Greggs Regulatory News (GRG)

12 Mar 2007 07:02

Greggs PLC12 March 2007 12 March 2007 GREGGS plc PRELIMINARY RESULTS FOR THE 52 WEEKS ENDED 30 DECEMBER 2006 KEY FINANCIALS+---------+-----------------------------------+-----------------------------------+| | Before Bakers Oven restructuring | After Bakers Oven restructuring || | costs | costs |+---------+-------------+---------------------+-------------+---------------------+| | 2006| Change YOY| 2006| Change YOY|+---------+-------------+---------------------+-------------+---------------------+|Sales | £551m| +3.3%| £551m| +3.3%|+---------+-------------+---------------------+-------------+---------------------+|Operating| £42.2m| -10.4%| £38.7m| -17.8%||profit | | | | |+---------+-------------+---------------------+-------------+---------------------+|Pre-tax | £43.7m| -12.8%| £40.2m| -19.8%||profit | | | | |+---------+-------------+---------------------+-------------+---------------------+|Diluted | 261.6p| -6.2%| 239.9p| -14.0%||earnings | | | | ||per share| | | | |+---------+-------------+---------------------+-------------+---------------------+|Dividends| 116.0p| +9.4%| 116.0p| +9.4%||per share| | | | |+---------+-------------+---------------------+-------------+---------------------+ • Like-for-like sales up 0.5% for year: more positive trend in final weeks • Operating profit before restructuring costs down £4.9m including energy costs up £4.5m • £39.5m distributed via share buybacks • Twenty-second consecutive year of dividend growth reflecting continued strong cash generation and confidence in the future • Comprehensive business review completed • Retail Director for Greggs brand appointed • Significantly increasing customer focus and responsiveness; many innovative trials being developed "Like-for-like sales in the nine weeks to 3 March 2007 have increased by 3.9 percent, broadly in line with inflation. Operating profit is in line with ourbudget and ahead of the comparable period last year. In our programme tostrengthen and develop the Greggs brand, the emphasis this year will be verymuch on evaluating and learning from the results of our trials, along with thesteady and progressive adoption of best practice across the business. Althoughwe expect to see some near term benefits from this work, its real objective isto enhance the growth potential of the Group over the next two to three years.While additional costs will be incurred as we reorganise and develop the Greggsbrand, overall we expect that 2007 will be a year of progress for the Group." - Derek Netherton, Chairman ENQUIRIES:Greggs plc Hudson SandlerSir Michael Darrington, Managing Director Michael Sandler / Wendy BakerRichard Hutton, Financial Director Tel: 020 7796 4133Tel: 020 7796 4133 on Monday, 12 March only 0191 281 7721 thereafter High resolution images are available for the media to view and download fromwww.vismedia.co.uk CHAIRMAN'S STATEMENT As we had anticipated, 2006 proved to be a challenging year for the Group.During the year we conducted a comprehensive review of the business, whichconfirmed its fundamental strengths in terms of branding, shops, products andpeople, but also identified opportunities for improvement. We are thereforemaking changes to enable us to become even more focused on our customers,respond more rapidly to a fast-changing and increasingly competitive marketplace, and facilitate Greggs' continuing development as a powerful andinnovative national brand. Results Total Group sales for the 52 weeks ended 30 December 2006 increased by 3.3 percent to £551 million (2005: £533 million). After a flat first half,like-for-like sales performance improved towards the end of the year. Thelike-for-like sales improvement during the second half (28 weeks) was 0.9 percent, making an increase for the year as a whole of 0.5 per cent. Operating profit, excluding the costs of restructuring the Bakers Oven businessin the North and Scotland, was £42.2 million (2005: £47.1 million), a reductionof 10.4 per cent giving an operating margin of 7.7 per cent (2005: 8.8 per cent)for the year. The principal factors here were the modest like-for-like salesprogress, including a 2.5 per cent decline in core volumes, and a £4.5 millionincrease in energy costs. These were mitigated to some extent by efficiencyimprovements and a continuing effort to bear down on overheads. Finance income was reduced by 50 per cent to £1.5 million (2005: £3.0 million)as we returned surplus cash to our shareholders through increased