
359 148,265 164,237
22
20
22
8
20
22
8
Balance at 30 December 2007
Total comprehensive income
for the year
Profit for the financial year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity
Shares purchased and cancelled
Sale of own shares
Share–based payment transactions
Dividends to equity holders
Tax items taken directly to reserves
Total transactions with owners
Balance at 27 December 2008
53 weeks ended 2 January 2010
Balance at 28 December 2008
Total comprehensive income for
the year
Profit for the financial year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity
Sale of own shares
Share–based payment transactions
Dividends to equity holders
Tax items taken directly to reserves
Total transactions with owners
Balance at 2 January 2010
41
Statements of changes in equity
(continued)
Parent Company
52 weeks ended 27 December 2008
Attributable to equity holders of the Company
Note
Issued
capital
Share
premium
Capital
redemption
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
Balance at 30 December 2007
2,127
13,533
312
128,221
144,193
Total comprehensive income for
the year
Profit for the financial year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity
Shares purchased and cancelled
Sale of own shares
Share–based payment transactions
Dividends to equity holders
Tax items taken directly to reserves
Total transactions with owners
Balance at 27 December 2008
53 weeks ended 2 January 2010
Balance at 28 December 2008
Total comprehensive income for
the year
Profit for the financial year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded
directly in equity
Sale of own shares
Share–based payment transactions
Dividends to equity holders
Tax items taken directly to reserves
Total transactions with owners
Balance at 2 January 2010
42
7
22
20
22
8
7
20
22
8
–
–
–
(47)
–
–
–
–
(47)
–
–
–
–
–
–
–
–
–
–
–
–
34,211
34,211
(9,082)
(9,082)
25,129
25,129
47
(9,738)
(9,738)
–
–
–
–
698
698
1,047
1,047
(14,535)
(14,535)
(132)
(132)
47
(22,660)
(22,660)
2,080
13,533
359
130,690
146,662
2,080
13,533
359 130,690 146,662
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
34,171
34,171
(4,982)
(4,982)
29,189
29,189
1,182
1,182
982
982
(15,339)
(15,339)
73
73
(13,102)
(13,102)
2,080
13,533
359 146,777 162,749
Statements of cashflows
for the 53 weeks ended 2 January 2010 (2008: 52 weeks ended 27 December 2008)
Note
Group
Parent Company
2009
£’000
2008
£’000
2009
£’000
2008
£’000
Operating activities
Cash generated from operations
(see page 44)
Income tax paid
Net cash inflow from operating
activities
Investing activities
Acquisition of property, plant and
equipment
Acquisition of intangible assets
Proceeds from sale of property, plant and
equipment
Interest received
Net cash outflow from investing
activities
Financing activities
Sale of own shares
Shares purchased and cancelled
Dividends paid
Government grants received
Net cash outflow from financing
activities
Net increase / (decrease) 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
Included in cash and cash equivalents per
the balance sheet
Included in current liabilities
Cash and cash equivalents at the end
of the year
11
10
6
22
22
22
16
16
16
17
87,944
59,163
87,944
59,494
(14,731)
(14,807)
(14,731)
(14,771)
73,213
44,356
73,213
44,723
(30,296)
(40,758)
(30,296)
(40,758)
–
(686)
–
(686)
2,368
2,200
2,368
2,200
346
857
346
857
(27,582)
(38,387)
(27,582)
(38,387)
1,182
–
698
(9,738)
1,182
–
698
(9,738)
(15,339)
(14,535)
(15,339)
(14,535)
1,087
8,083
1,087
8,083
(13,070)
(15,492)
(13,070)
(15,492)
32,561
(9,523)
32,561
(9,156)
2,058
11,581
2,058
11,214
34,619
2,058
34,619
2,058
34,619
4,433
34,619
4,433
–
(2,375)
–
(2,375)
34,619
2,058
34,619
2,058
43
Statements of cashflows
for the 53 weeks ended 2 January 2010 (2008: 52 weeks ended 27 December 2008)
(continued)
Note
Group
Parent Company
2009
£’000
2008
£’000
2009
£’000
2008
£’000
Cash flow statement – cash generated
from operations
Profit for the financial year
34,374
34,095
34,171
34,211
107
–
107
–
27,218
26,010
27,218
26,010
–
10
(228)
–
(771)
(84)
203
10
(228)
–
(771)
(84)
–
(6,969)
–
(6,969)
982
(346)
–
1,047
(857)
(353)
15,375
(2,244)
(2,764)
(8,001)
(592)
5,271
59,163
982
(346)
–
14,405
266
1,492
11,103
(321)
(1,118)
87,944
1,047
(857)
(353)
15,259
(2,244)
(2,764)
(7,670)
(592)
5,271
59,494
Amortisation
Depreciation
Impairment
Loss / (profit) on sale of property, plant
and equipment
Release of government grants
Gain on curtailment of defined benefit
pension scheme
Share based payment expenses
Finance income
Unrealised exchange gain relating to
property, plant and equipment
10
11
12
20
6
Income tax expense
8
14,405
Decrease / (increase) in inventories
Decrease / (increase) in receivables
Increase / (decrease) in payables
Decrease in pension liability
(Decrease) / increase in provisions
Cash from operating activities
266
1,492
11,103
(321)
(1,118)
87,944
44
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 18 March 2010.
(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”), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS.
On publishing the Parent Company accounts here together with the Group accounts, the Company is
taking advantage of the exemption in s408 of the Companies Act 2006 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. A minor presentational change has been made to the income statement reallocating
some salary and associated costs from administrative expenses to cost of sales and distribution and selling
costs. There is no impact on net profit (see further detail below).
The Group’s business activities, together with the factors likely to affect its future development, performance
and position are set out in the Directors’ report and business review on pages 8 to 35. The financial position
of the Group, its cash flows, liquidity position and borrowing facilities are described in the Chief Executive’s
report on pages 13 to 19. In addition note 2 to the accounts includes the Group’s objectives, policies
and processes for managing its capital; its financial risk management objectives; details of its financial
instruments and hedging activities; and its exposures to credit risk and liquidity risk.
The Group has considerable financial resources and the business continues to be strongly cash generative.
As a consequence, the directors believe that the Group is well placed to manage its business risk
successfully despite the current uncertain economic outlook.
After making enquiries, the directors have a reasonable expectation that the Company and the Group
have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the annual report and accounts.
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 accounting policies set out below have been applied consistently throughout the Group and to all years
presented in these consolidated accounts and are unchanged from previous years. A minor presentational
change has been made to the income statement reallocating some salary and associated costs from
administrative expenses to cost of sales and distribution and selling costs. As a result the comparative
figures for 2008 have been restated as follows – administrative expenses have reduced from £40.8m to
£35.9m, cost of sales has increased from £240.2m to £241.9m and distribution and selling costs have
increased from £306.6m to £309.7m. There is no impact on net profit. From 1 January 2009 the following
standards, amendments and interpretations became effective and were adopted by the Group:
45
Notes to the consolidated accounts
(continued)
Significant accounting policies (continued)
• Amendments to IAS 1 Presentation of Financial Statements – these amendments revise requirements
for the presentation of the financial statements and do not affect the Group’s overall reported results.
• Improvements to IFRSs (2008) – the amendments to IAS 1 clarify the classification of derivative
financial instruments as current or non–current.
• Amendments to IFRS 2 Share–based payments: Vesting Conditions and Cancellations – these
amendments concern certain aspects of the valuation of share–based payments and the impact of
a cancellation by a grantee. These amendments have not had a significant impact on the charge for
share–based payments.
• IFRS 8 Operating Segments – this standard amends the requirements for disclosure of segmental
performance and does not have any effect on the Group’s overall reported results.
• Amendment to IAS 23 Borrowing Costs – the amendment generally eliminates the option to expense
borrowing costs attributable to the acquisition, construction or production of a qualifying asset as
incurred, and instead requires the capitalisation of such borrowing costs as part of the cost of the
specific asset.
• Amendments to IFRS 7 Improving Disclosures about Financial Instruments – these amendments are
to enhance disclosures over fair value measurements relating to financial instruments and improving
disclosures over liquidity risk.
• IFRIC 14 IAS 19 The Limit of a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction – this interpretation applies where regulatory funding requirements will result in an
unrecognisable surplus arising in the future.
The adoption of the above has not had a significant impact on the Group’s profit for the year or equity.
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.
The key estimates and judgements that have the most significant impact on the accounts are as follows:
Lease classification
Judgement has to be applied as to whether the Group’s shop leases are operating leases or finance leases
– see note 23 for how this is determined.
Post retirement benefits
The determination of the pension cost and defined benefit obligation of the Group’s defined benefit pension
scheme depends on the selection of certain assumptions including the discount rate, inflation rate, mortality
rates and expected return on scheme assets. Differences arising from actual experience or future changes in
assumptions will be reflected in future years. The key assumptions made for 2009 are given in note 20.
Impairment of property, plant and equipment
Property, plant and equipment is reviewed for impairment if events or changes in circumstances indicate
that the carrying value may not be recoverable. For example, bakery equipment may be impaired if it is no
longer in use and/or shop fittings may be impaired if sales in that shop fall. When a review for impairment
is conducted, the recoverable amount is determined based on value in use calculations which include
management’s estimates of future cash flows generated by the assets and an appropriate discount rate.
