Greggs plc

So good morning, lovely to see so many of you here this morning and welcome to Greg's interim results. and it's quite a momentous occasion today because it is Richard Hutton's last interim sales presentation after 20 years as CFO at Greggs and 28 years with the business. So Richard became CFO a little over 20 years ago in May 2006 and Richard the share price at that time was around 160 pence and that is taking into account the stock up split and the market cap at that time was around 180 million. At the time we had two UK brands we had Greggs and we had Baker's Oven and we also had a small chain of shops in Belgium at that time Richard. So we ended that year with Richard being CFO with 1300 shops and we delivered 40 million pounds of pbt in that year. Richard's also been a long-standing trustee of our Greggs Foundation and he's been a real champion of the Greggs Breakfast Clubs from their very inception back in 1999 so probably sits here very proudly being able to talk about the fact that we feed 75,000 children every school day that would otherwise not have a So can I just ask you to give them a huge round of applause. Richard sees most of what we're going to deliver today but he hasn't seen any of that. What I would say is the great news is he remains in role until the end of this year so you still will have countless conversations with him and he will still be here for our October trading update. I'm also delighted to announce that Ben Waldron will join us as CFO designate from the end of October and then he will take over the role as CFO. CFO on the 1st of January 2027 and between the period of Ben joining us and Richard leaving it will be a seamless and smooth transition as they work together with the senior finance team to deliver that. So back to the agenda, which will be in the usual format. So I'll talk about the results that we've announced today. I will then hand over to Richard to update on the financial performance in more detail. And I will then take you through the operational strategic review and give you a view as to the outlook. So let's start with a quick overview of the first half of 2026. So we've delivered a strong financial performance in a market that remains tough. As you can see in the slides, total sales growth was 7.2% with company managed like for like growth of 2.1%. Profit for tax was £76 million, that is up 19.7% on 2025 when profits were significantly impacted by the heatwave in June last year and they're also slightly ahead of 2024. We have delivered a much more resilient performance in the first half of this year including during the hotter weather in May and June with cost areas such as labour and waste very well controlled. Operating cash flow has grown by 18.3% and we have maintained the interim dividend at 19 pence. and in terms of our strategic plans we've seen further good progress in the first half of the year. Our brand metrics remain strong and we maintain our sector leading value reputation outperforming the market and continuing to grow our market share of visits. We continue to offer wider access to Greggs by growing in multiple channels including grocery retail. Our ongoing menu innovation ensures that we continue to adapt to the consumer trends in both new and our traditional categories with products such as the chicken roll and we have a strong pipeline of opportunities to grow and improve our shortest choppy state with our smaller format trials potentially provide potentially providing further opportunities as we continue to focus on being more convenient for our customers and our investment projects are progressing well and as we've previously guided we are now returning to a phase of strong free cash generation as capital intensity reduces so in summary it's a strong financial performance in the first half of the year and we continue to make progress against our strategic plan and I will now hand over to Richard to take you through our detailed financial performance

Thanks Roisin and thank you for that lovely introduction as well which as you say I wasn't aware of. You might be surprised to know that I've mainly enjoyed doing this, actually. I think it's helpful to your thinking to actually have to explain the Gregg story and to articulate it. And the questions that you ask us as well challenge our thinking and just make us turn over stones and make sure that we're looking at everything. So thank you for your part in that over... and well 20 years I think this must be presentation number 41 on that basis because I think the first one was literally 20 years ago at the interims and you know a number of you have been with us for quite a long time as well and have followed the journey for a fair bit of time particularly on the advisory side but I'm just looking around the room I think Darren you may be the only face who was here that time 20 years ago and and you still look as young as you did then so yeah thank you for that and the thing I would other thing I would say is just to reassure you I'm just the front man I mean there's a very very strong finance team back at Greggs they do all the work they pull all this together I just come out and tell the story they're still there and they will continue to produce high quality information for you as we go forward and I'll look forward to introducing Ben and I wouldn't be going if we didn't have the succession planned well and so I'm pleased that I'll be able