MCA picks highlights from Greggs’ 2020 preliminary financial results 

Succession planning

Greggs chairman Ian Durant will stay on at the company to help appoint a successor to Roger Whiteside, as the CEO approaches retirement age.

In normal circumstances, Durant would have been expected to step down in 2020, but has been asked by the board to remain in post, in order to address the succession of 62-year-old Whiteside.

Durant said: “We are grateful to Roger for his willingness to be flexible regarding his retirement date to ensure the best possible succession and transition process.”

Digital

Meanwhile, the company also updated on its digital strategy, as part of preliminary results for 2020.

The Greggs Rewards loyalty scheme was launched nationwide in October 2020, with a click and collect service made available to all shops in September.

These two new services have been brought together in a new app which is now being piloted ahead of launch in the second quarter of 2021.

Expansion

Whiteside said Greggs expects to see a further shift away from office-dependent catchments and weaker shopping locations, and hailed the “diversity of our estate”, meaning the brand is not overly dependent on any one location type, and downturns in some areas are balanced by improvements in others.

Shops accessed by car have been the strongest performers during the Covid crisis, and these location types already formed most of Greggs new shop pipeline.

Whiteside said: “This gave us the confidence to restart our new shop opening programme in the second half and we are targeting a rapid return to previously planned growth levels of circa 100 net new shops for the year ahead.”

Greggs is also seeking new opportunities in previously underrepresented locations such as central London and mass transport hubs, where availability and rental levels will now make those locations more accessible.

Whiteside said: “With a strong pipeline and support from multi-channel development we have raised our target for the UK estate to 3,000 shops.”

Delivery

Meanwhile, an important feature of the improving trend in like-for-like sales from company-managed shops has been the contribution of delivery services, which were rolled out nationally across the second half of 2020.

In the fourth quarter of the year, delivery represented 5.5% of company-managed shop sales, supplied by 600 shops that now provide delivery services to catchments served by Just Eat.

This is expected to increase to around 800 shops in 2021.

Finance director Richard Hutton said delivery channel transactions typically have a much higher average transaction value (ATV) than those from walk-in customers.

Whilst the percentage margin from a delivery transaction is slightly lower than the walk-in equivalent there is a benefit from the incremental delivery transactions and their higher ATV, he said. 

Impairments

Greggs made write-offs of £9m for food and drink stock losses in the early part of 2020, with the surplus donated to good causes where possible. 

The acceleration of the closure of 38 shops crystallised impairment charges amounting to £5.4m, and the company has provided for £2.5m in onerous costs directly linked to these leases, for example rates, service charges and insurance.

A further £8.6m charge was made for the impairment of 87 shops which continue to trade but are unlikely to recover the full carrying value of their assets.

Incremental costs of £9.3m were incurred to put in place additional protective measures across the business, including a proactive virus-testing programme at our manufacturing and logistics sites.

Heading into 2021 Greggs is incurring monthly costs of around £1m in respect of additional cleaning, protective workwear and testing.

A collective consultation, which resulted in 820 redundancies, led to a one-off cost of £10.2m, but has lowered ongoing annual Employment costs by £14.4m.

Cap-ex

A total of £58.7m (2019: £86.0 million) was invested in capital expenditure during 2020.

Depreciation and amortisation on property, plant and equipment and intangibles in the year was £60.8m (2019: £59.9m).

A further £51.9m (2019: £50.8m) of depreciation was charged in respect of right-of-use assets as a result of capitalised leases.

Plans for 2021 include capital expenditure of around £70m, with 100 new company-managed shops alongside further openings with franchise partners.

Having invested substantially in the shop estate, relatively few shops will be refurbished in 2021, but Greggs will continue trials of formats designed to support future plans.

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