46
Depreciation of property, plant and equipment
Depreciation is provided so as to write down the assets to the residual values over their estimated useful
lives, both of which require management’s judgement (see accounting policy (g)).
Provisions
Provision is required in respect of closed shops for which the Group has on going lease commitments.
Management exercises judgement as to whether the shop will be sublet to a third party taking into account
current market conditions and, if so, for how long and at what rent, in order to estimate the future net holding
cost to the Group until the lease can be exited. This estimate is then discounted (where the impact would be
material) at a rate that reflects the current time value of money and the risks specific to the liability. In respect
of our exit from the Belgian operation, a provision remains for the potential recourse of leases taken over by
the new owner.
(c) Basis of consolidation
The consolidated accounts include the results of Greggs plc and its subsidiary undertakings for the 53
weeks ended 2 January 2010. The comparative period is the 52 weeks ended 27 December 2008.
(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.
(d) Exceptional items
Exceptional items are defined as items of income and expenditure which are material and unusual in nature
and which are considered to be of such significance that they require separate disclosure on the face of the
income statement in accordance with IAS 1.
(e) 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.
(f)
Intangible assets
The Group’s only intangible asset is accounting software which is measured at cost less accumulated
amortisation and accumulated impairment losses.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure is recognised in the income statement as incurred.
Amortisation is recognised in the income statement on a straight line basis over the estimated useful lives of
intangible assets from the date that they are available for use. The estimated useful lives for the current and
comparative periods are five years.
47
Notes to the consolidated accounts
(continued)
Significant accounting policies (continued)
(g) 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 (k)). 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 and Company 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
10%
Plant:
General
Computers
Motor vehicles
Delivery trays
10%
20% – 33¹⁄³%
20% – 25%
33¹⁄³%
Shop fixtures and fittings:
General
Electronic equipment
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 available for use.
(h)
Investments
Investments in subsidiaries are carried at cost less impairment.
(i)
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 includes expenditure incurred in acquiring the inventories and direct production
labour costs.
(j) 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.
48
(k)
Impairment
The carrying amounts of the Group and Company’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. Impairment reviews are carried out on an
individual shop basis unless there are a number of shops in the same location, in which case the impairment
review is based on the location.
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.
(l) 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 and Company’s accounting policies. Thereafter generally the
assets are measured at the lower of their carrying amount and fair value less cost to sell.
(m) 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.
(n) 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 total equity.
(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 and Company’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.
49
Notes to the consolidated accounts
(continued)
Significant accounting policies (continued)
The Group and Company recognise actuarial gains and losses in full in the year in which they occur in the
statement of changes in equity.
(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 but is accounted for as current tax when it arises.
(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.
(ii) Closed shops
Provision is made for vacant and partly sublet properties for the shorter of the remaining period of the lease
and the period until, in the directors’ opinion, they will be able to exit the lease commitment. Significant
assumptions are applied in making these calculations and such provisions are assessed by reference to the
best available information at the balance sheet date.
(q) Revenue
(i)
Goods sold
Revenue from the sale of goods is recognised as income on receipt of cash and is stated after deduction of
discounts, promotions and value added taxation.
(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.
50
(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 cash balances and foreign exchange movements relating
to overseas bank accounts. 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 movements on
any Euro bank borrowings.
(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.
Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or
liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable
profit, and differences relating to investments in subsidiaries to the extent that it is probable that they will 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) Research and development
The Company continuously strives to improve its products and processes through technical and other
innovation. Such expenditure is typically expensed to the income statement as the related intellectual
property is not capable of being formalised.
51
Notes to the consolidated accounts
(continued)
Significant accounting policies (continued)
(w)
IFRSs available for early adoption not yet applied
The following standards and amendments to standards which will be relevant to the Group, were available
for early adoption but have not been applied in these accounts:
• Amendment to IAS 32 Financial Instruments: Presentation: Classification of Rights Issues applicable
for accounting periods beginning on or after 1 February 2010.
• Amendment to IFRIC 9 and IAS 39 Embedded Derivatives applicable for accounting periods
beginning on or after 30 June 2009.
• Amendments to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged Items
applicable for accounting periods beginning on or after 30 June 2009.
• Revised IFRS 3 Business Combinations applicable for accounting periods beginning on or after
1 July 2009.
• Amendments to IAS 27 Consolidated and Separate Financial Statements applicable for accounting
periods beginning on or after 1 July 2009.
These standards amendments are not currently expected to have a significant impact on the accounts when
they are adopted.
1.
Segmental analysis
The introduction of IFRS 8 has necessitated a reassessment of the reportable segments within the Group
and the nature of related disclosures. The Board is considered to be the “chief operating decision maker” of
the Group in the context of the IFRS 8 definition.
Throughout 2008 and 2009 the Group has progressively been reorganised into a centrally managed
business with an integrated supply chain. During 2009 the Group’s 11 operating divisions were reorganised
into seven retail regions, each reporting to the Group Retail Director. These retail regions, and their
predecessor divisions, have similar economic characteristics, products, customers and production and
distribution methods and have therefore been aggregated into a single reportable segment. The segment
results, as reported to the chief operating decision maker, are calculated under the principles of IFRS.
Products and services – the Group sells a consistent range of fresh bakery goods, sandwiches and drinks in
its shops.
Major customers – the majority of sales are made to the general public on a cash basis. A small proportion
of sales are made on credit to certain organisations but these are immaterial in a group context.
Geographical areas – in early 2009 we exited our Belgian stores, which were insignificant in a group context.
All other results arise in the UK.
The Board has carefully considered the requirements of IFRS 8 and concluded that, as there is only one
reportable segment whose revenue, profits, assets and liabilities are measured and reported on a consistent
basis with the group financial statements no additional numerical disclosures are necessary.
52
2.
Financial Risk Management
Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails
to meet its contractual obligations.
Trade and other receivables
The Group’s exposure to credit risk is considered not to be significant as sale of goods is for cash. Other
receivables are primarily prepaid rent and rates as well as amounts owed from HM Revenue & Customs
in respect of VAT. The credit risk on remaining other receivables and trade receivables is therefore not
considered significant.
Counterparty risk is also considered low. All of the Group’s surplus cash is held with highly rated banks,
in line with Group policy.
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.
The Group operates with net current liabilities because all sales are for cash and limited stocks are held
given their perishable nature. It is therefore reliant on the continued strong performance of the retail portfolio
to meet its short term liabilities. This is a well established and proven business model. Any increase in short
term liquidity risk can be mitigated by reducing the capital expenditure budget. The Group has substantial
cash resources at the year end, and if necessary, would be able to obtain substantial debt funding.
The Group has overdraft facilities of £5,000,000 and €3,000,000 of which £5,000,000 and €3,000,000 was
undrawn at 2 January 2010 (2008: £3,563,000 and €2,019,000).
Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices which will affect the Group’s income or the value of its holdings of financial instruments.
Given that, as explained below, market risk is not significant, sensitivity analysis would not be meaningful.
Currency Risk
Following the exit from the Belgian operation the Group has no regular transactions in foreign currency
although there are occasional purchases, mainly of capital items, denominated in foreign currency. Whilst
certain costs such as electricity and wheat can be influenced by movements in the US dollar, actual
contracts are priced in sterling. In respect of those key costs which are volatile, such as electricity and flour,
the price may be fixed for a period of time in line with Group policy. All such contracts are for the Group’s
own expected usage.
Interest rate
The Group has low exposure to interest rate risk. Interest only arises on its bank deposits and overdrafts.
Net financial income in the year was £346,000.
Equity prices
The Group has no equity investments other than its subsidiaries.
53
Notes to the consolidated accounts
(continued)
2. Financial Risk Management (continued)
Capital Management
The Board defines capital as the equity of the Group. The Group remains net cash positive with funding
requirements met by cash generated from retail operations. The Board’s policy is to maintain a strong
capital base so as to maintain investor, creditor and market confidence and to enable successful future
development of the business. The Board’s policy on dividend levels is to pursue a progressive dividend
policy that pays due regard to the growth of earnings per share over the medium term, the cash generative
nature of our growing business and our continuing determination to deliver value to our shareholders.
The Board will continue to consider purchasing its own shares in the market dependent on market prices
and surplus cash levels. The trustees of the Greggs Employment Benefit Trust also purchase shares for
future satisfaction of employee share options. During the year the shareholders approved a ten for one
share split in order to make the Company’s shares more accessible and appealing, particularly to small
shareholders and our own employees.
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
2 January 2010 (2008: £nil).
Fair values
The fair value of the Group’s financial assets and liabilities is not materially different from their carrying values.
Financial assets and liabilities comprise principally of trade receivables and trade payables and the only
interest bearing balances are the bank deposits and borrowings which attract interest at variable rate.
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.
54
3.
Profit before tax
Profit before tax is stated after charging / (crediting)
Depreciation on owned property, plant and equipment
Loss/(profit) on disposal of fixed assets
(including disposal of properties – note 4)
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
2009
£’000
2008
£’000
27,218
26,010
10
(228)
42,041
(771)
(84)
40,739
179
178
–
3
9
94
6
–
3
9
58
4
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.