dividends andshare buybacks. In consequence, pre-tax profit before restructuring costs was£43.7 million (2005: £50.2 million), a reduction of 12.8 per cent. After the£3.5 million closure costs arising from the Bakers Oven restructuring pre-taxprofit was 19.8 per cent lower than in 2005 at £40.2 million. Before restructuring costs, diluted earnings per share were 262 pence (2005: 279pence), a reduction of 6.2 per cent. This compared favourably with the 10.4 percent decrease in operating profit, reflecting the benefit of share buybacks.After the impact of restructuring costs, diluted earnings per share were 240pence (2005: 279 pence), a reduction of 14.0 per cent. Dividend The Board recommends a final dividend of 78.0 pence per share (2005: 70.0pence), an increase of 11.4 per cent. Together with the interim dividend of 38.0pence (2004: 36.0 pence), paid in October 2006, this makes a total for the yearof 116.0 pence (2005: 106.0 pence). This is a rise of 9.4 per cent, making 2006our twenty-second consecutive year of dividend growth since Greggs came to thestock market in 1984. The increased dividend is covered 2.3 times by dilutedearnings per share before restructuring costs (2005: 2.6 times) and isconsistent with our previously stated intention to progress towards cover of 2.0times. Subject to the approval of the Annual General Meeting, the final dividend willbe paid on 25 May 2007 to shareholders on the register at 27 April 2007. As announced in the interim report, we believe that our shareholders willbenefit from a more efficient balance sheet. In addition to delivering valuethrough increased dividends, the Company spent a total of £39.5 million duringthe year purchasing 1,036,479 of its ordinary shares for cancellation, at anaverage price of £37.87 per share. The trustees of the Greggs Employee BenefitTrust purchased a further 438,829 shares at a cost of £16.4 million for thefuture satisfaction of employee share options. The combined effect of thesepurchases, totalling £55.9 million, is seen in the reduction of net cash on ourbalance sheet from £65.6 million to £19.6 million during 2006. It is the Board's intention to renew its authority to buy back shares at theAnnual General Meeting, and to continue to buy back shares when it is in theinterests of our shareholders to do so. Results of strategic review During 2006 we completed a thorough review, looking at all aspects of ourbusiness, to ensure that it continues to develop in line with our customers'needs. In order to accelerate the implementation of initiatives to extend theappeal and availability of products under the Greggs brand we are creating a newmanagement structure. Key priorities will include the improvement of our productrange to enhance its appeal as the mass market becomes more aspirational, andthe development of formats and opening hours that can satisfy demand for food onthe go throughout the day. Action in these areas will be backed by significantlyincreased investments in research, advertising and promotion, and in improvingthe retail environment through refits and refurbishments. This programme ofchange is intended to drive a progressive acceleration of both top and bottomline growth. Profitability is also expected to benefit in the medium term fromcost reductions as best practice is implemented across the business. MikeDarrington discusses these changes in more detail in his report. The Board Raymond Reynolds (47) was appointed to the Board as an Executive Director in thenew role of Retail Director for the Greggs brand on 18 December 2006. He ischarged with the development of a stronger, more unified and customer-focusedGreggs brand throughout the UK. Two Directors who have made truly exceptional contributions to the business willretire at our AGM in May. Ian Gregg (67), who has served as a Non-ExecutiveDirector since August 2002, was Executive Chairman and Managing Director from1964-84, then Executive Chairman 1984-93 and Non-Executive Chairman 1993-2002.Greggs is a unique business in many ways, one of which is the integrity of itsvalues and the way in which these are embedded throughout the company. Ian wasthe inspiration for this as well as many other strengths of the business. On apersonal note I am also very grateful for all the help that he has given to mesince I took over from him as Chairman. Malcolm Simpson (65), retired asFinancial Director in May 2006 after 31 years on the Board in that role. For thelast year he has served as an Executive