to introduce Ben to you in the last couple of months of this year as we run in parallel and I'm sure he'll be a very strong successor. So enough of this nonsense back into the performance. So we're on slide six of the pack, the incoming expenditure overview. And we've given you two years comps here because last year was an unusual year. We did have a very tough first half. We were affected by the heat wave, particularly at the end of the period in June. and I think it hurt us more than it probably should have done because it sort of caught us unawares and I think one of the things the team have done this year is they've got much better at managing heat both in terms of ranging, staff availability, those sort of things. So the cost ratios bear up better in a heat wave now than they did back then. You can't get away from the fact that people eat less in hot weather but we have got some mitigation in terms of some of the things we've introduced like ice drinks as well. So Richard John Hutton, Thank you very much. There's some change in the structure of the P&L in the interest line because we were carrying an awful lot of cash into this investment program that we've been going through two years ago. You can see the cash was there two years ago from the finance income line where we were earning some good money on deposit with that. That's obviously sort of left the business now. It's been deployed into CapEx at the new sites and through growth. Thank you very much. and an imputed interest rate which is equivalent to the current market rate and that's much higher than it was 10 years ago. Now this isn't real money, this is accounting but effectively as you renew leases you increase the interest charge that goes through the account. So yes, pardon me longs for the days when you could just charge a cash rent through the books and you didn't have to explain these things but that is the reality. Nothing much to see in the tax line. We've got a 26% tax rate which is consistent with guidance and obviously the diluted earnings per share are slightly up on where they were two years ago and 21% up on the year. So let's get into the sales number a bit more. 7.2% sales growth, and on slide 7 you can see the building blocks of that growth. So company managed like for like at just over 2% is obviously important, it's the lifeblood of the business, but you can see that there are other elements to this. So the growth in the estate is actually twice as big in terms of sales progress as the like for like element. and then you've also got the contribution from business to business growth which is a combination of our franchise business which we are developing with additional sites mainly in petrol forecourts and also growth like for like of that but also the grocery segment where we've extended The Availability of Our Bake at Home range from originally Iceland Foods now into Tesco as well. So that started in September last year and we've had a good first half in terms of that range being extended into more shops but also the Iceland business developing well as well. So those have both contributed to this sort of multi-channel sort of volume picture for the first half. and if we look at that versus the market on page eight we try and give it some context so the solid blue line is that overall sales growth in the business including grocery including new shops as well and you can see that we're substantially ahead of the benchmark which is the yellow line and that's the all eating and drinking out of home as measured by card spending data from Barclaycard so you can see obviously we've got a fair gulf there but we've been taking more space so you would expect us to run ahead of that line I think the the interesting thing though is if you look at the dotted line that's the company managed like for like growth as well and it broadly follows the market but slightly ahead and the reassurance I take from that is that we are managing to extend the reach of the Greggs brand both in grocery and in estate growth without compromising the The like for like performance of the existing estate and that's a really important thing given that the story for Grace going forward is to do more of this and to penetrate more deeply but going carefully so as to avoid damaging existing shop growth. So I think it gives us some reassurance on that but also helps to contextualise that like for like number as well. If we then look into the P&L, so on slide 9 we've got the cost ratios within the P&L. Obviously that overall sales progress leverages margin within the whole system because we do have a degree of fixed cost both in terms of the rent of our existing shops and also the elements of supply chain that we have in house with the vertical integration. The gross margin has benefited from lower inflation in food and packaging costs particularly, so that's been a help in terms of the year on year gross margin position. and the distribution and selling cost ratio, whilst wages continue to be inflationary, there's been a slight phasing change and that we've moved our pay awards to April from December. We mitigated this with a small increase in January, but then a bigger increase in April this year. So there's been some phasing benefits to the first half again, which has come through in the distribution and selling ratio. and nothing much to see in admin costs but then we've got that financing impact that we've already