Exceptional items
The following items, all relating to 2008, have been presented separately on the face of the consolidated
income statement for the comparative period in order to show separately the underlying trading performance
of the Group. There are no such items for 2009.
Profit on disposal of properties
During 2008 the Company had a profit on disposal of properties of £1,064,000, principally relating to the
disposal of a freehold development site in Scotland.
Curtailment of defined benefit pension scheme
An exceptional credit of £6,969,000 arose on the curtailment of the defined benefit scheme following a
change in the calculation assumptions. The scheme is now closed as regards the accrual of future benefits
and the assumptions regarding future payments increases were therefore changed from being salary based
to inflation based.
Restructuring costs
A one–off restructuring charge of £3,715,000 was taken in 2008 which reflected the expected exit costs from
our Belgian operation, the costs of closing two Bakers Oven shops in January 2009 which were not suitable
for conversion to Greggs, and an increase in previously disclosed provisions for the restructuring of Bakers
Oven in the North and Scotland to reflect the worsening property market. An additional charge of £1,263,000
arose in 2009 but this is not considered material in itself to merit disclosure as an exceptional item.
55
Notes to the consolidated accounts
(continued)
5.
Personnel expenses
The average number of persons employed by the Group (including directors) during the year was as follows:
Group and Parent Company
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
2009
2008
Number
Number
647
415
2,718
15,264
19,044
640
370
2,788
15,616
19,414
Note
20
20
20
Group and Parent Company
2009
£’000
2008
£’000
236,811
232,601
18,462
3,351
379
982
17,207
2,889
(300)
1,047
259,985
253,444
Included within wages and salaries, 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
6. Finance income
Interest income on cash balances
Foreign exchange gain
56
2009
£’000
1,389
3,313
641
5,343
2008
£’000
1,194
2,841
559
4,594
2009
£’000
2008
£’000
209
137
346
428
429
857
7.
Profit attributable to Greggs plc
Of the Group profit for the year, £34,171,000 (2008: £34,211,000) is dealt with in the accounts of the Parent
Company. The Company has taken advantage of the exemption permitted by section 408 of the Companies
Act 2006 from presenting its own income statement.
8. 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
Disposal of non–qualifying assets
Impact of phasing out of Industrial Buildings
Allowance
Adjustment re prior years
Total income tax expense in income statement
2009
28.0%
0.9%
2.3%
(0.2%)
2009
£’000
48,779
13,658
437
1,120
(104)
–
–
(1.5%)
29.5%
(706)
14,405
2009
£’000
2008
£’000
16,410
(1,157)
15,253
14,735
(298)
14,437
(1,299)
451
(848)
866
72
938
14,405
15,375
2008
28.5%
2.7%
2.2%
(0.7%)
(1.2%)
(0.4%)
31.1%
2008
£’000
49,470
14,099
1,322
1,092
(334)
(578)
(226)
15,375
57
Notes to the consolidated accounts
(continued)
8. Income tax expense (continued)
Tax recognised directly in equity
2009
2009
Current tax Deferred tax
£’000
£’000
2009
Total
£’000
2008
Total
£’000
Relating to equity–settled transactions
Relating to defined benefit plans – actuarial gains
(SOCI)
(3)
–
(3)
(70)
(73)
132
(1,938)
(1,938)
(3,532)
(2,008)
(2,011)
(3,400)
9.
Earnings per share
Basic earnings per share
Basic earnings per share for the year ended 2 January 2010 is calculated by dividing profit attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during the year
ended 2 January 2010 as calculated below.
Diluted earnings per share
Diluted earnings per share for the year ended 2 January 2010 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 2 January 2010 as calculated below.
Adjusted earnings per share
Basic and diluted earnings per share have been calculated for the years ended 2 January 2010 and
27 December 2008 which exclude the exceptional items. These have been calculated by dividing profit
attributable to ordinary shareholders excluding the exceptional items by the relevant weighted average
number of ordinary shares as calculated below.
Profit attributable to ordinary shareholders
2009
Adjusted
and
unadjusted
2008
2008
2008
Adjusted
Unadjusted
Total
Excluding
exceptional
items
Exceptional
items
(Note 4)
Total
£’000
£’000
£’000
£’000
34,374
31,119
2,976
34,095
34.1p
34.0p
30.7p
30.6p
2.9p
2.9p
33.6p
33.5p
Profit for the financial year attributable to equity
holders of the parent
Basic earnings per share
Diluted earnings per share
58
Weighted average number of ordinary shares
Issued ordinary shares at start of year
Effect of own shares held
Effect of shares purchased and cancelled
2009
2008*
Number
Number
103,990,470 106,350,910
(3,170,821)
(3,363,050)
–
(1,734,830)
Weighted average number of ordinary shares during the year
100,819,649 101,253,030
Effect of share options on issue
427,864
411,560
Weighted average number of ordinary shares (diluted) during the year
101,247,513 101,664,590
* The figures for 2008 have been adjusted to reflect the ten for one share split which took place during 2009.
10.
Intangible assets
Group and Parent Company
Cost
Balance at 30 December 2007
Additions
Balance at 27 December 2008
Balance at 28 December 2008
Additions
Balance at 2 January 2010
Amortisation
Balance at 30 December 2007 and 27 December 2008
Balance at 28 December 2008
Amortisation charge for the year
Balance at 2 January 2010
Carrying amounts
At 30 December 2007
At 27 December 2008
At 28 December 2008
At 2 January 2010
The accounting software was available for use on 28 December 2008.
Software
£’000
–
686
686
686
–
686
–
–
107
107
–
686
686
579
59
Notes to the consolidated accounts
(continued)
11. Property, plant and equipment
Group
Cost
Land and
buildings
Plant and
equipment
Fixtures
and fittings
Under
construction
Total
£’000
£’000
£’000
£’000
£’000
Balance at 30 December 2007
99,777
87,647
145,576
–
333,000
Additions
Disposals
Reclassification
Effect of movements in
exchange rate
1,197
(986)
6
–
7,569
(5,816)
(331)
19
18,101
(4,998)
325
519
13,891
–
–
–
40,758
(11,800)
–
538
Balance at 27 December 2008
99,994
89,088
159,523
13,891
362,496
Balance at 28 December 2008
Additions
Disposals
Reclassification
99,994
1,244
(298)
14,844
89,088
10,265
(3,987)
–
159,523
13,891
362,496
17,834
(6,659)
953
30,296
–
(10,944)
–
(14,844)
–
Balance at 2 January 2010
115,784
95,366
170,698
–
381,848
Depreciation
Balance at 30 December 2007
Depreciation charge for the year
Disposals
Effect of movements in
exchange rate
15,558
2,038
(520)
51,700
8,877
(5,449)
68,959
15,095
(4,402)
–
18
167
Balance at 27 December 2008
17,076
55,146
79,819
Balance at 28 December 2008
Depreciation charge for the year
Disposals
Balance at 2 January 2010
Carrying amounts
At 30 December 2007
At 27 December 2008
At 28 December 2008
At 2 January 2010
17,076
2,318
(80)
19,314
84,219
82,918
82,918
96,470
55,146
9,043
(3,887)
60,302
35,947
33,942
33,942
35,064
79,819
15,857
(4,599)
91,077
76,617
79,704
79,704
79,621
–
–
–
–
–
–
–
–
–
136,217
26,010
(10,371)
185
152,041
152,041
27,218
(8,566)
170,693
–
196,783
13,891
210,455
13,891
210,455
–
211,155
60
Parent Company
Cost
Land and
Buildings
Plant and
equipment
Fixtures
and fittings
Under
construction
Total
£’000
£’000
£’000
£’000
£’000
Balance at 30 December 2007
100,287
88,180
146,064
–
334,531
Additions
Disposals
Reclassification
Effect of movements in
exchange rate
1,197
(986)
6
–
7,569
(5,816)
(331)
19
18,101
(4,998)
325
519
13,891
–
–
–
40,758
(11,800)
–
538
Balance at 27 December 2008
100,504
89,621
160,011
13,891
364,027
Balance at 28 December 2008
100,504
1,244
(298)
14,844
116,294
89,621
10,265
(3,987)
–
160,011
13,891
364,027
17,834
(6,659)
953
30,296
–
(10,944)
–
(14,844)
–
95,899
171,186
–
383,379
Additions
Disposals
Reclassification
Balance at 2 January 2010
Depreciation
Balance at 30 December 2007
Depreciation charge for the year
Disposals
Effect of movements in
exchange rate
15,835
2,038
(520)
51,970
8,877
(5,449)
69,350
15,095
(4,402)
–
18
167
Balance at 27 December 2008
17,353
55,416
80,210
Balance at 28 December 2008
Depreciation charge for the year
Disposals
Balance at 2 January 2010
Carrying amounts
At 30 December 2007
At 27 December 2008
At 28 December 2008
At 2 January 2010
17,353
2,318
(80)
19,591
84,452
83,151
83,151
96,703
55,416
9,043
(3,887)
60,572
36,210
34,205
34,205
35,327
80,210
15,857
(4,599)
91,468
76,714
79,801
79,801
79,718
–
–
–
–
–
–
–
–
–
137,155
26,010
(10,371)
185
152,979
152,979
27,218
(8,566)
171,631
–
197,376
13,891
211,048
13,891
211,048
–
211,748
61
Notes to the consolidated accounts
(continued)
11. Property, plant and equipment (continued)
Land and buildings
The carrying amount of land and building comprises:
Freehold property
Long leasehold property
Short leasehold property
Group
Parent Company
2009
£’000
95,490
883
97
2008
£’000
81,827
1,007
84
2009
£’000
95,723
883
97
2008
£’000
82,060
1,007
84
96,470
82,918
96,703
83,151
Property, plant and equipment under construction
Assets under construction at 27 December 2008 comprised a new bakery.
