Annual Report
& Accounts
2011
Annual Report & Accounts 2011
1
Sales up 5.8% to £701m
Pre-tax profit* up 1.1% to £53.1m
Diluted earnings per share* up 4.0% to 38.8 pence
84 net new shops opened
183 shop refurbishments completed
Over 800 new retail jobs created
£21m investment in two new bakeries in Newcastle and
Cumbria, completed on time and within budget
Total dividend per share up 6.0% to 19.3 pence
27th consecutive year of dividend growth
*before exceptional items: 2011 pre-tax credit £7.4m (2010: nil)
Annual report & accounts 2011
Directors’ report and business review
4
Chairman’s statement
7
Chief Executive’s report
11
Financial Review
17
Social Responsibility
26
Principal risks and uncertainties
30
Board of Directors
32
Governance
36
Audit Committee Report
38
Additional information
Directors’ Remuneration Report
40
Statement of Directors’ responsibilities 52
53
Independent auditor’s report
57
Accounts
Consolidated income statement
Consolidated statement of
57
comprehensive income
58
Balance sheets
59
Statements of changes in equity
Statements of cashflows
61
Notes to the consolidated accounts 63
2
Annual Report & Accounts 2011
Our vision
To be the number 1 for
sandwiches and savouries
from a united team who are
passionate about being the
best in bakery.
Our values
We will be enthusiastic and
supportive in all that we do,
open, honest and appreciative,
treating everyone with fairness,
consideration and respect.
The home of fresh baking
Greggs is the UK’s leading bakery retailer specialising
in freshly made bakery food. With over 1,570 shops
across the UK served by ten regional bakeries,
our 20,000 employees are proud to serve 6 million
customers each week. What sets us apart is our
passion for baking and our drive for quality and
value. We are a growing business and are delivering
our accelerated shop opening programme that will
see Greggs reaching more than 2,000 shops
across the UK in the coming years.
We made
hot sandwiches
available in over
700 shops;
we sold over
2 million in 2011.
4
Annual Report & Accounts 2011
Directors’ report
and business review
The directors have pleasure in presenting their annual report and the audited accounts for the 52
weeks ended 31 December 2011. The comparative period is the 52 weeks ended 1 January 2011.
The directors’ report and business review is set out on pages 4 to 39.
Chairman’s statement
“Greggs performed well in 2011 in what was a very challenging
time for the economy and the consumer. We have continued to
make good progress towards our strategic objectives with a record
number of shop openings across the UK, and investment in two
major new bakeries in Newcastle and Cumbria.”
Our financial performance
We have delivered another
strong set of results. Continued
sales growth combined with cost
efficiency savings, offsetting some
of the major inflationary pressures
facing the business, helped to
deliver pre-tax profits of £53.1
million before exceptional items
(2010: £52.5 million) on sales of
£701 million (2010: £662 million).
The Board recommends an
increased final dividend of 13.5
pence per share, making a total
dividend for the year of 19.3 pence
(2010: 18.2 pence). This is an
increase of 6.0 per cent, reflecting
the growth of diluted earnings per
share before exceptional items.
This is Greggs’ 27th consecutive
year of increased dividends since
the company floated 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.
Our values
Our values lie at the very heart of
what we do and in our relationships
with our staff, customers and
shareholders. In such difficult
economic times customers expect
us to continue providing great
tasting products at great value
prices; but they also expect us to
do even more to help those who
are most disadvantaged within
the community.
In 2011 we raised record amounts
of money for a wide variety of
causes, including an amazing £1
million for the BBC Children in
Need appeal.
We received the lifetime
achievement award at the
Sandwich Industry Awards and
were also named Corporate
Foundation of the Year at the
Business Charity Awards,
demonstrating that our values are
recognised throughout the industry.
I would like to pay tribute to the
tremendous efforts of our 20,000
people over the past year. Their
continued passion and dedication
have been rewarded through our
profit sharing scheme, in which
10 per cent of profits are shared
among our staff.
The Board
Ian Durant joined us as an
independent non-executive director
on 5 October 2011.
Annual Report & Accounts 2011
5
“ We have delivered
another strong set
of results.”
Ian is Chairman of Capital and
Counties Properties PLC and a
non-executive director of Greene
King plc and Home Retail Group
plc. Ian brings extensive financial
and commercial experience,
particularly in the property field.
Bob Bennett, a non-executive
director since 2003, will retire from
the Board at our AGM in May. Bob
was, until recently, Chairman of the
Audit Committee and our Senior
Independent Director. We are
indebted to him for his service to
Greggs and wish him a very long
and happy retirement.
In view of Bob’s impending
retirement we made a number of
changes to Board responsibilities
at the beginning of 2012, with
Julie Baddeley succeeding Bob
as Senior Independent Director,
Ian Durant taking his place as
Chairman of the Audit Committee
and Iain Ferguson becoming
Chairman of the Remuneration
Committee in place of Julie
Baddeley.
Prospects
While we expect 2012 to be
another year of significant
challenge for UK consumers we
believe that we are well placed
to deliver further progress. In the
current year we will continue our
accelerated expansion with the
opening of around 90 net new
shops and further development of
new channels to market. This, and
our determination to deliver further
cost savings, reinforces our belief
that the business continues to offer
substantial opportunities for long
term, profitable growth.
Derek Netherton
Chairman
14 March 2012
In 2011, we rolled
out fresh bean to cup
Fairtrade coffee to
all our shops.
We sold over 17
million cups, an
increase of 15%
from 2010.
Annual Report & Accounts 2011
7
Chief Executive’s report
“I am pleased to report a year of progress against the background
of continuing pressure on consumers’ disposable incomes and
substantial increases in energy and ingredient costs. We have grown
sales and made Greggs even more accessible to new customers by
opening a record number of new shops across the UK. Increased
investment in promotional activity has reinforced our long-established
reputation for great value, while our drive to improve efficiency
throughout the business has contributed to the delivery of another
year of profitable growth.”
“ We have grown
sales and made Greggs
even more accessible
to new customers.”
Market background:
consumers under pressure
Consumers’ disposable income
remained under significant pressure
throughout 2011, as they were hit
by the impact of rising costs for
fuel, domestic energy and food.
The number of people out of
work also continued to grow, with
total unemployment reaching its
highest level since 1994, and youth
unemployment rising to a record
of more than one million. Greggs
naturally experienced the effects
of reduced footfall on high streets
resulting from these tough times
for the economy as a whole. Some
brighter spots included a short-
term boost in sentiment around
the royal wedding in April, and very
strong demand over the Christmas
period. This benefited from softer
comparatives with the period of
heavy snow in 2010, as well as the
more favourable trading pattern
of Christmas and New Year’s Day
falling on Sundays.
Financial performance:
in line with expectations
In this challenging trading
environment, we achieved record
sales of £701 million, a rise of
5.8 per cent. Like-for-like sales
increased by 1.4 per cent, slightly
ahead of our expectations of
marginally positive like-for-like
growth over the year as a whole.
Operating profit before exceptional
items was up 1.2 per cent at £53.0
million and pre-tax profit before
exceptional items rose 1.1 per
cent to £53.1 million. Our Finance
Director, Richard Hutton, comments
on our financial performance in
more detail in the Financial Review
on pages 11 and 12.
Our products:
listening to our customers
Throughout 2011 we recognised that
customers were seeking out even
greater value and we responded
to this with substantial increases
in our promotional investment,
particularly our popular Meal Deals.
A very strong performance in our
savouries category during the year
further underlined consumers’ focus
on outstanding value, with these
products offering a lower average
selling price compared
to sandwiches.
The breakfast market continued
to grow and we performed
strongly in this area, aided by our
breakfast Meal Deal. Hot drinks
also performed very well, following
8
Annual Report & Accounts 2011
Chief Executive’s report - continued
completion of the roll-out to all our
shops of coffee machines serving
freshly ground Fairtrade coffee; we
sold a record 17.3 million cups of
coffee during the year, an increase
of 15 per cent.
Consumers welcome innovation
and we launched 180 new products
during the year, an increase of
25 per cent. Notable successes
included our range of Superstar
Doughnuts, introduced in October,
of which we sold more than
4.8 million by the year end. Hot
sandwiches also showed good
growth as we continued our roll-out
of the range, which is now available
in over 700 shops.
The quality of our products was
recognised by our success in a
number of awards during the year.
This included the British Sandwich
Association’s prestigious “British
Sandwich Industry Award”.
Our shops: accelerated
expansion and new formats
We set new records for both shop
openings and shop refurbishments
in 2011. In total we opened 98 new
shops, a net addition of 84 shops
after 14 closures, and we have been
very pleased with the performance
of these new outlets. Our new
shop in the Westfield Stratford City
development in London broke all
our records for a first day of trading,
and is already our second highest
turnover shop in the country.
We have continued to move into
a wider range of locations where
our customers are at work, on the
move, or at leisure, with one in three
of our new shops opening away
from traditional high street locations.
This included nine openings in retail
parks and six in industrial parks,
together with two new shops at
petrol filling stations and a kiosk on
the concourse of Newcastle railway
station. In October we announced
our move into the motorway
services market through a trial with
Moto Hospitality Limited. The first
franchised Greggs shop opened
at Lymm services in Cheshire in
January 2012 and is performing
well. We will be exploring further
opportunities to open shops in
partnership with Moto in the
year ahead.
We completed 183 shop
refurbishments during the year,
making the Greggs shopping
experience even more enjoyable
for our customers by increasing
space for browsing, making more
products available for self-selection
and providing seating wherever
possible. As part of our continuing
drive to improve customer service
we completed the installation of
card payment facilities in all our
shops during the first half and
introduced contactless payment
facilities in the second half.
We believe that there are potentially
three types of shop format
appropriate for Greggs: ’Food on
the go’, ’Local bakery’ and ’Coffee
shop’. The ’Food on the go’ and
’Local bakery’ formats already
exist within Greggs but we believe
that there is the potential for a new
coffee shop format. Therefore,
in September we opened a new
coffee shop concept, “Greggs
moment”, in Newcastle upon Tyne.
“Greggs moment” offers a range
of specially developed bakery
food to complement our freshly
ground coffees and broad selection
of teas, served in an attractive
contemporary environment with
seating on two floors. It has been
well received by our customers
and we will be opening three more
“Greggs moment” outlets this
year as we continue to pursue
the opportunity presented by the
growing coffee shop market.
We passed a significant milestone
with the opening of our 1,500th
shop in York in March 2011, and
had a total of 1,571 shops at the
year end. We plan to continue our
investment in shop expansion
and refurbishments in the current
year, adding around 90 new shops,
net of closures, by the end of
2012, and refitting a further
100 - 120 shops.
New channels to market
During the year we diversified into
wholesaling as part of our strategy
to access new markets. We believe
that Greggs has the potential to
expand significantly into the ’take
home’ food market. The successful
trial of Greggs branded four-pack
frozen sausage rolls was extended
to all 750 Iceland stores nationwide
in October, with strong results,
and we are now working closely
with Iceland to add more Greggs
products to their range. Importantly,
we have seen no cannibalisation of
sales from existing Greggs shops
and have received very positive
comments from Greggs customers.
Our supply chain:
investing for future growth
At Greggs we are both a baker and
a retailer. This gives us a distinct
point of difference from most of our
competitors and a deep passion
for our products and the quality of
their ingredients. The use of our
own unique recipes, and our bakery
expertise, enables us to make great
tasting food that our customers
love, all at great value prices.
During 2011 we completed two
major investments in our supply
chain, with the commissioning
in September of new bakeries in
Newcastle upon Tyne and Penrith.
Our £16.5 million Gosforth Park
bakery in Newcastle replaces an
older bakery in the city. Our £4.5
million Penrith bakery is a specialist
confectionery facility supplying
Annual Report & Accounts 2011
9
in 2011 is not expected to continue
at the same level, and sentiment
should benefit from major national
events including the Diamond
Jubilee celebrations, the London
Olympics and the Euro 2012
football championship. We are
planning to make the most of
these opportunities while focusing
throughout the year on maximising
our customer appeal through
continued product innovation and
promotional activity.
As we expected, there has been a
slow start to 2012. The pattern of
Christmas and New Year holiday
trading that contributed to the
strength of our sales at the close
of 2011 reversed in the first week of
January, and two weeks of severe
weather, with snow and ice in many
parts of the country, also had an
adverse impact on sales. Total sales
for the first ten weeks of the current
financial year to 10 March 2012 are
up 3.3 per cent, with like-for-like
sales down by 1.8 per cent. It is
too early to tell if this slower start is
a sign of a more prolonged trend in
sales, however we have managed
costs well through this period and
our profit performance remains
on target.
Total sales this year will benefit from
the opening of around 90 net new
shops, creating a further 700 - 800
new retail jobs and making Greggs
even more accessible to customers
across the UK. We will also continue
to drive our programmes of
efficiency improvements throughout
the business. Our strategy for long
term growth is well on track, and I
believe that 2012 will be a year of
further progress for Greggs.
Kennedy McMeikan
Chief Executive
14 March 2012
shops throughout the country.
Following the opening of these
new facilities we closed our older
bakery in Penrith as part of the
strategic repositioning of our supply
chain capability.
Both new bakeries were completed
on time and within budget, and
without any interruption in the
supply chain to our customers:
a major achievement that is a
testament to the expertise of our
bakery teams. Operationally, both
bakeries are performing very
well and delivering the expected
improvements in efficiency as well
as providing us with increased
capacity to support our continued
shop expansion.
Across our supply chain as a whole,
our investment in more efficient
processes has delivered significant
savings and we now expect to
achieve our targeted £10 million of
annual savings two years ahead of
schedule in 2012.
In 2012 we will not be making the
same level of investments in our
supply chain that have been a
feature of the last two years. We will
complete a £2.5 million upgrade of
our savoury manufacturing plant in
Newcastle, which will increase its
capacity by 10 per cent. In addition
we will also invest in a “micro”
bakery in Norwich to support our
expansion in East Anglia, an area
outside the reach of our main
bakeries.
Social responsibility:
doing the right thing
At Greggs we have always prided
ourselves on “doing the right
thing”, whether for our people, our
customers, local communities or
the environment.
One great example of this has
been the fantastic work done by
so many to support children in
some of the most disadvantaged
communities. By the end of the
year Greggs Breakfast Clubs were
operating in 180 schools across the
UK, providing 8,000 children with
a free, healthy breakfast every day.
Fourteen clubs are now operating
through partner organisations
and I am delighted that more
companies are becoming involved
in supporting Breakfast Clubs.
We are enormously grateful to
these organisations for having the
vision and compassion to tackle
child poverty right here in the UK.
We were particularly pleased to be
able to open five new clubs during
the second half in areas of London,
Birmingham, Manchester and
Liverpool affected by the summer
riots. I would also like to pay tribute
to the head teachers, their staff and
the volunteers who make these
clubs work so brilliantly.
Our people: our greatest strength
We remain indebted to our
people for their incredible energy,
enthusiasm and commitment to
delivering products and service
that will delight our customers.
I am particularly pleased that we
were able to create more than 800
new retail jobs through our shop
opening programme during the
year, lifting the total number of
Greggs employees above 20,000
for the first time. We continue to
share 10 per cent of our profits with
our people and I am delighted that
a record £5.9 million will be shared
among our staff in respect of our
performance in 2011.
Outlook for 2012
This will undoubtedly be another
challenging year for UK consumers,
with disposable incomes expected
to continue contracting well into
the second half. However, the
severe inflationary pressure on
fuel, domestic energy and food
costs that the consumer suffered
We sold
over 800,000
porridge pots
in 2011, as part of
our new, wider
breakfast range.
Annual Report & Accounts 2011
11
Financial review
“In 2011 we invested to create the capacity for future growth whilst
accelerating the number of shop openings and refurbishments as
we continue to expand and modernise our estate. Higher increases
than we had planned for energy and ingredient costs were mitigated
by the accelerated delivery of cost savings, and the business has
remained cash generative and financially strong.”