Director in charge of our IT function.His contribution to the business cannot be overestimated. Mike Darrington paystribute to Ian and Malcolm at the end of this report. People This has been a challenging year for all at Greggs, and I would like to expressthe thanks of the Board to every member of our team for their continuedcommitment to delivering excellent customer service, and for their positiveresponse to the necessary changes we have made during the year. Prospects The more positive sales trend which developed in the final weeks of 2006 hascontinued in the current year to date. Like-for-like sales in the nine weeks to3 March 2007 have increased by 3.9 per cent, broadly in line with inflation.Operating profit is in line with our budget and ahead of the comparable periodlast year. In our programme to strengthen and develop the Greggs brand, theemphasis this year will be very much on evaluating and learning from the resultsof our trials, along with the progressive adoption of best practice across thebusiness. Although we expect to see some near term benefits from this work, itsreal objective is to enhance the growth potential of the Group over the next twoto three years. While additional costs will be incurred as we reorganise anddevelop the Greggs brand, overall we expect that 2007 will be a year of progressfor the Group. Derek Netherton, Chairman 12 March 2007 MANAGING DIRECTOR'S REPORT We are significantly increasing our customer focus to enable us to drive astronger and more unified Greggs brand that can respond more rapidly andeffectively to changing needs and tastes. We are taking major initiatives in theareas of management, customers, products, shops and marketing. These actionswill create a more streamlined Group with the capability to deliverprogressively improving performance through a focus on innovation and bestpractice. Trading performance Trading conditions during 2006 were the most demanding that we have encounteredfor well over a decade, and these were reflected in our disappointinglike-for-like sales performance. The flat like-for-like sales trend of the firsthalf (24 weeks) continued for longer than we had expected in the second half,partly because of the effects of an exceptionally hot summer. Real improvementswere achieved, against progressively easier comparatives, in the final twomonths of the year, with like-for-like sales in the six weeks to 9 Decembergrowing by 2.0 per cent and in the final three weeks to 30 December by 3.3 percent. As the Chairman has noted, these delivered an uplift of 0.9 per cent overthe second half as a whole, making an increase of 0.5 per cent for the year.With our selling price inflation averaging 3.0 per cent, this represented a 2.5per cent decline in core volumes year-on-year. The market in which we operate has become progressively more competitive, withthe proliferation of high street convenience formats operated by the majorsupermarket groups, and the growth of numerous specialist takeaway food chains.This has occurred at a time when high street footfall has in any case been underpressure. The high operational gearing of the business makes it sensitive tochanges in like-for-like sales. In 2006, we faced an exceptional increase in energy costs following the end of along term electricity supply agreement and significant hikes in gas and otherpower costs. In total, the Group's energy bill rose by £4.5 million comparedwith 2005, and this was the largest single contributor to the £4.9 millionreduction in continuing operating profit. Through forward buying we managed toavoid the peak of the energy cost spike and, as a consequence, these costs in2007 are likely to be at a similar level to 2006. Advantageous forward buying also enabled us to mitigate the effects of asignificant increase in the market price of flour, our most importantingredient, from autumn 2006, as poor harvests worldwide resulted in a shortageof good quality milling wheat. Labour, our largest single cost, reflectedunderlying wage inflation of just under 4 per cent, partially offset by improvedscheduling of shop staff hours and a continued drive to enhance efficiency. Wealso robustly challenged all spending as part of a determined focus on tightercost management across the Group. Greggs brand UK. The Greggs brand in the UK recorded a like-for-like salesdecline of 0.3 per cent in the first half and an improvement of 1.2 per cent inthe second half, making an increase of 0.5 per cent for the year. Selling priceinflation