12.
Investments
Parent Company
Cost
As at 30 December 2007, 27 December 2008 and 2 January 2010
Impairment
As at 30 December 2007 and 27 December 2008
Impairment charge for the year
As at 2 January 2010
Carrying amount
As at 30 December 2007 and 27 December 2008
As at 2 January 2010
Shares in subsidiary undertakings
£’000
5,828
638
203
841
5,190
4,987
The Company’s subsidiary undertakings, which are all wholly owned, are as follows:
Principal activity
Country of incorporation
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
Non–trading
Dormant
Non–trading
Property holding
Dormant
Non–trading
Dormant
Non–trading
Trustees
62
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
Scotland
England and Wales
England and Wales
England and Wales
13. Deferred tax assets and liabilities
Group
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2009
£’000
2008
£’000
2009
£’000
2008
£’000
2009
£’000
2008
£’000
Property, plant and equipment
–
–
14,385
14,828
14,385
14,828
Employee benefits
Short term temporary differences
(4,004)
(1,800)
(1,083)
(874)
–
–
–
–
(4,004)
(1,800)
(1,083)
(874)
Tax (assets) / liabilities
(5,087)
(2,674)
14,385
14,828
9,298
12,154
The movements in temporary differences during the year ended 27 December 2008 were as follows:
Property, plant and equipment
Employee benefits
Short term temporary differences
Balance at
30 December
2007
£’000
15,804
(965)
(524)
14,315
Recognised
in income
£’000
(976)
2,264
(350)
938
Recognised
in equity
Balance at
27 December
2008
£’000
£’000
–
(3,099)
–
14,828
(1,800)
(874)
(3,099)
12,154
The movements in temporary differences during the year ended 2 January 2010 were as follows:
Balance at
28 December
2008
£’000
Recognised
in income
Recognised
in equity
£’000
£’000
Balance at
2 January
2010
£’000
14,828
(1,800)
(874)
12,154
(443)
(196)
(209)
(848)
–
(2,008)
–
(2,008)
14,385
(4,004)
(1,083)
9,298
Property, plant and equipment
Employee benefits
Short term temporary differences
Parent Company
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2009
£’000
2008
£’000
2009
£’000
2008
£’000
2009
£’000
2008
£’000
Property, plant and equipment
–
–
13,646
14,089
13,646
14,089
Employee benefits
Short term temporary differences
(4,004)
(1,800)
(1,083)
(874)
–
–
–
–
(4,004)
(1,800)
(1,083)
(874)
Tax (assets) / liabilities
(5,087)
(2,674)
13,646
14,089
8,559
11,415
63
Notes to the consolidated accounts
(continued)
13. Deferred tax assets and liabilities (continued)
The movements in temporary differences during the year ended 27 December 2008 were as follows:
Property, plant and equipment
Employee benefits
Short term temporary differences
Balance at
30 December
2007
£’000
Recognised
in income
Recognised
in equity
£’000
£’000
Balance at
27 December
2008
£’000
15,065
(965)
(524)
13,576
(976)
2,264
(350)
938
–
(3,099)
–
(3,099)
14,089
(1,800)
(874)
11,415
The movements in temporary differences during the year ended 2 January 2010 were as follows:
Property, plant and equipment
Employee benefits
Short term temporary differences
14.
Inventories
Raw materials and consumables
Work in progress
15. Trade and other receivables
Trade receivables
Other receivables
Prepayments
Balance at
28 December
2008
£’000
Recognised
in income
Recognised
in equity
£’000
£’000
Balance at
2 January
2010
£’000
14,089
(1,800)
(874)
11,415
(443)
(196)
(209)
(848)
–
(2,008)
–
(2,008)
13,646
(4,004)
(1,083)
8,559
Group and Parent Company
2009
£’000
2008
£’000
8,999
8,801
2,887
11,886
3,351
12,152
Group and Parent Company
2009
£’000
709
5,944
14,553
21,206
2008
£’000
387
8,438
13,873
22,698
No amounts are overdue and there is no provision for impairment in the current or prior year.
64
16. Cash and cash equivalents
Cash and cash equivalents in the balance sheet
Bank overdraft
Cash and cash equivalents in the statement of cash flows
17. Trade and other payables
Bank overdraft
Trade payables
Amounts owed to subsidiary undertakings
Other taxes and social security
Other payables
Accruals and deferred income
Deferred government grants
18. Current tax liability
Group and Parent Company
2009
£’000
34,619
–
34,619
2008
£’000
4,433
(2,375)
2,058
Group
Parent Company
2009
£’000
–
35,167
–
7,122
13,236
15,748
465
2008
£’000
2,375
26,807
–
6,136
15,423
11,805
215
2009
£’000
–
35,167
7,807
7,122
13,236
15,748
465
2008
£’000
2,375
26,807
7,807
6,136
15,423
11,805
215
71,738
62,761
79,545
70,568
The current tax liability of £8,857,000 in the Group and the Parent Company (2008: Group and Parent
Company £8,337,000) represents the estimated amount of income taxes payable in respect of current and
prior years.
19. Other payables
Deferred government grants
Group and Parent Company
2009
£’000
8,830
2008
£’000
8,221
The Group has been awarded five government grants relating to the extension of existing facilities and
construction of new facilities. The grants, which have all been recognised as deferred income, are being
amortised over the weighted average of the useful lives of the assets they have been used to acquire.
65
Notes to the consolidated accounts
(continued)
20. Employee benefits
Defined benefit plan
The Group makes contributions to a defined benefit (final salary) plan that provides pension benefits for
employees upon retirement.
Group and Parent Company
2009
£’000
(87,211)
74,879
(12,332)
2008
£’000
(69,563)
63,830
(5,733)
Group and Parent Company
2009
£’000
2008
£’000
69,563
78,461
–
4,387
15,538
(2,277)
–
–
87,211
600
4,488
(5,133)
(2,076)
192
(6,969)
69,563
Group and Parent Company
2009
£’000
63,830
4,008
8,618
700
–
(2,277)
74,879
2008
£’000
77,781
5,388
(17,747)
292
192
(2,076)
63,830
Present value of funded obligations
Fair value of plan assets
Recognised liability for defined benefit obligations
This scheme was closed to future accrual in 2008.
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 losses / (gains)
Benefits paid
Contributions by employees
Gain on curtailment of scheme
Changes in the fair value of plan assets are as follows:
Opening fair value of plan assets
Expected return
Actuarial gains / (losses)
Contributions by employer
Contributions by employee
Benefits paid
Closing fair value of plan assets
66
The amounts recognised in the income statement are as follows:
Current service cost
Interest on obligation
Expected return on plan assets
Gain on curtailment of scheme
Total included in employee benefit expense
The charge (credit) is recognised in the following line items of the income statement.
Cost of sales
Distribution and selling costs
Administrative expenses
Other income
Group
2009
£’000
–
4,387
(4,008)
–
379
Group
2009
£’000
–
–
379
–
379
2008
£’000
600
4,488
(5,388)
(6,969)
(7,269)
2008
£’000
(63)
(91)
(146)
(6,969)
(7,269)
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 net
losses of £18,631,000 (2008: net losses of £11,711,000).
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
2009
£’000
60,340
10,079
1,201
3,259
74,879
12,626
2008
£’000
43,519
6,127
605
13,579
63,830
(12,359)
The plan assets include ordinary shares issued by the Company with a fair value of £2,283,000 (2008:
£1,840,000).
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.
67
Notes to the consolidated accounts
(continued)
20. Employee benefits (continued)
Principal actuarial assumptions (expressed as weighted averages):
Discount rate
Expected rate of return on plan assets
Future salary increases
Future pension increases
Group and Parent Company
2009
5.8%
6.9%
n/a
3.0%
2008
6.4%
6.4%
n/a
2.9%
Mortality rate assumptions have been taken from the A92 pre–retirement and AP92c2025 post–retirement
tables. The mortality assumptions take account of experience to date and assumptions for further
improvements in life expectancy of scheme members.
Examples of the resulting life expectancies are as follows:
Life expectancy from age 65 (years)
2009
2008
Male
Female
Male
Female
Member aged 65 in 2009
Member aged 65 in 2029
21.4
23.4
23.9
25.7
21.4
23.4
23.9
25.7
The other demographic assumptions have been set having regard to latest trends in the scheme.