discussed in terms of shop leases and the Derby site being capitalised increasing the overall net finance expense. Looking forward, there have been a few tailwinds in the first half in terms of the grocery, the phasing of some of that cost inflation. The other thing to highlight for the second half though is that the Derby operating costs will increase by about £10 million in the second half. So this is why in our overall guidance we've said we believe that the year itself will overall be broadly flat in terms of profit progress year on year. which might be a surprise given the progress we've made in H1 but just to flag those new costs coming in in the second half of the year. If we then dive into the cost base on page 10, quick reminder that the big two for us are people costs which is the blue segment of this chart at 39% and then food and packaging which is a third of our cost base. The food and packaging inflation has been slightly better than we'd hoped and we saw a little bit of inflation at the start of the year. We're now going through a period where we've got deflation in some of our food items and the forecast is that we should head back into a small amount of inflation by the end of the year with a bit more going into 2027 as fuel costs and energy costs start to flow through the supply chain and we come off some of our fixed positions. We've got about 70% of the second half's requirements fixed on food and packaging. So we've got good cover there, but about a third of it's still to fix. And we've got even better cover on energy, where we've got 90% of our overall energy and fuel requirements covered for the year. So we've got all of our electricity and gas broadly bought for this year, and we're only exposed on vehicle fuel requirements. The equivalent for next year is we're about 50% covered in that energy mix. So that's a decent place to be. People costs inflating at around 4% across the year as a whole and I've flagged that lower inflation from wages and salaries in Q1. and then in shop occupancy costs which is our rent, our rates, those sort of things. Rents are pretty stable and we're now able to quantify the benefit of the reduction in business rates that we saw announced in the budget having got the bills in now. It's worth about three and a half million a year on an annual basis to us from April. So across the piece, we're now expecting that inflation for the year will be more like 2% compared with the 3% that we saw at the start of the year. And in the background, of course, we continue to try and make the structural savings that help to offset the new costs that come into the business. A decent first half with some rollover of benefit of the projects that we did last year. So we've saved about $7 million in H1 against our full-year target of $11 million. So it feels like we've got good momentum in that and the energy savings is still going into that programme across the whole team. If we turn then to CapEx on page 11, this gives you a bit of history and a bit of the forward guidance on CapEx overall. What you can see is it's built of three main components. The orange colour at the bottom is IT and other miscellaneous items, and we're in a period where we're spending more on IT because we're renewing our SAP infrastructure and moving to the new S4 HANA basis. That's going well. There are live modules going on. in every week and we expect to be finished with that around about the middle of next year. The green element reflects our retail capital expenditure and we're having a relatively light year this year which reflects the relatively small number of shop refurbishments that we've got in the system, about 50 or so this year. That will start to increase going forward and you can see the number or the value of the retail capex increases and that reflects a greater rate of shop refitting and we should be north of 100 in those couple of years which we need to do to get back on cycle. We've been fortunate we've been able to take a bit of a break with some of the shop refurbs at the same time as going through the more intensive supply chain investment programme. that's the blue element that you can see and you can see it's a fundamental change this year having got through the peak last year where we spent 287 million on capex this year we've been able to reduce the guidance from 200 to 180 it partly reflects the guidance on shop numbers for this year so the overall net growth in shop numbers likely to be in the range 100 to 110 we've previously guided to 120 so that takes a little bit of capex out on the retail side and the rest of it really relates to the supply chain projects where as we get closer to the end we've been able to release some of the contingency in those projects and the team are delivering them under budget and that's been something I guess we hoped but couldn't really plan for until we got closer to the end of those big build projects. So £20 million coming out of this year's CapEx. And what you can see in the background of this slide is that the greyed out area is the The cash inflow from operating activities, and that's after paying for leases as well. And that's been quite committed in the last three years. But going forward, if we assume that it carries on at a similar rate, then the free cash optionality increases materially in the business. So we do have a big gap emerging and that will give us the opportunity to enhance returns