“ The business has
remained cash generative and
financially strong.”
Sales
Total Group sales for the 52 weeks
ended 31 December were £701
million (2010: £662 million), an
increase of 5.8 per cent. Like-for-
like sales grew by 1.4 per cent over
the year as a whole, comprising
an increase of 0.4 per cent in the
first half, 0.8 per cent in the third
quarter and 3.8 per cent in the
final quarter. The improvement
in performance towards the end
of the year reflected the benefit
of more favourable weather in
late November and December,
compared with a period severely
disrupted by snow in 2010, and
an advantageous pattern of
Christmas and New Year trading.
Profit before exceptional items
Operating profit before exceptional
items was £53.0 million (2010:
£52.4 million), an increase of 1.2
per cent. The negative impact on
profit caused by the additional
public holiday in 2011 for the royal
wedding was in the order of £1
million, reflecting our reduced
trading hours and additional costs
of operation on the day.
After net finance income of £0.1
million (2010: £0.2 million) pre-tax
profit before exceptional items was
£53.1 million (2010: £52.5 million),
an increase of 1.1 per cent.
Operating margin
Operating margin before
exceptional items was 7.6 per cent
(2010: 7.9 per cent). Approximately
half of this reduction is directly
attributable to the costs of the
additional public holiday in 2011,
with the balance principally
reflecting a 50 per cent increase
in our investment in promotional
activity as we responded to the
demands of a significantly more
value-driven market place and
extended our national Meal Deals.
We bore substantial cost increases
in commodity prices during the
year, which affected most of
our key ingredients as well as
our energy-related production,
distribution and retailing costs. This
pressure was partly mitigated by
our continuing drive to identify and
unlock cost savings of almost £5
million throughout the business.
These were generated by further
improvements in the effectiveness
of our purchasing, and continued
overhead savings following the
centralisation of our business.
Our supply chain cost reduction
programme is ahead of plan, and
is now delivering annual savings
of £6.8 million compared with the
position two years ago. We now
expect to achieve our original target
of £10 million of annual savings in
2012, two years ahead of schedule,
and to increase the total annual
saving to £15 million by 2014.
12
Annual Report & Accounts 2011
Financial review - continued
Our diversification into
wholesaling, begun in 2011,
creates a new growth opportunity
for the future. Our initial success
with Iceland has demonstrated the
potential to sell Greggs products
into the take-home market and
foodservice sector with no obvious
cannibalisation of our own
shops’ sales.
Exceptional items
There was a net exceptional credit
in 2011 of £7.4 million (2010: nil).
As already disclosed in the interim
report, this principally comprised
an exceptional pension credit
of £9.6 million arising from the
decision that the revaluation
and indexation of occupational
pensions should in future be based
on the Consumer Price Index rather
than the Retail Price Index. This
was partly offset by a provision
of £2.2 million for property and
restructuring costs arising from the
closure of our old Newcastle and
Penrith bakeries as we relocated to
new sites.
Pre-tax profit including
exceptional items was £60.5
million (2010: £52.5 million),
an increase of 15.2 per cent.
Taxation
The Group’s effective tax rate for
the year was 26.4 per cent (2010:
27.8 per cent), a reduction of
1.4 percentage points, primarily
reflecting the lowering of the
headline rate of corporation tax
from 28 per cent to 26 per cent
from April 2011.
Earnings per share
Diluted earnings per share before
exceptional items were 38.8 pence
(2010: 37.3 pence), an increase
of 4.0 per cent, with the increase
at the pre-tax level boosted by
the lower tax charge and a lower
average number of shares in issue
following our buyback programme
in 2010. Basic earnings per share
before exceptional items were
39.5 pence (2010: 37.8 pence).
Earnings per share including
exceptional items were 44.3 pence
diluted (2010: 37.3 pence)
and 45.0 pence basic
(2010: 37.8 pence).
Dividends
The Board recommends an
increased final dividend of 13.5
pence per share (2010: 12.7
pence). Together with the interim
dividend of 5.8 pence (2010:
5.5 pence), paid in October
2011, this makes a total for the
year of 19.3 pence (2010: 18.2
pence). This is an increase of 6.0
per cent, maintaining cover by
diluted earnings per share before
exceptional items of 2.0 times.
Subject to the approval of
shareholders at the Annual
General Meeting, the final dividend
will be paid on 25 May 2012 to
shareholders on the register on
27 April 2012.
Capital expenditure
We invested £59.1 million (2010:
£45.6 million) in the business
during 2011. This reflected the
completion of the £21 million
investment in the Newcastle and
Penrith bakeries, as well as the
accelerated rate of new shop
openings and refits. We also
invested £6 million in equipment
across the business as we
completed the installation of
fresh ground coffee machines in
all our shops and continued the
roll-out of our hot sandwich offer.
Depreciation in the year was £30.7
million (2010: £29.0 million).
We plan capital expenditure of
circa £45 million in 2012, the focus
being on new shop openings and
continued refurbishments. As in
2011, our investment in the future
of the business will be funded from
our own strong cash flow.
Return on capital
We manage our return on capital
through our Investment Board,
where all capital expenditure is
subject to rigorous appraisal both
before and after it is made. For new
shops, we target a return on capital
of over 20 per cent by the third
year of operation, in recognition
of the fact that we need to cover
our longer term investment in
the supply chain. Our new shop
returns in 2011 were well on track
to achieve returns in line with
our targets.
We also targeted greater
efficiencies in the costs of
refurbishing our shops in 2011 and
were successful in achieving a
reduction of 15 per cent per square
metre in the cost of our shopfitting
during the year.
Excluding this year’s exceptional
credit, we delivered an overall
return on capital employed for 2011
of 24.4 per cent (2010: 25.9 per
cent). The year-on-year reduction
reflects the relatively modest profit
progress during a year in which
significant capital expenditure
was committed.
Cash flows and balance sheet
The Group remains highly cash
generative, with total cash
generated from operations in
2011 of £88.1 million (2010: £77.8
million). At the end of the year the
Group had no debt and net cash
and cash equivalents of £19.5
million (2010: £20.8 million). This
puts us in a strong position to
fulfil the growth potential of the
business while continuing to deliver
good returns for shareholders.
Richard Hutton
Finance Director
14 March 2012
We have sold 4.8 million
Superstar Doughnuts
since their launch in
October 2011.
14
Annual Report & Accounts 2011
Key financial
performance indicators
We use seven key financial performance indicators to monitor the performance of the Group against our
strategy. These KPIs and how we performed against them are detailed below:
Total sales growth
2011
5.8%
2010
2.1%
3.3%
2009
2008
2007
7.1%
6.4%
Like-for-like sales growth
2011
1.4%
2010
0.2%
2009
0.8%
2008
2007
4.4%
5.3%
Growth in net shop numbers
The percentage year-on-year change in total sales for the Group,
adjusted for the impact of a 53 week year in 2009.
In 2011 total sales grew by 5.8% (2010: 2.1%) to £701m (2010: £662m).
This reflected the accelerated opening of new shops along with like-for-like
sales growth in the Group’s existing estate.
Compares year-on-year cash sales in our ’core’ shops, i.e. it is not
distorted by shop openings and closures. Like-for-like sales growth
includes selling price inflation and VAT.
Like-for-like sales grew by 1.4% in 2011 (2010: 0.2%). The increase in the
rate of VAT to 20% in January 2011 accounted for 0.4% of the like-for-like
sales growth in the year.
68
84
Represents the net increase in the number of shops in operation at the
end of the year.
In 2011 we opened a total of 98 new shops and closed 14 resulting in
the net addition of 84 new shops to the estate (2010: 68).
2011
2011
2010
2010
2009
2009
10
2008
2008
2007
2007
41
32
Annual Report & Accounts 2011
15
Capital expenditure (£m)
2011
2010
2009
2008
2007
30.3
45.6
40.8
42.3
59.1
The total amount incurred in the year on investment in tangible
fixed assets.
Capital expenditure in 2011 was £59.1m (2010: £45.6m) which included
£16m (2010: £5m) in respect of the construction of two new bakeries.
Adjusted operating profit (£m)
2011
2010
2009
2008
2007
Operating margin
2011
2010
2009
2008
2007
53.0
52.4
48.4
44.3
47.7
7.6%
7.9%
7.4%
7.1%
8.1%
Reflects the performance of the Group before financing and taxation impacts
and excludes exceptional items arising in the year.
Adjusted operating profit for the year increased by 1.2% to £53.0m (2010:
£52.4m). This included the negative impact caused by the additional public
holiday in 2011, which reduced profits by circa £1m.
Shows the adjusted operating profit of the Group as a percentage of
turnover.
Operating margin for the year has reduced slightly to 7.6% (2010: 7.9%)
reflecting the additional public holiday (see above) and increased promotional
activity investment.
Adjusted diluted earnings per share (pence)
2011
2011
2010
2010
38.8
37.3
Calculated by dividing profit attributable to shareholders before exceptional
items by the average number of dilutive outstanding shares.
Diluted earnings per share increased by 4.0% to 38.8p (2010: 37.3p).
2009
2009
10
34.0
2008
2008
2007
2007
41
30.6
32
32.0
We serve fresh
sandwiches,
handmade using
bread we baked
ourselves.
Annual Report & Accounts 2011
17
Social Responsibility
8,000 breakfasts served every day in our Breakfast Clubs.
A record £1 million raised for BBC Children in Need in 2011.
£650,000 donated to Greggs Foundation.
35% reduction in salt and 17% in fat in our core
confectionery lines.
Our overall carbon footprint reduced by 5.6%.
Our approach to Social Responsibility
Greggs is a growing company
that has always cared about
’doing the right thing’ for
our local communities, our
people, our customers and for
our environment. Our values
underpin our approach to social
responsibility and help us run
our business in a safe and
responsible way.
The Board is accountable for
social responsibility, and the Chief
Executive is ultimately responsible
for the delivery of our commitments
in this area. In 2008 we established
a Steering Group to effectively
manage and embed social
responsibility within our business,
defining our responsibilities under
four key ’pillars’ – Community;
People; Food & Nutrition and
Environment.
The Steering Group, chaired
by the Company Secretary and
General Counsel, comprises four
members of the Operating Board
plus the Chief Executive and the
Social Responsibility Manager. The
Steering Group meets quarterly
and is responsible for overseeing
the delivery of our annual social
responsibility targets.
18
Annual Report & Accounts 2011
Greggs Chief Executive, Kennedy McMeikan visiting a Greggs Breakfast Club.
Making a difference to our local communities.
Progress against our
2011 targets
Extend the Greggs Breakfast
Club scheme to 180
supported clubs.
✓
By the end of the year a total of
180 Breakfast Clubs were open,
with 14 of these now operating
under our partnership model with
other organisations. In total 8,000
children benefit each day from
the clubs – that is over 1.4 million
healthy breakfasts each year –
and over 500 parent volunteers
help run clubs. We made a specific
mid-year commitment to support
the areas of London, Birmingham,
Manchester and Liverpool
affected by the recent riots, and
five of our new clubs were opened
in these areas.
Donate at least one per cent of
profits to the grant-making and
Breakfast Club programmes
of Greggs Foundation. Hold a
conference for our Regional Charity
Committees in 2011 to encourage
our people to do even more for
our local communities.
✓
In 2011 we donated a total of
£650,000 to the grant-making
and Breakfast Club programmes
of our Foundation, representing
1.2 per cent of pre-tax profits. We
held our Foundation Conference
at the beginning of February
2012 after deciding this was the
most appropriate date. We were
overwhelmed by the enthusiasm
of our people to do even more to
support our local communities in
the year ahead.
Hold our second national
fundraising week for Greggs
Foundation in 2011 with the aim
of raising over £70,000.
✓
We ran a very successful
campaign, raising £83,400. All of
this money went to support smaller,
locally-based organisations in the
communities served by our shops,
with our people and customers
encouraged to nominate local
causes to receive support. We
were delighted to have raised such
a significant amount of money for
the Foundation.
For the sixth year running we will
engage our staff and customers
in a major national fundraising
campaign to support the
BBC Children in Need appeal.
✓
2011 was another record year of
fundraising by Greggs. We raised
an amazing £1,001,052 for BBC
Children in Need. This takes our
total raised to over £3 million in
the last four years and we are
the second largest corporate
fundraiser. The immense sense of
pride and achievement at raising
such a phenomenal amount of
money for BBC Children in Need
was simply fantastic.
Support Greggs-sponsored fun
runs and another Great Bakery
Bike Ride to help more of our
Annual Report & Accounts 2011
19
personal and professional
development opportunities for
our Greggs volunteers and a
great understanding of some
of the issues facing our local
communities.
Our targets for 2012
Extend the Greggs Breakfast
Club scheme to a total number of
220 clubs.
Donate at least one per cent of
profits to the grant-making and
Breakfast Club programmes
of Greggs Foundation and
encourage our people to do even
more for our local communities.
Hold our third national
fundraising week for Greggs
Foundation with the aim of
raising £100,000 to support
good causes.
For the seventh year running we
will engage our staff and
customers in a major national
fundraising campaign to
support the BBC Children in
Need appeal.
Deliver a multi-sports
programme into 20 primary
schools to promote healthy
exercise. Support the 30th North
East Children’s Cancer Run to
help raise £300,000 in 2012.
Continue our work on initiatives
to help break the cycle of
unemployment amongst the
young and those in marginalised
groups in our communities by:
• increasing our investment
by £100,000 to help tackle
youth unemployment
• providing more than 100
placements in 2012
• providing training and
mentoring to prepare people
for the world of work.
Over £3m raised
for BBC Children in Need
in the last 4 years.
Fundraising for BBC Children in Need.
people to fundraise through
exercise-related activities.
✓
We continued our support of the
Greggs North East Children’s
Cancer Run, which has now
raised over £5 million since 1983.
In 2011 the North East Children’s
Cancer Run raised £195,000. We
also ran ’Bakery Bike Rides’ in our
regions in support of the Greggs
Foundation fundraising week.
Divert an increasing proportion
of our fresh, unsold food to
good causes.
✓
We now work with regional
FareShare organisations in
London, Birmingham, Manchester,
Newcastle, Edinburgh and
Dundee, donating unsold food for
distribution to groups in need.
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.
✓
In 2011 we have made significant
progress in our work with Business
Action on Homelessness (BAOH)
through the Cyrenians. 56 people
have now come through this
programme in the North East
with six people participating in
the Greggs BAOH programme
in 2011. We are really proud
that of these, four have now
secured employment, three with
us and one with the Cyrenians.
Our People Director sits on the
Leadership team of the National
Employers Forum to Reduce Re-
offending and we have a number
of ongoing projects to assist in
this agenda by both preparing
people for work and providing
job opportunities and placements
within Greggs. Working in these
partnerships provides support
in a variety of ways, through
training, mentoring, placement
opportunities and employment
opportunities. They also provide
20
Annual Report & Accounts 2011
A great place to work.
Progress against our
2011 targets
We will continue to share
10 per cent of our profits with
our people.
✓
We are proud that we have been
able to continue our long-standing
commitment to share 10 per cent
of our profits with our people and
a record £5.9 million will be shared
amongst eligible employees in
respect of 2011.
In our EOS survey our
engagement score will
improve to at least 73 per cent.
✓
In our Employee Opinion Survey
(EOS) our engagement score
improved to 77 per cent, up
from 72 per cent in 2010. We are
extremely pleased with this result
and we thank the 89 per cent of
our people who took the time to
complete our EOS.
We will focus on communication for
our people and our targets will be:
• More than 65 per cent of our
people feel they have the
opportunity to contribute their
views on issues that affect them.
• More than 65 per cent of our
supply teams feel that their line
manager/supervisor shares
important knowledge and
information with them.
