ANNUAL
REPORT &
ACCOUNTS
2010
1487
shops nationwide
68 new shops opened
in the last year
Annual Report & Accounts 2010
Contents
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
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 cashfl ows
Notes to the consolidated accounts
Directors’ Remuneration Report
6
8
12
18
20
27
27
28
28
31
32
33
35
35
36
37
39
41
72
2
Baking since 1939
The Home of Fresh Baking
Greggs is the leading bakery
retailer in the UK. We have over
1,480 shops, supplied by ten
regional bakeries and 90 in-store
bakers.
We employ over 19,000 people and
serve six million customers each
week.
We are passionate about baking
and offer our customers quality,
fresh food at great value prices.
We are tremendously proud of
our food, hand making all of our
sandwiches and baking all our
savouries fresh each day in our
shops.
Financial highlights
Turnover
Like–for–like sales growth
Operating profit
Pre–tax profit
Diluted earnings per share
Dividend per ordinary share
* 2009 sales included a 53rd week.
Financial calendar
Announcement of results and dividends
Half year
Full year
Dividends
Interim
Final
Annual report posted to shareholders
Annual General Meeting
We are a growing business, with
plans to make Greggs even more
accessible to new customers by
opening over 600 shops in the
coming years, in locations where
people live, work, travel and spend
their leisure time.
Our new shops will create around
6,000 new retail jobs. Our
expansion plans also include
investment in our supply chain,
to allow our ten bakeries to
efficiently supply both new and
existing shops.
2010
£’m
662.3
0.2%
52.4
52.5
Pence
37.3
18.2
2009
£’m
658.2*
0.8%
48.4
48.8
Pence
34.0
16.6
Early August
March
Mid October
20 May 2011
Early April
11 May 2011
Annual Report & Accounts 2010
3
Our Vision
4
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
hand made in the shops each day
by our highly trained staff.
All our savouries are sold fresh
from the ovens in our shops
throughout the day.
Our bakeries 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.
For our people
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.
Our values
Greggs began as a family business
and we have retained those
good, honest family values as our
business has grown.
We will be enthusiastic and
supportive in all that we do,
open, honest and appreciative,
treating everyone with fairness,
consideration and respect.
For our communities
We promise to continue to help
make a difference to people’s
lives. Through our award winning
Greggs Breakfast Club scheme,
the Greggs Foundation, Children’s
Cancer Runs and other fundraising
activities, we strive to make a
positive impact on people’s lives,
building a strong community
reputation in the areas where we
operate.
best in
bakery
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.
Annual Report & Accounts 2010
5
Directors’ Report
pence), paid in October 2010,
this makes a total for the year of
18.2 pence (2009: 16.6 pence),
an increase of 9.6 per cent. This is
covered 2.0 times (2009: 2.0 times)
by diluted earnings per share.
Subject to the approval of the
Annual General Meeting, the fi nal
dividend will be paid on 20 May
2011 to shareholders on the
register on 26 April 2011.
We are proud to maintain our
exceptional record of dividend
growth for the 26th consecutive
year since Greggs fl oated on the
stock market in 1984. 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.
During the year we purchased for
cancellation 2,834,569 shares at
an average price of £4.51 and a
total cost of £12.9 million, in line
with the plans we announced in
March 2010. The business remains
strongly cash generative and we
ended the year with net cash and
short term investments of £23.8
million (2009: £34.6 million) on the
balance sheet.
Taken together, the cash return to
shareholders through buybacks
and dividends paid in 2010 was
£29.9 million.
Results
Total Group sales for the 52 weeks
ended 1 January 2011 were £662
million, an increase of 2.1 per cent
compared with the equivalent
52 week period in 2009. Like-for-
like sales grew by 0.2 per cent.
Compared with our turnover of £658
million in the 53 weeks ended 2
January 2010, the increase in total
sales was 0.6 per cent.
Operating profi t grew by 8.1 per
cent to £52.4 million (2009: £48.4
million) refl ecting an improvement
in operating margin to 7.9 per
cent (2009: 7.4 per cent). After
net fi nance income of £0.2 million
(2009: £0.3 million) pre-tax profi t
increased by 7.7 per cent to £52.5
million (2009: £48.8 million). There
were no exceptional items during
either year.
The Group’s effective tax rate for
the year was 27.8 per cent (2009:
29.5 per cent), refl ecting positive
settlement of outstanding capital
allowance claims and the impact
of the Government’s reduction in
the Corporation Tax rate to 27 per
cent on our deferred tax balances.
Diluted earnings per share were
37.3 pence (2009: 34.0 pence),
an increase of 9.7 per cent which
refl ected the benefi ts of the lower
tax charge and our share buyback
programme.
Dividend and share
buyback
The Board recommends an
increased fi nal dividend of 12.7
pence per share (2009: 11.4
pence). Together with the interim
dividend of 5.5 pence (2009: 5.2
Directors’ Report and
Business Review for the 52
weeks ended 1 January 2011
The directors have pleasure in
presenting their annual report and
the audited accounts for the 52
weeks ended 1 January 2011. The
comparative period is the 53 weeks
ended 2 January 2010.
The directors’ report and business
review is set out on pages 6 to 31.
Chairman’s Statement
“ I am pleased to report another
year of good progress. We have
delivered record profi ts and a
record number of new shop
openings. We are delighted to
be able to refl ect this success
by increasing our dividend
to shareholders for the 26th
consecutive year as well as
continuing to reward our people
through our long-established profi t
sharing scheme.”
6
Annual Report & Accounts 2010
Northumbria University is to honour
Sir Michael Darrington for his
outstanding contribution to the food
industry and business ethics. We
congratulate Ian and Michael on
these well-deserved honours.
Prospects
The growth opportunities for Greggs
across the UK remain significant
and our plans to open at least 600
new shops are well on track. Our
investment in an even more efficient
supply chain continues to make
good progress and will support our
accelerated growth.
2011 will present some significant
challenges to UK retailers given the
prevailing economic environment.
However, I believe that our
reputation for great value, the
growing benefits of our move to
a centrally run business and our
cash-generative model mean that
we are well placed to make
progress despite these challenges.
The strategy that we set out in 2009
has been the basis of our record
results in 2010. Our programme
of accelerated expansion has
progressed ahead of our original
plan, delivering a record 68 net
new shops and making Greggs
accessible to more customers
across the UK. All of this gives me
confidence in Greggs’ long term
prospects as we continue to pursue
our proven strategy for growth.
Derek Netherton
Chairman
16 March 2011
The Board
We welcome Jonathan Jowett, who
joined Greggs in April 2010 and
took over as Company Secretary at
our AGM in May. I would like to take
this opportunity to thank Andrew
Davison of Muckle LLP for his
service as Company Secretary
since 1995, and I am delighted that
he is continuing his long association
with Greggs as Chairman of the
trustees of the Greggs Foundation
and as a pension trustee.
People
I cannot thank our staff enough
for the enthusiasm and passion
that they display throughout the
business, with our customers and
in the support that they give to the
wider community.
I am delighted that 16,800 qualifying
employees are sharing in a record
£5.8 million through our long-
established profit sharing scheme in
recognition of the efforts they have
all made to deliver record results
under very challenging trading
conditions.
Ian Gregg OBE and
Sir Michael Darrington
We are delighted that our former
Chairman Ian Gregg OBE and
former Group Managing Director Sir
Michael Darrington are both to be
honoured with Doctorates of Civil
Law.
Newcastle University is to recognise
Ian for his outstanding contributions
in building this business and
establishing its strong commitment
to social responsibility, notably
through the introduction of our
profit sharing scheme in 1985 and
the establishment of the Greggs
Foundation in 1987.
Ian Gregg OBE
Sir Michael Darrington
7
Chief Executive’s Report
Trading performance
Despite the tough trading
conditions facing high streets
across the UK in 2010 we grew total
sales by 2.1 per cent compared
with the equivalent 52 week period
in 2009, including a 0.2 per cent
increase in like-for-like sales.
Trading grew more diffi cult in
the second half of the year, and
particularly in the fi nal quarter, not
helped by heavy snowfalls across
the country in November and
December.
Whilst UK consumers continue to
experience a very testing climate,
one certainty is that they will
increasingly seek out great value,
for which Greggs has a very strong
reputation. We have continued to
listen to our customers’ needs and
responded by providing them with
exceptional promotions, such as
our breakfast meal deal offering
coffee or tea combined with bacon
or sausage in a roll. At only £1.99
this represents outstanding value
compared with other food-on-the-
go retailers and we have now sold
more than 10 million breakfast rolls
since they were launched.
We also recognised that there
was an opportunity to strengthen
our offer in the growing breakfast
market and have now extended our
breakfast offer to include porridge,
croissants, pain au chocolat, fruit
smoothies, and cheese and bacon
wraps, and made this the focus of
our current marketing campaign
for Greggs as ‘The home of fresh
baking’.
Another feature of the year was the
strong growth of hot drinks as we
rolled out more coffee machines
serving freshly ground Fairtrade
coffee. Great quality coffee at a
price some 40 per cent below that
of branded coffee operators is
proving increasingly popular with
our customers. This is now available
in 1,100 of our shops and we will
complete the roll-out in 2011.
During the year we were delighted
to receive a number of awards,
including being voted Best Bakery
and Sandwich Chain in Best
Magazine’s British Food Awards,
while our mince pies were named
the UK’s best by Woman magazine.
Growing margins
Our operating margin increased by
0.5 per cent compared with that in
2009, which was affected by the
additional costs of a 53rd week.
Other key drivers of our improved
performance in 2010 included:
• supply chain savings from
implementation of our strategy
• improved scheduling of labour
• a reduction in shop waste
• better buying
• a full year’s benefi t from our
actions in 2009 to reorganise the
business, harmonise our product
range and create a single brand.
Our shops
During 2010 we broke our previous
records for the numbers of both net
shop openings and shop refi ts.
We opened a total of 93 new shops,
delivering a net increase of 68 after
25 closures, and giving us a total of
1,487 shops at 1 January 2011.
“ Record numbers of shop
openings and investment in
refurbishments, including
the roll-out of our new shop
design, is making the shopping
experience even more
accessible and enjoyable
for both new and existing
customers. Our focus on great
value ensures that we are well
positioned for the harsh times
prevailing in the wider economy,
while our drive to improve
effi ciency has continued
to deliver profi table growth for
the benefi t of all stakeholders
in the business.”
8
Annual Report & Accounts 2010
We have a healthy pipeline of new
shops coming through and expect
to add approximately 80 net new
shops in the course of 2011.
The current property market
conditions have increased the
availability of more attractive sites
and are encouraging landlords to
take a more realistic view on rents.
We completed 135 shop
refurbishments in 2010, including
28 using our new shop design.
In the current year we will extend
these new design refits outside the
London area with plans to refit a
total of 60 across the UK in 2011.
We have seen good returns on
capital for our refits in 2010 and we
plan to increase the total number of
shop refits to 160 during 2011.
Our supply chain
One of our unique points of
difference is that we make the
majority of the food we sell.
As bakers we are at the very
heart of producing our food and
therefore much closer than most
of our competitors to the source of
origin of our products. We use our
bakery skills and expertise to make
great tasting food that offers our
customers great value.
Supplying the majority of our own
food means we are closer to the
ingredients and recipes and are
passionate about the quality of the
products we make. This difference
means that we know what’s
happening with our food right
through from ‘wheat to eat’.