averaged 3.1 per cent, once again reflecting improvements to ourproduct offer as well as the recovery of cost increases. Bakers Oven brand. Like-for-like sales under the Bakers Oven brand grew by 0.8per cent in the first half and recorded a marginal decline of 0.1 per cent inthe second half, making an increase of 0.4 per cent for the year as a whole.Selling price inflation averaged 2.6 per cent. Greggs Continental Europe. Our Belgian business is now trading from six shops inAntwerp and Leuven, which are achieving good core sales growth. We plan to openat least two more shops in Belgium during 2007. Structure and strategy: Greggs As the Chairman has noted, we have conducted a comprehensive review of ourstructure and strategy during 2006. Whilst confirming the fundamental strengthsof the business, it has made us even more determined to drive harder in thoseareas where there are opportunities for improvement. Management. We operate in an increasingly fast-moving market place, and it isessential that we have the capacity to react quickly to changing consumerdemands and tastes. Following our review, the Board concluded that the previousmanagement structure, which allowed considerable autonomy to the eight Greggsdivisions in the UK, could no longer meet this key requirement. Raymond Reynoldswas therefore appointed Retail Director in December 2006 to unify the Greggsbrand and to drive an improvement programme based on an even greaterunderstanding of our customers and their needs. Customers. Our market research has confirmed the great loyalty of the millioncustomers who visit Greggs each day. It has also highlighted clear opportunitiesto strengthen engagement with our existing customers and to extend our appeal tonew groups of consumers. Our objective is to develop the Greggs brand to deliverquality food on the go to customers throughout the day, with a range that iscapable of satisfying their varying lifestyles and preferences. Products. While maintaining our focus on delivering great taste and enjoyment atcompetitive prices, we will develop our offer to cater for more aspirationaldemands. We will continue to offer iconic bakery products such as our sausagerolls and doughnuts. These will be complemented by more adventurous new productsand by further expansion and development of our Healthier Options range ofwraps, rolls and sandwiches, which currently comprises seven lines. Each productcontains less than 400 Kcalories, less than 10g of fat, less than 4g ofsaturated fat and less than 2g of salt. The range is complemented by a healthyfruit salad pot. Together, Healthier Options products already account for over10 per cent of our sandwich sales. Shops. The strategic review has confirmed the fundamental strength of our retailproperty portfolio. We are now seeking to develop our range of outlets andopening times so that they are appropriately geared to each meal occasion and tolocal demand for food on the go. In developing our retail estate, we willprogressively focus on new types of locations where there is demand for highquality takeaway food, as well as on the traditional high street. We will alsoput increasing emphasis on capital investment devoted to enhancing the appeal ofour existing shops through refits and refurbishments. Marketing. All these changes will be supported by a significant increase in ourmarketing expenditure, including a campaign to promote awareness of the Greggsbrand. We will place particular emphasis on the freshness, quality andenjoyability of our products, including the excellent provenance of ouringredients. As our new structure becomes established, we will speed up the adoption of bestpractice throughout the Greggs business, both in the product range we offer andin the way it is produced and sold. This will help us to drive down costs aswell as building Greggs' reputation as a consistent, national brand. Structure and strategy: Bakers Oven In August we announced the restructuring of Bakers Oven in the North andScotland, involving the closure of these two divisions and the transfer of 49 oftheir shops either to the Greggs brand or the successful Bakers Oven Midlandsoperation. A further 14 poorly performing shops were closed. These changes havebeen implemented in accordance with our plans, and will deliver the projectedprofit enhancement of £1.25 million per annum from 2007. We incurred total restructuring costs of £3.5 million, slightly below ourrevised estimate but exceeding our original budget of £2.5 