7
Our EOS results show that
64 per cent of our workforce feel
they have the opportunity to
contribute their views. Our retail
teams achieved 66 per cent and our
Head Office teams 70 per cent. We
achieved 53 per cent in our supply
chain and this will be our main area
of focus in 2012. While missing our
overall target, this is a significant
improvement on the 58 per cent
score in 2010. In 2012 we will focus
on increasing the opportunities our
people have to contribute their views.
In 2011, 56 per cent of our
supply teams felt that important
knowledge and information about
the business is shared with them.
This misses our target of
65 per cent, but is an improvement
on the 51 per cent scored in 2010.
Our retail teams scored 81 per cent
and our Head Office teams scored 80
per cent. In 2012 we will increase our
focus on improving communication
within our supply teams.
We will create over 700 new
retail jobs through our new
shop opening programme.
✓
In 2011 we opened a net 84 new
shops around the UK, creating
over 800 new retail jobs for people
in our local communities.
We will reduce our accidents
by 5 per cent from our Accident
Incident Rate of 2010.
✓
By delivering a simpler, more
easily understood approach to
safety, involving all levels within
the business, we are pleased that
reportable accidents have been
reduced by 27 per cent. This was
an excellent achievement and a
credit to our Health and Safety
teams’ efforts in 2011.
Annual Report & Accounts 2011
21
10% of
our profits
shared with
our employees
once again.
We will recruit and develop 10 - 15
new Bakery Apprentices in 2011.
✓
We operate a Bakery Apprentice
Programme and have provided
training and career development
for ten young people in 2011.
To enhance the skills of our people
and benefit our communities we
will encourage our 650 graded
managers to commit to using
one working day to volunteer their
skills and expertise in 2011 to
support a local community-based
or environmental project.
✘
The introduction of this programme
was delayed until 2012. During
2011 we continued to provide
our people with paid time away
from work to volunteer and over
250 working days were spent
volunteering by our people,
benefiting our local communities.
Our targets for 2012
We will aim to create a further
800 new retail jobs through
our shop opening programme.
We will continue to share 10 per
cent of our profits with our people.
In our EOS survey, our
engagement score will improve
to at least 78 per cent.
We will focus on communication
with our people, and our targets
will be:
• more than 65 per cent of
our people feel they have
the opportunity to contribute
their views on issues that
affect them
• more than 65 per cent of our
supply teams feel that their
line manager/supervisor
shares important knowledge
and information with them.
We will improve our health and
safety performance through:
• reducing our accidents by a
further 5 per cent from our
Accident Incident Rate of 2011.
• increasing by 50 per cent the
number of retail units achieving
our top health and safety rating.
To enhance the skills of our people
and benefit our communities we
will continue to encourage our 650
graded managers to commit to
using one working day to volunteer
their skills and expertise in 2012 to
support a local community-based
or environmental project.
Improve the diversity of our
people by:
• ensuring that we recruit from
a wide pool of talent that is
reflective of our local community
around main office locations in
the North East of England
• delivering a roadshow
highlighting our development
programmes, career
progression and role models
to encourage more women
to progress into senior roles
throughout Greggs.
22
Annual Report & Accounts 2011
Fresh quality bakery food our customers can trust.
Progress against our
2011 targets
Provide nutritional information
for our full national range.
✓
We have published detailed
nutritional information on our
national range of products
using in-store leaflets and our
website. Customers can also
telephone our customer
contact team to request
nutritional information on any
of our products including
regional and local products.
Continue to reduce salt content,
working towards the Food
Standards Agency and Department
of Health 2012 targets, without
compromising the great taste
and quality of our food.
✓
Our work continues in this area and
we are pleased that, for our core
bread products, we have reduced
the salt content by 19 per cent,
already meeting the FSA’s
2012 target for salt in bread.
We have also reduced the salt
content of our core confectionery
lines by 35 per cent. This work
has been done without
adversely affecting the taste
or quality of our products and
our work in 2012 will continue
to focus on our sandwich and
savoury lines.
Continue to reduce fat content
without compromising the
great taste and quality
of our food.
✓
In addition to the salt reduction
work on our core confectionery
lines, we have also successfully
reduced the fat content in these
products by 17 per cent.
Again this work has been
done without adversely
affecting the taste and quality
of the products and our work
in 2012 will continue to
focus on our sandwich and
savoury lines.
Continue to remove the
last artificial flavours from
the range of products we
make ourselves.
✘
Work has continued to remove
the artificial flavours from the few
remaining products containing
them. While the work was not
completed in 2011, we fully expect
this to be completed in 2012, again
ensuring that we do not adversely
affect the taste and quality our
customers expect from Greggs.
Collate our approach to
ethical sourcing into a formal,
defined policy.
✓
In 2011 we defined our stance
on ethical sourcing in a formal
policy covering the specific areas
of ’Relationships with Suppliers’,
’Local Sourcing’, ’Quality’, ’Animal
Welfare’, ’Ethics’, ’Environment’
and ’People’.
Annual Report & Accounts 2011
23
We provide
nutritional
information
for our full
national range.
Promote better understanding
of balanced diets.
✓
We continued our work with
ExpoChef in 2011, working with
over 7,000 primary school children
to promote a better understanding
of food and the need for a
balanced diet as part of a healthy
lifestyle - since 2010 over 10,500
children have benefited from our
partnership with ExpoChef.
We also partnered with Newcastle
Eagles Foundation to deliver
a healthy diet and lifestyle
message to over 800 primary
school children, while our ’football
festivals’ with Newcastle United
Foundation / Complete Football
delivered a similar lifestyle and
exercise programme for 27
primary schools across the
North East region.
Our targets for 2012
Keep up-to-date nutritional information available for customers on:
• our evolving national range
• our key local lines.
Continue to reduce salt content, working towards the FSA / DoH 2012
targets, without compromising the great taste and quality of our food,
with particular emphasis on:
• savouries
• sandwiches.
Continue to reduce fat content through recipe improvement without
compromising the great taste and quality of our food, with particular
emphasis on:
• savouries
• sandwiches.
Remove the last artificial flavours from our savoury range without
compromising their great taste and quality.
Undertake and evaluate a significant trial to display calorie information
on shelf edge ticketing for the entire range.
24
Annual Report & Accounts 2011
Reducing our impact on the world around us.
Our targets for 2012
We will continue to target a 25
per cent reduction in our carbon
footprint by 2015 (measured
in tonnes of CO2e per shop)
by building on our 5.6 per cent
reduction in 2011.
Achieve a reduction in total
energy usage (measured in
tonnes of CO2e per shop) of:
• 3 per cent in bakeries
• 1.5 per cent in shops.
We will divert an additional 5
per cent of waste from landfill
in 2012, building on the 75 per
cent of waste currently diverted
in 2011.
Achieve an additional 1.5
per cent reduction in carbon
generated by our distribution
activity (measured in tonnes
of CO2e per KM per shop) as
part of a three-year 6 per cent
reduction target.
We will support the Rivers Trusts
in Wales through the donation
of the revenues raised from the
Welsh carrier bag charge.
Progress against our
2011 targets
Achieve a 5 per cent reduction
on 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.
✓
A range of efficiency work
across our shops, bakeries and
distribution fleet has successfully
reduced our overall footprint
(tonnes of carbon per shop) by 5.6
per cent this year.
Achieve a 3 per cent reduction in
total energy usage in our shops
and bakeries (measured in
tonnes of CO2e per shop).
✓
We are pleased to report that our
energy efficiency work across retail
and supply has delivered a 3.8 per
cent reduction in carbon per shop,
against a target of 3 per cent.
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).
✓
Trials of the latest vehicle
telematics system and a dedicated
fuel efficiency training programme,
coupled with ongoing fleet
efficiency work, has enabled us to
meet our 3-year reduction target
on distribution fleet carbon in a
single year. Against a 2.5 per cent
reduction target, we reduced our
carbon (tonnes per KM per shop)
by 6.2 per cent.
We will divert an additional
10 per cent of waste from
landfill in 2011.
✓
We have worked hard over the last
two years to significantly reduce
the proportion of our waste going
to landfill and we are pleased to
report that in 2011 we successfully
diverted an additional 29 per cent
of waste from landfill. We now
divert 75 per cent of our waste
away from landfill, a significant
achievement compared to
2009 (16 per cent) and 2010
(49 per cent).
Reduce our bakery waste by
5 per cent (on a per shop basis).
✓
In terms of reducing production
waste, we are pleased with our
progress in 2011, and while there is
room for further improvement, we
have successfully reduced bakery
waste (on a per shop basis) by
17 per cent.
We will trial an electric car
for six months to get a better
understanding of how this
could help reduce our future
carbon footprint.
✓
During 2011 we trialled a Nissan
LEAF electric car and feedback
was positive although concerns
remain over the range of the
vehicle. The findings will help us
to further revise and shape our car
policy when electric vehicles go
into mass production in the future.
We will explore involvement
with the Rivers Trust to investigate
ways in which we can support
improvements in the
environment.
✓
We have investigated ways in
which we can work with the
individual Rivers Trusts, and
plans are now in place to offer
volunteering opportunities as part
of our volunteering programme
in 2012.
Annual Report & Accounts 2011
25
Re-opening of our Colchester shops, following a refit.
Greggs is a member of
the FTSE4Good
sustainability index.
Greggs took part in the
Business in the Community
Corporate Responsibility
Index for the first time in
2010. We continued our
involvement in 2011 and
achieved a bronze award.
Recognition
The Greggs Foundation
received recognition as
Corporate Foundation
of the Year at the 2011
Business Charity Awards,
praised for its localness, the
engagement of staff and the
fabulous neighbourhood
charitable activity.
Greggs Finance Director
Richard Hutton was
presented with the
Sustainable Business
Award at the FDs’
Excellence Awards 2011.
Greggs is a contributor to the
Carbon Disclosure Project.
26
Annual Report & Accounts 2011
Principal risks
and uncertainties
The Board is ultimately responsible for the Company’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.
Our principal risks and uncertainties relating to the business at present are as follows:
Market and economic risks
Risks and their impact
Economic uncertainty
Mitigating actions and controls
The continued economic uncertainty in the UK and
beyond affects consumer confidence and reduces the
footfall on the high street. This could have a detrimental
effect on the Company’s revenues.
The Company is committed to maintaining the value
of its offer and works to find the most effective ways
to communicate this to customers. The Company
continues to diversify its estate such that it is not
entirely reliant on high street footfall.
Consumers’ tastes and trends
Customer tastes are constantly changing, as are
trends in eating, driven by government-backed
campaigns linked to the health of the nation and
obesity. The Company could lose market share if its
products do not keep up with these tastes and trends.
The Company conducts regular research into
consumer tastes, and works constantly on product
development to ensure its range has broad appeal
and reflects changing trends. It also monitors changes
in and performance of its competitors. The Company
recognises the link between a balanced diet and a
healthy lifestyle and therefore provides nutritional
information on its website to allow customers to make
an informed choice.
Annual Report & Accounts 2011
27
Operational risks
Risks and their impact
Mitigating actions and controls
Product quality and safety
The Company produces and sells a wide range
of products. If products are not of a high and
consistent standard, or out-of-date ingredients and
products are used and sold, the Company could be
exposed to significant food safety issues. This could
have a detrimental impact on consumer confidence
and revenue.
Disruption to production
A major incident leads to the loss of a key production
facility. This could lead to a significant loss of capacity
and supply disruption to our shops with a resultant
impact on revenue.
The Company has in place detailed procedures
regarding product quality and safety and these are
subject to regular audits.
The Company has detailed disaster recovery and
business continuity plans which include potential
alternative sources of supply.
Food scare
A major food scare beyond the control of the Company
could lead to a disruption in ingredient supply or a
general consumer boycott of some products.
We constantly monitor national and worldwide
situations. We also work closely with Government and
other UK agencies.
Disruption to external supply chain
Dependencies on key suppliers could lead to a
situation where we are unable to maintain production.
We aim to ensure we have several sources of supply
but where this is not achieved we have an actionable
alternative supply strategy.
Reputation risk
If we don’t meet high production, safety, social,
environmental and ethical standards in all of our
operations there is a risk that our brand reputation
could be damaged.
Our Operating Board, Risk Committee and Social
Responsibility Steering Group regularly review and
monitor our operations, identifying potentially brand-
damaging risks and developing mitigation plans. All of
our products are subjected to rigorous quality checks
and audit. We also have in place a Crisis Management
process for dealing with incidents in an appropriate
and timely manner, and we retain public relations
consultants to advise and assist with any issues which
are being debated in public.
28
Annual Report & Accounts 2011
Principal risks and uncertainties - continued
Regulatory risks
Risks and their impact
Mitigating actions and controls
Health and safety
A health and safety accident or incident could lead to
serious illness, injury or even loss of life for one or more
of the Company’s employees or customers.
The Company has functioning health and safety
policies and procedures throughout the business.
The operation of these is subject to both internal and
external audit.
Legal
Adverse regulatory risk including tax, planning,
environmental, employment, and food safety laws can
increase the cost base and reduce flexibility.
In addition to taking advice where it is considered
appropriate, the Company monitors new legislative
developments through its membership of the CBI
and British Retail Consortium, such that it can lobby
Government where appropriate and plan to give effect
to new laws as and when they are adopted.
Financial risks
Risks and their impact
Mitigating actions and controls
Liquidity
The Company operates with net current liabilities and
is reliant on its cash sales to meet short-term payment
requirements.
In the event of a significant business interruption
the Company would draw on cash and borrowing
facilities to meet working capital requirements. This
would include deferring capital expenditure in order to
maximise cashflow.
Pension scheme
The Company has a potential liability under its defined
benefit pension scheme. The funding level of the
scheme is sensitive to the risk of changes in key
assumptions such as life expectancy, price inflation
and asset returns. Changes in these assumptions can
lead to volatility in the liability (or surplus) recognised
on the balance sheet.
Price inflation
Significant changes in the costs of raw materials,
wages, overheads and utilities could create volatility in
the Company’s short-term financial performance.
The scheme is closed to new members and to future
accrual of benefits. The Company works closely with
the Trustee of the scheme to manage its long-term
funding requirements.
To mitigate this risk, agreements with suppliers fix the
price of key input costs in the short term. This reduces
volatility and allows the Company to plan its costs with
greater certainty.
Risk management
Operating Board
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
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.
The Operating Board, answerable
directly to the Chief Executive,
is responsible for implementing
decisions of the Board and
providing protection against the
major risks by various techniques,
including strategic planning,
monitoring, supervision and training.
The Operating Board is made
up of the following functional
directors: Finance, Retail, Trading
and Marketing, Supply Chain,
People, and Corporate Affairs. It
meets monthly to review financial
and other business performance,
as well as to develop, monitor and
implement the strategies as set by
the Board. Although the Operating
Board is not a formal committee
of the Board, it does have its
own terms of reference which are
reviewed by the Board from time
to time.
Risk Committee
The Risk Committee is a
management committee chaired
by the Company Secretary
and General Counsel. The Risk
Committee consists of the Chief
Executive, all members of the
Operating Board, and appropriate
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 through
personal presentation, narrative
reports and key performance
indicators (internal and external
to the organisation) and through
the Audit Committee. The risks
are assessed on a regular basis
across all functional areas but, in
particular, the areas of food safety,
health and safety, the competitive
environment, information flow,
Annual Report & Accounts 2011
29
asset protection and regulatory
requirements.
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.
There were no matters reported
through the policy during the year.
Following the implementation of
the Bribery Act in July 2011, a new
Anti-Bribery and Corruption Policy
was introduced. Subsequently a
Business Conduct Policy with an
associated updated Gifts, Tips and
Hospitality Policy has been issued
and the final stage will include a
review of the Whistle Blowing Policy.