The flexibility and controls that result
from having our own supply chain
are significant strengths that we
are continuing to build on. Over the
course of 2010 we have continued
to improve our supply chain
efficiency and this has allowed us to
increase the number
of shops that can be supplied from
our existing bakeries. In 2009 we
outlined a five year plan to reduce
the cost of supply to our shops by
£10 million. Through consolidation
of manufacturing into centres of
excellence and investment in more
efficient processes we delivered
savings of £1.4 million in 2010,
ahead of our original plan.
Construction of our new bakery at
Balliol Park in Newcastle upon Tyne
is progressing well. The new facility
will be open and fully operational in
the second half of 2011, increasing
standards, efficiency and capacity
when compared with our old
Newcastle bakery. We currently
anticipate that this relocation may
result in a £1 million one-off charge
in 2011. Building has also started
at our new centre of excellence
for confectionery at Penrith, which
is due to become operational in
September 2011.
We have also secured land and
planning permission to construct a
new bakery in Wiltshire to support
our future growth plans in the South
West.
New operating structure
2010 was our first full year with our
new central structure in place.
This has enabled increased
capacity to open new shops,
greater speed in reacting to market
conditions, tighter cost controls,
efficiency savings and simplicity in
running our business.
We have benefited from economies
of scale in purchasing and have
reduced costs through harmonising
work practices in our supply chain.
Our marketing campaigns have
increased in impact and cost
effectiveness as the adoption of a
single national brand means that
they now benefit all our shops.
In the coming year there is more
scope to improve our business
even further and we have embarked
on three major change programmes
in order to drive sales and reduce
costs.
Capital expenditure
Our total capital expenditure in
2010 was £45.6 million (2009: £30.3
million) reflecting our accelerated
rate of new shop openings and
refits, and the commencement of
investment in our supply chain to
support future growth. In 2011 we
plan to increase capital expenditure
to around £60 million, as we further
accelerate the rate of new shop
openings, around half of which
are likely to be in the new shop
design, complete even more
refurbishments, and undertake
the major phase of investment in
our new Newcastle and Penrith
bakeries.
This investment programme reflects
our strong confidence in the future
prospects of the business, and will
be funded from our own cash flow.
Corporate Social
Responsibility
I am really proud that in 2010 our
people have been outstanding
once again at going that extra mile
to do more for those who are less
fortunate. We are also blessed
with fantastic customers whose
generosity during very difficult times
is remarkable. For this I would
like to thank our people and our
customers so much for everything
that they do to make such a
difference to other people’s lives.
As an example of this we raised
an amazing £904,850 for the BBC
Children in Need appeal during
2010, and also made significant
donations to the Haiti and Pakistan
disaster appeals.
9
Chief Executive’s report continued
The community
The Greggs Breakfast Clubs
are now in their eleventh year of
operation, providing primary school
children in disadvantaged areas
with free, nutritious breakfasts
each day. We supply fresh bread
from our local shops for toast,
along with funding for cereals, fruit
and equipment. By developing
partnerships with other companies
we were able to exceed our target
of reaching 150 Breakfast Clubs in
2010, and by the end of the year
we had a total of 161, feeding more
than 7,000 children each day. The
success of the Clubs now being
supported by other organisations,
using the Greggs model, has
encouraged us to set a new goal of
expanding to 300 Breakfast Clubs
as quickly as suitable partnerships
can be developed.
The Greggs Operating Board
also made a fantastic effort to
raise money for charity, with all its
members taking part in The Great
Bakery Bike Ride, which attracted
nearly 100 participants and raised
£90,000 in aid of Children in Need
and Greggs Breakfast Clubs. Our
Finance Director Richard Hutton,
along with Robin Leaver and Paul
Ryan, covered a remarkable 900
miles in ten days.
During the year we were honoured
to receive a Gold award in the
Health & Wellbeing category of
The Food and Drink Federation
Community Partnership Awards.
The Greggs Foundation has
continued its outstanding work,
giving a record £1.4 million in
grants to charitable and community
organisations in the areas where we
operate. In 2010 we launched the
first Foundation Week in our shops,
which raised £66,000 in support of
these initiatives. I continue to be
hugely impressed with the Greggs
Foundation and the great work it
does across the UK.
Our food
We removed all artificial colours,
HVOs (hydrogenated vegetable
oils) and added trans fats from our
own products by the end of 2009.
Last year we removed artificial
flavours from the majority of our
products and work is continuing
to remove them completely. We
have worked relentlessly to try
and ensure that in making these
changes our customers do not
experience any change in the great
taste of the products they love.
The environment
We have made significant progress
in reducing the amount of food
waste sent to landfill and achieved
a 36 per cent reduction in the year.
Following the installation of smart
meters designed to facilitate better
monitoring and control of our
energy usage we have achieved
a reduction in overall energy
consumption as measured on a per
shop basis.
The Greggs Foundation has
continued to provide support
of £50,000 per annum to the
Community Foundation’s innovative
LEAF project, which makes grants
to charitable organisations to
encourage people to take action on
global environmental issues and to
promote sustainable living.
BBC Children in Need
Greggs Breakfast Clubs
10
Annual Report & Accounts 2010
The Great Bakery Bike Ride
Corporate Social Responsibility has
always been important to Greggs
and is deeply rooted in our culture.
I am grateful to all our people
for their continued determination
to put something back into the
communities where we operate,
and congratulate them on their
achievements during the year.
These and other issues are covered
in greater depth in our Corporate
Social Responsibility Report on
pages 12 – 17.
Our people
I am profoundly grateful to our
people for everything they do to
serve our customers each day.
There could be no better illustration
of the extraordinary spirit and
commitment of our people than the
example of the shop manager in
Scotland who was so determined
to open her shop during the severe
snow in December that she walked
14 miles to get there and ended
the working day by walking another
14 miles home. At the same time
workers who were unable to get
home slept in our bakeries in
order to keep our supply chain
functioning for our customers.
I am particularly pleased that this
year our staff are sharing a record
£5.8 million through our profit
sharing scheme, which has been
distributing 10 per cent of our
profits each year since its inception
in 1985.
Outlook for 2011
The year ahead will continue to
be challenging with rising global
commodity prices being reflected
in significant upward pressure on
many of the key ingredient costs
of all food producers. However, we
expect to continue making Greggs
even more efficient and as part of
this we are dedicating resources
to indentify and unlock further cost
savings throughout the business.
Total sales in the year ahead will
benefit from a growing contribution
from new selling space as our
expansion programme accelerates,
with the opening of around 80
net new shops during the year,
financed from our own strong
cash flow. In addition to the total
sales growth I believe marginally
positive like-for-like growth during
the year is achievable. Performance
in the year to date is in line with
our expectations, with total sales
for the ten weeks ended 12 March
2011 increasing by 3.8 per cent,
including like-for-like sales of 0.4
per cent. Whilst profits in the first
half will have to bear the impact
of additional bank holidays when
compared to 2010 we expect the
year as a whole to be one of further
progress for Greggs.
Greggs has a clear vision: “To be
the number one for sandwiches
and savouries from a united team
who are passionate about being
the best in bakery”. By virtue
of its strong value positioning,
excellent products, outstanding
staff and clear strategy for growth,
with increasing investment in our
shops and supply chain funded
from our own cash flow I believe
that Greggs is well placed for the
challenges ahead. I look forward to
giving consumers greater choice by
opening more shops across the UK,
and to Greggs continuing to make
a strong contribution to society as
a whole through adherence to our
long-established family values.
Kennedy McMeikan
Chief Executive
16 March 2011
11
Corporate Social Responsibility
Greggs cares
Greggs is a company that cares
deeply about making a difference
to the lives of people in our local
communities. We made terrific
progress in this area in 2010 with a
record-breaking year in terms of the
amount of money our customers
and staff raised in support of local
communities, through company-
led activities and the Greggs
Foundation.
We care that our people are well
looked after and rewarded for their
hard work and we have made really
good progress against our ‘great
place to work’ targets.
We want our customers to
experience quality bakery food
they can trust at affordable prices.
We made good progress over the
year in reducing salt and fat in our
products but still have more to do
on making nutritional information
more easily available for bread,
rolls and confectionery lines.
In 2010, we diverted more waste
from landfill, but there remain
plenty of opportunities to do more
for the environment, particularly
in reducing carbon, which we will
continue to focus on in the year
ahead.
A record year of
fundraising!
We helped raise
and donate over
£2.7 million
12
Annual Report & Accounts 2010
Our Achievements in 2010
• We shared 10 per cent of our
profi ts, a record £5.8 million, with
our people through our national
profi t share scheme, enabling
them to share in the success of
the company they work so
hard for.
• We now have 161 Breakfast
Clubs, giving over 7,000 children
a nutritious breakfast, free,
every day.
• We grew the number of Greggs
Breakfast Clubs* from 125 to 151.
In addition, by partnering with
other organisations (Beachcroft
LLP, the CBI, Middlesbrough
Council and RBS) we have
been able to open another ten
Breakfast Clubs. We would like
to thank our co-sponsors for their
fantastic support of the Breakfast
Club initiative.
• In 2010 we partnered with
Expochef to deliver healthier
eating awareness sessions in
primary schools. We sponsored
56 such events in our Breakfast
Club schools.
• A record year of fundraising!
We helped raise and donate
over £2.7 million:
- for the fi fth year running, Greggs
supported the BBC Children
in Need campaign. Thanks to
the hard work and generosity
of our people and customers,
we substantially increased our
total raised to £904,850 in 2010,
making Greggs the second
largest corporate contributor to
BBC Children in Need;
- our Great Bakery Bike Ride
raised £90,000. A team from
Greggs, led by Finance Director
Richard Hutton, cycled over
900 miles in ten days on a route
covering all ten Greggs regional
bakeries and distribution sites;
- we held our fi rst ever Foundation
Week, raising over £66,000 for
the Greggs Foundation and
resulting in donations to 50
charities chosen by our staff and
customers. Foundation Week
will now become an annual
event in the Greggs calendar;
and
- following the earthquake
disaster in Haiti our staff and
customers raised £186,000 for
the offi cial campaign, followed
by a further £92,000 for the
Pakistan fl oods appeal.
• We launched two major
initiatives in conjunction with
other businesess, to help break
the cycle of unemployment for
marginalised groups - a work
placement programme for
homeless people and a training
course for women offenders
in prison, aiming to give them
skills to help them fi nd future
employment.
• We removed artifi cial fl avours from
the majority of products we make
ourselves without impacting taste,
which is a key concern for our
customers.
• We diverted an additional 36 per
cent of our waste from landfi ll,
signifi cantly exceeding our target
of 10 per cent, meaning that in
2010, 49 per cent of our total
waste was diverted from landfi ll.
• We reduced our Carbon Footprint
(tonnes of CO2e) by 5 per cent on
a per shop basis.
* Greggs Breakfast Clubs give primary school children in deprived areas
a nutritious free breakfast every day. Greggs provide the equipment,
bread and money to purchase cereal, milk, etc, and the clubs are
operated by the school and parent volunteers.
• Our people continued to organise
and take part in Big Tidy Up
Events across England, Scotland
and Wales, in conjunction with
Keep Britain Tidy, clearing litter
from local areas.
Thank you to our
Breakfast Club partners
Recognition:
The Greggs Breakfast Club
scheme was awarded Gold status
by the Food and Drink Federation
Community Awards, in the Health
& Wellbeing category.
Greggs Breakfast Clubs
featured as one of fi ve exemplar
companies at the Business in the
Community Annual Leadership
Summit in 2010. The event was
hosted by HRH The Prince of
Wales and was attended by
Prime Minister David Cameron
and over 200 business leaders
from around the UK.
Greggs CEO Kennedy McMeikan
was appointed as HRH The
Prince of Wales Ambassador for
the North East, in recognition of
his leadership and commitment
to local communities.