million owing tohigher than expected property costs. Since the beginning of the current year wehave completed the sale of the Carricks bakery site in Newcastle upon Tyne,formerly the headquarters of Bakers Oven North. As we have previously disclosed,the property profit on this sale will help to mitigate the costs of closure. Bakers Oven in the South and Midlands remains a successful and profitablebusiness, delivering good returns on our investment, and we remain committed toits future growth and development. Retail profile We opened 48 new shops during the year and closed 31, giving us a net increaseof 17 units to a total of 1,336 at 30 December 2006. There were a larger numberof closures than usual as a result of the restructuring of Bakers Oven in theNorth and Scotland. Following these changes, our portfolio at the year endcomprised 1,165 shops (2005: 1,098) under the Greggs brand in the UK, anincrease of 67; 165 (2005: 216) under the Bakers Oven brand, a reduction of 51;and six under the Greggs brand in Belgium, an increase of one. We completed 29 comprehensive shop refurbishments and 24 minor refits during theyear. During 2007, we expect to add a net 20 - 25 new shops to our portfolio, after acontinuing programme of action to weed out underperforming outlets. As part ofour drive to enhance the customer appeal of our stores, we will accelerate thepace of our programme of refurbishments and refits during the year. Capital investment Capital expenditure during the year was £30.0 million (2005: £41.7 million).This was significantly below our original budget of £40 million, principally asthe result of site problems which delayed the start of work on our new Glasgowbakery, and the scaling back of planned shop openings. We plan to invest some£39 million in the business during 2007, which will include the Glasgow bakeryconstruction; the completion of a smaller scale expansion of our South Walesfacility; and a substantial increase in our expenditure on shop refits andrefurbishments. Cash flow and balance sheet The business remains consistently highly cash generative, underpinning theBoard's strategic decision to maintain our long-established, progressivedividend policy, reduce dividend cover and conduct a continuing share buybackprogramme. During the year the Company and the Greggs Employee Benefit Trusttogether spent £55.9 million on the purchase of shares; the Company paiddividends to shareholders totalling £12.1 million; and we made an additionalcontribution of £5.5 million to our main pension scheme, reducing its deficitunder IAS19 to £1.9 million at 30 December 2006 (2005: £9.7 million). Despite these substantial outlays, we ended the year with net cash on thebalance sheet of £19.6 million, a reduction of £46.0 million since our previousyear end. Community and environment We are proud to have maintained our commitment to the communities in which weoperate during 2006, both through the Company's continued charitable donationsand the efforts of our employees. In total Greggs gave £540,000 to charitiesduring the year (2005: £609,000), amounting to 1.3 per cent of our pre-taxprofit. This was directed principally through the Greggs Trust and our GreggsBreakfast Clubs scheme, where the number of clubs operating in primary schoolsin disadvantaged areas rose from 113 to 124. In addition to this our staffhelped to raise £345,000 for children's cancer charities through regional funruns and over £70,000 for the BBC Children In Need appeal. We have maintained our drive to improve energy efficiency and reduce carbonemissions through our SEBA (Save Energy Be Aware) initiative in all our shopsand bakeries. I am pleased to report that this delivered a 10 per cent reductionin our energy usage in production during 2006. We have also continued to pursuevarious initiatives to increase recycling and reduce the amount of food wastegoing to landfill. People Our excellent people have again demonstrated their dedication to the business,and have worked hard to overcome the challenges created by a more demandingmarket place. I would like to record my special appreciation of the way thoseaffected by the restructuring of Bakers Oven pulled together to help us to makethose changes as quickly and smoothly as possible. I would also like to thankand send our good wishes for the future to two senior members of our managementteam who retired this year after long periods of service: Ian Edgeworth, who hadbeen personnel director at our Group head office in