as we look forward and apply our capital allocation policy looking forward from next year onwards. If we just talk about the new shop performance on page 12, this is something I'm really pleased about. We've taken a lot of learning in recent years from some of the experimentation and different formats and locations that we've been going into as we've expanded the estate post pandemic. and it's improving progressively the actual selection process and technology is helpful as well. It's easier to get your head around a huge estate like ours when you've got more technology and tools at your disposal. So we've been refining the process. It's had an impact on the number of shops we've taken. You'll see we've nudged that down slightly this year but the quality of the openings and the performance of them is better and that's important and if you actually model out The impact of taking fewer shops at a higher ROI versus trying to take more shops to leverage your capacity. It's better to go slightly slower with higher quality returns because you're still having to deploy all that shop capital. So that's been really helpful and we have been more than in line with our targets which are to and Richard John Hutton. Thank you very much. The new catchments that we're going into with new shops, 62% of them don't have an existing shop within a mile and a mile is quite a long way, particularly if you're on foot in a catchment. So they are pushing ourselves into areas where there currently isn't Greggs conveniently available. We also monitor the sales transfer from existing shops when we open a new shop. We anticipate that this will be around 5% and actually it's coming in slightly below that. So again, some reassurance in terms of the cannibalisation there. And the one I think is actually probably the most important is by using the app. And we talked about this last year. We can use the app to actually measure real customer behaviour when customers who are using existing stores have access to a new store. We can see whether their frequency changes with the existing store repertoire. and the evidence again is that it doesn't, it just makes it more convenient for them to come to us more often which talks to an unmet demand and reinforces I think the journey ahead. Finally, the liquidity tax and dividends slide. I always feel this could do with a photo to liven it up, couldn't it really? But the important things on this really are the cash inflow. So strong cash inflow in the first half of 111 million up from 94 million last year. And that means our cash position has improved year on year with 16 million of net cash. We're slightly drawn on the RCF. Thank you very much. and then as we've already flagged the EPS up from 45 to 55 pence and we've maintained the interim dividend which we'd expect to do until we get back to our preferred level of earnings cover which is two times covered. So that's me, with that I'll hand you back to Roisin and we can get into more of the operational and strategic development.

Thank you Richard. So let me just spend a few minutes now updating you on the progress we're making on our journey to be a multi-channel food on the go brand. Thank you very much. Our track record of innovation and constant evolution to meet changing consumer trends, demands and tastes and our vertical integration which allows us to offer affordable quality to our customers by driving efficiency right throughout the supply chain. and the market leading combination of quality and value ultimately that's the formula that translates into brand strength so staying focused on the relevance of our brand is extremely important it's great to see that our brand strength continues to be market leading and very importantly as you can see on the chart on the right of the slide we continue to be rated the number one brand for value and have seen the gap to our competitors widening But we do that without compromising on quality and that's what really differentiates the brand. We continue to grow market share of visits and this year we've increased that by 0.3 percentage points to 8.7% in a food to go market where the volumes have declined by just under 2% of visits in the year to June. and pressure on disposable income continues to be the biggest market headwind our freshly prepared food hot options customisations differentiates us and it's our loyalty scheme and our value deals that work to really deepen the value offer that we offer to the customer and as I've said many times before at the heart of Greggs is the food and drink menu and we work hard to make sure that we stay focused on our purpose follow the trends and tastes and ensuring that we offer this at great prices we innovate in traditional categories to broaden our appeal so an example of that I mentioned earlier would be the chicken roll but we also respond to the dietary trends and we recently refreshed and extended our salad range there's some pictures just sitting behind Richard and that's to try and make sure that there's a broader range out there for the consumer adding higher protein options and also making sure that we do more on labelling to make it easier for the customer to make the choice that they want New categories such as iced drinks put Greggs into growth markets where we can bring our value offering to more people and the first half this capability enabled us to bring Greggs iced matcha to the market and recently we