13
Progress against our 2010 targets
Making a difference
to our communities.
We will run our fi rst ever
national fundraising initiative for
the Greggs Foundation.
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.
In 2010 we ran our fi rst
Foundation Week, with our
people and customers raising
£66,000!
For the fi fth year we will engage
our staff and customers in
a major national fundraising
campaign to support the BBC
Children in Need appeal.
2010 was a record year of
fund-raising by Greggs,
smashing our 2009 total by
raising an incredible £904,850
for BBC Children in Need.
This takes our fi ve year total
for BBC Children in Need to an
amazing £2.5 million.
We will pilot initiatives to use
our skills as a major employer
to help break the cycle of
unemployment for marginalised
groups in communities.
In 2010 we piloted two initiatives.
Firstly, we developed a training
skills course for women
offenders in Low Newton Prison,
in partnership with fi ve other
businesses in the North East;
secondly Greggs were one of
the founding companies working
with the Cyreniens and other
businesses on a work placement
programme for homeless
people. Both initiatives are being
repeated in 2011.
In 2010 we achieved a total of
151 (Greggs) Breakfast Clubs.
Our new partnership model
brings other businesses on
board and has already secured
an additional ten Breakfast
Clubs, enabling us to set a
target of 180 Breakfast Clubs by
the end of 2011.
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.
56 Expochef events took place
in 2010, with the remaining four
completed in January 2011.
Over 3,500 primary school
children benefi ted from the
Expochef programme.
We will donate at least 1 per
cent of profi ts to the grant-
making and Breakfast Club
programmes of the Greggs
Foundation.
The Greggs Foundation is
integral to the Company and
we are very pleased to report
continued commitment to our
Foundation with 1.2 per cent of
pre-tax profi ts donated to it in
2010.
14
Our targets for 2011:
• We will extend the Greggs
Breakfast Club scheme
to 180 supported clubs
• We will donate at least 1 per cent
of profi ts to the grant-making
and Breakfast Club programmes
of the Greggs Foundation
• We will hold our second national
fund-raising week for the Greggs
Foundation, aiming to raise over
£70,000
• For the sixth year running we will
engage our staff and customers
in a major national fund-raising
campaign to support the BBC
Children in Need appeal
• We will support Greggs-
sponsored fun runs and a second
Great Bakery Bike Ride
to help more of our people to
fund-raise through exercise-
related activities
• We will divert an increased
proportion of our unsold food
to local charities
• We will continue to roll out
initiatives to help break the
cycle of unemployment for
marginalised groups in our
communities, utilising our skills as
a major employer
Over 3,500 primary school children
benefi tted from the Expochef
programme
Annual Report & Accounts 2010
A great place to work.
In the 2010 Employee Opinion
Survey (EOS) our target is that
75 per cent of our employees
participate in the survey
and we improve on our 2008
engagement score of 72
per cent.
From 2010 we committed to
conducting an annual survey,
seeking employees’ feedback
on key areas of communication,
teamwork and training &
development. In 2010, 72
per cent of our employees
completed the survey, a little
short of the 75 per cent target.
We maintained our engagement
score of 72 per cent with overall
satisfaction amongst our people
remaining high, evidenced by
our low labour turnover rates and
long service of employees.
Through opening 50-60 new
shops in 2010 we will create
circa 500-600 new jobs.
In opening a net additional 68
shops around the UK, we have
created more than 650 new retail
jobs for local people.
We will move from a regional to
a national profi t share scheme to
ensure every person working at
Greggs shares in the Company’s
success.
In 2010, a record £5.8 million
was shared amongst eligible
employees, with 16,800 people
benefi ting.
We will enhance our
management skills and
development by delivering a
‘coaching skills’ programme
and a ‘high performing teams’
programme in 2010.
In the fi rst quarter of 2010 we ran
a Coaching Skills programme
for senior managers, which
will continue to run in 2011.
We also ran a series of High
Performing Team training
sessions across the Company,
providing our people with skills
and techniques for effective
teamworking.
We will review and improve our
apprentice scheme and aim to
have 30 bakery apprenticeships
in place by the end of 2010.
We are delighted to report that
in 2010, seven apprentices
graduated from the current
training programme. During
2010 we completed the review
of our apprentice scheme.
The review highlighted that the
requirement for apprenticeships
would be 10-15 and therefore
we have revised our target and
are now ready to launch the
new apprentice scheme in 2011.
Our targets for 2011:
• We will continue to share 10 per
cent of our profi ts with our people
• In our 2011 EOS survey we aim to
achieve an engagement score of
73 per cent or more
• We will improve communication
for our people, to achieve
the following targets:
- More than two thirds of
our people feel they have
the opportunity to contribute
their views on issues that
affect them
- More than two thirds of our
supply teams feel that
their line manager/supervisor
shares important
knowledge and information
with them
• We will create over 700 new retail
jobs through our new shop
opening programme
• We will reduce our accidents
by 5 per cent from our Accident
Incident Rate of 2010
• We will recruit and develop 10 -
15 new Bakery Apprentices
• We will encourage our 650
graded managers to commit
one working day to volunteer their
skills and expertise to support
a local community or
environmental project
15
Progress against our
2010 targets continued
Quality, fresh bakery
food our customers
can trust.
We will remove ALL artifi cial
fl avours from the products we
make by the middle of 2010.
We have made signifi cant
progress against this target and
the majority of Greggs food
does not now contain artifi cial
fl avours. Work will continue in
2011 to remove artifi cial fl avours
from the last remaining products
without changing the taste of our
much loved products, which is a
key consideration for customers.
Nutritional information will be
available to all our customers
in all our shops for our national
bread & rolls and confectionery
ranges, so that our entire
national product range is
completed by the end of 2010.
In each Greggs shop,
customers have access to
leafl ets detailing the nutritional
values for our national ranges
of sandwiches, savouries and
drinks, which represent over
75 per cent of purchases.
However, in 2010 we were not
able to complete the work to
make the same information
available in our shops for bread
and confectionery products.
Customers can telephone
our customer contact team to
request nutritional information
on any of our products, but
we want to make this available
to them in our shops and will
continue to work on this in 2011.
We will reduce the salt, fat and
saturated fat content for each of
our products, working towards
the Food Standards Agency’s
2012 targets.
We have met the FSA’s salt
reduction targets for 2012
ahead of target for our national
bread lines. Work has been
ongoing throughout the year to
progressively reduce the salt, fat
and saturated fat content of our
other products. This continues
to be done without adversely
affecting the taste or quality
of our products, a signifi cant
consideration for our customers.
Our targets for 2011:
• We will provide nutritional
information in our shops for our
full national product range
• We will continue to reduce salt
content, working towards the
FSA/DoH 2012 targets, without
compromising the great taste
and quality of our food
• We will continue to reduce fat
content without compromising
the great taste and quality of
our food
• We will continue to remove the
last artifi cial fl avours from the
products we make ourselves
• We will agree and issue an
ethical sourcing policy
• We will promote a better
understanding of balanced diets
16
Annual Report & Accounts 2010
We will aim to divert an
additional 10 per cent of waste
from landfi ll, building on the
18 per cent diversion achieved
in 2009 and the 20 per cent
diversion achieved in 2008.
We are pleased to report that we
exceeded this target, diverting
an additional 36 per cent of
waste from landfi ll in 2010.
We will aim to reduce our bakery
waste by 10 per cent (on a per
shop basis).
We weren’t able to meet this
target in 2010, however for 2011
we have plans to implement
bakery and shop waste
monitoring processes into all our
bakeries, and this target will be
carried forward.
Our targets for 2011:
• We will achieve a 5 per cent
reduction in our 2010 carbon
footprint (measured in tonnes of
CO2e per shop), as part of our
target of 25 per cent reduction
per shop by the end of 2015
• We will divert a further 10 per
cent of waste from landfi ll
• We will achieve a 3 per cent
reduction in total energy usage
in our shops and bakeries
(measured in tonnes of CO2e
per shop)
• We will achieve a 2.5 per cent
reduction over the next three
years in carbon generated by our
distribution activity (measured in
tonnes of CO2e per km per shop)
We will continue to work with
Keep Britain Tidy to encourage
responsible disposal of litter.
• We will reduce our bakery waste
by 5 per cent (on a per shop
basis)
• We will trial an electric car
for six months to get a better
understanding of how this could
help reduce our future carbon
footprint
• We will explore involvement with
the Rivers Trust to investigate
ways in which we can support
improvements to the environment
Our strong relationship with
Keep Britain Tidy continues and
during the year we organised a
number of ‘Big Tidy Up’ events
throughout the country; we
became founding participants in
the ‘Love Where You Live’ litter
awareness programme; and our
Chief Executive was a keynote
speaker at the Keep Britain Tidy
Annual Conference 2010. We
will continue to work closely with
Keep Britain Tidy in the year
ahead.
Reducing our
impact on the world
around us.
We will aim to achieve a 25 per
cent reduction of our carbon
footprint by 2015 (measured in
tonnes of CO2e per shop).
We made some progress in
2010 towards the 2015 target,
reducing our overall carbon
footprint by 5 per cent as per the
above measure. We recognise
there is still much more to do.
We will aim to achieve a 2.5
per cent reduction in carbon
generated by our distribution
activity.
We weren’t able to make as
much progress as we would
have liked, achieving a 1 per
cent reduction. We remain
committed to reducing carbon
emissions from our distribution
activities and have carried this
commitment forward.
We will aim to achieve a 5 per
cent reduction in energy usage
per shop against our 2009
consumption.
We achieved a small reduction
in energy usage per shop of 1
per cent. Our challenge was to
make sure we could accurately
monitor shop energy usage
across all of our 1,487 shops, so
in 2010 we focused on installing
smart meters, which are now
in virtually all of our shops. In
2011, we will focus our attention
on further reducing the amount
of energy used across the
business, measured on a per
shop basis.
17
Key Performance Indicators
KPI
Definition
2006
2007
2008
2009
2010
(a)
(b)
(c)
(d)
(e)*
(f)*
(g)*
3.3%
0.5%
1.3%
£30.0m
£42.2m
7.7%
26.2p
6.4%
5.3%
2.4%
£42.3m
£47.7m
8.1%
32.0p
7.1%
4.4%
3.0%
£40.8m
£44.3m
7.1%
30.6p
4.8%^
0.8%
0.7%
£30.3m
£48.4m
7.4%
34.0p
0.6%^
0.2%
4.8%
£45.6m
£52.4m
7.9%
37.3p
Total sales growth
Like–for–like sales growth
Growth in net shop numbers
Capital expenditure
Operating profit
Operating margin
Diluted earnings per share
(adjusted for ten for one share
split which took place in 2009)
Definitions:
(a) Total sales growth is the percentage year on year change in total sales for the Group.
(b) 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.
(c) Growth in net shop numbers represents the percentage increase in number of shops in operation at the end
of the year.
(d) Capital expenditure is the total amount incurred in the year on investment in tangible fixed assets.
(e) Operating profit reflects the performance of the Group before financing and taxation impacts.
(f) Operating margin shows the operating profitability of the Group as a percentage of its sales.
(g) Diluted 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 and all dilutive potential ordinary shares (which comprise share options granted to
employees).
^ 2009 was a 53 week year, impacting on total sales growth for that year and the year immediately following.
Total sales growth for 2010 compared with the equivalent 52 week period in 2009 was 2.1 per cent. Total
sales growth for 2009, excluding the 53rd week was 3.2%. Like-for-like sales growth is unaffected by a 53
week year.