Internal audit
The function continues to review
the performance of shops, bakeries
and central 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 and 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. 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.
In 2012 the Internal Audit team will
be provided with further resource
to increase its effectiveness.
30
Annual Report & Accounts 2011
Board of Directors
Back row, from left to right - Bob Bennett, Iain Ferguson, Jonathan Jowett, Raymond Reynolds, Richard Hutton, Roger Whiteside.
Front row, from left to right - Julie Baddeley, Derek Netherton, Kennedy McMeikan, Ian Durant.
The Board
The Board currently comprises the
Chairman, three executive and five
non-executive directors. On 5 October
2011, Ian Durant joined the Board
as an independent non-executive
director. There were no other
changes to the Board during
the period.
Derek Netherton
(Chairman), 67
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 was appointed to the
Board on 1 March 2002 and was
appointed Chairman in August of the
same year. Derek is Chairman
of Opera North, and a non-executive
director of three companies in the
Canada Life UK group. There have
been no significant changes to the
Chairman’s other commitments
during 2011. Derek is Chairman of
the Nominations Committee.
Kennedy McMeikan
(Chief Executive), 46
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 retail career at Sears UK in
1986, after five years’ service in the
Royal Navy.
Richard Hutton FCA
(Finance Director), 43
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), 52
Was appointed to the Board as Retail
Director on 18 December 2006. He
joined Greggs in retail management
in 1986, and has recently celebrated
25 years’ service with the Company.
During the late 1990s, as General
Manager, he built a significant new
business for Greggs in the Edinburgh
region, and in 2002 he was appointed
Managing Director of Greggs of
Scotland.
Bob Bennett, 64
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
Audit, Nominations and Remuneration
Committees, and was Chairman of
the Audit Committee from 2004 and
Senior Independent Director (from
2008), until 31 December 2011. Bob
will retire as a director at the end of
the AGM to be held on 16 May 2012.
Julie Baddeley, 60
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 Harvey Nash
plc, and is Chairwoman of Sustain
Limited, the environmental consulting
group. Julie is a member of the
Remuneration, Nominations and Audit
Committees and was Chair of the
Remuneration Committee until
31 December 2011. Julie was
appointed as the Senior Independent
Director on 1 January 2012.
Roger Whiteside, 53
Joined the Board on 17 March 2008.
Roger is Chief Executive 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.
Iain Ferguson, CBE, 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 currently a non-
executive director of Balfour Beatty
plc, Chairman Elect of Berendson
plc, Honorary Vice President of the
British Nutrition Foundation and
lead non-executive director of the
DEFRA Management Committee.
Iain became Chairman of the
Remuneration Committee on
1 January 2012, and is also a
member of the Nominations and
Audit Committees.
Ian Durant, 53
Joined the Board on 5 October 2011.
He is a Chartered Accountant with a
background in international financial
and commercial management, and
experience of the retail, property, hotel
and transport sectors. Ian’s career
includes leadership roles with the
retail division of Hanson and Jardine
Matheson, Hongkong Land, Dairy
Farm International, Thistle Hotels,
SeaContainers and as Finance
Director at Liberty International. Ian
is currently Chairman of Capital and
Counties Properties PLC, a non-
executive director of Greene King
plc and Home Retail Group plc,
and an Advisory Board member of
Eurosite Power Inc. Ian was appointed
Chairman of the Audit Committee on
1 January 2012 and he also sits on
the Nominations and Remuneration
Committees.
Jonathan Jowett
(Company Secretary), 49
Joined the Company in April 2010
and was appointed as Company
Secretary on 12 May 2010. He is a
solicitor by profession, and has held
the position of Company Secretary
in a number of FTSE 250 and FTSE
Annual Report & Accounts 2011
31
Smallcap companies. His previous
employers include Avon Cosmetics
Limited, SSL International plc, Wagon
plc and Bakkavor Group. Jonathan is
Secretary to the Board and each of
its committees.
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 1 January 2011
and 31 December 2011 (or at date
of appointment if later) are set out in
note 25 to the accounts. Details of
directors’ share options are set out in
the Directors’ Remuneration report on
pages 40 to 51.
In accordance with provision B.7.1
of the Governance Code, all directors
will retire from the Board at the AGM
and offer themselves for election
by shareholders.
The Nominations Committee has
considered the appropriateness and
suitability of each director standing for
election and has recommended to the
Board that each individual should be
put forward for election.
Directors’ indemnities
and conflicts
As at the date of this report,
indemnities are in force under
which the Company has agreed to
indemnify the directors, to the extent
permitted by law, in respect of losses
arising out of or in connection with
the execution of their duties, powers
or responsibilities as directors of the
Company. The indemnities do not
apply in situations where the relevant
director has been guilty of fraud or
wilful misconduct.
Under the authority granted to
them in the Company’s Articles
of Association, the Board has
considered carefully any situation
declared by any director pursuant
to which they have or might have
a conflict of interest and, where it
considers it appropriate to do so,
has authorised the continuation
of that situation. In exercising its
authority, the directors have had
regard to their statutory and other
duties to the Company.
32
Annual Report & Accounts 2011
Governance
“This is the first year that the
Board is reporting against The
UK Corporate Governance Code
(“the Governance Code”), as
introduced by the Financial
Reporting Council in June
2010. I can report that the
Board considers that it has
complied, throughout the year
under review, with the principles
of governance set out in the
Governance Code.”
Derek Netherton – Chairman
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 following statements, together
with the Directors’ Remuneration
Report on pages 40 to 51,
describe how the relevant
principles and provisions of the
Governance Code were applied to
the Company in 2011 and will be
relevant to the Company for the
2012 financial year.
The Board
Effectiveness
The Nominations Committee under
the leadership of the Chairman
has considered the blend of skills
and experience that the directors
bring to the Board. This includes
independent and objective
experience of food retailing,
consumer goods manufacturing,
finance, property, human resource
management and corporate
finance to complement the existing
skills and experience of the
executive directors.
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 2011, the
scheduled Board and Committee
meetings and the number of
meetings attended by each 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
Ian Durant*
Iain Ferguson
Roger Whiteside
6
6
6
6
6
5
5
1
6
6
4
-
-
-
-
3
4
1
4
4
4
-
-
-
-
3
4
1
4
4
3
3
-
-
-
3
2
1
3
3
*Based on meetings since joining the Board on 5 October 2011.
In addition, the non-executive directors meet formally twice each year and from time to time, as required.
The Board has a policy on the
separation of the roles of the
Chairman and the Chief Executive.
The Chairman sets the agenda
for Board meetings in accordance
with a specific Schedule of Matters
Reserved, 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 proud of its reputation
for bringing the Company’s best
talent through the organisation and
encouraging people to succeed
regardless of gender, race or any
other characteristic. As a result
three out of seven of the most
senior retail managers are women,
as are three out of ten bakery
managers. The Board believes it is
in the best interests of the Company
to continue to bring women through
to the very top levels within the
business and is supportive of Lord
Davies’ call to action.
At Board level, the Company has
benefited from having a stable
Board and would only look to
replace the existing directors as
and when it is appropriate for them
to retire. At the moment the Board
has nine directors (of whom one is
female) and would hope to have
recruited two new female directors
by 2015. This of course depends
on finding suitable candidates,
and the Board will continue to
actively encourage its recruiters
to seek out qualified women as
potential directors.
The Board is firmly of the view that
it is in the interests of the Company
and the communities in which
it operates that it recruits and
develops the very best people from
the widest possible pool of talent.
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 Governance
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.
Election and re-election of
directors
The Company’s articles of
association require that all directors
must retire and seek election at the
first AGM following appointment.
Accordingly, Ian Durant will resign
as a director and offer himself for
election at the AGM to be held on
16 May 2012. Furthermore, the
Board has resolved that, in line with
Governance Code provision B.7.1,
all of the directors will be subject to
annual re-election by shareholders.
Annual Report & Accounts 2011
33
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.
Evaluation
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 2011, 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 then
to the Board for evaluation and
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.
The Board has not yet conducted
an external evaluation, and will give
consideration to this in autumn
2012 when the subject is next due
for review.
34
Annual Report & Accounts 2011
Governance - continued
Board Committees
The Nominations Committee
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, and each of the
committees is provided with sufficient
resources to undertake its duties.
The Audit Committee
currently consists of five independent
non-executive directors: Ian
Durant (who assumed the Chair
on 1 January 2012), Bob Bennett
(Chairman until 31 December 2011),
Julie Baddeley, Roger Whiteside and
Iain Ferguson. The Committee met
four times in the year, and a fuller
report on its activities is set out on
pages 36 and 37.
The Remuneration Committee
currently consists entirely of
independent non-executive directors:
Iain Ferguson (who assumed the
chair from 1 January 2012) Julie
Baddeley (who was Chair until 31
December 2011), Bob Bennett,
Roger Whiteside and Ian Durant.
The Committee’s main duties (which
it discharged during the year) are to
determine the base 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 40 to 51 of this annual report.
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 should be
nominated for re-election by the
members; and to approve and
manage the process for setting
the specification for all Board
appointments, identifying candidates
who meet that specification and
making recommendations to
the Board on the basis of merit
and compliance with objective
criteria in respect of all new
Board appointments.
In recruiting additional directors
the Nominations Committee
defines the role and uses external
consultants to assist in identifying
suitable candidates from which
the Committee selects a shortlist
and conducts interviews. The final
candidate is then subject to formal
recommendation by the Committee
and approval by the Board.
During the year the Committee
oversaw the appointment of Ian
Durant as an independent
non-executive director. This process
commenced with the appointment
of Inzito LLP to assist with the
search for a non-executive director.
Inzito followed a brief approved by
the Nominations Committee and
produced a shortlist of candidates
who were interviewed by members
of the Committee and the executive
directors. The Committee then
recommended to the Board the
appointment of Ian Durant, which
was duly confirmed.
Board Handbook which contains
key information and policies that
are relevant to the position. In the
induction process tailored for Ian
Durant, this included meeting with
the external auditor, as well as other
senior members of KPMG Audit Plc
who are not otherwise engaged on
the audit work for the Company.
For new executive directors where
the appointment is their first such
office, the induction includes details
of the legal duties and obligations
of being a director.
Risk management
Details of the Company’s principal
risks and the management of
these are given in the Business
Review section, Principal risks and
uncertainties on pages 26 to 29.
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.
Relations with shareholders
The Chairman ensures that
there is effective communication
with individual and institutional
shareholders through the
announcement of regular trading
updates, as well as general
presentations after announcement
of the interim and preliminary
results and the posting of results
on the Company’s website.
The Board receives reports on
any comments received from
shareholders following these
presentations.
Following appointment, new directors
are subject to an in-depth tailored
induction process. In the case of
non-executive directors, this
includes meeting with members
of the Operating Board, visiting
bakeries, shops, and offices, and
being provided with an extensive
The Chief Executive and the
Finance Director carry out
extensive engagement with
institutional shareholders and
market analysts, either meeting
them as part of company
presentations and briefings,
Annual Report & Accounts 2011
35
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 they are individually aware,
there is no relevant audit information
of which the Company’s auditors
are unaware; and that they have
taken all the steps that they ought
to have taken as a director to make
themselves aware of any relevant
audit information and to establish
that the Company’s auditors are
aware of that information.
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, Chief
Executive’s report and the Financial
Review which supplement the
statutory accounts themselves.
A statement of directors’
responsibilities in respect of the
preparation of accounts is given on
page 52. A statement of auditors’
responsibilities is given in the report
of the auditors on page 53.
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 63).
Number of
shares held
Percentage of
issued share capital
Templeton Investment Counsel LLC
Troy Asset Management
F & C Asset Management
Legal & General Investment
Management
5,059,689
4,640,666
3,403,162
3,188,166
5.00
4.59
3.36
3.15
individual meetings, or in telephone
calls. 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 AGM is well attended, with
the Chairmen of the Board and its
Committees available to answer
any issues raised and any newly
appointed directors being available
to meet shareholders. 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 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.
Substantial shareholdings
At 14 March 2012 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:
36
Annual Report & Accounts 2011
Audit Committee Report
“I am pleased to present the Company’s first separate report to
shareholders on the work of the Audit Committee.”
Ian Durant, Chairman of the Audit Committee
Committee activity
The Audit Committee is one of the
key committees of the Board. The
main functions discharged by the
Committee during the year were:
(i)
(ii)
(iii)
(iv)
(v)
to ensure that the accounting
and financial policies of
the Company are proper
and effective;
to assist the Board in fulfilling
its oversight responsibilities
by monitoring the integrity of
the accounts and information
published by the Company;
to review the internal
financial controls and the
Group’s approach to risk
management;
to monitor compliance with
the Listing Rules and the
recommendations of the
Governance Code; and
to maintain an appropriate
relationship with the
Company’s external and
internal 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;
monitored compliance with
financial reporting standards;
considered the accounting for
items requiring the exercise of
material judgements, estimates
and assumptions and any unusual
items; considered the Company’s
taxation policy and accounting;
and considered the size and remit
of the internal audit function.
The Committee reviewed the
Company’s internal control
environment to satisfy itself that
procedures are in place to ensure
that assets are well protected,
authority levels for expenditure
are clear, segregation of duties
exists 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 inspection by the internal audit
team and review by the Audit
Committee.
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.
Following the introduction of
the Bribery Act in July 2011,
the Committee considered and
approved a new Anti-Bribery and
Corruption Policy, along with a
new Business Conduct Policy
and a revised Gifts, Tips and
Hospitality Policy.
The Committee normally invites
the Chairman, the executive
directors, the Internal Audit
Manager, and the external auditors
to attend its meetings, although
time is set aside bi-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.
Annual Report & Accounts 2011
37
The Governance 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 Company’s financial team
and to its auditors and can seek
further professional advice, at the
Company’s cost, if required.
External auditors
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%
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 2011, non-audit fees
paid to KPMG Audit Plc and related
KPMG operations amounted to
£83,000 (which is 52 per cent of the
audit fee for the year) and related
to taxation compliance services
and pension scheme audits.
Reappointment of auditors
In accordance with Section 489
of the Companies Act 2006, a
resolution for the reappointment
of KPMG Audit Plc as auditors
of the Company will be proposed
at the forthcoming Annual
General Meeting.
Ian Durant
Chairman of the Audit Committee
14 March 2012
38
Annual Report & Accounts 2011
Additional information
Fixed assets
In the opinion of the directors,
the aggregate market value of
the Group’s properties is not
significantly different from their
historical net book amount.
Authority to purchase shares
At the AGM (Annual General
Meeting) on 11 May 2011, 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 had not been used as
at 31 December 2011.
The authority remains in force until
the conclusion of the AGM in 2012
or 16 August 2012, whichever is the
earlier. It is the Board’s intention to
seek approval at the 2012 AGM for
the renewal of this authority.
Takeover Directive information
Following the implementation
of the European Directive on
Takeover Bids by certain provisions
of the Companies Act 2006, the
Company is required to disclose
certain additional information in the
directors’ report. This information is
set out below.
• The Company has one class
of share in issue being ordinary
shares of 2p each. As at 14 March
2012, 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) of the Companies Act 2006
(CA 2006) or if the shareholder has
failed to reply to a duly served notice
requiring him to provide a written
statement stating he is the beneficial
owner of shares.
• A notice convening a general
meeting can contain a statement
that a shareholder is not entitled
to attend and vote at a general
meeting unless his name is entered
on the register of members of the
Company at a specific time (not
more than 48 hours before the
meeting) and if a shareholder’s
name is not so entered he is not
entitled to attend and vote.
• 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 35.
• Where, under an employee share
plan operated by the Company,
Annual Report & Accounts 2011
39
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 AGM, any
director appointed by the Board
since the last AGM must retire from
office but is eligible for re-election
by the shareholders. Furthermore,
the Board has resolved that, in line
with Governance Code provision
B.7.1, all of the directors will be
subject to annual re-election by
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 buy back shares
in the Company. At each AGM,
resolutions are proposed granting
and setting out the limits on
these powers.