History of plan
The history of the plan for current and prior years is as follows:
Present value of defined benefit
obligation
Fair value of plan assets
Deficit
Group and Parent Company
2008
£’000
2007
£’000
2006
£’000
2005
£’000
(69,563)
(78,461)
(74,823)
(69,538)
63,830
(5,733)
77,781
(680)
72,940
(1,883)
59,808
(9,730)
2009
£’000
(87,211)
74,879
(12,332)
68
Experience adjustments:
Group and Parent Company
2009
£’000
2008
£’000
2007
£’000
2006
£’000
2005
£’000
Experience adjustments
on plan liabilities
Experience adjustments
on plan assets
Net actuarial experience
adjustments
(15,538) 17.8% 5,133 7.4% 2,207 2.8%
180 0.2% (6,414) 9.2%
8,618 11.5% (17,747) 27.8% (797) 1.0% 2,561 3.5% 4,069 6.8%
(6,920)
(12,614)
1,410
2,741
(2,345)
The Group expects to contribute £600,000 to its defined benefit plan in 2010.
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 £3,351,000 (2008: £2,889,000) 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, September 2006, June 2008 and September 2009 and an Executive
Share Option Scheme, which granted options in September 2003, March 2004, August 2004, September
2004, August 2006, April 2008 and April 2009.
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.
The Company established a Long–Term Incentive Plan in 2006 and grants of options have been made under
this scheme in March 2007, March 2008 and August 2008.
69
Notes to the consolidated accounts
(continued)
20. Employee benefits (continued)
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 6
March
1999
Senior
employees
268p
1,002,500
Three years’ service and EPS growth of
2–4% over RPI on average over those
three years
Contractual
life
7 to 10 years
Executive Share Option
Scheme 7
March
2000
Senior
employees
170p
1,502,000
Executive Share Option
Scheme 8
April
2002
Senior
employees
352p
88,000
Executive Share Option
Scheme 9
September
2003
Senior
employees
310p
82,500
Executive Share Option
Scheme 11
August
2004
Senior
employees
340p
930,000
September
2004
Senior
employees
348p
24,000
Three years’ service and EPS growth
of 2% over RPI on average over those
three years
7 to 10 years
Three years’ service and EPS growth of
2–4% over RPI on average over those
three years
7 to 10 years
Three years’ service and EPS growth
of 2% over RPI on average over those
three years
10 years
Three years’ service and EPS growth of
3–5% over RPI on average over those
three years
10 years
Three years’ service and EPS growth of
3–5% over RPI on average over those
three years
10 years
Savings Related Share
Option Scheme 8
September
2005
All
employees
411p
641,480
Three years’ service
3.5 years
Executive Share Option
Scheme 12
August 2006 Senior
407p
1,028,000
employees
Three years’ service and EPS growth of
3–5% over RPI on average over those
three years
10 years
Savings Related Share
Option Scheme 9
September
2006
All employees 371p
662,770
Three years’ service
3.5 years
Long Term Incentive
Plan 1
March 2007 Senior
executives
Long Term Incentive
Plan 2
March 2008 Senior
executives
nil
nil
30,780
126,600
Executive Share Option
Scheme 13
April 2008
Senior
employees
457p
618,500
Three years’ service and EPS growth of
3–7.5% over RPI on average over those
three years
10 years
Three years’ service and EPS growth of
3–10% over RPI on average over those
three years
10 years
Three years’ service and EPS growth of
3–5% over RPI on average over those
three years
10 years
June 2008
All employees 393p
761,020
Three years’ service
3.5 years
Savings Related Share
Option Scheme 10
Long Term Incentive
Plan 3
August 2008 Senior
nil
180,210
executives
Executive Share Option
Scheme 14
April 2009
Senior
employees
356p
2,012,000
Three years’ service and EPS growth of
3–10% over RPI on average over those
three years
10 years
Three years’ service and EPS growth of
3–7% over RPI on average over those
three years
10 years
Savings Related Share
Option Scheme 11
September
2009
All employees 354p
717,837
Three years’ service
3.5 years
70
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
2009
2008*
Number of
options
Weighted
average
exercise
price
Number of
options
Weighted
average
exercise
price
366p
4,063,500
408p
(1,008,453)
364p
355p
353p
(510,964)
2,729,837
5,273,920
378p
371p
291p
345p
366p
2,673,580
(221,080)
(75,330)
1,686,330
4,063,500
Exercisable at the end of the year
379p
994,061
374p
889,840
* figures for 2008 have been adjusted to reflect the ten for one share split which took place during 2009
The options outstanding at 2 January 2010 have an exercise price in the range of £nil to £4.57 and have
a weighted average contractual life of 5.1 years. The options exercised during the year had a weighted
average market value of £4.24 (2008: £4.34).
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.
2009
2008
Savings
Related
Share
Option
Scheme 11
September
2009
Long Term
Incentive
Plan 2
Executive
Share
Option
Scheme 13
Savings
Related
Share
Option
Scheme 10
Long Term
Incentive
Plan 3
March
2008*
April
2008*
June
2008*
August
2008*
Fair value at grant date
Share price
Exercise price
Expected volatility
Option life
Expected dividends
Risk free rate
64p
393p
354p
25.0%
25.1%
3 years
3 years
4.18%
2.20%
4.26%
1.95%
412p
448p
nil
21.8%
3 years
2.77%
5.25%
76p
458p
458p
21.9%
3 years
2.71%
5.00%
92p
438p
394p
21.9%
3 years
2.83%
5.00%
340p
376p
nil
22.8%
3 years
3.38%
5.00%
* figures for early 2009 and 2008 have been adjusted to reflect the ten for one share split which took place
during 2009.
71
Executive
Share
Option
Scheme 14
April
2009*
47p
356p
356p
Notes to the consolidated accounts
(continued)
20. Employee benefits (continued)
The expected volatility is based on historical volatility, adjusted for any expected changes to future volatility
due to publicly available information. The historical 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 2005
Share options granted in 2006
Share options granted in 2007
Share options granted in 2008
Share options granted in 2009
Total expense recognised as employee costs
21. Provisions
Balance at start of year
Additional provision in the year
Transfer from trade and other payables
Utilised in year
Balance at end of year
Included in current liabilities
Included in non–current liabilities
2009
£’000
–
161
(24)
575
270
982
2008
£’000
129
236
100
582
–
1,047
Group and Parent Company
Closed Shop Provision
2009
£’000
5,271
1,263
–
(2,381)
4,153
857
3,296
4,153
2008
£’000
–
3,715
1,556
–
5,271
2,843
2,428
5,271
The closed shop provision relates to costs in respect of the closure of shops and in particular the onerous
lease and other commitments associated with the closure of a shop. Included within the provision is
£199,000 in respect of possible recourse on leases transferred to the purchaser on the sale of the
Belgian operation.
The key area of uncertainty relates to the net future rental costs to be incurred on closed shops and, in
particular, whether the shops can be sublet until lease exit. The provision assumes that subletting is unlikely
in the current climate. The provision is expected to be substantially utilised within three years such that the
impact of discounting would not be material.
72
22. Capital and reserves
Share capital
Ordinary shares
2009
2008
Number
Number
In issue and fully paid at start of year – ordinary shares of 20p
10,399,047 10,635,091
Purchased and cancelled
–
(236,044)
Additional shares resulting from ten for one share split – ordinary shares of 2p
93,591,423
–
In issue and fully paid at the end of the year – ordinary shares of 2p
103,990,470
10,399,047
At 2 January 2010 the authorised share capital comprised 250,000,000 ordinary shares with a par value of 2p
each (2008: 25,000,000 with a par value of 20p each).
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled
to one vote per share at meetings of the Company. During 2008 236,044 shares with a nominal value of
£47,000 were purchased for cancellation for a consideration of £9,738,000.
Capital redemption reserve
The capital redemption reserve relates to the nominal value of issued share capital bought back by the
Company and cancelled.
Own shares held
Deducted from retained earnings is £12,060,000 (2008: £13,242,000) 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 2,895,636 shares (2008: 3,257,740 shares) with a market value at 2 January
2010 of £12,596,000 (2008: £11,415,000) 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, Greggs Savings Related Share
Option Schemes and Greggs Long Term Incentive Plan 2006 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:
2007 final dividend*
2008 interim dividend*
2008 final dividend*
2009 interim dividend
2009
2008
Per share
Per share
pence
pence
–
–
10.0p
5.2p
15.2p
9.4p
4.9p
–
–
14.3p
*These amounts have been restated to reflect the ten for one share split which took place during the year.
73
Notes to the consolidated accounts
(continued)
22. Capital and reserves (continued)
The proposed final dividend in respect of 2009 amounts to 11.4 pence per share (£11,855,000). This
proposed dividend is subject to approval at the Annual General Meeting and has not been included as a
liability in these accounts.
2007 final dividend
2008 interim dividend
2008 final dividend
2009 interim dividend
23. Operating leases
Non–cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
2009
£’000
–
–
10,097
5,242
15,339
2008
£’000
9,565
4,970
–
–
14,535
2009
£’000
2008
£’000
34,791
34,780
101,677
102,268
56,080
46,090
192,548
183,138
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.
74
24. Capital commitments
During the year ended 2 January 2010, the Group entered into contracts to purchase property, plant and
equipment for £804,000 (2008: £1,308,000). These commitments are expected to be settled in the following
financial year.