* Operating profit, operating margin and diluted earnings per share – in order to show each of these KPI
trends on a comparable basis the figures shown are the underlying figures excluding the impact of any one-
off items. One-off items have occurred as follows:
2006 - Bakers Oven restructuring costs of £3.5m;
2007 - one-off property gains of £2.2m;
2008 - exceptional credit of £4.3m, comprising £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.
18
Annual Report & Accounts 2010
19
Corporate Governance
Roger Whiteside
Raymond Reynolds
Iain Ferguson
Julie Baddeley
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 following statements, together
with the Directors’ Remuneration
Report on pages 72 to 83 describe
how the relevant principles and
provisions of the Combined Code
were applied to the Company in
2010 and will be relevant to the
Company for the 2011 financial year.
20
The Board
There were no changes to the Board
during the period.
The Board currently comprises the
Chairman, three executive and four
non-executive directors as follows:
Derek Netherton (Chairman),
66, 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. Derek was appointed as Chair
of Opera North on 17 June 2010.
The Board does not consider that
this new commitment will have any
adverse impact on his ability to
perform his duties as Chairman of
the Company. He is Chairman of the
Nominations Committee.
Kennedy McMeikan (Chief
Executive), 45, 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. In 2010 Kennedy was
appointed as HRH The Prince of
Wales ambassador for the North East.
Richard Hutton FCA (Finance
Director), 42, 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.
Raymond Reynolds (Retail
Director), 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.
Annual Report & Accounts 2010
Bob Bennett
Derek Netherton
Kennedy McMeikan
Richard Hutton
Bob Bennett (Senior Independent
Director), 63, 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, 59, was appointed
to the Board in March 2005.
She has held senior executive
roles in Woolwich plc (where she
was responsible for Information
Technology and Human
Resources), Accenture and Sema
Consulting. Julie is a non-executive
director of Chrysalis VCT plc,
and is an Associate Fellow of the
Said Business School, Oxford.
Julie has recently been invited
to join the Board of Sustain, an
organisation providing consultancy
services on carbon reduction. This
appointment will be effective from
1 April 2011. Julie is a member
of the Nominations and Audit
Committees and has been Chair of
the Remuneration Committee since
2005.
Roger Whiteside, 52, 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, 55, 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
executive positions. He is 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. He is currently a non-
executive director of Balfour Beatty
plc and Berendson plc, a member
of the PricewaterhouseCoopers
(UK) Advisory Board, Honorary Vice
President of the British Nutrition
Foundation and lead Non-Executive
Director of the DEFRA Management
Committee. Iain is a member of the
Nominations, Remuneration and
Audit Committees of the Board.
21
Corporate Governance continued
On 12 May 2010 Andrew Davison stepped down as Company Secretary. He was replaced by Jonathan Jowett,
LL.M., who was appointed as Company Secretary and General Counsel. Jonathan qualified as a solicitor
in 1989, and prior to joining the Company, held similar positions in international branded and own-brand
manufacturing companies listed in London and on overseas stock exchanges. He sits on the Editorial Board of
the International In-House Counsel Journal.
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 2010, the scheduled Board and
Committee meetings, and the number of meetings attended by each current director were as follows:
Main Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
Number of meetings held
Derek Netherton
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Julie Baddeley
Bob Bennett
Roger Whiteside
Iain Ferguson
6
6
6
6
6
6
6
6
6
4
–
–
–
–
4
4
4
4
5
–
–
–
–
5
5
5
5
2
2
2
–
–
2
2
2
2
In addition, the non-executive directors meet formally twice each year and from time to time, as required.
22
Annual Report & Accounts 2010
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
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
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 annually without the
Chairman present 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. For the review
relating to 2010, each director
completed a written questionnaire
and participated in a ‘one to
one’ 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
23
Corporate Governance continued
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 shortlist
and conducts interviews. The final
candidate is then subject to formal
recommendation by the Committee
and approval by the Board.
Each of the Committees is provided
with sufficient resources to
undertake its duties.
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 Chief Executive, Finance
Director, the external auditors, and
more recently the Internal Audit
Manager in attendance, although
time is set aside annually for
discussion between the Committee
and the external auditors and
with the Internal Audit Manager,
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 internal audit activity
and the 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 72 to 83 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
24
Annual Report & Accounts 2010
Relations with shareholders
Risk Management
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 Chairman
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 they have not been
able to resolve through the normal
channels of the Chairman, Chief
Executive or Finance Director, or for
circumstances where such contact
would not be 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.
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
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:
Board of Directors
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 was chaired by
the Chief Executive until June 2010
after which the Company Secretary
and General Counsel took the Chair.
The Risk Committee consists of all
members of the Operating Board,
and heads of certain management
functions within the business. It
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
25
Corporate Governance continued
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 of food
safety, health and safety, competitive
environment, information flow,
asset protection and regulatory
requirements.
Key Risks and
Mitigating Actions
The Board considers the key risks to
the Company 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
Financial Reporting
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.
The Company has in place a strong
financial control environment.
The Company’s financial control
procedures are set out in its
Accounting Manual and are
designed to ensure that assets
are well-protected, authority
levels for expenditure are clear,
and performance is regularly
monitored. Processes are in place
to ensure that key controls are
being operated and compliance
with these processes is the subject
of independent inspection by the
Company’s internal audit team. A
comprehensive budgeting process
ensures that there are clear and
stretching plans for all areas of the
business and performance against
these plans is reported weekly and
monthly to the Company’s Operating
Board. Members of the finance team
work alongside Operating Board
directors and their functional teams
to highlight performance issues and
support achievement of financial
objectives.
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,
and the Chairman of the Audit
Committee is the first line recipient of
any matters that are raised through
this policy.
26
Internal Audit
During the year the Board provided
additional resource to improve
the effectiveness of the Internal
Audit team. The function continues
to review the performance of the
Supply Chain and regional Retail
functions across a range of financial
and non-financial requirements,
reporting findings to senior
management and direct to the
Audit Committee. The Internal Audit
Manager reports to the Company
Secretary & General Counsel, to
improve functional independence,
and has a standing invitation
to attend all Audit Committee
meetings, not only that part relating
to the presentation of relevant audit
reports.
Annual Report & Accounts 2010
The Internal Audit team has authority
to access all areas of the business,
senior management, and the
Chairman of the Audit Committee as
is seen fit.
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 32. A statement of auditor’s
responsibilities is given in the report
of the auditor on page 33.
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 41).
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 2 January 2010
and 1 January 2011 (or at date of
appointment if later) are set out in
note 24 to the accounts. Details of
directors’ share options are set out
in the Directors’ Remuneration report
on pages 72 to 83.
In accordance with the Company’s
Articles of Association, Derek
Netherton, Kennedy McMeikan,
Raymond Reynolds, and Iain
Ferguson will retire from the Board
at the AGM. Julie Baddeley, who
is Chair of the Remuneration
Committee, was appointed as a
director in March 2005, and as at
the date of the AGM will have been
a director for in excess of six years.
In accordance with the requirements
of clause B.2.3 of the UK Corporate
Governance Code, the Nominations
Committee duly and rigorously
considered the independence of
Julie Baddeley and resolved that
Julie was independent and should
be invited to stand for re-election
as a director. Accordingly, with all
directors standing down, being
eligible, they each offer themselves
for re-election.
27
Corporate Governance continued
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.
Substantial shareholdings
At 16 March 2011 the only notified holdings of substantial voting rights in respect of the issued share capital of the
Company (which may have altered since the date 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 Limited
F&C Asset Management
Troy Asset Management
Legal and General Investment Management
A.J. Davison (as trustee of various settlements)
Norges Bank
5,002,497
5,001,366
4,338,847
4,104,434
3,806,030
3,133,000
4.95
4.94
4.29
4.06
3.76
3.10
Authority to purchase shares
At the AGM on 13 May 2010, 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 been used as to 2,834,569 shares as at 1 January 2011.
The balance remains in force until the conclusion of the AGM in 2011 or 11 August 2011, whichever is the
earlier. It is the Board’s intention to seek approval at the 2011 AGM for the renewal of this authority.
28
Annual Report & Accounts 2010
Additional information
Following the implementation of
the European Directive on Takeover
Bids by certain provisions of the
Companies Act 2006 (CA 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
15 March 2011, there were
101,155,901 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) 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.
• 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 28.
• 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. 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
29
Corporate Governance continued
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 72 to 83. However,
provisions in the employee share
plans operated by the Company
may allow options to be exercised
early on a takeover.
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,
attempts are made 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 1 January 2011 was 41
days (2009: 41 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.
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 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
buyback 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
30
Auditors
Auditor independence and
policy on the use of the
auditors for non-audit work
There are strict policies and
procedures in place to control
the use of external auditors in the
provision of non-audit services.
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 per cent
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 2010, non audit
fees paid to KPMG Audit Plc and
related KPMG operations amounted
to £151,000 and related principally
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.
Annual Report & Accounts 2010
By order of the Board
Jonathan D Jowett
Company Secretary
Greggs plc (CRN 502851)
Fernwood House
Clayton Road
Jesmond
Newcastle upon Tyne
NE2 1TL
16 March 2011
31
• 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.
K. McMeikan
R.J. Hutton
16 March 2011
Statement of Directors’
responsibilities
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 judgements and estimates
that are reasonable and prudent;
• state whether they have been
prepared in accordance with
IFRSs as adopted by the EU;
• 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 complies 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.
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
32
Independent auditor’s report to the
members of Greggs plc
Annual Report & Accounts 2010
We have audited the accounts of
Greggs plc for the 52 weeks ended
1 January 2011 set out on pages
35 to 71. 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 auditor’s report and for no
other purpose. To the fullest extent
permitted by law, we do not accept
or assume responsibility to anyone
other than the Company and the
Company’s members, as a body,
for our audit work, for this report, or
for the opinions we have formed.
Respective responsibilities
of directors and auditor
As explained more fully in the
Directors’ Responsibilities Statement
set out on page 32, 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, and express
an opinion on, 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 web-site at www.frc.org.uk/
apb/scope/private.cfm.
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 1 January 2011 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 32, in relation to going
concern; and
- the part of the Corporate
Governance Statement on page
20 relating to the Company’s
compliance with the nine
provisions of the June 2008
Combined Code specified for our
review; and
- certain elements of the report to
shareholders by the Board on
directors’ remuneration.