• The Company is not party to any
significant agreements which take
effect, alter or terminate upon a
change of control of the Company,
following a takeover bid.
• There are no agreements
between the Company and its
directors or employees providing
for compensation for loss of office
or employment (whether through
resignation, purported redundancy
or otherwise) that occurs because
of a takeover bid. Details of the
directors’ service agreements and
terms of appointment are set out
in the Directors’ Remuneration
Report on pages 40 to 51. However,
provisions in the employee share
plans operated by the Company
may allow options to be exercised
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 31 December 2011 was 41
days (2010: 41 days).
Disabled employees
Applications for employment
of disabled persons are always
fully considered, bearing in mind
the aptitudes of the applicant
concerned. In the event of members
of staff becoming disabled every
effort is made to ensure that their
employment within the Company
continues and that appropriate
training is arranged. It is the policy
of the Company that the training,
career development and promotion
of disabled persons should, as far
as possible, be identical to that of
other employees.
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 order of the Board
Jonathan D Jowett
Company Secretary
Greggs plc (CRN 502851)
Fernwood House
Clayton Road
Jesmond
Newcastle upon Tyne
NE2 1TL
14 March 2012
40
Annual Report & Accounts 2011
Directors’ Remuneration Report
“I am pleased to introduce the Directors’ Remuneration
Report of Greggs plc.”
Iain Ferguson, Chairman of the Remuneration Committee
The aim of Greggs’ remuneration
policy is to align executive
remuneration with shareholders’
interests and the long term
growth of the Company. The
Remuneration Committee
will continue to review the
remuneration arrangements
on an ongoing basis to ensure
that the structure remains
appropriate.
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 UK Corporate
Governance code relating to
directors’ remuneration.
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 unaudited
and audited 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 was chaired by
Julie Baddeley until 31 December
2011, after which Iain Ferguson
was appointed to that role.
During the course of meetings held
in the year, items considered by the
Committee included:
• the targets in place for the
Performance Share Plan;
The Regulations require the
auditors to report to the Company’s
members on the “auditable part”
• setting of objectives for the
executive directors ensuring risk
forms a key part of these; and
• review of 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 in the context
of market and best practice.
Jonathan Jowett (Company
Secretary and General Counsel)
and Roisin Currie (Group People
Director) 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. Base salaries
Annual Report & Accounts 2011
41
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. This exercise has
been conducted by PWC in 2011,
however the recommendations
Overview of remuneration policy
from this report, which were to
increase the executives’ salaries in
line with the market, have not been
actioned in 2012.
performance on risk, governance,
environmental and social issues
when setting the remuneration of
executive directors.
The Committee seeks to structure
bonus arrangements that will align
the interests of executive directors
with those of shareholders. The
Committee considers corporate
Objective
Performance period
Basis of delivery
Base salary
Reflects market levels
based on role and
individual skill and
experience
Annual Bonus
(including Profit Share)
Maximum earning
opportunity of 90 per cent
of salary for all
executive directors
Incentivises achievement
of annual targets and
objectives consistent
with the short to medium
term strategic needs of
the business
Reviewed annually
Reviewed annually
Performance
Share Plan
Incentivises long-term
value creation
Annual award
Alignment with
shareholders’ interests
Three year
performance period
Retention incentive
Individual performance and
contribution recognised
to ensure market
competitiveness
Balanced approach based
on stretching financial
(profit and sales) targets
and personal objectives
(related to functional KPIs)
Award subject to a
combination of demanding
TSR and EPS targets
Maximum reward will only
occur for upper quartile
performance
Provides a market
competitive level of
provision with good
flexibility while minimising
risk to the Company
Cost increases in line with
base salary growth
Defined contribution
benefits
Maximum awards
of 90 per cent of salary for
Chief Executive and 70
per cent of salary for other
executive directors
Pension
Base salary
For 2012 an increase of 2.75 per cent 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 increased in line with market salary growth.
42
Annual Report & Accounts 2011
Directors’ Remuneration Report - continued
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 2011 the maximum target bonus levels
were established on the following basis:
Maximum 2011 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) 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
Whilst each element could be
measured separately, failure to
exceed the profit level achieved
in 2010 would have resulted in no
bonus being earned for either the
profit or sales elements in 2011.
Against the 2011 annual bonus
targets, a payment of 35 per cent
of annual salary has been earned
by Kennedy McMeikan, 35 per
cent by Richard Hutton and 35
per cent by Raymond Reynolds.
This compares to 2010 where the
executives earned 51.0 per cent of
salary for delivery of the annual
bonus target.
For 2012 the maximum target
bonus levels will continue to
be established on the basis
above, which the Remuneration
Committee considers to be
suitably challenging.
Whilst each element can be
measured separately, failure to
exceed the profit level achieved in
2011 will result in no bonus being
earned for either the profit or sales
elements in 2012.
The Committee introduced a
clawback clause in the Bonus
Scheme rules in 2011 as follows:
“The Committee reserves the right
to ’clawback’ 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”.
Annual Report & Accounts 2011
43
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 a PSP under which an award of shares is made that is 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, has provided a greater focus on achieving key long
term business goals and increased shareholder value.
The awards made under the PSP in 2010 and 2011 have the following targets set:
EPS
TSR
Annual compound
growth
Proportion of
award vesting
(% opportunity)
Position relative to
appropriate group
of FTSE 250 Food
Producers, Retailers &
Leisure Companies
Proportion of
award vesting
(% opportunity)
Failure to vest
Less than RPI + 3%
Threshold
Maximum
RPI + 3%
RPI + 8%
Nil
12.5%
50%
Below median
At median
Upper quartile
Nil
12.5%
50%
Following advice received from PWC, and given the current economic climate, the Committee is satisfied
that these targets are sufficiently challenging to ensure they drive the right behaviours whilst also rewarding
performance. Consequently the Committee has decided that these targets will again be used for the 2012 grant.
The comparator group used in connection with the PSP was established following a comprehensive review,
including advice taken from PWC, and now consists of 26 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. Northern Foods and Robert Wiseman Dairies were removed from the list given
their delisted status. The remaining 26 companies are:
• Brown (N) Group
• Carpetright
• Cranswick
• Dairy Crest
• Debenhams
• Dignity
• Dixons Retail
• Domino’s Pizza
• Dunelm Group
• Game Group
• Greene King
• Halfords Group
• HMV Group
• JD Wetherspoon
• Inchcape
• Kesa Electricals
• Marston’s
• Millennium & Copthorne Hotels
• Mitchells & Butlers
• Mothercare
• Premier Foods
• Rank Group
• Restaurant Group
• Sports Direct International
• Tate & Lyle
• WH Smith
These targets and the comparator group will remain in place for the 2012 scheme and will be reviewed by the Committee
at the end of 2012, given that the scheme will then have been in place for three years.
44
Annual Report & Accounts 2011
Directors’ Remuneration Report - continued
Other share based
incentive schemes
LTIP
As previously outlined, from 2010
a PSP has replaced the previous
LTIP, and therefore the Committee
will offer no further participation in
the LTIP. In 2011, the LTIP award
of over 180,210 shares made to
Kennedy McMeikan when he joined
the Company in 2008, came to
maturity. The performance criterion
set at the time of the award was
not met, and therefore none of
the options awarded have vested.
Consequently, all options granted
under the LTIP have either been
exercised or lapsed.
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 to
executive directors in 2011.
Details of awards previously made
to executive directors under this
scheme are given in the audited
section of this report on page 49.
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 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 base 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’
on page 49.
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 to 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
per cent of pensionable salaries
from members, provided for up
to two-thirds of final pensionable
salary, dependent on length of
Annual Report & Accounts 2011
45
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.
Due to the changes in the
annual allowance for tax relief on
pensions, effective from 6 April
2011, the Committee has decided
to allow the executive directors
a degree of flexibility with regard
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 directors 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 is
disclosed on page 48.
Share Retention Guidelines
The Committee has introduced
Share Retention Guidelines for
executive directors. These are
effective from 1 January 2011 and
require executive directors to build
up a shareholding of 100 per cent
of their respective base salaries in
a five year period, through shares
matured and granted via the
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.
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Number of shares held at the
end of the year
Holding as a percentage of
base salary for year*
2011
72,425
55,003
52,440
2010
64,681
35,237
52,010
2011
80.2%
104.7%
111.9%
2010
67.9%
63.5%
105.1%
*the percentage holding is calculated using the year end share price.
46
Annual Report & Accounts 2011
Directors’ Remuneration Report - continued
Policy on Service Contract
Notice Periods and Payments on
Early Termination
The Company’s policy on the
duration of executive 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;
• it has been agreed that future
executive directors’ service
contracts will be terminable on one
year’s notice served by either party;
• non-executive directors
are appointed subject to the
Company’s articles of association,
which require them to retire and
to seek election at the first AGM
after appointment. Thereafter, and
following the introduction of the UK
Corporate Governance Code in
June 2010, the Board has resolved
that every director will be subject to
annual re-election by shareholders.
The Nominations Committee
advises the Board as to whether
directors should be nominated for
re-election; and
• it seeks mitigation of entitlements
on termination. 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 offer
themselves for election or
re-election, or if not re-appointed at
such time.
Directors’ service contracts
Details of the directors’ service
contracts or letters of appointment
are as follows:
Executive Directors
Kennedy McMeikan has a service
contract with the Company dated
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 base salaries,
each is entitled to participate in the
Company’s profit sharing scheme
available to all employees. The
value of this is then deducted
from their annual bonus. 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 and
permanent health insurance.
Non-Executive Directors
In order to ensure that no director
is involved in deciding their 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
obtained in 2011 from PWC.
An increase in fees of 2.75 per
cent was awarded to the Chairman
and the non-executive directors,
effective from 1 January 2012. This
was applied in line with the award
given to all employees across the
business and did not match the
average growth in fees across
the market.
The basic non-executive fees for
2012 are £38,853 per annum,
including membership of
committee(s) and an additional
£5,775 for Chairmanship of
the Audit or Remuneration
Committee(s) and for the Senior
Independent Director.
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,
31 March 2009 for Iain Ferguson
and 6 December 2011 for Ian
Durant. 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. 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.
Annual Report & Accounts 2011
47
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 comprising 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.
Greggs
FTSE 350 (excluding investment trusts)
FTSE 250 (excluding investment trusts)
48
Annual Report & Accounts 2011
Directors’ Remuneration Report - continued
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 2012
£
Executive
Salary/fees
Salary in lieu
of pension
paid in contributions
2011
£
2011
£
Estimated
value of
benefits
2011
£
Annual
profit share
2011
£
Annual
bonus
2011
£
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
469,397
273,027
243,624
456,834
22,334
265,720
237,104
-
19,446
26,016
13,911
12,513
8,917
9,351
8,344
149,934
83,045
74,102
Chairman
Derek Netherton
126,800
123,406
Non-executive
Bob Bennett
Julie Baddeley
Roger Whiteside
Iain Ferguson
Ian Durant
(appointed 5
October 2011)
20,455
44,630
38,854
44,630
44,630
43,435
43,435
37,814
37,814
9,066
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
2011
£
664,035
372,027
351,509
123,406
43,435
43,435
37,814
37,814
9,066
Total
1,306,047
1,254,628
41,780
52,440
26,612
307,081
1,682,541
Executive
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Chairman
Derek Netherton
Non-executive
Bob Bennett
Julie Baddeley
Roger Whiteside
Iain Ferguson
Total
Salary/fees
paid in
2010
£
Estimated
value of
benefits
2010
£
Annual
profit share
2010
£
Annual
bonus
2010
£
447,000
260,000
232,000
120,750
42,500
42,500
37,000
37,000
25,550
20,777
12,602
6,752
10,170
9,075
221,045
122,330
109,155
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
2010
£
700,347
413,277
362,832
120,750
42,500
42,500
37,000
37,000
1,218,750
58,929
25,997
452,530
1,756,206
Annual Report & Accounts 2011
49
Share options
The following table sets out details of the executive and savings related share options (all of which were granted at a nil
cost to the executive director concerned) held by, or granted to, each executive director during the year, according to the
register of directors’ interests:
Number of options during the year
At 2 January
2011
Number
Granted
Number
Exercised
Number
Lapsed
Number
At 31
December
2011
Number
Exercise
price
£
Date of
grant
Market price
at date of
exercise
£
Gain on
exercise
£
Date from
which
exercisable
Expiry
date Scheme
Kennedy McMeikan
80,000
276
-
-
Richard Hutton
-
374
26,750
80,000
430
410
-
-
-
-
-
374
Raymond Reynolds
26,750
80,000
430
410
-
-
-
-
-
374
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. 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
-
-
-
-
-
430
-
-
-
-
430
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
80,000
3.56
Apr 09
276
3.54
Sep 09
374
4.53
Apr 11
26,750
4.07
Aug 06
80,000
3.56
Apr 09
-
-
-
-
-
-
-
-
-
-
Apr 12
Apr 19
Exec
Nov 12
Apr 13
SAYE
Jun 14
Nov 14
SAYE
Aug 09
Aug 16
Exec
Apr 12
Apr 19
Exec
-
3.94
Apr 08
5.10
500
Jun 11
Nov 11
SAYE
410
3.54
Sep 09
374
4.53
Apr 11
26,750
4.07
Aug 06
80,000
3.56
Apr 09
-
-
-
-
-
-
-
-
Nov 12
Apr 13
SAYE
Jun 14
Nov 14
SAYE
Aug 09
Aug 16
Exec
Apr 12
Apr 19
Exec
-
3.94
Apr 08
5.24
600
Jun 11
Nov 11
SAYE
410
374
3.54
Sep 09
4.53
Apr 11
-
-
-
-
Nov 12
Apr 13
SAYE
Jun 14
Nov 14
SAYE
Retail Price Index over the three years.
If earnings per share growth exceeds
RPI growth by 3 per cent then half
of the options will be exercisable, if
earnings per share growth exceeds
RPI growth by 5 per cent then all of
the options will be exercisable and if
earnings per share growth exceeds
RPI growth by between 3 per cent
and 5 per cent 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 per
cent then half of the options will be
exercisable, if earnings per share
growth exceeds RPI growth by 7
per cent then all of the options will
be exercisable and if earnings per
share growth exceeds RPI growth by
between 3 per cent and 7 per cent
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.
50
Annual Report & Accounts 2011
Directors’ Remuneration Report - continued
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
43) held by, or granted to, each director during the year, according to the register of directors’ interests:
Number of options/awards
At 2
January
2011
Granted
during
2011
Exercised
during
2011
Lapsed
during
2011
At 31
December
2011
Date of grant
Market
price of
each share
at date of
grant
£
Market price
at date of
exercise
£
Gain on
exercise
£
Date from
which
exercisable
Expiry
date Scheme
Kennedy McMeikan
Aug 08
180,210
Apr 10
82,169
-
-
Mar 11
-
79,219
-
-
-
180,210
-
3.762
-
-
82,169
4.896
79,219
5.190
-
-
-
-
-
-
Aug 11
Aug 18
LTIP
Apr 13
Apr 20
PSP
Mar 14 Mar 21
PSP
Richard Hutton
Mar 08
28,460
Apr 10
37,173
-
-
Mar 11
-
35,838
Raymond Reynolds
Mar 08
25,100
Apr 10
33,169
-
-
Mar 11
-
31,979
14,329
14,131
-
4.475
5.190
74,368
Mar 11 Mar 18
LTIP
-
-
-
-
37,173
4.896
35,838
5.190
-
-
-
-
Apr 13
Apr 20
PSP
Mar 14 Mar 21
PSP
12,637
12,463
-
4.475
5.190
65,586
Mar 11 Mar 18
LTIP
-
-
-
-
33,169
4.896
31,979
5.190
-
-
-
-
Apr 13
Apr 20
PSP
Mar 14 Mar 21
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 31 December 2011 was £5.060. The highest and lowest
mid-market prices of ordinary shares during the financial year were £5.505 and £4.450 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 per cent of pensionable salary 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 contribution pension schemes. No pension benefits were
earned or accrued by any non-executive director.