Newcastle upon Tyne since1983; and Peter Rossi, who joined the business in 1988 and had been managingdirector of Greggs of Yorkshire since 1997. In addition we have two othersignificant retirements coming in 2007 and, as the Chairman has noted, apersonal tribute from me to Ian Gregg and Malcolm Simpson follows this report. The future We are taking clear steps to address the difficulties we encountered in 2006,and have initiated a programme of change that will build on the enormousfundamental strengths of the Group. This will help us to develop an even moreresponsive and cost-effective business that can satisfy the needs of customers,employees and shareholders alike. We will do so without compromising our corevalues or our commitment to delivering excellent products and service. I amconfident that this will provide the most solid of foundations for the deliveryof our vision of long term growth as Europe's finest bakery-related retailer. Sir Michael Darrington Managing Director 12 March 2007 TRIBUTE TO IAN GREGG AND MALCOLM SIMPSON BY SIR MICHAEL DARRINGTON The Greggs business was started by Ian's parents in the late 30s, selling yeastand eggs from a van. As a young boy, after his parents bought their first shopand bakery in 1951, Ian found himself helping with all the tasks in the bakery,as well as studying. Just as Ian qualified as a lawyer, his father diedunexpectedly. Ian agreed to help his mother with the business for a short periodbut, to his surprise, found he became enthused by it. At that time, the businesscomprised a bakery in Gosforth with one shop and seven delivery vans and, inthose days, the business was mainly bread, rolls and cakes. Ian progressively built the business over the next 20 years, growing it bothorganically and by acquisition. He developed the savoury business, putting ovensinto all the shops and he found himself working bakers' hours. He alsoreintroduced the iconic Stottie Cake. As those who know him understand, Ian loves working with people and is excellentat choosing them, which has contributed to the strong and stable team that wasbuilt. He has excellent personal values which he built into the business in theearly days and which we have progressively developed as the business has grown.He is remarkable in that he has the vision of an entrepreneur but was neverhappier than when he went in to help out with a problem in the bakery. In the early 80s, Ian decided he had done his bit in growing Greggs, which wasstill a private business, and he asked me to join and to continue theimprovement and expansion of the business. I came to Greggs as MD in 1983 from alarge public company, joining a relatively small family business, which was abit of an act of faith. However, I had met Ian on a number of occasions and aswe got to know each other I felt we shared lots of ideas and had a lot of valuesin common and that Ian was somebody to be trusted. The business floated on the London Stock Exchange in May 1984 and we carried ongrowing and improving the business. Ian became progressively more non-executivein his Chairman's role. He retired as Chairman in 2002 but, fortunately for us,agreed to stay on for a few more years. Ian was amazing in that theunderstanding we had was that he would leave me to get on with doing things myway rather than getting involved himself. He did this even when, on a number ofoccasions, he must have felt pretty uncomfortable. I doubt that anyone elsecould have done this as well as Ian. Even during his most frenetic times, Ian found time for the other passion in hislife - salmon fishing. He has always been very involved in conservation -including being the Chairman of the River Tweed Commissioners and TweedFoundation, for which he was awarded an OBE. He is also very generous and set upa significant charitable trust to help the disadvantaged. He has a large numberof achievements, both in and out of the business, which have influenced a lot ofpeople. Ian is a very modest and unassuming man, with great strength of character. Hisretirement from Greggs is the end of an era. The AGM also sees the retirement of another pillar of Greggs - Malcolm Simpson,who has been Financial Director of Greggs since 1976. He was a great help to Ianin the early days and, when I joined Greggs in 1983, Malcolm was particularlywelcoming and supportive in what was initially a challenging time. Malcolmsteered us through our flotation in May 1984. He is a larger-than-life characterwho has had a wide-ranging involvement