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
16 March 2011
33
34
Consolidated income statement
for the 52 weeks ended 1 January 2011 (2009: 53 weeks ended 2 January 2010)
Revenue
Cost of sales
Gross profit
Distribution and selling costs
Administrative expenses
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
Note
2010
£’000
2009
£’000
1
662,326
658,186
(252,651)
(252,284)
409,675
405,902
(321,261)
(321,686)
(36,049)
52,365
158
52,523
(14,589)
(35,783)
48,433
346
48,779
(14,405)
37,934
34,374
37.8p
37.3p
34.1p
34.0p
5
3–5
7
8
8
Consolidated statement of comprehensive income
for the 52 weeks ended 1 January 2011 (2009: 53 weeks ended 2 January 2010)
Profit for the financial year
Other comprehensive income
Actuarial gains/(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
19
7
Group
2010
£’000
2009
£’000
37,934
34,374
2,881
(778)
2,103
(6,920)
1,938
(4,982)
40,037
29,392
35
Balance sheets
at 1 January 2011 (2009: 2 January 2010)
ASSETS
Non–current assets
Intangible assets
Property, plant and equipment
Investments
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Other investments
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current tax liabilities
Provisions
Non–current liabilities
Other payables
Defined benefit pension liability
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
2010
£’000
Parent Company
2009
£’000
2010
£’000
2009
£’000
9
10
11
12
13
14
11
15
16
20
17
19
18
20
21
21
433
226,150
–
226,583
11,883
22,309
20,790
3,000
57,982
284,565
(70,246)
(6,282)
(1,018)
(77,546)
(8,439)
(8,764)
(10,924)
(2,665)
(30,792)
(108,338)
176,227
579
211,155
–
211,734
11,886
21,206
34,619
–
67,711
279,445
(71,738)
(8,857)
(857)
(81,452)
(8,830)
(12,332)
(9,298)
(3,296)
(33,756)
(115,208)
164,237
433
226,743
4,987
232,163
11,883
22,309
20,790
3,000
57,982
290,145
(78,053)
(6,282)
(1,018)
(85,353)
(8,439)
(8,764)
(10,212)
(2,665)
(30,080)
(115,433)
174,712
579
211,748
4,987
217,314
11,886
21,206
34,619
–
67,711
285,025
(79,545)
(8,857)
(857)
(89,259)
(8,830)
(12,332)
(8,559)
(3,296)
(33,017)
(122,276)
162,749
2,023
13,533
416
160,255
2,080
13,533
359
148,265
2,023
13,533
416
158,740
2,080
13,533
359
146,777
176,227
164,237
174,712
162,749
The accounts on pages 35 to 71 were approved by the Board of directors on 16 March 2011 and were
signed on its behalf by:
K. McMeikan
R.J. Hutton
Company Registered Number 502851
36
Statements of changes in equity
for the 52 weeks ended 1 January 2011 (2009: 53 weeks ended 2 January 2010)
Group
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
52 weeks ended 1 January 2011
Balance at 3 January 2010
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 1 January 2011
Attributable to equity holders of the Company
Note
Issued
capital
Share
premium
Capital
redemption
reserve
Retained
earnings
Total
£’000
£’000
£’000
£’000
£’000
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
2,080
13,533
359 148,265 164,237
–
–
–
(57)
–
–
–
–
(57)
–
–
–
–
–
–
–
–
–
–
–
–
37,934
37,934
2,103
2,103
40,037
40,037
57
(12,864)
(12,864)
–
–
–
–
734
642
734
642
(17,061)
(17,061)
502
502
57
(28,047)
(28,047)
2,023
13,533
416 160,255 176,227
19
21
7
21
19
21
7
37
Statements of changes in equity
(continued)
Parent Company
53 weeks ended 2 January 2010
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 28 December 2008
2,080
13,533
359
130,690
146,662
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
52 weeks ended 1 January 2011
Balance at 3 January 2010
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 1 January 2011
38
6
19
21
7
6
21
19
21
7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
2,080
13,533
359 146,777 162,749
–
–
–
(57)
–
–
–
–
(57)
–
–
–
–
–
–
–
–
–
–
–
–
37,907
37,907
2,103
2,103
40,010
40,010
57
(12,864)
(12,864)
–
–
–
–
734
642
734
642
(17,061)
(17,061)
502
502
57
(28,047)
(28,047)
2,023
13,533
416 158,740 174,712
Statements of cashflows
for the 52 weeks ended 1 January 2011 (2009: 53 weeks ended 2 January 2010)
Operating activities
Cash generated from operations
(see page 40)
Income tax paid
Net cash inflow from operating
activities
Investing activities
Acquisition of property, plant and
equipment
Proceeds from sale of property, plant and
equipment
Interest received
Acquisition of other investments
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 (decrease) / increase in cash and
cash equivalents
Cash and cash equivalents at the start of
the year
Cash and cash equivalents at the end
of the year
Note
Group
Parent Company
2010
£’000
2009
£’000
2010
£’000
2009
£’000
77,826
87,944
77,826
87,944
(15,814)
(14,731)
(15,814)
(14,731)
62,012
73,213
62,012
73,213
(44,672)
(30,296)
(44,672)
(30,296)
815
158
(3,000)
2,368
346
–
815
158
(3,000)
2,368
346
–
(46,699)
(27,582)
(46,699)
(27,582)
734
(12,864)
(17,061)
49
1,182
–
(15,339)
1,087
734
(12,864)
(17,061)
49
1,182
–
(15,339)
1,087
(29,142)
(13,070)
(29,142)
(13,070)
(13,829)
32,561
(13,829)
32,561
34,619
2,058
34,619
2,058
20,790
34,619
20,790
34,619
5
11
21
21
14
14
39
Statements of cashflows
for the 52 weeks ended 1 January 2011 (2009: 53 weeks ended 2 January 2010)
(continued)
Note
Group
Parent Company
2010
£’000
2009
£’000
2010
£’000
2009
£’000
Cash flow statement – cash generated
from operations
Profit for the financial year
37,934
34,374
37,907
34,171
Amortisation
Depreciation
Impairment
Loss on sale of property, plant and
equipment
Release of government grants
Share based payment expenses
Finance income
Income tax expense
Decrease in inventories
(Increase) / decrease in receivables
(Decrease) / increase in payables
Decrease in pension liability
Decrease in provisions
Cash from operating activities
9
10
11
19
5
7
146
107
146
107
28,965
27,218
28,965
27,218
–
869
(437)
642
(158)
–
10
(228)
982
(346)
–
869
(437)
642
(158)
203
10
(228)
982
(346)
14,589
14,405
14,616
14,405
3
(1,103)
(2,467)
(687)
(470)
77,826
266
1,492
11,103
(321)
(1,118)
87,944
3
(1,103)
(2,467)
(687)
(470)
77,826
266
1,492
11,103
(321)
(1,118)
87,944
40
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 16 March 2011.
(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.
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 6 to 31. The financial position
of the Group, its cash flows, liquidity position and borrowing facilities are described in the Chief Executive’s
report on pages 8 to 11. 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. From 3 January 2010
the following standards, amendments and interpretations became effective and were adopted by the Group:
• Amendments to IAS 39 Financial Instruments: Recognition and Measurement: Eligible Hedged Items
– this amendment clarifies the existing principles that determine whether specific risks or portions of
cash flows are eligible for designation in a hedging relationship;
• Revised IFRS 3 Business Combinations – this standard significantly changed the way in which
business combinations are accounted for. This change will only impact the Company if an
acquisition takes place in the future.
• Amendments to IAS 27 Consolidated and Separate Financial Statements – the amendment reflects
changes to the accounting for non-controlling interest.
The adoption of the above has not had a significant impact on the Group’s profit for the year or equity.
41
Notes to the consolidated accounts
(continued)
Significant accounting policies (continued)
(b) Basis of preparation (continued)
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 22 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 2010 are given in note 19.
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.
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 exercise 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 in 2008 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 52
weeks ended 1 January 2011. The comparative period is the 53 weeks ended 2 January 2010.
(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.
42
Significant accounting policies (continued)
(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.
(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 cost of replacing a component of an item of property, plant and equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the component will
flow to the Group, and its costs can be measured reliably. The carrying value of the replaced component is
derecognised. The costs of the day to day servicing of property, plant and equipment are recognised in profit
and loss as incurred.
43
Notes to the consolidated accounts
(continued)
Significant accounting policies (continued)
(g) Property, plant and equipment (continued)
(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
Non-current investments comprise investments in subsidiaries which are carried at cost less impairment.
Current investments comprise fixed term fixed rate bank deposits where the term is greater than three
months.
(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.
44
Significant accounting policies (continued)
(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.
45
Notes to the consolidated accounts
(continued)
Significant accounting policies (continued)
(o) Employee benefits (continued)
When the benefits of a plan are improved, the portion of the increased benefit relating to past service by
employees is recognised as an expense in the income statement on a straight-line basis over the average
period until the benefits become vested. To the extent that the benefits vest immediately, the expense is
recognised immediately in the income statement.
The Group 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.
46
Significant accounting policies (continued)
(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)
(i)
Finance income and expense
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.
47
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 14 Prepayments of a Minimum Funding Requirement applicable for accounting
periods beginning on or after 1 January 2011.
• Revised IAS 24 Related Party Disclosure applicable for accounting periods beginning on or after
1 January 2011.
• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments applicable for accounting periods
beginning on or after 1 July 2010.
These standards amendments are not currently expected to have a significant impact on the accounts when
they are adopted.
1.
Segmental analysis
The Board is considered to be the “chief operating decision maker” of the Group in the context of the
IFRS 8 definition. The information which is reviewed by the Board for the purposes of assessing financial
performance and allocating resources comprise the profit and loss account for the company as a whole.
Throughout 2009 and 2010 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 – all 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.
48
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 1 January 2011 (2009: £5,000,000 and €3,000,000).
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices that 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 £158,000 (2009: £346,000).
Equity prices
The Group has no equity investments other than its subsidiaries.
49
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.
Financial instruments
Group and Parent Company
All of the Group’s surplus cash is invested as cash placed on deposit or fixed term deposits.
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 and fixed term deposits.
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
1 January 2011 (2009: £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.
50
3.
Profit before tax
Profit before tax is stated after charging / (crediting)
Depreciation on owned property, plant and equipment
Loss on disposal of fixed assets
Release of government grants
Payments under operating leases – property rents
Auditors’ remuneration
Audit of these accounts
Audit of previous year’s accounts
Other services pursuant to such legislation
Audit of pension schemes’ accounts
Other services relating to taxation
All other services
2010
£’000
2009
£’000
28,965
27,218
869
(437)
10
(228)
41,837
42,041
153
30
3
7
137
4
179
–
3
9
94
6
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.
Personnel expenses
The average number of persons employed by the Group (including directors) during the year was as follows:
Management
Administration
Production
Shop
The aggregate personnel costs of these persons were as follows:
Wages and salaries
Compulsory social security contributions
Pension costs – defined contribution plans
Pension costs – defined benefit plans
Equity settled transactions
Group and Parent Company
2010
2009
Number
Number
718
438
2,845
15,180
19,181
647
415
2,718
15,264
19,044
Group and Parent Company
2010
£’000
2009
£’000
251,982
236,811
19,238
3,538
(87)
642
18,462
3,351
379
982
275,313
259,985
51
Note
19
19
19
Notes to the consolidated accounts
(continued)
4.
Personnel expenses (continued)
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
5.
Finance income
Interest income on cash balances
Foreign exchange (loss) / gain
6.
Profit attributable to Greggs plc
2010
£’000
1,513
3,607
698
5,818
2009
£’000
1,389
3,313
641
5,343
2010
£’000
2009
£’000
165
(7)
158
209
137
346
Of the Group profit for the year, £37,907,000 (2009: £34,171,000) 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.
7.
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
52
2010
£’000
2009
£’000
16,200
(2,961)
13,239
16,410
(1,157)
15,253
(222)
1,572
1,350
(1,299)
451
(848)
14,589
14,405
7.
Income tax expense (continued)
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 change in deferred tax rate to 27%
Adjustment re prior years
Total income tax expense in income statement
2010
28.0%
1.1%
1.4%
(0.1%)
(0.8%)
(1.8%)
27.8%
2010
£’000
52,523
14,706
582
728
(38)
(405)
(984)
14,589
2009
28.0%
0.9%
2.3%
(0.2%)
–
(1.5%)
29.5%
2009
£’000
48,779
13,658
437
1,120
(104)
–
(706)
14,405
On 28 July 2010 a reduction in the rate of corporation tax from 28% to 27% was substantively enacted to take
effect from 1 April 2011. Any timing differences which reverse before 1 April 2011 will be charged / credited at
28% and any timing differences which exist at 1 April 2011 will reverse at 27%.
Tax recognised directly in equity
Relating to equity-settled transactions
Relating to defined benefit plans –
actuarial gains / (losses)
8.