Defined benefit scheme
The following table sets out the change in each director’s accrued pension in the Company’s defined benefit scheme
during the year and his accrued benefits in the scheme at the year end:
Accrued
annual
pension
entitlement at
age 65 as at 1
January 2011
£
Accrued
annual pension
entitlement at
age 65 as at
31 December
2011
£
Increase
in accrued
pension
entitlement for
the year
£
Increase
in accrued
pension
entitlement for
the year net
of inflation of
5.0%
£
Transfer value
of increase
in accrued
pension
entitlement for
the year
£
Date of birth
Date service
commenced
3/6/68
4/11/59
1/1/98
1/12/86
18,522
69,535
18,522
69,535
-
-
-
-
-
-
Executive Director
Richard Hutton
Raymond Reynolds
Note 1: The pension entitlement shown is that which would be paid annually on retirement based on service to the end of the year, but excluding
any statutory increases which would be due after the year end.
Note 2: The inflation rate of 5.0% shown in the table above is that published by the Secretary of State for Social Security in accordance with
Schedule 3 of the Pensions Schemes Act 1993.
Annual Report & Accounts 2011
51
Executive Director
Richard Hutton
Raymond Reynolds
Cash equivalent
transfer value as at
1 January 2011
£
Cash equivalent
transfer value as at
31 December 2011
£
Increase in the
cash equivalent
transfer value since
1 January 2011
£
191,497
901,932
225,664
1,107,146
-
-
Note: cash equivalent transfer values have been calculated in accordance with Actuaries Guidance Note GN11 and the
increase is stated net of contributions made by the director. The transfer values disclosed above do not represent a sum
paid or payable to the individual director. Instead they represent a potential liability of the pension scheme.
Money purchase schemes
The Company has paid the contributions set out below to the Company’s money purchase defined contribution pension
schemes for the benefit of executive directors during this financial year.
Contribution in
respect of 2011
£
Contribution in
respect of 2010
£
43,210
45,172
15,095
67,050
33,800
32,480
Executive Director
Kennedy McMeikan
Richard Hutton
Raymond Reynolds
Approval by Shareholders
At the Annual General Meeting of the Company to be held on 16 May 2012, a resolution approving this report is to be
proposed as an ordinary resolution.
This report was approved by the Board on 14 March 2012.
Signed on behalf of the Board
Iain Ferguson
Director
Chairman of the Remuneration Committee
14 March 2012
52
Annual Report & Accounts 2011
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; and
• prepare the accounts on the going concern basis unless it is inappropriate to presume that the Group and the Parent
Company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent
Company and enable them to ensure that its accounts comply with the Companies Act 2006. They have general
responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible for preparing a Directors’ Report, Directors’
Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on
the Company’s website. Legislation in the UK governing the preparation and dissemination of accounts may differ
from legislation in other jurisdictions.
The directors confirm that to the best of their knowledge:
• the accounts, prepared in accordance with the applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit of the Company and the undertakings included in the consolidation
taken as a whole; and
• the directors’ report, which incorporates the Chairman’s statement, the Chief Executive’s report, the Financial Review
and the 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.
Kennedy McMeikan
14 March 2012
Richard Hutton
Annual Report & Accounts 2011
53
Independent auditor’s report to
the members of Greggs plc
We have audited the accounts of Greggs plc for the year ended 31 December 2011 set out on pages 57 to 94.
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 52, 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 website 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
31 December 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.
54
Annual Report & Accounts 2011
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; or
• a Corporate Governance Statement has not been prepared by the Parent Company.
Under the Listing Rules we are required to review:
• the Directors’ Statement, set out on page 52 in relation to going concern;
• the part of the Corporate Governance Statement on page 32 relating to the Company’s compliance with the
nine provisions of the UK Corporate Governance 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
14 March 2012
We sold over 300
million freshly baked
savouries in 2011.
All our confectionery
is hand finished.
In 2011 we sold
5.5 million of our
Belgian buns.
Consolidated income statement
for the 52 weeks ended 31 December 2011 (2010: 52 weeks ended 1 January 2011)
Annual Report & Accounts 2011
57
Note
2011
2011
2011
2010
Excluding
exceptional
items
Exceptional
items
(see note 4)
Total
Total
£’000
£’000
£’000
£’000
1
701,088
-
701,088
662,326
(270,533)
(2,245)
(272,778)
(252,651)
430,555
(2,245)
428,310
409,675
(342,641)
(34,903)
-
53,011
69
53,080
(14,068)
-
-
9,665
7,420
-
7,420
(1,929)
(342,641)
(321,261)
(34,903)
(36,049)
9,665
-
60,431
52,365
69
158
60,500
52,523
(15,997)
(14,589)
39,012
5,491
44,503
37,934
39.5p
38.8p
5.5p
5.5p
45.0p
44.3p
37.8p
37.3p
6
3–6
8
9
9
Revenue
Cost of sales
Gross profit
Distribution and selling costs
Administrative expenses
Other income
Operating profit
Finance income
Profit before tax
Income tax
Profit for the financial year attributable to
equity holders of the parent
Basic earnings per share
Diluted earnings per share
Consolidated statement of comprehensive income
for the 52 weeks ended 31 December 2011 (2010: 52 weeks ended 1 January 2011)
Profit for the financial year
Other comprehensive income
Actuarial (losses) gains on defined benefit pension
plans
Tax on items taken directly to equity
Other comprehensive income for the financial year,
net of income tax
Total comprehensive income for the
financial year
Note
20
8
Group
2011
£’000
2010
£’000
44,503
37,934
(10,359)
2,590
(7,769)
2,881
(778)
2,103
36,734
40,037
58
Annual Report & Accounts 2011
Balance sheets
at 31 December 2011 (2010: 1 January 2011)
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
Group
Note
2011
£’000
Parent Company
2010
£’000
2011
£’000
2010
£’000
10
11
12
13
14
15
12
16
17
21
18
20
19
21
22
22
289
253,264
-
253,553
14,274
21,165
19,508
500
55,447
309,000
(74,304)
(5,969)
(620)
(80,893)
(7,969)
(8,866)
(10,010)
(2,879)
(29,724)
(110,617)
198,383
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
289
253,857
4,987
259,133
14,274
21,165
19,508
500
55,447
314,580
(82,111)
(5,969)
(620)
(88,700)
(7,969)
(8,866)
(9,351)
(2,879)
(29,065)
(117,765)
196,815
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
2,023
13,533
416
182,411
2,023
13,533
416
160,255
2,023
13,533
416
180,843
2,023
13,533
416
158,740
198,383
176,227
196,815
174,712
The accounts on pages 57 to 94 were approved by the Board of directors on 14 March 2012 and were signed on its
behalf by:
Kennedy McMeikan
Richard Hutton
Company Registered Number 502851
Annual Report & Accounts 2011
59
Statements of changes in equity
for the 52 weeks ended 31 December 2011 (2010: 52 weeks ended 1 January 2011)
Group
52 weeks ended 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
359 148,265
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
2,023
13,533
416 160,255 176,227
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,503
44,503
(7,769)
(7,769)
36,734
36,734
(557)
3,266
699
(557)
3,266
699
(18,286)
(18,286)
300
300
(14,578)
(14,578)
2,023
13,533
416 182,411 198,383
22
20
22
8
20
22
8
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
52 weeks ended 31 December 2011
Balance at 2 January 2011
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
Sale of own shares
Share-based payment transactions
Dividends to equity holders
Tax items taken directly to reserves
Total transactions with owners
Balance at 31 December 2011
60
Annual Report & Accounts 2011
Statements of changes in equity
(continued)
Parent Company
52 weeks ended 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
146,777
162,749
7
22
20
22
8
7
20
22
8
-
-
-
(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
2,023
13,533
416 158,740 174,712
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,450
44,450
(7,769)
(7,769)
36,681
36,681
(557)
3,266
699
(557)
3,266
699
(18,286)
(18,286)
300
300
(14,578)
(14,578)
2,023
13,533
416 180,843 196,815
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
52 weeks ended 31 December 2011
Balance at 2 January 2011
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
Sale of own shares
Share-based payment transactions
Dividends to equity holders
Tax items taken directly to reserves
Total transactions with owners
Balance at 31 December 2011
Statements of cashflows
for the 52 weeks ended 31 December 2011 (2010: 52 weeks ended 1 January 2011)
Annual Report & Accounts 2011
61
Operating activities
Cash generated from operations
(see page 62)
Income tax paid
Note
Group
Parent Company
2011
£’000
2010
£’000
2011
£’000
2010
£’000
88,112
77,826
88,112
77,826
(14,334)
(15,814)
(14,334)
(15,814)
Net cash inflow from operating activities
73,778
62,012
73,778
62,012
Investing activities
Acquisition of property, plant and equipment
(62,822)
(44,672)
(62,822)
(44,672)
Proceeds from sale of property, plant and
equipment
Interest received
Redemption / (acquisition) of
other investments
770
69
815
158
770
69
815
158
2,500
(3,000)
2,500
(3,000)
6
12
Net cash outflow from investing activities
(59,483)
(46,699)
(59,483)
(46,699)
Financing activities
Sale of own shares
Shares purchased for Employee
Benefit Trust
Shares purchased and cancelled
Dividends paid
Government grants received
3,266
734
3,266
22
22
(557)
-
(18,286)
-
-
(557)
(12,864)
(17,061)
49
-
(18,286)
-
734
-
(12,864)
(17,061)
49
Net cash outflow from financing activities
(15,577)
(29,142)
(15,577)
(29,142)
Net decrease in cash and cash equivalents
(1,282)
(13,829)
(1,282)
(13,829)
Cash and cash equivalents at the start
of the year
Cash and cash equivalents at the end
of the year
15
15
20,790
34,619
20,790
34,619
19,508
20,790
19,508
20,790
62
Annual Report & Accounts 2011
Statements of cashflows
for the 52 weeks ended 31 December 2011 (2010: 52 weeks ended 1 January 2011)
(continued)
Cashflow statement – cash generated
from operations
Profit for the financial year
Amortisation
Depreciation
Loss on sale of property, plant and equipment
Release of government grants
Gain arising from pension adjustment
Share-based payment expenses
Finance income
Income tax expense
(Increase) / decrease in inventories
Decrease / (increase) in receivables
Increase / (decrease) in payables
Decrease in pension liability
Decrease in provisions
Cash from operating activities
Note
Group
Parent Company
2011
£’000
2010
£’000
2011
£’000
2010
£’000
10
11
20
6
8
44,503
37,934
44,450
37,907
144
146
144
146
30,707
28,965
30,707
28,965
512
(470)
(9,665)
699
(69)
15,997
(2,391)
1,144
7,777
(592)
(184)
88,112
869
(437)
-
642
(158)
14,589
3
(1,103)
(2,467)
(687)
(470)
77,826
512
(470)
(9,665)
699
(69)
16,050
(2,391)
1,144
7,777
(592)
(184)
88,112
869
(437)
-
642
(158)
14,616
3
(1,103)
(2,467)
(687)
(470)
77,826
Annual Report & Accounts 2011
63
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 14 March 2012.
(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 except the defined benefit pension liability, which is recognised as plan assets less the present value of
the defined benefit obligation.
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 4 to 39. The financial position of the
Group, its cashflows and liquidity are described in the Financial Review on pages 11 and 12. 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 IFRS transition date (1 January 2004), as no
significant acquisitions had taken place during the previous ten 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 2 January 2011 the
following standards, amendments and interpretations became effective and were adopted by the Group:
•
•
•
•
•
•
•
Revised IAS 24 Related Party Disclosure
Improvements to IFRSs
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement
Amendment to IAS 32 Financial Instruments: Presentation: Classification of Rights Issues
Amendment to IAS 39 Reclassification of Financial Assets: Effective Date and Transition
Amendments to IFRS 2 Group Cash-settled Share-based Payment Transactions
The adoption of the above has not had a significant impact on the Group’s profit for the year or equity.
64
Annual Report & Accounts 2011
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 23 for how this is determined.
Post-retirement benefits
The determination of the 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 2011 are given in note 20.
Impairment of property, plant and equipment
Property, plant and equipment are 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 cashflows
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 vacated properties and properties which the Group has committed to vacate and
for which the Group has ongoing lease commitments. Management exercise judgement as to whether the property
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
31 December 2011. The comparative period is the 52 weeks ended 1 January 2011.
(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.
Annual Report & Accounts 2011
65
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 the income statement as incurred.
66
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
Significant accounting policies (continued)
(g) Property, plant and equipment (continued)
(iii) Depreciation
Depreciation is provided so as to write off the cost (less residual value) of each item of property, plant and equipment
during its expected useful life using the straight line method over the following periods:
Freehold and long leasehold buildings
Short leasehold properties
Plant, machinery, equipment, vehicles,
fixtures and fittings
40 years
10 years or length of lease if shorter
3 to 10 years
Freehold land is not depreciated.
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 cashflows.
Annual Report & Accounts 2011
67
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.
68
Annual Report & Accounts 2011
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 cashflows 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) Vacant properties
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.
Annual Report & Accounts 2011
69
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) Finance income and expenses
(i) Finance income
Finance income comprises interest receivable on cash balances and foreign exchange movements relating to
overseas bank accounts. Interest income is recognised in the income statement as it accrues using the effective
interest method.
(ii) Finance expenses
Finance expenses comprise interest payable on borrowings and related foreign exchange movements on any Euro
bank borrowings.
(u) Income tax
Income tax comprises current and deferred tax. Income tax is recognised in the income statement except to the
extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively
enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet liability method, providing for temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. The amount of deferred tax recognised is based on the expected manner of realisation or settlement of the
carrying amounts of assets and liabilities, using tax rates that are expected to apply when the temporary differences
reverse, based on rates enacted or substantively enacted at the balance sheet date.
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 and does not always have distinguishable research and development phases.
70
Annual Report & Accounts 2011
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:
•
•
•
•
•
•
•
•
•
•
•
Amendments to IFRS 7 ‘Disclosures – Transfers of Financial Assets’ mandatory for accounting periods
commencing on or after 1 July 2011.
Amendments to IAS 12 ‘Deferred Tax: Recovery of Underlying Assets’ mandatory for accounting periods
commencing on or after 1 January 2012.
Amendments to IAS 1 ‘Presentation of Items of Other Comprehensive Income’ mandatory for accounting
periods commencing on or after 1 July 2012.
IFRS 10 ‘Consolidated Financial Statements’ and IAS 27 (2011) ‘Separate Financial Statements’ mandatory for
accounting periods commencing on or after 1 January 2013.
IFRS 11 ‘Joint Arrangements’ and Amendments to IAS 28 (2008) ‘Investments in Associates and
Joint Ventures’ mandatory for accounting periods commencing on or after 1 January 2013.
IFRS 12 ‘Disclosure of Interests in Other Entities’ mandatory for accounting periods commencing
on or after 1 January 2013.
IFRS 13 ‘Fair Value Measurement’ mandatory for accounting periods commencing on or after
1 January 2013.
Amendments to IAS 19 ‘Defined Benefit Plans’ mandatory for accounting periods commencing
on or after 1 January 2013.
Amendments to IFRS 7 ‘Disclosures – Offsetting Financial Assets and Financial Liabilities’
mandatory for accounting periods commencing on or after 1 January 2013.
Amendments to IAS 32 ‘Offsetting Financial Assets and Financial Liabilities’ mandatory for accounting periods
commencing on or after 1 January 2014.