25. 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
Greggs Properties Limited
Dormant subsidiaries
Amounts owed to
related parties
Amounts owed by
related parties
2009
£’000
1,375
6,432
2008
£’000
1,375
6,432
2009
£’000
–
–
2008
£’000
–
–
The Greggs Foundation is also a related party and during the year the Company made a donation to the
Greggs Foundation of £300,000 (see Corporate Social Responsibility on pages 20 to 24).
75
Notes to the consolidated accounts
(continued)
25. Related parties (continued)
Transactions with key management personnel
The directors are the key management personnel of the Group. The Company has been notified of the
following interests of the directors who served during the year (including those of their connected persons
but excluding interests in shares pursuant to unexercised share options) in the share capital of the Company
as follows:
Ordinary shares of 2p Ordinary shares of 2p
(Beneficial interest)
(Trustee holding with no
beneficial interest)
2009
(or date of
cessation if
earlier)
2008#
(or date of
appointment
if later)
2009
(or date of
cessation if
earlier)
2008#
(or date of
appointment
if later)
338,000
57,860
27,117
43,730
10,000
–
–
12,253
10,000
363,000
53,160
–
–
–
–
23,330
1,650,000* 2,150,000*
43,280
10,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Mike Darrington (non–executive)
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Derek Netherton (non–executive)
Bob Bennett (non–executive)
Julie Baddeley (non–executive)
Roger Whiteside
Iain Ferguson (appointed 31 March 2009)
# the figures for 2008 have been adjusted to reflect the ten for one share split which took place during 2009.
* Included within the holding of A. J. Davison referred to on page 33.
Details of directors’ share options, emoluments, pension benefits and other non–cash benefits can be
found in the Directors’ Remuneration report on pages 77 to 88. Total remuneration is included in personnel
expenses (see note 5).
There have been no changes since 2 January 2010 in the directors’ interests noted above.
76
Directors’ Remuneration Report
Introduction
This report has been prepared in accordance with the Directors’ Remuneration Report Regulations 2002 (the
“Regulations”). This report also meets the relevant requirements of the Listing Rules of the Financial Services
Authority and the relevant provisions of the Companies Act 2006 and describes how the Board has applied
the Principles of Good Governance relating to directors’ remuneration.
The Regulations require the auditors to report to the Company’s members on the “auditable part” of the
Directors’ Remuneration Report and to state whether, in their opinion, that part of the report has been
properly prepared. This report has, therefore, been divided into separate sections for audited and unaudited
information.
Unaudited information
The Remuneration Committee of the Board (the “Committee”) sets the remuneration and terms of
appointment of the executive directors and the Chairman on behalf of the Board.
The committee met 5 times during 2009 with each member attending as follows:
Name
Julie Baddeley
Bob Bennett
Roger Whiteside
Iain Ferguson*
Number of meetings held whilst
a Committee member
Number of meetings attended
by a Committee member
5
5
5
5
5
5
3
2
* Joined the Committee in March 2009
At these meetings, amongst other items, the Committee considered:
• The terms of service and remuneration levels for Executive Directors
• The competitiveness of the Company’s total reward package, including the level of annual and
long–term incentive opportunity
• The effectiveness of the annual bonus and long–term incentive plans
In addition, each year the Committee considers Greggs total remuneration policy in the context of market
and best practice.
Andrew Davison (the Company Secretary and legal advisor) and Nicola Bailey (the Company’s Group
People Director) have supported the Committee in their deliberations. The Committee appointed Monks
Partnership to assist in generally determining the remuneration of its senior management team and devising
share based incentive plans.
77
Directors’ Remuneration Report
(continued)
General Policy on Directors’ Remuneration
The Committee’s policy is to provide competitive remuneration packages that will attract, retain and motivate
individuals with appropriate skills and experience with the incentive to add sustainable long–term growth
and value that will best serve the interests of the Company, its shareholders, employees and customers.
Basic salaries and total packages are set to reflect the market. They are regularly benchmarked by external
consultants against the median level payments made to executives in similar roles in companies of
comparative size, sector and complexity (which exercise was last conducted by Monks Partnership in 2009).
The Committee seeks to structure bonus arrangements that will align the interests of executive directors with
those of shareholders. The Committee considers corporate performance on risk, governance, environmental
and social issues when setting the remuneration of executive directors.
Overview of Remuneration Policy
Objective
Performance period
Basis of delivery
Base Salary
• Reflects market levels
• Reviewed annually
based on role and individual
skill and experience
• Individual performance and
contribution recognised
to ensure market
competitiveness
Annual Bonus
(inc Profit Share)
Maximum earning opportunity
of 90% of salary for all
Executive Directors from 2010
• Incentivises achievement
of annual targets and
objectives consistent with
the short to medium term
strategic needs of the
business
LTIP (Performance
Share Plan)
Maximum awards of 90%
of salary for CEO and 70%
of salary for other Executive
Directors
• Incentivises long–term value
creation
• Alignment with
shareholders interests
• Retention incentive
Pension
• Provides a market
competitive level of
provision with good
flexibility while minimising
risk to the Company
• Reviewed annually
• Balanced approach based
• Annual award
• Three year performance
period
on stretching financial
(profit and sales) targets
and personal objectives
(related to functional KPI’s)
• Award subject to a
combination of demanding
TSR and EPS targets
• Maximum reward will only
occur for upper quartile
performance
• Minimum vesting 25%
• Cost increases in line with
• Defined contribution
salary growth
benefits
Base Salary
The increase in base salaries for 2010 for executive directors was 2%, in line with the award given to all
employees across the business. However, following the benchmarking exercise the salary level for Richard
Hutton was further reviewed as it was seen to have fallen to below the lower quartile in the appropriate
comparator group. As a result of this review a further 5.5% was awarded in addition to the all employee base
review of 2%, taking him further towards the market median for a fully established Finance Director.
78
Annual Bonus
The Committee seeks to structure annual bonus arrangements so as to encourage sustainable growth in the
Company’s profits; and is satisfied that the structure will not raise environmental, social or governance risks
by inadvertently encouraging irresponsible behaviour. Each executive director has a personal objective to
ensure they monitor and take appropriate action to minimise key business risks. The Committee’s policy is
that all bonus payments to executive directors should be non–pensionable. For 2009 the maximum target
bonus levels were established on the following basis:
Maximum 2009
bonus achievable
Financial Target
(Profit)
Financial Target
(Sales)
Personal Objectives
(related to functional
KPI’s)
Percentage of basic
salary
Kennedy McMeikan 60%
Richard Hutton
60%
Raymond Reynolds 60%
20%
20%
20%
20%
20%
20%
90%
70%
70%
Whilst each element could be measured separately, failure to exceed the profit level achieved in 2008 would
have resulted in no bonus being earned for either the profit or sales elements in 2009.
Against the 2009 Annual Bonus targets a payment of 27% of annual salary has been earned by
Kennedy McMeikan, 21% by Richard Hutton and 20% by Raymond Reynolds.
Following the benchmarking exercise against median level payments made to executives in comparator
companies it was noted that we had fallen significantly behind the market in the maximum earning
opportunity for executive directors. We have therefore reviewed the maximum earning opportunity for 2010
for Richard Hutton and Raymond Reynolds and increased the level to 90% of base salary. The maximum
earning opportunity for Kennedy McMeikan remains unchanged at 90%.
For 2010 the maximum target bonus levels will be established on the following basis, which the
Remuneration Committee consider to be suitably challenging:
Maximum 2010
bonus achievable
Financial Target
(Profit)
Financial Target
(Sales)
Personal Objectives
(related to functional
KPI’s)
% of base salary
Kennedy McMeikan 60%
Richard Hutton
60%
Raymond Reynolds 60%
20%
20%
20%
20%
20%
20%
90%
90%
90%
Whilst each element can be measured separately, failure to exceed the profit level achieved in 2009 will result
in no bonus being earned for either the profit or sales elements in 2010.
79
Directors’ Remuneration Report
(continued)
Long–Term Incentive Plans (“LTIP”)
Performance Share Plan
Shareholder approval was obtained in 2009 for the introduction of a Performance Share Plan (PSP) from
2010. The plan replaces the previous Deferred Bonus LTIP for executive directors, which was dependent on
the level of annual bonus award and therefore balanced more towards short term performance.
The introduction of a Performance Share Plan under which an award of shares will be made that is in line
with the level awarded under the previous LTIP, restricted for three years and vesting in full or part subject to
the achievement of a combination of earnings per share (EPS) growth and total shareholder return (TSR)
targets, is designed to provide a greater focus on achieving key long–term business goals and increased
shareholder value. The first awards under the PSP to be made in 2010 will have the following targets set:
EPS
Annual compound
growth
Proportion of
award vesting
(% opportunity)
TSR
Position relative
to appropriate
group of FTSE 250
Food Producers,
Retailers & Leisure
Companies
Proportion of
award vesting
(% opportunity)
Less than RPI + 3% Nil
Below median
Nil
Threshold
RPI + 3%
Maximum
RPI + 8%
12.5%
50%
At median
12.5%
Upper quartile
50%
Following the introduction of this plan the Remuneration Committee will now be considering a policy on
share ownership guidelines for executive directors.