Earnings per share
Basic earnings per share
2010
2010
Current tax Deferred tax
£’000
£’000
1
–
1
(503)
778
275
2010
Total
£’000
(502)
778
276
2009
Total
£’000
(73)
(1,938)
(2,011)
Basic earnings per share for the year ended 1 January 2011 is calculated by dividing profit attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during the year
ended 1 January 2011 as calculated below.
Diluted earnings per share
Diluted earnings per share for the year ended 1 January 2011 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 1 January 2011 as calculated below.
53
Notes to the consolidated accounts
(continued)
8.
Earnings per share (continued)
Profit attributable to ordinary shareholders
Profit for the financial year attributable to equity
holders of the parent
Basic earnings per share
Diluted earnings per share
Weighted average number of ordinary shares
Issued ordinary shares at start of year
Effect of own shares held
Effect of shares purchased and cancelled
2010
£’000
2009
£’000
37,934
34,374
37.8p
37.3p
34.1p
34.0p
2010
2009
Number
Number
103,990,470 103,990,470
(2,753,645)
(3,170,821)
(959,689)
–
Weighted average number of ordinary shares during the year
100,277,136 100,819,649
Effect of share options on issue
1,326,346
427,864
Weighted average number of ordinary shares (diluted) during the year
101,603,482 101,247,513
9.
Intangible assets
Group and Parent Company
Cost
Balance at 29 December 2008, 2 January 2010 and 1 January 2011
Amortisation
Balance at 29 December 2008
Amortisation charge for the year
Balance at 2 January 2010
Balance at 3 January 2010
Amortisation charge for the year
Balance at 1 January 2011
Carrying amounts
At 28 December 2008
At 2 January 2010
At 3 January 2010
At 1 January 2011
54
Software
£’000
686
–
107
107
107
146
253
–
579
579
433
10. 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 28 December 2008
Additions
Disposals
Reclassification
99,994
1,244
(298)
14,844
89,088
10,265
(3,987)
17,834
(6,659)
953
–
–
–
(14,844)
159,523
13,891
362,496
Balance at 2 January 2010
115,784
95,366
170,698
Balance at 3 January 2010
115,784
Additions
Disposals
Reclassification
812
(38)
(354)
95,366
10,543
(5,165)
4,834
170,698
26,445
(8,070)
(4,480)
30,296
(10,944)
–
381,848
381,848
–
–
7,844
45,644
–
–
(13,273)
–
Balance at 1 January 2011
116,204
105,578
184,593
7,844
414,219
Depreciation
Balance at 28 December 2008
Depreciation charge for the year
Disposals
Balance at 2 January 2010
Balance at 3 January 2010
Depreciation charge for the year
Disposals
Reclassification
Balance at 1 January 2011
Carrying amounts
At 28 December 2008
At 2 January 2010
At 3 January 2010
At 1 January 2011
17,076
2,318
(80)
19,314
19,314
2,995
(38)
738
23,009
82,918
96,470
96,470
93,195
55,146
9,043
(3,887)
60,302
60,302
9,865
(5,011)
1,799
66,955
33,942
35,064
35,064
38,623
79,819
15,857
(4,599)
91,077
91,077
16,105
(6,540)
(2,537)
98,105
79,704
79,621
79,621
86,488
–
–
–
–
–
–
–
–
–
152,041
27,218
(8,566)
170,693
170,693
28,965
(11,589)
–
188,069
13,891
210,455
–
–
211,155
211,155
7,844
226,150
55
Notes to the consolidated accounts
(continued)
10. Property, plant and equipment (continued)
Parent Company
Land and
Buildings
Plant and
equipment
Fixtures
and fittings
Under
construction
Total
£’000
£’000
£’000
£’000
£’000
Cost
Balance at 28 December 2008
100,504
Additions
Disposals
Reclassification
Balance at 2 January 2010
1,244
(298)
14,844
116,294
Balance at 3 January 2010
116,294
Additions
Disposals
Reclassification
812
(38)
(354)
160,011
13,891
364,027
89,621
10,265
(3,987)
17,834
(6,659)
953
–
–
–
(14,844)
30,296
(10,944)
–
383,379
383,379
–
–
7,844
45,644
–
–
(13,273)
–
95,899
171,186
95,899
10,543
(5,165)
4,834
171,186
26,445
(8,070)
(4,480)
Balance at 1 January 2011
116,714
106,111
185,081
7,844
415,750
Depreciation
Balance at 28 December 2008
Depreciation charge for the year
Disposals
Balance at 2 January 2010
Balance at 3 January 2010
Depreciation charge for the year
Disposals
Reclassification
Balance at 1 January 2011
Carrying amounts
At 28 December 2008
At 2 January 2010
At 3 January 2010
At 1 January 2011
17,353
2,318
(80)
19,591
19,591
2,995
(38)
738
23,286
83,151
96,703
96,703
93,428
55,416
9,043
(3,887)
60,572
60,572
9,865
(5,011)
1,799
67,225
34,205
35,327
35,327
38,886
80,210
15,857
(4,599)
91,468
91,468
16,105
(6,540)
(2,537)
98,496
79,801
79,718
79,718
86,585
–
–
–
–
–
–
–
–
–
152,979
27,218
(8,566)
171,631
171,631
28,965
(11,589)
–
189,007
13,891
211,048
–
–
211,748
211,748
7,844
226,743
56
10. 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
2010
£’000
2009
£’000
2010
£’000
2009
£’000
92,411
95,490
92,644
95,723
626
158
883
97
626
158
883
97
93,195
96,470
93,428
96,703
Property, plant and equipment under construction
Assets under construction at 1 January 2011 comprised new bakeries and equipment for new shops not yet
fitted.
11.
Investments
Non-current investments
Parent Company
Cost
As at 28 December 2008, 2 January 2010 and 1 January 2011
Impairment
As at 28 December 2008
Impairment charge for the year
As at 2 January 2010
As at 3 January 2010
Impairment charge for the year
As at 1 January 2011
Carrying amount
As at 28 December 2008
As at 2 January 2010
As at 3 January 2010
As at 1 January 2011
Shares in subsidiary undertakings
£’000
5,828
638
203
841
841
–
841
5,190
4,987
4,987
4,987
57
Notes to the consolidated accounts
(continued)
11.
Investments (continued)
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
Current investments
Non-trading
Dormant
Non-trading
Property holding
Dormant
Non-trading
Dormant
Non-trading
Trustees
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
Scotland
England and Wales
England and Wales
England and Wales
Fixed rate bond
12.
Inventories
Raw materials and consumables
Work in progress
13. Trade and other receivables
Trade receivables
Other receivables
Prepayments
Group and Parent Company
2010
£’000
3,000
2009
£’000
–
Group and Parent Company
2010
£’000
2009
£’000
9,105
8,999
2,778
11,883
2,887
11,886
Group and Parent Company
2010
£’000
1,690
3,880
16,739
22,309
2009
£’000
709
5,944
14,553
21,206
No amounts are overdue and there is no provision for impairment in the current or prior year.
58
14. Cash and cash equivalents
Cash and cash equivalents
15. Trade and other payables
Group and Parent Company
2010
£’000
2009
£’000
20,790
34,619
Group
Parent Company
2010
£’000
2009
£’000
2010
£’000
2009
£’000
Trade payables
33,382
35,167
33,382
35,167
Amounts owed to subsidiary undertakings
Other taxes and social security
Other payables
Accruals and deferred income
Deferred government grants
16. Current tax liability
–
7,439
13,326
15,631
468
–
7,122
13,236
15,748
465
7,807
7,439
13,326
15,631
468
7,807
7,122
13,236
15,748
465
70,246
71,738
78,053
79,545
The current tax liability of £6,282,000 in the Group and the Parent Company (2009: Group and Parent
Company £8,857,000) represents the estimated amount of income taxes payable in respect of current and
prior years.
17. Other payables
Deferred government grants
Group and Parent Company
2010
£’000
2009
£’000
8,439
8,830
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.
59
Notes to the consolidated accounts
(continued)
18. Deferred tax assets and liabilities
Group
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2010
£’000
2009
£’000
2010
£’000
2009
2010
£’000
£’000
2009
£’000
Property, plant and equipment
–
–
15,485
14,385
15,485
14,385
Employee benefits
Short term temporary differences
(3,571)
(4,004)
(990)
(1,083)
–
–
–
–
(3,571)
(4,004)
(990)
(1,083)
Tax (assets) / liabilities
(4,561)
(5,087)
15,485
14,385
10,924
9,298
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
Balance at
28 December
2008
£’000
Recognised
in income
Recognised
in equity
£’000
£’000
14,828
(1,800)
(874)
12,154
(443)
(196)
(209)
(848)
–
(2,008)
–
(2,008)
Balance at
2 January
2010
£’000
14,385
(4,004)
(1,083)
9,298
The movements in temporary differences during the year ended 1 January 2011 were as follows:
Property, plant and equipment
Employee benefits
Short term temporary differences
Balance at
3 January
2010
£’000
14,385
(4,004)
(1,083)
9,298
Recognised
in income
Recognised
in equity
£’000
£’000
Balance at
1 January
2011
£’000
1,100
157
93
1,350
–
276
–
276
15,485
(3,571)
(990)
10,924
60
18. Deferred tax assets and liabilities (continued)
Parent Company
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2010
£’000
2009
£’000
2010
£’000
2009
£’000
2010
£’000
2009
£’000
Property, plant and equipment
–
–
14,773
13,646
14,773
13,646
Employee benefits
Short term temporary differences
(3,571)
(4,004)
(990)
(1,083)
–
–
–
–
(3,571)
(4,004)
(990)
(1,083)
Tax (assets) / liabilities
(4,561)
(5,087)
14,773
13,646
10,212
8,559
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
Balance at
28 December
2008
£’000
Recognised
in income
Recognised
in equity
£’000
£’000
14,089
(1,800)
(874)
11,415
(443)
(196)
(209)
(848)
–
(2,008)
–
(2,008)
Balance at
2 January
2010
£’000
13,646
(4,004)
(1,083)
8,559
The movements in temporary differences during the year ended 1 January 2011 were as follows:
Property, plant and equipment
Employee benefits
Short term temporary differences
Balance at
3 January
2010
£’000
Recognised
in income
Recognised
in equity
£’000
£’000
Balance at
1 January
2011
£’000
13,646
(4,004)
(1,083)
8,559
1,127
157
93
1,377
–
276
–
276
14,773
(3,571)
(990)
10,212
61
Notes to the consolidated accounts
(continued)
19. Employee benefits
Defined benefit plan
The Group makes contributions to a defined benefit (final salary) plan that provides pension benefits for
employees upon retirement.
Present value of funded obligations
Fair value of plan assets
Recognised liability for defined benefit obligations
This scheme was closed to future accrual in 2008 .
Inflationary growth assumptions
Group and Parent Company
2010
£’000
(92,544)
83,780
(8,764)
2009
£’000
(87,211)
74,879
(12,332)
In July 2010 the UK Government announced its intention to pass legislation amending the statutory
revaluation of pension scheme benefits and increases to pensions in payment under defined benefit pension
schemes from RPI to CPI measures. A change to CPI would affect the Group’s defined benefit scheme
by reducing the deficit and therefore the net liability recognised in the balance sheet. After reviewing UITF
Abstract 48 the directors believe that no adjustment is appropriate at 1 January 2011. The directors have
continued to apply prudent assumptions in relation to benefit increases.