in most areas of our business and hasmade a major contribution to our success over many years. He is verystrong-minded and (most of the time!) I have appreciated both his challengingapproach as well as his supportiveness. Greggs have been very fortunate to have two such excellent people giving suchlong-term commitment to the very successful building of our business. I know that I, and many others, will miss them tremendously and would like towish them every success and happiness in the future. Greggs plc Consolidated income statementfor the 52 weeks ended 30 December 2006 (2005: 52 weeks ended 31 December 2005) 2006 2006 2006 2005 £'000 £'000 £'000 £'000 Excluding Bakers Oven Total Bakers Oven restructuring restructuring costs costs Revenue 550,849 - 550,849 533,435Cost of sales (209,455) (68) (209,523) (203,346) ________ ________ ________ ________Gross profit 341,394 (68) 341,326 330,089 Distribution and selling costs (262,917) (2,947) (265,864) (247,188)Administrative expenses (36,232) (483) (36,715) (35,758) ________ ________ ________ ________Operating profit 42,245 (3,498) 38,747 47,143 Finance income 1,579 - 1,579 3,106Finance expenses (87) - (87) (90) ________ ________ ________ ________Profit before tax 43,737 (3,498) 40,239 50,159 Income tax (14,227) 1,049 (13,178) (16,085) ________ ________ ________ ________Profit for the financial yearattributable to equity holders ofthe parent 29,510 (2,449) 27,061 34,074 ======= ======= ======= =======Basic earnings per share 241.2p 282.1pDiluted earnings per share 239.9p 278.9p Dividends 2006 2005 Interim dividend paid (pence pershare) 38p 36pFinal dividend proposed (pence pershare) 78p 70p Greggs plc Consolidated statement of recognised income and expensefor the 52 weeks ended 30 December 2006 (2005: 52 weeks ended 31 December 2005) 2006 2005 £'000 £'000 Actuarial gains / (losses) on defined benefit pension plans 2,741 (2,345)Tax on items taken directly to equity (822) 704 ________ ________Net income / (expense) recognised directly in equity 1,919 (1,641) Profit for the financial year 27,061 34,074 ________ ________ Total recognised income and expense for the financial yearattributable to equity holders of the parent 28,980 32,433 ======= ======= Greggs plc Consolidated balance sheetat 30 December 2006 (2005: 31 December 2005) 2006 2005 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 184,325 180,826 Current assetsInventories 8,429 7,713Trade and other receivables 16,026 15,861Cash and cash equivalents 19,585 65,602Asset held for sale 275 - ________ ________ 44,315 89,176 ________ ________Total assets 228,640 270,002 ________ ________LIABILITIESCurrent liabilitiesTrade and other payables (61,295) (58,686)Current tax liabilities (5,467) (8,086) ________ ________ (66,762) (66,772)Non-current liabilitiesDefined benefit pension liability (1,883) (9,730)Other payables (90) (98)Deferred tax liability (15,014) (11,927) ________ ________ (16,987) (21,755) ________ ________Total liabilities (83,749) (88,527) ________ ________Net assets 144,891 181,475 ======= =======EQUITYCapital and reservesIssued capital 2,232 2,439Share premium account 13,533 13,440Capital redemption reserve 207 -Retained earnings 128,919 165,596 ________ ________Total equity attributable to equity holders of the parent 144,891 181,475 ======= ======= Greggs plc Consolidated statement of cashflowsfor the 52 weeks ended 30 December 2006 (2005: 52 weeks ended 31 December 2005) 2006 2005 £'000 £'000Operating activitiesCash generated from operations (see below) 66,185 67,689Income tax paid (13,600) (14,625) ________ ________Net cash inflow from operating activities 52,585 53,064 ________ ________Investing activitiesAcquisition of property, plant and equipment (30,023) (41,687)Proceeds from sale of property, plant and equipment 1,599 2,171Interest received 1,579 3,106 ________ ________Net cash outflow from investing activities (26,845) (36,410) ________ ________Financing activitiesDefined benefit pension scheme special contribution (5,500) (4,000)Interest paid (74) (90)Proceeds from issue of share capital 93 1,234Sale of own shares 1,809 3,695Purchase of own shares (16,436) (2,173)Shares purchased and cancelled (39,544) -Dividends paid (12,105) (12,319) ________ ________Net cash outflow from financing activities (71,757) (13,653) ________ ________Net (decrease) / increase in cash and cash equivalents (46,017) 3,001 Cash and cash equivalents at the start of the year 65,602 62,601 ________ ________Cash and cash equivalents