IFRS 9 ‘Financial Instruments’ mandatory for accounting periods commencing on or after
1 January 2015.
None of these standards and amendments are expected to have a significant impact on the accounts when they
are adopted except for amendments to IAS 19 ‘Defined Benefit Plans’. The amendments to IAS 19 are expected to
reduce profit before tax and increase actuarial gains in other comprehensive income by the same amount. There
would be no impact on total equity. The Group does not intend to adopt this standard early and the extent of the
impact has not been determined.
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 comprises the profit and loss account for the Company as a whole.
The Group is a centrally-managed business with an integrated supply chain. There are seven retail regions, each
reporting to the Group Retail Director. The business performance is assessed after allocation of supply chain costs
to the retail regions. These retail regions 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, including wholesale customers, but these are immaterial in a
Group context.
Geographical areas - all results arise in the UK.
Annual Report & Accounts 2011
71
1. Segmental analysis (continued)
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.
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 the majority of sales of goods are
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 the majority of 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 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 of which £5,000,000 was undrawn at 31 December 2011
(2010: £5,000,000).
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices
will affect the Group’s income or the value of its holdings of financial instruments.
Given that, as explained above, market risk is not significant, sensitivity analysis would not be meaningful.
Currency risk
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 £69,000 (2010: £158,000).
Equity prices
The Group has no equity investments other than its subsidiaries.
72
Annual Report & Accounts 2011
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 Employee 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 assets comprise 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
31 December 2011 (2010: £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.
3. Profit before tax
Profit before tax is stated after charging / (crediting)
Amortisation of intangible assets
Depreciation on owned property, plant and equipment
Loss on disposal of fixed assets
Release of government grants
Payments under operating leases – property rents
Research and development expenditure
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
Annual Report & Accounts 2011
73
2011
£’000
2010
£’000
144
146
30,707
28,965
512
(470)
869
(437)
43,988
41,837
726
157
-
3
7
70
6
416
153
30
3
7
137
4
Amounts paid to the Company’s auditor in respect of services to the Company, other than the audit of the Company’s
accounts, have not been disclosed as the information is required instead to be presented on a consolidated basis.
4. Exceptional items
Cost of sales
Closure of Penrith bakery – asset write-down and redundancy
Closure of Gosforth bakery
- asset write-down
- lease costs
Administrative expenses
Pension amendment – see below
Total exceptional items
There were no exceptional items in 2010.
Pension amendment
2011
£’000
(441)
(704)
(1,100)
(2,245)
9,665
7,420
Following the UK Government’s legislation announced in July 2010 that requires statutory indexation of pension
benefits to be based on CPI rather than RPI, the Group informed pension members in April 2011 that this
amendment would be applied to the Group’s defined benefit pension scheme. The exceptional credit represents the
ensuing reduction in the net pension liability.
74
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
5. Personnel expenses
The average number of persons employed by the Group (including directors) during the year was as follows:
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
2011
2010
Number
Number
697
412
2,778
15,617
19,504
718
438
2,845
15,180
19,181
Group and Parent Company
2011
£’000
2010
£’000
259,274
251,982
18,805
5,850
(592)
699
19,238
3,538
(87)
642
284,036
275,313
Note
20
20
20
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
2011
£’000
1,530
3,652
708
5,890
2010
£’000
1,513
3,607
698
5,818
Annual Report & Accounts 2011
75
2011
£’000
56
13
69
2010
£’000
165
(7)
158
6. Finance income
Interest income on cash balances
Foreign exchange gain / (loss)
7. Profit attributable to Greggs plc
Of the Group profit for the year, £44,450,000 (2010: £37,907,000) is dealt with in the accounts of the Parent Company.
The Company has taken advantage of the exemption permitted by section 408 of the Companies Act 2006 from
presenting its own income statement.
8.
Income tax expense
Recognised in the income statement
Current tax expense
Current year
Adjustment for prior years
Deferred tax expense
Origination and reversal of temporary differences
Reduction in tax rate
Adjustment for prior years
Total income tax expense in income statement
2011
£’000
2010
£’000
15,044
(1,007)
14,037
16,200
(2,961)
13,239
2,174
(809)
595
1,960
15,997
(222)
(405)
1,977
1,350
14,589
76
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
8.
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 reduction in deferred tax rate
Adjustment re prior years
Total income tax expense in income statement
2011
26.5%
0.9%
1.3%
0.0%
(1.6%)
(0.7%)
26.4%
2011
£’000
60,500
16,033
523
773
-
(920)
(412)
15,997
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
On 5 July 2011 a reduction in the rate of corporation tax from 26% to 25% was substantively enacted to take effect
from 1 April 2012. Any timing differences which reverse before 1 April 2012 will be charged / credited at
26% and any timing differences which exist at 1 April 2012 will reverse at 25%.
The Chancellor has also announced further annual reductions to the main rate of corporation tax of 1% per annum
from 1 April 2012 until the main rate of UK corporation tax reaches 23% with effect from 1 April 2014.
Tax recognised directly in equity
Debit / (credit) to equity:
Relating to equity-settled transactions
Relating to defined benefit plans –
actuarial gains / (losses)
9. Earnings per share
Basic earnings per share
2011
2011
Current tax Deferred tax
£’000
£’000
2011
Total
£’000
(16)
-
(16)
(284)
(300)
(2,590)
(2,590)
(2,874)
(2,890)
2010
Total
£’000
(502)
778
276
Basic earnings per share for the year ended 31 December 2011 are calculated by dividing profit attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during the year ended
31 December 2011 as calculated below.
Diluted earnings per share
Diluted earnings per share for the year ended 31 December 2011 are 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
31 December 2011 as calculated below.
Annual Report & Accounts 2011
77
9. 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
2011
Excluding
exceptional
items
£’000
2011
2011
Exceptional
items
Total
2010
Total
£’000
£’000
£’000
39,012
5,491
44,503
37,934
39.5p
38.8p
5.5p
5.5p
45.0p
44.3p
37.8p
37.3p
Issued ordinary shares at start of year
Effect of own shares held
Effect of shares purchased and cancelled
Weighted average number of ordinary shares during the year
Effect of share options on issue
2011
2010
Number
Number
101,155,901 103,990,470
(2,194,189)
(2,753,645)
-
(959,689)
98,961,712 100,277,136
1,512,151
1,326,346
Weighted average number of ordinary shares (diluted) during the year
100,473,863 101,603,482
10. Intangible assets
Group and Parent Company
Cost
Balance at 3 January 2010, 1 January 2011 and 31 December 2011
Amortisation
Balance at 3 January 2010
Amortisation charge for the year
Balance at 1 January 2011
Balance at 2 January 2011
Amortisation charge for the year
Balance at 31 December 2011
Carrying amounts
At 3 January 2010
At 1 January 2011
At 2 January 2011
At 31 December 2011
Software
£’000
686
107
146
253
253
144
397
579
433
433
289
78
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
11. Property, plant and equipment
Group
Cost
Balance at 3 January 2010
Additions
Disposals
Reclassification
Land and
buildings
Plant and
equipment
Fixtures
and fittings
Under
construction
Total
£’000
£’000
£’000
£’000
£’000
115,784
812
(38)
(354)
95,366
10,543
(5,165)
4,834
170,698
26,445
(8,070)
(4,480)
-
381,848
7,844
-
-
45,644
(13,273)
-
Balance at 1 January 2011
116,204
105,578
184,593
7,844
414,219
Balance at 2 January 2011
116,204
105,578
184,593
7,844
414,219
Additions
Disposals
Reclassification
14,012
(23)
5,391
13,514
(5,570)
1,905
31,577
(7,563)
-
-
548
(7,844)
Balance at 31 December 2011
135,584
115,427
209,155
Depreciation
Balance at 3 January 2010
Depreciation charge for the year
Disposals
Reclassification
Balance at 1 January 2011
Balance at 2 January 2011
Depreciation charge for the year
Disposals
Balance at 31 December 2011
Carrying amounts
At 3 January 2010
At 1 January 2011
At 2 January 2011
At 31 December 2011
19,314
2,995
(38)
738
23,009
23,009
3,186
(23)
26,172
96,470
93,195
93,195
109,412
60,302
9,865
(5,011)
1,799
66,955
66,955
9,790
(5,272)
71,473
35,064
38,623
38,623
43,954
91,077
16,105
(6,540)
(2,537)
98,105
98,105
17,731
(6,579)
109,257
79,621
86,488
86,488
99,898
59,103
(13,156)
-
460,166
170,693
28,965
(11,589)
-
188,069
188,069
30,707
(11,874)
206,902
211,155
226,150
226,150
-
-
-
-
-
-
-
-
-
-
-
7,844
7,844
-
253,264
Annual Report & Accounts 2011
79
11. Property, plant and equipment (continued)
Parent Company
Cost
Balance at 3 January 2010
Additions
Disposals
Reclassification
Land and
buildings
Plant and
equipment
Fixtures
and fittings
Under
construction
Total
£’000
£’000
£’000
£’000
£’000
116,294
812
(38)
(354)
95,899
10,543
(5,165)
4,834
171,186
26,445
(8,070)
(4,480)
-
383,379
7,844
-
-
45,644
(13,273)
-
Balance at 1 January 2011
116,714
106,111
185,081
7,844
415,750
Balance at 2 January 2011
116,714
106,111
185,081
7,844
415,750
Additions
Disposals
Reclassification
14,012
(23)
5,391
13,514
(5,570)
1,905
31,577
(7,563)
-
-
548
(7,844)
Balance at 31 December 2011
136,094
115,960
209,643
Depreciation
Balance at 3 January 2010
Depreciation charge for the year
Disposals
Reclassification
Balance at 1 January 2011
Balance at 2 January 2011
Depreciation charge for the year
Disposals
Balance at 31 December 2011
Carrying amounts
At 3 January 2010
At 1 January 2011
At 2 January 2011
At 31 December 2011
19,591
2,995
(38)
738
23,286
23,286
3,186
(23)
26,449
96,703
93,428
93,428
109,645
60,572
9,865
(5,011)
1,799
67,225
67,225
9,790
(5,272)
71,743
35,327
38,886
38,886
44,217
91,468
16,105
(6,540)
(2,537)
98,496
98,496
17,731
(6,579)
109,648
79,718
86,585
86,585
99,995
59,103
(13,156)
-
461,697
171,631
28,965
(11,589)
-
189,007
189,007
30,707
(11,874)
207,840
211,748
226,743
226,743
-
-
-
-
-
-
-
-
-
-
-
7,844
7,844
-
253,857
80
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
11. Property, plant and equipment (continued)
Land and buildings
The carrying amount of land and building comprises:
Freehold property
Long leasehold property
Short leasehold property
Group
Parent Company
2011
£’000
2010
£’000
2011
£’000
2010
£’000
109,277
92,411
109,510
92,644
8
127
626
158
8
127
626
158
109,412
93,195
109,645
93,428
Property, plant and equipment under construction
Assets under construction at 1 January 2011 comprised new bakeries and equipment for new shops not yet fitted.
Construction of these assets was completed during 2011. There were no assets under construction at
31 December 2011.
12. Investments
Non-current investments
Parent Company
Cost
As at 3 January 2010, 1 January 2011 and 31 December 2011
Impairment
As at 3 January 2010
Impairment charge for the year
As at 1 January 2011
As at 2 January 2011
Impairment charge for the year
As at 31 December 2011
Carrying amount
As at 3 January 2010
As at 1 January 2011
As at 2 January 2011
As at 31 December 2011
Shares in subsidiary undertakings
£’000
5,828
638
203
841
841
-
841
5,190
4,987
4,987
4,987
Annual Report & Accounts 2011
81
12. 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
Fixed rate bond
13. Inventories
Raw materials and consumables
Work in progress
14. Trade and other receivables
Trade receivables
Other receivables
Prepayments
England and Wales
England and Wales
England and Wales
England and Wales
Scotland
Scotland
England and Wales
England and Wales
England and Wales
Group and Parent Company
2011
£’000
2010
£’000
500
3,000
Group and Parent Company
2011
£’000
10,757
3,517
14,274
2010
£’000
9,105
2,778
11,883
Group and Parent Company
2011
£’000
1,119
5,073
14,973
21,165
2010
£’000
1,690
4,419
16,200
22,309
No amounts are overdue and there is no provision for impairment in the current or prior year.
82
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
15. Cash and cash equivalents
Cash and cash equivalents
16. Trade and other payables
Group and Parent Company
2011
£’000
2010
£’000
19,508
20,790
Group
Parent Company
2011
£’000
2010
£’000
2011
£’000
2010
£’000
Trade payables
37,346
33,382
37,346
33,382
Amounts owed to subsidiary undertakings
Other taxes and social security
Other payables
Accruals and deferred income
Deferred government grants
17. Current tax liability
-
7,511
15,781
13,198
468
-
7,439
13,326
15,631
468
7,807
7,511
15,781
13,198
468
7,807
7,439
13,326
15,631
468
74,304
70,246
82,111
78,053
The current tax liability of £5,969,000 in the Group and the Parent Company (2010: Group and Parent Company
£6,282,000) represents the estimated amount of income taxes payable in respect of current and prior years.
18. Other payables
Deferred government grants
Group and Parent Company
2011
£’000
2010
£’000
7,969
8,439
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.
Annual Report & Accounts 2011
83
19. Deferred tax assets and liabilities
Group
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2011
£’000
2010
£’000
2011
£’000
2010
£’000
2011
£’000
2010
£’000
Property, plant and equipment
-
-
13,986
15,485
13,986
15,485
Employee benefits
Short-term temporary differences
(3,788)
(3,571)
(188)
(990)
-
-
-
-
(3,788)
(3,571)
(188)
(990)
Tax (assets) / liabilities
(3,976)
(4,561)
13,986
15,485
10,010
10,924
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
Recognised
in income
Recognised
in equity
Balance at 1
January 2011
£’000
£’000
£’000
£’000
14,385
(4,004)
(1,083)
9,298
1,100
157
93
1,350
-
276
-
276
15,485
(3,571)
(990)
10,924
The movements in temporary differences during the year ended 31 December 2011 were as follows:
Property, plant and equipment
Employee benefits
Short-term temporary differences
Balance at 2
January 2011
Recognised
in income
Recognised
in equity
£’000
£’000
£’000
Balance at
31 December
2011
£’000
15,485
(3,571)
(990)
10,924
(1,499)
2,657
802
1,960
-
(2,874)
-
(2,874)
13,986
(3,788)
(188)
10,010
84
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
19. Deferred tax assets and liabilities (continued)
Parent Company
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
2011
£’000
2010
£’000
2011
£’000
2010
£’000
2011
£’000
2010
£’000
Property, plant and equipment
-
-
13,327
14,773
13,327
14,773
Employee benefits
Short-term temporary differences
(3,788)
(3,571)
(188)
(990)
-
-
-
-
(3,788)
(3,571)
(188)
(990)
Tax (assets) / liabilities
(3,976)
(4,561)
13,327
14,773
9,351
10,212
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
Recognised in
income
Recognised
in equity
Balance at 1
January 2011
£’000
£’000
£’000
£’000
13,646
(4,004)
(1,083)
8,559
1,127
157
93
1,377
-
276
-
276
14,773
(3,571)
(990)
10,212
The movements in temporary differences during the year ended 31 December 2011 were as follows:
Property, plant and equipment
Employee benefits
Short-term temporary differences
Balance at 2
January 2011
Recognised in
income
Recognised
in equity
£’000
£’000
£’000
Balance at 31
December
2011
£’000
14,773
(3,571)
(990)
10,212
(1,446)
2,657
802
2,013
-
(2,874)
-
(2,874)
13,327
(3,788)
(188)
9,351
Annual Report & Accounts 2011
85
20. Employee benefits
Defined benefit plan
The Group makes contributions to a defined benefit (final salary) plan that provides pension benefits for
employees upon retirement.