Liability for defined benefit obligations
Changes in the present value of the defined benefit obligation are as follows:
Group and Parent Company
2010
£’000
87,211
4,993
2,800
(2,460)
92,544
2009
£’000
69,563
4,387
15,538
(2,277)
87,211
Opening defined benefit obligation
Interest cost
Actuarial losses
Benefits paid
62
19. Employee benefits (continued)
Changes in the fair value of plan assets are as follows:
Opening fair value of plan assets
Expected return
Actuarial gains
Contributions by employer
Benefits paid
Closing fair value of plan assets
The amounts recognised in the income statement are as follows:
Group and Parent Company
2010
£’000
2009
£’000
74,879
63,830
5,080
5,681
600
(2,460)
83,780
Group
2010
£’000
4,993
(5,080)
(87)
4,008
8,618
700
(2,277)
74,879
2009
£’000
4,387
(4,008)
379
Group
2010
£’000
(87)
(87)
2009
£’000
379
379
Interest on obligation
Expected return on plan assets
Total included in employee benefit expense
The (credit) / charge is recognised in the following line items of the income statement:
Administrative expenses
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 £15,750,000 (2009: net losses of £18,631,000).
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
2010
£’000
58,705
20,404
1,411
3,260
83,780
10,761
2009
£’000
60,340
10,079
1,201
3,259
74,879
12,626
The plan assets include ordinary shares issued by the Company with a fair value of £2,441,000 (2009:
£2,283,000).
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.
63
Notes to the consolidated accounts
(continued)
19. 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
2010
5.5%
6.5%
n/a
3.0%
2009
5.8%
6.9%
n/a
3.0%
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)
2010
2009
Male
Female
Male
Female
Member aged 65 in 2010
Member aged 65 in 2030
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:
Group and Parent Company
2010
£’000
2009
£’000
2008
£’000
2007
£’000
2006
£’000
Present value of defined benefit
obligation
Fair value of plan assets
Deficit
(92,544)
(87,211)
(69,563)
(78,461)
(74,823)
83,780
(8,764)
74,879
(12,332)
63,830
(5,733)
77,781
(680)
72,940
(1,883)
64
19. Employee benefits (continued)
Experience adjustments:
2010
£’000
Group and Parent Company
2008
£’000
2007
£’000
2009
£’000
2006
£’000
Experience adjustments
on plan liabilities
Experience adjustments
on plan assets
(2,800) 3.0% (15,538) 17.8% 5,133 7.4% 2,207 2.8%
180 0.2%
5,681 6.8% 8,618 11.5% (17,747) 27.8% (797) 1.0% 2,561 3.5%
Net actuarial experience
adjustments
2,881
(6,920)
(12,614)
1,410
2,741
The Group expects to contribute £nil to its defined benefit plan in 2011.
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 £3,538,000 (2009: £3,351,000) 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.
The Company established a Performance Share Plan in 2009 and a grant of options has been made under
this scheme in April 2010.
65
Notes to the consolidated accounts
(continued)
19. 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 7
March 2000 Senior
170p
1,502,000
employees
Three years’ service and EPS growth of
2% over RPI on average over those
three years
Contractual
life
7 to 10 years
Executive Share Option
Scheme 8
April 2002
Senior
employees
352p
88,000
Three years’ service and EPS growth of
2-4% over RPI on average over those
three years
7 to 10 years
Executive Share Option
Scheme 9
September
2003
Senior
employees
310p
82,500
Executive Share Option
Scheme 11
August 2004 Senior
340p
930,000
employees
September
2004
Senior
employees
348p
24,000
Executive Share Option
Scheme 12
August 2006 Senior
407p
1,028,000
employees
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
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
Performance Share
Plan 1
April 2010
Senior
executives
nil
270,521
Three years’ service, EPS annual
compound growth of 3-8% over RPI
over those three years and TSR position
relative to an appropriate comparator
group
10 years
66
19. Employee benefits (continued)
The number and weighted average exercise price of share options is as follows:
Outstanding at the beginning of the year
Lapsed during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
2010
Number of
options
Weighted
average
exercise
price
2009
Weighted
average
exercise
price
Number of
options
353p
371p
302p
5,273,920
(420,053)
(171,127)
nil
270,521
334p
4,953,261
366p
408p
364p
355p
353p
4,063,500
(1,008,453)
(510,964)
2,729,837
5,273,920
Exercisable at the end of the year
386p
696,147
379p
994,061
The options outstanding at 1 January 2011 have an exercise price in the range of £nil to £4.57 and have a
weighted average contractual life of 6 years. The options exercised during the year had a weighted average
market value of £4.74 (2009: £4.24).
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.
2010
Performance
Share Plan 1
2009
Executive
Share Option
Scheme 14
Savings
Related
Share Option
Scheme 11
April 2010
April 2009
September
2009
442p
490p
nil
26.2%
3 years
3.39%
1.88%
47p
356p
356p
25.0%
3 years
4.18%
2.20%
64p
393p
354p
25.1%
3 years
4.26%
1.95%
Fair value at grant date
Share price
Exercise price
Expected volatility
Option life
Expected dividends
Risk free rate
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.
67
Notes to the consolidated accounts
(continued)
19. Employee benefits (continued)
The costs charged to the income statement relating to share based payments were as follows:
Share options granted in 2006
Share options granted in 2007
Share options granted in 2008
Share options granted in 2009
Share options granted in 2010
Total expense recognised as employee costs
20. Provisions
Balance at start of year
Additional provision in the year
Utilised in year
Provisions reversed during the year
Balance at end of year
Included in current liabilities
Included in non–current liabilities
2010
£’000
84
(10)
30
398
140
642
2009
£’000
161
(24)
575
270
–
982
Group and Parent Company
Closed Shop Provision
2010
£’000
4,153
451
(379)
(542)
3,683
1,018
2,665
3,683
2009
£’000
5,271
1,263
(2,381)
–
4,153
857
3,296
4,153
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.
68
21. Capital and reserves
Share capital and share premium
Ordinary shares
2010
2009
Number
Number
In issue and fully paid at start of year – ordinary shares of 2p (2009: 20p)
103,990,470
10,399,047
Purchased and cancelled
(2,834,569)
–
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
101,155,901 103,990,470
At 1 January 2011 the authorised share capital comprised 250,000,000 ordinary shares with a par value of 2p
each (2009: 250,000,000 with a par value of 2p 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 2009 2,834,569 shares with a nominal value of
£57,000 were purchased for cancellation for a consideration of £12,864,000.
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 £11,327,000 (2009: £12,060,000) 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 2,677,620 shares (2009: 2,895,636 shares) with a market value at 1 January
2011 of £12,451,000 (2009: £12,596,000) 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, Greggs Long Term Incentive Plan 2006 and Greggs Performance Share Plan 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:
2010
2009
Per share
Per share
pence
pence
2008 final dividend *
2009 interim dividend
2009 final dividend
2010 interim dividend
–
–
11.4p
5.5p
16.9p
*This amount has been restated to reflect the ten for one share split which took place during 2009.
10.0p
5.2p
–
–
15.2p
69
Notes to the consolidated accounts
(continued)
21. Capital and reserves (continued)
The proposed final dividend in respect of 2010 amounts to 12.7 pence per share (£12,847,000).
This proposed dividend is subject to approval at the Annual General Meeting and has not been included
as a liability in these accounts.
2008 final dividend
2009 interim dividend
2009 final dividend
2010 interim dividend
22. Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
2010
£’000
–
–
11,553
5,508
17,061
2009
£’000
10,097
5,242
–
–
15,339
2010
£’000
2009
£’000
37,047
34,827
100,655
101,821
28,229
33,081
165,931
169,729
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, title does not pass for the land or building. 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 land or building it is judged that substantially all the risks and
rewards of the land and building are with the landlord. Based on these qualitative factors it is concluded that
the leases are operating leases.
70
23. Capital commitments
During the year ended 1 January 2011, the Group entered into contracts to purchase property, plant and
equipment for £6,004,000 (2009: £804,000). These commitments are expected to be settled in the following
financial year.
24. Related parties
Identity of related parties
The Group has a related party relationship with its subsidiaries (see note 11) 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
Amounts owed to
related parties
Amounts owed by
related parties
Dormant subsidiaries
7,807
7,807
–
2010
£’000
2009
£’000
2010
£’000
2009
£’000
–
The Greggs Foundation is also a related party and during the year the Company made a donation to the
Greggs Foundation of £638,000 (see Corporate Social Responsibility on pages 12 to 17).
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)
2010
2009
2010
2009
(or date of
cessation if
earlier)
(or date of
appointment
if later)
(or date of
cessation if
earlier)
(or date of
appointment
if later)
64,681
35,237
52,010
10,000
–
3,000
12,253
10,000
57,860
–
–
27,117
1,650,000
1,650,000
43,730
10,000
–
–
12,253
10,000
–
–
–
–
–
–
–
–
–
–
–
–
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Derek Netherton (non-executive)
Bob Bennett (non-executive)
Julie Baddeley (non-executive)
Roger Whiteside (non-executive)
Iain Ferguson (non-executive)
Details of directors’ share options, emoluments, pension benefits and other non-cash benefits can be
found in the Directors’ Remuneration report on pages 72 to 83. Total remuneration is included in personnel
expenses (see note 4).
There have been no changes since 1 January 2011 in the directors’ interests noted above.
71
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 five times during 2010 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
5
5
At these meetings, amongst other items, the Committee considered:
• introduction of a Share Retention Policy for executive directors;
• setting of objectives for the executive directors ensuring risk forms a key part of these; and
• measures and targets to ensure that executive directors were not incentivised to take inappropriate
levels of risk.
In addition, each year the Committee considers Greggs’ total remuneration policy for executive directors in
the context of market and best practice and levels of remuneration throughout the Company.
Andrew Davison (Company Secretary until June 2010), Jonathan Jowett (Company Secretary and General
Counsel from June 2010), Nicola Bailey (Group People Director until March 2010) and Roisin Currie (Group
People Director from January 2010) have supported the Committee in their deliberations, along with external
consultants, PWC.
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, its 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
and will be undertaken again in 2011).
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.
72
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
• Reviewed annually
• Balanced approach based
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
• 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%
Pension
Base Salary
• Provides a market
competitive level of
provision with good
flexibility while minimising
risk to the Company
• Cost increases in line with
• Defined contribution
salary growth
benefits
For 2011 an increase of 2.2% has been applied to the executive directors’ salaries. This has been applied in
line with the award given to all employees across the business, rather than being reviewed alongside market
salary growth.
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 2010 the maximum target
bonus levels were established on the following basis:
Maximum 2010
bonus achievable
Maximum bonus
achievable as % of
basic salary
Financial Target
(Profit) as % of total
bonus opportunity
Financial Target
(Sales) as % of total
bonus opportunity
Personal Objectives
(related to functional
KPI’s) as % of total
bonus opportunity
Kennedy McMeikan 90% of salary
60% of bonus
20% of bonus
20% of bonus
Richard Hutton
90% of salary
60% of bonus
20% of bonus
20% of bonus
Raymond Reynolds 90% of salary
60% of bonus
20% of bonus
20% of bonus
73
Directors’ Remuneration Report
(continued)
Whilst each element could be measured separately, failure to exceed the profit level achieved in 2009 would
have resulted in no bonus being earned for either the profit or sales elements in 2010.
Against the 2010 annual bonus targets a payment of 56.6% of annual salary has been earned by Kennedy
McMeikan, 56.6% by Richard Hutton and 56.6% by Raymond Reynolds.
For 2011 the maximum target bonus levels will continue to be established on the basis above, which the
Remuneration Committee consider to be suitably challenging.
Whilst each element can be measured separately, failure to exceed the profit level achieved in 2010 will result
in no bonus being earned for either the profit or sales elements in 2011.