at the end of the year 19,585 65,602 ======= ======= Cash flow statement - cash generated from operations 2006 2005 £'000 £'000 Profit for the financial year 27,061 34,074Depreciation 23,884 22,038Loss on sale of property, plant and equipment 753 484Release of government grants (8) (7)Share based payment expenses 687 557Finance income (1,579) (3,106)Finance expenses 87 90Income tax expense 13,178 16,085Increase in inventories (716) (430)Increase in debtors (165) (1,912)Increase / (decrease) in creditors 2,609 (517)Increase in pension liability 394 333 ________ ________Cash from operating activities 66,185 67,689 ======= ======= Greggs plc NOTES: 1. Status of financial information The financial information set out above does not constitute the company'sstatutory accounts for the years ended 30 December 2006 or 31 December 2005. Thefinancial information for 2005 is derived from the statutory accounts for 2005which have been delivered to the registrar of companies. The auditors havereported on the 2005 accounts; their report was (i) unqualified, (ii) did notinclude a reference to any matters to which the auditors drew attention by wayof emphasis without qualifying their report and (iii) did not contain astatement under section 237(2) or (3) of the Companies Act 1985. The statutoryaccounts for 2006 will be finalised on the basis of the financial informationpresented by the directors in this preliminary announcement and will bedelivered to the registrar of companies in due course. 2. Dividends The following tables analyse dividends when paid and the year to which theyrelate: 2006 2005 Per share Per share pence pence 2004 final dividend - 66.0p2005 interim dividend - 36.0p2005 final dividend 70.0p -2006 interim dividend 38.0p - ________ ________ 108.0p 102.0p ======= ======= The proposed final dividend in respect of 2006 amounts to 78.0 pence per share(£8,706,000). This proposed dividend is subject to approval at the AnnualGeneral Meeting and has not been included as a liability in these accounts. 2006 2005 £'000 £'000 2004 final dividend - 7,9592005 interim dividend - 4,3602005 final dividend 8,013 -2006 interim dividend 4,092 - ________ ________ 12,105 12,319 ======= ======= Capital Retained 2006 2005 Issued Share redemption earnings Total Total capital premium reserve £'000 £'000 £'000 £'000 £'000 £'000 Balance at 1January 2006 2,439 13,440 - 165,596 181,475 157,156Shares issuedin the year - 93 - - 93 1,234Sharespurchased andcancelled (207) - 207 (39,544) (39,544) -Totalrecognisedincome andexpense - - - 28,980 28,980 32,433Purchase ofown shares - - - (16,436) (16,436) (2,173)Sale of ownshares - - - 1,809 1,809 3,695Share-basedpayments - - - 687 687 557Dividends - - - (12,105) (12,105) (12,319)Tax itemstaken directlyto reserves - - - (68) (68) 892 ________ ________ ________ ________ ________ ________Balance at 30December 2006 2,232 13,533 207 128,919 144,891 181,475 ======= ======= ======= ======= ======= ======= 4. Earnings per share Basic earnings per share The calculation of basic earning per share at 30 December 2006 was based onprofit attributable to ordinary shareholders of £27,061,000 (2005: £34,074,000)and a weighted average number of ordinary shares outstanding during the yearended 30 December 2006 of 11,220,493 (2005: 12,080,526). Diluted earning per share The calculation of diluted earnings per share at 30 December 2006 was based onprofit attributable to ordinary shareholders of £27,061,000 (2005: £34,074,000)and a weighted average number of ordinary shares outstanding during the yearended 31 December 2005 of 11,280,902 (2005: 12,215,800). Adjusted earnings per share Basic and diluted earnings per share have been calculated for the year ended 30December 2006 which exclude the effect of the Bakers Oven restructuring costs.These have been calculated by dividing profit attributable to ordinaryshareholders excluding Bakers Oven restructuring costs by the relevant weightedaverage number of ordinary shares as calculated below. Profit attributable to ordinary shareholders 2006 2006 2006 2005 £'000 £'000 £'000 £'000 Excluding Bakers Oven Total Bakers Oven restructuring restructuring costs costs Profit for the financial yearattributable to equity holders of the parent 29,510 (2,449) 27,061 34,074 ======= ======= ======= =======Basic earnings per share 263.0p (21.8p) 241.2p 282.1pDiluted earnings per share 261.6p (21.7p) 239.9p 278.9p This information is provided by RNS The company news service from the London Stock Exchange