introduced a new blueberry flavour variant as well because you just need to keep that excitement for the customer to try something else and something new. and this focus continues at pace to ensure we can democratise and we can grow categories across our menu as tastes and trends change. Now on estate, Richard has already shared with you the strength of our new shop openings and we continue to focus on the quality of the opportunities available to us to ensure we deliver profitable shop growth as we extend and reshape our estate and stay relentlessly focused on making sure that we are delivering great returns. As a result, as Richard said, we expect to open between 100 to 110 net new shops for this year with an additional 10 trial installations of our new Greggs Express formats. We believe the medium term rate that we will open at will be at least 100 net new openings each year and the Greggs Express format trials potentially could provide further opportunities. and our analysis of the market shows that we have a clear opportunity for at least 3,500 shops in the UK over the longer term and that sort of is consistent with the supply chain capacity that we are building. so I have just mentioned Greggs Express but that's just one part of the enhanced flexibility that we've developed in terms of our formats that is opening up additional opportunities via and viable locations Greggs Bite Size which I've talked about before here while it's still only in four locations is showing very promising results and allowing us to bring most of our favourites to locations where the kitchen space is limited So the most recent bite size opening that we've just had for those of you based in London is London Bridge where we've now got a small bite size location on one of the platforms. We've got three convenience self-service Greggs express trials up and running and they are in petrol forecourt locations and these units allow customers to select coffee, hot food and sweet treats within our partners retail space and we expect to have around 10 of those trial locations open by the end of this year. and then at the end of the May we did open our international travel hub shop with our new franchise partner Lagardere and that is in Tenerife South Airport. It is only one shop but so far sales today are very encouraging and are hitting all the hurdles that we've set and as Rich has also alluded to our grocery bake at home range is performing strongly in both Iceland and Tesco and that continues to add channel flexibility for our customers. So I've previously updated you on the national distribution centres, so that's Derby and Kettering, and the fact that they will bring upstream picking at scale through greater automation with robotics reducing the labour intensity. These sites are the ones that create the logistics capacity to support 3,500 shops through our existing network of radial distribution centres. Darby will be operational in the coming months and Kettering in the first half of 2027 and both sites have also got an element of white space that would allow us to develop future logistics and manufacturing capacity as we require it. Richard mentioned a little bit about technology so we are in the midst of the SAP S4 HANA migration we are due to complete that in 2027 there are many benefits that come with that such as a more sophisticated forecasting and replenishment Thank you very much. but we're also deploying agentic AI in a few areas. Our software engineering team are now using that to both build and test new systems at pace and we'll be doing more of that going forward. and then just to quickly mention you know we continue to pride ourselves in doing the right thing at Greggs with significant focus and progress on our commitments under the Greggs pledge which is our version of ESG. Having proudly delivered the majority of the achievements that we set out in 2021 we have now developed a further seven commitments Thank you very much. Richard John Hutton, Sarah Dickson, As you would expect the team will continue to innovate in terms of the range and we have got some exciting product plans in the coming months and then our disciplined shop estate expansion is making Greggs more accessible for our customers as well as delivering strong returns on investment and Richard's already mentioned the board's expectations for the full year are unchanged. So that's the main updates. But just before I finish, I think it's just worth spending a few minutes reflecting on how all of this positions Greggs for future growth. So you see the slides behind me. The strength of the brand and the breadth of appeal enables us to rapidly evolve. Thank you very much. Ensuring that customers throughout the UK can access Greggs remains a compelling and material opportunity. There are still many locations where Greggs are underrepresented. Innovation is both driving new formats and new channels to generate revenue growth and this continues to be an area that we've got a strong track record. Sarah Dickson, Emma Walton, Raymond Reynolds, Thank you for that. What we will now do is we will take the questions in the room and I will also pass some questions to Richard who will be monitoring the iPad for those of you that are on the webcast. There are a couple of microphones in the room so if you do raise your hand we will get a microphone to you and take your questions at that point. Thank you. Sridhar, I'll start with you.