The comparator group was established following a comprehensive review, including advice taken from
Monks, and consists of 28 companies who are General Retailers, Food Producers/Manufacturers or Leisure
Companies and who were the most appropriate from the FTSE 250. They are:
• Brown (N) Group
• Carpetright
• Cranswick
• Dairy Crest
• Debenhams
• Dignity
• Domino's Pizza
• DSG International
• Dunelm Group
• Game Group
• Greene King
• Halfords Group
• HMV Group
• Inchcape
80
• Kesa Electricals
• Marston's
• Millennium & Copthorne Hotels
• Mitchells & Butlers
• Mothercare
• Northern Foods
• Premier Foods
• Rank Group
• Restaurant Group
• Robert Wiseman Dairies
• Sports Direct Intl.
• Tate & Lyle
• Wetherspoon (JD)
• WH Smith
Other share based incentive schemes
Deferred Bonus Scheme
Under this scheme, the Committee had discretion to invite the participants (including executive directors)
to utilise a proportion (not more than 50%) of their post tax annual bonus (including profit share) to acquire
shares in the Company and then grant nil cost options to match the pre–tax value of the sum invested. These
nil cost options were exercisable normally after three years, and only if certain performance criteria have
been met.
For the initial award, made in 2007, performance targets were set at average growth in earnings per share of
3% above RPI for a 1:1 match and 7.5% above RPI for a 2:1 match, with a straight line graph indicating the
relevant match for performance in between. Following the three year performance period the conditions have
been fully met for this initial award resulting in a 2:1 match being awarded to Richard Hutton, who has an
option over 8,120 shares, and Raymond Reynolds, who has an option over 6,100 shares.
For the award in 2008 the performance targets were set at average growth in earnings per share of 3%
above the RPI for a 1:1 match and 10% above the RPI for a 2:1 match, providing a further stretch in order to
achieve the maximum award.
Given the very low level of bonus payments awarded following the year 2008, the Committee did not offer
participation in this LTIP in 2009. As previously outlined a Performance Share Plan has replaced this LTIP
from 2010, and therefore the Committee will offer no further participation in this previous scheme.
Executive Share Option Scheme
There have also been occasional grants to the executive directors of options over shares in the Company,
pursuant to one or more of the share option schemes operated through the Committee. These include both
Inland Revenue approved and unapproved long–term share incentive schemes, designed to encourage the
executive directors and other employees to hold shares in the Company and to enhance share values.
As no participation into the Deferred Bonus LTIP was offered in 2009 an award of share options was made
to each executive director in line with such existing schemes. The level of award granted to each executive
director was:
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Award Granted (shares)
80,000
80,000
80,000
The performance conditions set under this grant were growth in earnings per share of 3% above RPI for the
minimum vesting and growth of 7% above RPI for maximum vesting.
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. 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.
81
Directors’ Remuneration Report
(continued)
The above policies enable the executive directors to receive potentially significant benefits in addition to their
basic salaries, but only if value has been created for shareholders. The Committee considers that, although
the non–performance related elements of the executive directors’ remuneration packages are substantial,
the performance related elements are significant in terms of providing motivation to the executive directors to
improve shareholder value.
Policy on Performance Conditions
The performance conditions attaching to share options granted to the executive directors under the Company’s
Senior Executive Share Option Schemes have varied according to the date of grant. Such conditions are set
by the Committee to establish challenging performance objectives linked to shareholder return. Executive
directors are not eligible to have executive share options granted in the same year as participation in the LTIP.
The Committee intends that if any executive share options are granted in the future, performance conditions will
continue to be settled on this basis. Details of the performance conditions for options currently outstanding are
set out in the section headed ‘Share Options’ below.
Whether performance conditions attached to share options have been met is tested by the Committee, which
compares the actual performance of the Company with relevant published statistics and, if necessary, obtains
advice from external consultants in order to reach its conclusion.
No performance conditions have been attached to options granted pursuant to the Company’s Savings
Related Share Option Scheme, which is available for all employees. The principal purpose of this scheme is to
encourage employees at all levels within the Company to participate in, and to understand better, the growth in
value of the Company and the rules of that scheme require that all options granted must be on the same terms.
Performance criteria in relation to the performance based annual cash bonuses payable to the executive
directors are set by the Committee each year in accordance with the general remuneration policy set out
above.
Policy on Pensions
Until the scheme was closed to further accrual from 1 April 2008, executive directors earned pension benefits
under the Greggs 1978 Retirement & Death Benefit Scheme, the Company’s defined benefit scheme. This
scheme, which required a contribution of 6.6% of pensionable salaries from members, provided for up to
two–thirds of final pensionable salary, dependent on length of pensionable service. Since 1 April 2008, the
Company has paid contributions to the Company’s money purchase defined contribution pension schemes for
all executive directors.
Policy on Service Contract Notice Periods and Payments on Early Termination
The Company’s policy on the duration of directors’ contracts is that:
• the Chief Executive’s service contract is terminable on one year’s notice served by either the Company
or the director
• other existing executive directors’ service contracts are terminable on one year’s notice served by the
Company or by six months’ notice served by the director;
• future executive directors will be engaged on terms necessary to secure individuals of appropriate
calibre, having regard to prevailing market conditions at that time;
• It is the Company’s policy to seek mitigation of entitlements on termination and the Company does
not normally make payments beyond its contractual obligations, including any payment in respect of
notice to which a director is entitled.
82
• 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. Any non–executive director
who has served on the Board for over nine years must seek re–election annually. Thereafter, one half
of the remaining directors, 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–election. The Nominations Committee advises the Board as to whether a particular
director, whose turn it is to retire by rotation, should be nominated for re–election.
Non–executive directors are not entitled to compensation for early termination of their appointments prior to the
date on which they would next be due to retire by rotation, or if not re–appointed at such time.
Directors’ service contracts
Details of the directors’ service contracts or letters of appointment are as follows:
Executive Directors
Kennedy McMeikan has a service contract with the Company dated 8th April 2008. His continuous period of
service with the Company commenced on 1st June 2008.
Richard Hutton has a service contract with the Company dated 7 April 2006. His continuous period of service
with the Company commenced on 1 January 1998.
Raymond Reynolds has a service contract with the Company dated 18 December 2006. His continuous period
of service with the Company commenced on 1 December 1986.
In addition to their basic salaries, each is entitled to participate in the Company’s profit sharing scheme
available to all employees. They are also entitled to additional benefits including membership of the company
pension scheme, the use of a motor car, private medical insurance, life assurance, permanent health insurance
and a contribution towards telephone expenses.
Non Executive Directors
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 executive directors (Kennedy McMeikan, Richard Hutton and Raymond Reynolds)
who periodically seek advice from external consultants as to the appropriate market rates applicable. Such
advice was obtained in 2009 from Monks Partnership, as a result of which increases were awarded in January
2010 which reflect appropriate market rates.
The basic non–executive fees for 2010 are £37,000 per annum, including membership of committee(s), and an
additional £5,500 for Chairmanship of the Audit or Remuneration Committees.
The non–executive directors do not have service contracts with the Company. However, each of them does
have a letter of appointment. These are dated 25 February 2002 for Derek Netherton, 1 December 2003 for
Bob Bennett, 1 March 2005 for Julie Baddeley, 21 February 2008 for Roger Whiteside and 31 March 2009 for
Iain Ferguson respectively. The terms of appointment of each non–executive director require that they seek
re–election 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. No right of compensation exists where the office is terminated, for whatever reason.
83
Directors’ Remuneration Report
(continued)
Performance graph
The graph 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 Trusts) and the FTSE
350 (excluding Investment Trusts).
These indices were chosen for this
comparison because they include companies
of broadly similar size to the Company.
FTSE 350 (excluding
investment trusts)
FTSE Mid 250 (excluding
investment trusts)
Greggs
Audited information
This information relates to both the Parent Company and the Group.