The Committee have also introduced a claw-back clause in the Bonus Scheme rules as follows;
The Committee reserve the right to ‘claw-back’ any portion of the bonus payment that has been paid in
error should it come to light, at a future date, that there was a material misstatement of the operating profit
resulting in a significant over-payment.
Share Based Remuneration
Performance Share Plan
Shareholder approval was obtained in 2009 for the introduction of a Performance Share Plan (PSP) from
2010.
The introduction of the Performance Share Plan in 2010 under which an award of shares was made
in line with the level awarded under the previous Long Term Incentive Plan (LTIP), restricted for three years
and vesting in full or part subject to the achievement of a combination of EPS growth and TSR targets, is
intended to provide a greater focus on achieving key long-term business goals and increased shareholder
value.
The awards under the PSP made in 2010 have the following targets set:
EPS
TSR
Annual compound
growth
Proportion of
award vesting
(% opportunity)
Proportion of
award vesting
(% opportunity)
Position relative
to comparator
group of FTSE 250
Food Producers,
Retailers & Leisure
Companies
Less than RPI + 3% Nil
Below median
Nil
Threshold
RPI + 3%
Maximum
RPI + 8%
12.5%
50%
At median
12.5%
Upper quartile
50%
74
The comparator group used in connection with the PSP 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 considered by the Remuneration Committee
to be 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
• 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
These targets and the comparator group will remain in place for the 2011 scheme.
Other share based incentive schemes
LTIP
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 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. Following the three year performance period the conditions have been
met to the extent that a 1.007:1 match will be awarded resulting in options over 14,329 shares becoming
excercisable by Richard Hutton and over 12,637 shares by Raymond Reynolds.
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 the 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.
No such awards were granted in 2010.
75
Directors’ Remuneration Report
(continued)
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 or PSP is not available to a particular individual, or where the
Committee considers it appropriate.
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 PSP.
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 or not 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, dependant 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.
76
Due to the changes in the annual allowance for tax relief on pensions, effective from 6th April 2011, the
Committee has decided to allow the executive directors a degree of flexibility with regards to how they
receive their pension contribution, with the principle that there should be no additional charge borne by the
Company.
Should the executive directors wish to cap their pension contribution at £50,000, in line with the new annual
allowance, they can do so and the balance of this contribution will be paid as a supplement in addition to
their salary on a monthly basis.
This supplement will be subject to tax and NI. The employer’s NI charge will be borne by the executive
director to ensure there are no additional charges to the Company.
The executive directors will be able to make this choice on an annual basis.
The remuneration adjustment will be disclosed in the Remuneration Report in the 2011 Annual Report and
Accounts.
Share Retention Guidelines
The Committee has introduced Share Retention Guidelines for executive directors. These are effective from 1
January 2011 and require each executive director to build up a shareholding of 100% of their base salary in a
five year period through shares matured and granted via the LTIP or PSP and a percentage of bonus payment
to be given as shares at the discretion of the Committee or chosen to be taken as shares by the executive
director. This will be reviewed by the Committee in March each year.
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 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;
• 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. Each year 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; and
• 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.
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.
77
Directors’ Remuneration Report
(continued)
Directors’ service contracts
Details of the executive directors’ service contracts or letters of appointment are as follows:
Executive Directors
Kennedy McMeikan has a service contract with the Company dated 8 April 2008. His continuous period of
service with the Company commenced on 1 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 the 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 last obtained in 2009 from Monks Partnership. An increase in fees of 2.2% was awarded to
the Committee Chairman and the non-executive directors, effective January 2011. This was applied in line with
the award given to all employees across the business and did not reflect the average growth in fees across the
market.
The basic non-executive fees for 2011 are £37,814 per annum, including membership of committee(s) and an
additional £5,621 for Chairmanship of the Audit or Remuneration Committee(s).
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. 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.
78
Performance graph
The graph below shows a comparison of the
total shareholder return for the Company’s
shares for each of the last five financial years
against the total shareholder return for the
companies comprised in the FTSE Mid 250
Index (excluding Investment 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
2011
£
2010
£
Estimated
value of
benefits
2010
£
Annual
profit
share
2010
£
Annual
bonus
2010
£
Total
2010
£
456,834
265,720
237,104
447,000
260,000
232,000
25,550
20,777
12,602
6,752
221,045
700,347
10,170
122,330
413,277
9,075
109,155
362,832
Executive
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Chairman
Derek Netherton
123,406
120,750
Non–executive
Bob Bennett
Julie Baddeley
Roger Whiteside
Iain Ferguson
Total
43,435
43,435
37,814
37,814
42,500
42,500
37,000
37,000
–
–
–
–
–
–
–
–
–
–
–
120,750
–
–
–
–
42,500
42,500
37,000
37,000
1,245,562
1,218,750
58,929
25,997
452,530
1,756,206
79
Directors’ Remuneration Report
(continued)
Salary/fees
paid in
2009
£
438,000
242,000
227,000
115,000
40,000
40,000
35,500
26,625
14,204
Estimated
value of
benefits
2009
Annual
profit
share
2009
Annual
bonus
Total
2009
2009
£
£
£
£
24,353
20,500
12,617
4,022
114,238
580,613
10,192
40,628
313,320
9,560
36,521
285,698
–
–
–
–
–
–
–
–
–
–
–
–
–
115,000
–
–
–
–
–
40,000
40,000
35,500
26,625
14,204
1,178,329
57,470
23,774
191,387
1,450,960
Executive
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Chairman
Derek Netherton
Non–executive
Bob Bennett
Julie Baddeley
Roger Whiteside
Iain Ferguson (from 13 May 2009)
Mike Darrington (resigned 13 May 2009)
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 executive director
during the year:
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Number of options during the year
At 2 January
2010
Number
Granted
Number
Exercised
Number
Lapsed
Number
At 1 January
2011
Number
Exercise
price
£ Date of grant
Date from
which exer-
cisable
80,000
276
26,750
80,000
430
410
26,750
80,000
430
410
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,000
276
26,750
80,000
430
410
26,750
80,000
430
410
3.56
3.54
4.07
3.56
3.938
3.54
4.07
3.56
3.938
3.54
Apr 09
Oct 09
Aug 06
Apr 09
Apr 08
Oct 09
Aug 06
Apr 09
Apr 08
Oct 09
Aug 12
Nov 12
Aug 09
Aug 12
Jun 11
Nov 12
Aug 09
Aug 12
Jun 11
Nov 12
Expiry
date
Scheme
Apr 19
Executive
Apr 13
SAYE
Aug 16
Executive
Apr 19
Executive
Dec 11
Apr 13
SAYE
SAYE
Aug 16
Executive
Apr 19
Executive
Dec 11
Apr 13
SAYE
SAYE
80
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.
The following table sets out details of the Long-Term Incentive Plan and Performance Share 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 74) held by, or granted to, each director during the year,
according to the register of director’s interests:
Options
held under
the plan at
2 January
2010
Date of
grant
Options
granted
during 2010
Options
exercised
during 2010
Options
lapsed
during
2010
Options
held under
the plan at
1 January
2011
Market price
of each
share at
date of grant
£
Market price
at date of
exercise
£
Date from
which
exercisable
Gain on
exercise
£
Expiry
date
Scheme
Kennedy McMeikan
Aug 08
180,210
-
Apr 10
-
82,169
Richard Hutton
Raymond Reynolds
Mar 07
Mar 08
Apr 10
Mar 07
Mar 08
Apr 10
8,120
28,460
-
-
-
37,173
6,100
25,100
-
-
-
33,169
-
-
8,120
-
-
6,100
-
-
-
-
-
-
-
-
-
-
180,210
82,169
-
28,460
37,173
-
25,100
33,169
3.762
4.896
4.746
4.475
4.896
4.746
4.475
4.896
–
–
–
–
Aug 11
Apr 13
Aug 18
Apr 20
4.553
36,970
-
-
-
-
4.553
27,773
-
-
-
-
Mar 10
Mar 11
Apr 13
Mar 10
Mar 11
Apr 13
Mar 17
Mar 18
Apr 20
Mar 17
Mar 18
Apr 20
LTIP
PSP
LTIP
LTIP
PSP
LTIP
LTIP
PSP
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 1 January 2011 was £4.69. The highest and
lowest mid-market prices of ordinary shares during the financial year were £4.01 and £4.96 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, dependant on length of pensionable
service. From 1 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.
81
Directors’ Remuneration Report
(continued)
Defined benefit scheme
The following table sets out the change in each director’s accrued pension in the Company’s defined benefit
scheme during the year and his accrued benefits in the scheme at the year end:
Executive Director
Date of birth
Date service
commenced
Accrued
annual
pension
entitlement at
age 65 as at 1
January 2011
£
Accrued
annual pension
entitlement at
age 65 as at 2
January 2010
£
Increase
in accrued
pension
entitlement for
the year
£
Increase
in accrued
pension
entitlement for
the year net
of inflation of
4.6%
£
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 4.6% 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.
Cash equivalent
transfer value as at 2
January 2010
Cash equivalent
transfer value as at
1 January 2011
£
£
172,649
872,910
191,497
901,932
Increase in the
cash equivalent
transfer value since
2 January 2010
£
–
–
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.
82
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.
Contribution in
respect of 2010
£
Contribution in
respect of 2009
£
67,050
33,800
32,480
65,700
31,460
29,699
Executive Director
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Approval by Shareholders
At the Annual General Meeting of the Company to be held on 11 May 2011, a resolution approving this
report is to be proposed as an ordinary resolution.
This report was approved by the Board on 16 March 2011.
Signed on behalf of the Board
Julie Baddeley
Director
Chair of Remuneration Committee
16 March 2011
83
10 Year History
2001
2002
2003
2004
2005
2006 †
2007 ~ 2008 §
2009
2010
(as restated)*
Turnover (£'000)
377,556 422,600 456,978 504,186 533,435 550,849 586,303 628,198 658,186 662,326
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
31,597
35,334
39,167
45,763
47,143
38,747
49,909
48,613
48,433
52,365
32,742
36,666
40,472
47,751
50,159
40,239
51,143
49,470
48,779
52,523
103,554 119,965 134,150 157,156 181,475 144,891 145,594 147,947 164,237 176,227
19.0
20.9
23.1
27.1
28.2
24.1
34.3
33.6
34.1
37.8
6.5
7.3
8.0
9.6
10.6
11.6
14.0
14.9
16.6
18.2
27,385
42,143
32,361
25,090
41,687
30,023
42,343
40,758
30,296
45,644
124,123 148,184 160,704 163,110 180,826 184,325 196,783 210,455 211,155 226,150
1,144
1,202
1,231
1,263
1,319
1,336
1,368
1,409
1,419
1,487
* 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.
Secretary and Registered Office
Jonathan D Jowett, LL.M. 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
Stockbrokers
UBS
1 Finsbury Avenue
London
EC2M 2PA
Brewin Dolphin Securities Ltd
Commercial Union House
39 Pilgrim Street
Newcastle upon Tyne
NE1 6RQ
Auditors
KPMG Audit Plc
Quayside House
110 Quayside
Newcastle upon Tyne
NE1 3DX
84
Solicitors
Muckle LLP
Time Central
32 Gallowgate
Newcastle upon Tyne
NE1 4BF
Registrars
Capita Registrars
Bourne House
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Fernwood House,
Clayton Road, Jesmond,
Newcastle Upon Tyne
NE2 1TL
www.greggs.co.uk
Design and project management –
Gratterpalm.
Material – This report has been
printed on elemental chlorine–free
paper which is made from trees
from sustainable forests.