Present value of funded obligations
Fair value of plan assets
Recognised liability for defined benefit obligations
This scheme was closed to future accrual in 2008.
Liability for defined benefit obligations
Changes in the present value of the defined benefit obligation are as follows:
Opening defined benefit obligation
Interest cost
Actuarial losses
Past service cost – adjustment from RPI to CPI
Benefits paid
Changes in the fair value of plan assets are as follows:
Opening fair value of plan assets
Expected return
Actuarial (losses) / gains
Contributions by employer
Benefits paid
Closing fair value of plan assets
Group and Parent Company
2011
£’000
2010
£’000
(87,809)
(92,544)
78,943
(8,866)
83,780
(8,764)
Group and Parent Company
2011
£’000
2010
£’000
92,544
87,211
4,758
3,035
(9,665)
(2,863)
87,809
4,993
2,800
-
(2,460)
92,544
Group and Parent Company
2011
£’000
83,780
5,350
(7,324)
-
(2,863)
78,943
2010
£’000
74,879
5,080
5,681
600
(2,460)
83,780
86
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
20. Employee benefits (continued)
The amounts recognised in the income statement are as follows:
Interest on obligation
Expected return on plan assets
Total included in employee benefit expense
Past service cost – adjustment from RPI to CPI
The credit is recognised in the following line items of the income statement:
Administrative expenses
Exceptional item – other income
Group
2011
£’000
4,758
(5,350)
(592)
(9,665)
(10,257)
Group
2011
£’000
(592)
(9,665)
(10,257)
2010
£’000
4,993
(5,080)
(87)
-
(87)
2010
£’000
(87)
-
(87)
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
£26,109,000 (2010: net losses of £15,750,000).
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
2011
£’000
53,129
21,315
1,974
2,525
78,943
(1,974)
2010
£’000
58,705
20,404
1,411
3,260
83,780
10,761
The plan assets include ordinary shares issued by the Company with a fair value of £2,656,000
(2010: £2,441,000).
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.
20. Employee benefits (continued)
Principal actuarial assumptions (expressed as weighted averages):
Discount rate
Expected rate of return on plan assets
Future salary increases
Future pension increases
Annual Report & Accounts 2011
87
Group and Parent Company
2011
4.8%
6.1%
n/a
2.3%
2010
5.5%
6.5%
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)
2011
2010
Male
Female
Male
Female
Member aged 65 in 2011
Member aged 65 in 2030
21.9
23.2
24.2
25.8
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
2011
£’000
2010
£’000
Present value of defined benefit obligation
(87,809)
(92,544)
Fair value of plan assets
Deficit
78,943
(8,866)
83,780
(8,764)
2009
£’000
(87,211)
74,879
(12,332)
2008
£’000
(69,563)
63,830
(5,733)
2007
£’000
(78,461)
77,781
(680)
88
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
20. Employee benefits (continued)
Experience adjustments:
2011
£’000
Group and Parent Company
2009
£’000
2008
£’000
2010
£’000
2007
£’000
Experience adjustments on
plan liabilities
Experience adjustments on
plan assets
Net actuarial experience
adjustments
(3,035) 3.5% (2,800)
3.0% (15,538) 17.8% 5,133 7.4% 2,207 2.8%
(7,324)
9.3% 5,681
6.8% 8,618
11.5% (17,747) 27.8% (797) 1.0%
(10,359)
2,881
(6,920)
(12,614)
1,410
The Group expects to contribute £nil to its defined benefit plan in 2012.
Defined contribution plan
The Company also operates defined contribution schemes for 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 £5,850,000 (2010: £3,538,000) 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, April 2008, September 2009 and April 2011, and an Executive
Share Option Scheme, which granted options in September 2003, March 2004, August 2004, September 2004,
August 2006, April 2008, April 2009 and August 2011.
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 grants of options have been made under this
scheme in April 2010 and March 2011.
Annual Report & Accounts 2011
89
20. Employee benefits (continued)
The terms and conditions of the grants are as follows, whereby all options are settled by physical delivery of shares:
Date of
grant
Employees
entitled
Exercise
price
Number of
shares granted
Vesting
conditions
Contractual life
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
Three years’ service and EPS growth of 2%
over RPI on average over those three years
10 years
Executive Share Option
Scheme 11
August 2004 Senior
340p
930,000
employees
Three years’ service and EPS growth of 3-5%
over RPI on average over those three years
10 years
September
2004
Senior
employees
348p
24,000
Three years’ service and EPS growth of 3-5%
over RPI on average over those three years
10 years
Executive Share Option
Scheme 12
August 2006 Senior
407p
1,028,000
Three years’ service and EPS growth of 3-5%
over RPI on average over those three years
10 years
Long Term Incentive
Plan 2
March 2008
Executive Share Option
Scheme 13
April 2008
nil
126,600
Three years’ service and EPS growth of 3-10%
over RPI on average over those three years
10 years
457p
618,500
Three years’ service and EPS growth of 3-5%
over RPI on average over those three years
10 years
April 2008
All employees
393p
761,020
Three years’ service
3.5 years
Savings-Related Share
Option Scheme 10
Long Term Incentive
Plan 3
Executive Share Option
Scheme 14
April 2009
Savings-Related Share
Option Scheme 11
September
2009
Performance Share Plan 1 April 2010
August 2008 Senior
nil
180,210
Three years’ service and EPS growth of 3-10%
over RPI on average over those three years
10 years
356p
2,012,000
Three years’ service and EPS growth of 3-7%
over RPI on average over those three years
10 years
All employees
354p
717,837
Three years’ service
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
3.5 years
10 years
employees
Senior
executives
Senior
employees
executives
Senior
employees
Performance Share Plan 2 March 2011
Senior
executives
nil
223,418
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
Savings-Related Share
Option Scheme 12
Executive Share Option
Scheme 15
April 2011
All employees
453p
697,609
Three years’ service
3.5 years
August 2011 Senior
482p
707,000
employees
Three years’ service and EPS growth of 3-7%
over RPI on average over those three years
10 years
90
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
20. 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
2011
2010
Number of
options
Weighted
average
exercise
price
Number of
options
Weighted
average
exercise
price
334p
273p
370p
403p
360p
4,953,261
(764,978)
(831,308)
1,621,027
4,978,002
353p
371p
302p
nil
5,273,920
(420,053)
(171,127)
270,521
334p
4,953,261
Exercisable at the end of the year
415p
719,826
386p
696,147
The options outstanding at 31 December 2011 have an exercise price in the range of £nil to £4.82 and have a
weighted average contractual life of 6 years. The options exercised during the year had a weighted average market
value of £5.25 (2010: £4.74).
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.
2011
Performance
Share Plan 2
Savings Related
Share Options
Scheme 12
Executive
Share Option
Scheme 15
2010
Performance
Share Plan 1
March 2011
April 2011
August 2011
April 2010
467p
519p
nil
26.2%
3 years
3.50%
1.83%
91p
503p
453p
26.2%
3 years
3.62%
1.93%
56p
482p
482p
24.3%
3 years
3.83%
0.84%
442p
490p
nil
26.2%
3 years
3.39%
1.88%
Fair value at grant date
Share price
Exercise price
Expected volatility
Option life
Expected dividend yield
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.
Annual Report & Accounts 2011
91
20. 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
Share options granted in 2011
Total expense recognised as employee costs
21. 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
2011
£’000
61
-
(192)
362
187
281
699
2010
£’000
84
(10)
30
398
140
-
642
Group and Parent Company
Vacated Property Provision
2011
£’000
3,683
1,870
(955)
(1,099)
3,499
620
2,879
3,499
2010
£’000
4,153
451
(379)
(542)
3,683
1,018
2,665
3,683
The vacated property provision relates to costs in respect of the vacation of properties and in particular the onerous
lease and other commitments associated with the vacation of a property. 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.
Provisions reversed during the year relate to leases which have been successfully exited on more favourable terms
than previously anticipated.
The key area of uncertainty relates to the net future rental costs to be incurred on vacated properties and, in particular,
whether the properties can be sublet until lease exit. The provision assumes that subletting is unlikely in the current
climate. For shops, the provision is expected to be substantially utilised within three years such, that the impact of
discounting would not be material. For bakeries, the period over which the provision will be utilised is less certain and
the provision is discounted over an appropriate period.
92
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
22. Capital and reserves
Share capital and share premium
Ordinary shares
2011
2010
Number
Number
In issue and fully paid at start of year – ordinary shares of 2p (2010: 2p)
101,155,901 103,990,470
Purchased and cancelled
-
(2,834,569)
In issue and fully paid at the end of the year – ordinary shares of 2p
101,155,901 101,155,901
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 2010 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 £8,618,000 (2010: £11,327,000) 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 1,929,034 shares (2010: 2,677,620 shares) with a market value at 31 December 2011
of £9,861,000 (2010: £12,451,000) which have not vested unconditionally in employees.
The shares held by the Greggs Employee Benefit Trust can be purchased either by employees on the exercise of
an option under the Greggs Executive Share Option Schemes, Greggs Savings Related Share Option Schemes
and Greggs 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:
2009 final dividend
2010 interim dividend
2010 final dividend
2011 interim dividend
2011
2010
Per share
Per share
pence
pence
-
-
12.7p
5.8p
18.5p
11.4p
5.5p
-
-
16.9p
Annual Report & Accounts 2011
93
22. Capital and reserves (continued)
The proposed final dividend in respect of 2011 amounts to 13.5 pence per share (£13,656,000). This proposed
dividend is subject to approval at the Annual General Meeting and has not been included as a liability in
these accounts.
2009 final dividend
2010 interim dividend
2010 final dividend
2011 interim dividend
23. Operating leases
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
2011
£’000
-
-
12,528
5,758
18,286
2010
£’000
11,553
5,508
-
-
17,061
2011
£’000
39,076
97,089
26,060
2010
£’000
37,047
100,655
28,229
162,225
165,931
The Group leases the majority of its shops under operating leases. The leases typically run for a period of ten 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.
94
Annual Report & Accounts 2011
Notes to the consolidated accounts
(continued)
24. Capital commitments
During the year ended 31 December 2011, the Group entered into contracts to purchase property, plant and
equipment for £4,677,000 (2010: £6,004,000). These commitments are expected to be settled in the following
financial year.
25. Related parties
Identity of related parties
The Group has a related party relationship with its subsidiaries (see note 12) and its directors and executive officers.
Trading transactions with subsidiaries – Group
There have been no transactions between the Company and its subsidiaries during the year (2010: £nil).
Trading transactions with subsidiaries – Parent Company
Amounts owed to
related parties
Amounts owed by
related parties
2011
£’000
2010
£’000
2011
£’000
2010
£’000
Dormant subsidiaries
7,807
7,807
-
-
The Greggs Foundation is also a related party and during the year the Company made a donation to the Greggs
Foundation of £650,000 (see Social Responsibility on pages 17 to 25 ).
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
(Beneficial interest)
Ordinary shares of 2p
(Trustee holding with no
beneficial interest)
2011
2010
2011
2010
(or date of
cessation if
earlier)
(or date of
appointment
if later)
(or date of
cessation if
earlier)
(or date of
appointment
if later)
72,425
55,003
52,440
11,946
-
3,000
12,253
10,000
1,950
64,681
35,237
52,010
10,000
-
3,000
12,253
10,000
-
-
1,650,000
-
-
-
-
-
-
-
1,650,000
-
-
-
-
-
-
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)
Ian Durant (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 40 to 51. Total remuneration is included in personnel expenses
(see note 5).
There have been no changes since 31 December 2011 in the directors’ interests noted above.
Annual Report & Accounts 2011
95
10 Year History
2002
2003
2004
2005
20061
20072
20083
2009
2010
20114
(as restated)*
Turnover (£'m)
422.6
457.0
504.2
533.4
550.8
586.3
628.2
658.2
662.3
701.1
Total sales growth (%)
11.9%
8.1% 10.3%^ 5.8%^
3.3%
6.4%
7.1%
4.8%^ 0.6%^
5.8%
Like-for-like sales growth
(%)
Earnings before interest
and tax (EBIT) excluding
exceptional items (£’m)
EBIT margin excluding
exceptional items (%)
Profit on ordinary activities
including exceptional
items and before taxation
(£’m)
Diluted earnings per share
excluding exceptional
items (pence) +
Dividend per share
(pence) +
6.4%
3.3%
5.1%
4.0%
0.5%
5.3%
4.4%
0.8%
0.2%
1.4%
35.3
39.2
45.8
47.1
42.2
47.7
44.3
48.4
52.4
53.0
8.4%
8.6%
9.1%
8.8%
7.7%
8.1%
7.1%
7.4%
7.9%
7.6%
36.7
40.5
47.8
50.2
40.2
51.1
49.5
48.8
52.5
60.5
20.5
22.8
26.8
27.9
26.2
32.0
30.6
34.0
37.3
38.8
7.3
8.0
9.6
10.6
11.6
14.0
14.9
16.6
18.2
19.3
Shareholders’ funds (£’m)
120.0
134.2
157.2
181.5
144.9
145.6
147.9
164.2
176.2
198.4
Capital expenditure (£’m)
42.1
32.4
25.1
41.7
30.0
42.3
40.8
30.3
45.6
59.1
Net book value of fixed
assets (£’m)
Number of shops in
operation at year end
148.2
160.7
163.1
180.8
184.3
196.8
210.5
211.2
226.2
253.3
1,202
1,231
1,263
1,319
1,336
1,368
1,409
1,419
1,487
1,571
*restated for the transition to IFRSs
^2004 and 2009 were 53 week years, impacting on total sales growth for that year and the year immediately following
+ All years prior to 2009 adjusted to take account of the ten for one share split which took place during 2009
Exceptional items
1 includes £3.5m Bakers Oven restructuring costs
2 includes one-off property gains of £2.2m
3 includes £4.3m exceptional credit
4 includes £7.4m exceptional credit (£9.6m pension credit offset by £2.2m bakery closure charges)
96
Annual Report & Accounts 2011
Financial calendar
Announcement of results and dividends
Half year
Full year
Early August
March
Dividends
Interim
Final
Mid October
25 May 2012
Annual report posted to shareholders
Annual General Meeting
Early April
16 May 2012
Secretary and advisers
Secretary
Jonathan D Jowett, LL.M. Solicitor
Registered Office
Fernwood House
Clayton Road
Jesmond
Newcastle upon Tyne
NE2 1TL
Registered number
502851
Bankers
National Westminster Bank Plc
149 High Street
Gosforth
Newcastle upon Tyne
NE3 1HA
Auditors
KPMG Audit Plc
Quayside House
110 Quayside
Newcastle upon Tyne
NE1 3DX
Stockbrokers
UBS
1 Finsbury Avenue
London
EC2M 2PA
Nplus1 Brewin LLP
Time Central
Gallowgate
Newcastle upon Tyne
NE1 4SR
Solicitors
Muckle LLP
Time Central
32 Gallowgate
Newcastle upon Tyne
NE1 4BF
Registrars
Capita Registrars
Bourne House
34 Beckenham Road
Beckenham
Kent
BR3 4TU
222shops in Scotland
● 11 net new shops opened in 2011
251shops in the North East
● 6 net new shops opened in 2011
201shops in the South East
● 15 net new shops opened in 2011
199shops in London
● 5 net new shops opened in 2011
206shops in the North West
● 12 net new shops opened in 2011
286shops in Central
● 17 net new shops opened
in 2011
206shops in the South West
● 18 net new shops opened in 2011
Greggs plc
Fernwood House
Clayton Road
Jesmond
Newcastle upon Tyne
NE2 1TL
Company Registered Number 502851
greggs.co.uk
L I S T E D
P R E M I U M
Design and
project management – Gratterpalm.
Material – This report has been
printed on elemental chlorine–free
paper which is made from trees
from sustainable forests.