Directors’ emoluments and compensation
The following tables set 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
set for
Salary/fees
paid in
2010
£
2009
£
Estimated
value of
benefits
2009
£
447,000
260,000
232,000
438,000
242,000
227,000
24,353
20,500
12,617
Annual
profit
share
2009
£
4,022
10,192
9,560
Annual
bonus
2009
£
Total
2009
£
114,238
40,628
36,521
580,613
313,320
285,698
Executive
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Chairman
Derek Netherton
120,750
115,000
42,500
42,500
37,000
40,000
40,000
35,500
37,000
26,625
–
14,204
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
115,000
40,000
40,000
35,500
26,625
14,204
1,218,750
1,178,329
57,470
23,774
191,387
1,450,960
Non–executive
Bob Bennett
Julie Baddeley
Roger Whiteside
Iain Ferguson (from 13
May 2009)
Mike Darrington
(resigned
13 May 2009)
Total
84
Salary/fees
paid in
2008
£
Estimated
value of
benefits
2008
Annual
profit
share
2008
Annual
bonus
Total
2008
2008
£
£
£
£
285,833
247,917
235,000
220,000
115,000
13,798
40,000
40,000
5,917
28,127
14,792
25,626
13,409
19,595
11,370
8,424
1,144
11,633
10,890
14,204
17,450
2,350
1,944
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
334,087
279,920
268,578
244,204
115,000
13,798
40,000
40,000
5,917
28,127
14,792
1,246,384
70,000
32,091
35,948
1,384,423
Executive
Mike Darrington (until 31 July 2008)
Ken McMeikan (appointed 1 June 2008)
Richard Hutton
Raymond Reynolds
Chairman
Derek Netherton
Non–executive
Stephen Curran (resigned 13 May 2008)
Bob Bennett
Julie Baddeley
Ian Gibson (resigned 29 February 2008)
Roger Whiteside (appointed 17 March
2008)
Mike Darrington (from 1 August 2008)
Total
Share options
The following table sets out details of the executive and savings related share options (all of which were
granted at a nominal cost to the executive director concerned) held by, or granted to, each director during
the year:
Number of options during the year
At 27
December
2008
Number*
Granted
Number
Exercised
Number
Lapsed
Number
At 2
January
2010
Number
Exercise
price
£
Market
price at
date of
exercise
£
Gain on
exercise
£
Date of
grant
Date from
which exer-
cisable Expiry date
Scheme
Ken McMeikan
–
–
80,000
276
Richard Hutton
40,000
–
–
80,000
Raymond
Reynolds
410
450
430
–
1,700
40,000
–
–
–
410
–
–
–
80,000
410
450
430
–
–
–
–
410
–
–
–
–
–
(450)
–
–
(1,700)
–
–
–
(450)
–
–
–
–
80,000
276
(13,250)
26,750
–
80,000
–
–
430
410
(410)
–
–
–
–
(13,250)
26,750
–
80,000
(410)
–
–
–
–
–
430
410
4.07
3.56
4.11
3.71
3.938
3.54
* All figures have been adjusted to reflect the 10 for 1 share split which took place during the year
3.56
3.54
4.07
3.56
4.11
3.71
3.938
3.54
–
–
–
–
–
–
–
–
–
–
Apr 09
Aug 12
Apr 19 Executive
Oct 09
Nov 12
Apr 13
SAYE
Aug 06
Aug 09
Aug 16 Executive
Apr 09
Aug 12
Apr 19 Executive
4.306
268.20
Sept 06
Nov 09
Sept 05
Nov 08
Apr 09
Apr 10
–
–
–
–
Apr 08
Jun 11
Dec 11
Oct 09
Nov 12
Apr 13
SAYE
SAYE
SAYE
SAYE
–
2.6875
3.588
153.09
Mar 99
Mar 02
Mar 09 Executive
–
–
–
–
–
–
Aug 06
Aug 09
Aug 16 Executive
Apr 09
Aug 12
Apr 19 Executive
4.345
285.75
Sept 06
Nov 09
Sept 05
Nov 08
Apr 09
Apr 10
–
–
–
–
Apr 08
Jun 11
Dec 11
Oct 09
Nov 12
Apr 13
SAYE
SAYE
SAYE
SAYE
85
Directors’ Remuneration Report
(continued)
The aggregate gains on exercise of share options were £707 (2008: £nil), including £nil (2008: £nil) 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 Schemes, 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, earnings per share growth must be greater than 2% per annum above
growth in the Retail Prices index.
• On the grant awarded in August 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.
• On the grant awarded in April 2009 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 7% then all of the options will be exercisable and
if earnings per share growth exceeds RPI growth by between 3% and 7% the number of options
exercisable is pro–rated on a straight line basis.
Options granted under the all employee SAYE scheme are not subject to performance conditions.
86
The following table sets out details of the Long–Term Incentive Plan share options (all of which were granted
at nil cost to the executive director concerned and subject to the performance conditions referred to on page
81) held by, or granted to, each director during the year:
Options
held under
the plan at
27 Decem-
ber 2008
8,120
28,460
6,100
25,100
Date of
grant
Mar 07
Mar 08
Mar 07
Mar 08
Richard Hutton
Raymond Reynolds
Kennedy McMeikan
Aug 08
180,210
Options
granted
during 2009
Options
exercised
during 2009
Options
lapsed
during 2009
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Options
held under
the plan at
2 January
2010
Market price
of each
share at
date of grant
£
Date from
which
exercisable Expiry date
8,120
28,460
6,100
25,100
4.746
4.475
4.746
4.475
Mar 10
Mar 11
Mar 10
Mar 11
Mar 17
Mar 18
Mar 17
Mar 18
180,210
3.762
Aug 11
Aug 18
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 2 January 2010 was £4.35. The highest and
lowest mid–market prices of ordinary shares during the financial year were £3.32 and £4.65 respectively.
Pensions
Until the scheme was closed to further accrual from 1 April 2008 Richard Hutton and Raymond Reynolds
earned pension benefits under the Greggs 1978 Retirement and Death Benefit Scheme, the Company’s
defined benefit scheme. This scheme, which required a contribution of 6.6% of pensionable salaries from
members, provided for up to two–thirds of final pensionable salary, dependent on length of pensionable
service. From 1st April 2008 all executive directors received contributions into the Company’s money
purchase defined contributions pension schemes. No pension benefits were earned or accrued in respect of
any non–executive director except Mike Darrington who accrued benefits up to 29 February 2008 whilst still
an executive director.
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:
Executive Director
Date of birth
Date service
commenced
Accrued
annual
pension
entitlement at
age 65 as at 2
January 2010
£
Accrued
annual pension
entitlement at
age 65 as at
27 December
2008
£
Increase
in accrued
pension
entitlement for
the year
£
Increase
in accrued
pension
entitlement for
the year net
of inflation of
0.0%
£
Transfer value
of increase
in accrued
pension
entitlement for
the year
£
Richard Hutton
Raymond Reynolds
3/6/68
4/11/59
1/1/98
1/12/86
18,522
69,535
18,522
69,535
–
–
–
–
–
–
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 0.0% 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.
87
Directors’ Remuneration Report
(continued)
Cash equivalent
transfer value as at
27 December 2008
Cash equivalent
transfer value as
at 2 January 2010
£
£
160,867
845,329
172,649
872,910
Increase in the cash
equivalent transfer
value since
27 December 2008
£
–
–
Executive Director
Richard Hutton
Raymond Reynolds
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 the Greggs Senior Executive Pension Scheme for
the benefit of executive directors during this financial year.
Executive Director
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Approval by Shareholders
Contribution in
respect of 2009
£
Contribution in
respect of 2008
£
65,700
31,460
29,699
37,188
27,309
24,199
At the Annual General Meeting of the Company to be held on 12 May 2010, a resolution approving this
report is to be proposed as an ordinary resolution.
This report was approved by the Board on 18 March 2010.
Signed on behalf of the Board
Julie Baddeley
Director
Chair of Remuneration Committee
18 March 2010
88
Financial Calendar
Announcement of results and dividends
Half year
Full year
Dividends
Interim
Final
Annual report posted to shareholders
Annual General Meeting
10 Year History
Early August
Early March
Mid October
Late May
Early April
12 May 2010
2000
2001
2002
2003
2004
2005
2006 †
2007 ~ 2008 §
2009
(as restated)*
Turnover (£'000)
339,008 377,556 422,600 456,978 504,186 533,435 550,849 586,303 628,198 658,186
Earnings before
interest and tax
(£'000)
Profit on ordinary
activities before
taxation (£'000)
Shareholders' funds
(£'000)
Earnings per share
(pence) ˆ
Dividend per share
(pence) ˆ
Capital expenditure
(£'000)
Net book value of
fixed assets (£'000)
Number of shops in
operation at
year end
26,044
31,597
35,334
39,167
45,763
47,143
38,747
49,909
48,613
48,433
26,356
32,742
36,666
40,472
47,751
50,159
40,239
51,143
49,470
48,779
88,169 103,554 119,965 134,150 157,156 181,475 144,891 145,594 147,947 164,237
16.2
19.0
20.9
23.1
27.1
28.2
24.1
34.3
33.6
34.1
5.5
6.5
7.3
8.0
9.6
10.6
11.6
14.0
14.9
16.6
21,397
27,385
42,143
32,361
25,090
41,687
30,023
42,343
40,758
30,296
113,285 124,123 148,184 160,704 163,110 180,826 184,325 196,783 210,455 211,155
1,105
1,144
1,202
1,231
1,263
1,319
1,336
1,368
1,409
1,419
* restated for the transition to IFRSs † includes £3.5m Bakers Oven Restructuring costs ~ includes one–off property gains
of £2.2m § includes £4.3m exceptional credit ˆ All years prior to 2009 adjusted to take account of the ten for one share split
which took place during 2009.
89
Secretary and Registered Office
Andrew John Davison LLB, Solicitor
Fernwood House
Clayton Road
Jesmond
Newcastle upon Tyne
NE2 1TL
Advisers
Bankers
National Westminster Bank Plc
149 High Street
Gosforth
Newcastle upon Tyne
NE3 1HA
Solicitors
Muckle LLP
Time Central
32 Gallowgate
Newcastle upon Tyne
NE1 4BF
Registrars
Capita Registrars
Bourne House
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Auditors
KPMG Audit Plc
Quayside House
110 Quayside
Newcastle upon Tyne
NE1 3DX
Stockbrokers
UBS
1 Finsbury Avenue
London
EC2M 2PA
Brewin Dolphin Securities Ltd
Time Central
32 Gallowgate
Newcastle upon Tyne
NE1 7SR
90
www.greggs.co.uk