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.

Good morning. Thank you for taking my questions. First of all, Richard, many congratulations on your retirement. I'm sure you're very proud of your long and successful track record and many contributions to Greg's. But I guess you're still on the hook for Q3. Many congrats. But listen, three quick questions, please. Clearly, the weather patterns are swinging around the volume numbers and traffic numbers. Anything you can help us in terms of July trading, how it looked like, that'll be very helpful just to understand how recent trends have changed. If not, it'll be great to know anyway. Secondly, both of you have touched on additional shareholder returns and the sort of capacity that's building. If you could talk a little bit about how we should think about cash on the balance sheet, what level you need to be holding on to, I remember some numbers in the back in the time so it'll be great to just get a refresher on that and what metrics we should be watching to have a view on the magnitude of additional return second one and lastly I think franchise like for like 1.3 versus 2.1 company managed is there anything we should be aware of on this fading and how should we think about it thank you

Great, thank you, Sridhar. Let me take your sales question and your franchise question, and then I will hand over to Richard for shareholder returns. So, yeah, the weather does have an impact on trading, as Richard alluded to earlier. Once temperatures get sort of above 28, 30, physiologically, we all eat less, so therefore you do see an impact. And it's interesting because you can even have very hot days where we see sales impacted and depressed significantly. and then it can bounce back the next couple of days where the weather is cooler. July has seen a much better performance over the last few weeks higher than the number that we've just reported and slightly higher than our own forecast expectations so that says that actually it bounces back when we sort of have milder cooler weather and people are back out and about. What I do think is we've also done better this year is we've developed more resilience in terms of our range so having a bigger salad range, having iced drinks, developing matcha and bringing new flavours to the market is really important because it creates a reason even in hot weather for someone to come to Greggs and we'll continue to experiment and do more and lean into that In terms of franchise, yep you are right. Normally our franchise number runs slightly stronger than our company managed like for like. One of our franchise partners is currently going through a structural change across their business and that has impacted on the operational performance across their petrol forecourts. It is only one of the partners. We're working on lump to improve that operational performance if we stripped that partner out franchise like for like still is slightly higher than the company managed so the run rate is the same we just have an issue with one partner that we're working through but it's a structural change they're making and then they will come through that and I will hand over to Richard on shareholder returns

Yeah and what we should have said is at the very back of your pack is a reiteration of our capital allocation policy and one of the things you'll see in there is we aim to have cash on the balance sheet at the end of the year of about three percent of turnover so that would indicate sort of around 70 million pounds at the end of this year. would be the the target when we get the cash back to that level then we would consider anything over that to be surplus cash and we should start to see that appearing in the next couple of years so we have our track record for the last gosh Thank you very much.

Good morning, Fintan Ryan here from Good Buddy and first of you Richard, congratulations on your long tenure and best of luck with the retirement and I guess getting your golf handicap up or down, sorry. Two questions for me please. Firstly, could you give us a sense in terms of the moving parts on the lower cost inflation guidance for this year? Where did you see the most deflation come in versus your initial expectations and how does this change your outlook for Thank you very much. for the new stores and also for the retrofits. So, like you said, that number is coming down this year, but should we expect, as the new menu ramps up, an actual significant step up in the store refurb costs? Thank you.

I will pass those to you, Richard.

Yeah, so lower costs in terms of food inputs. I mean, you'll be aware this time last year we were talking a lot about things like... Coffee prices, cocoa prices, those sort of things were quite inflationary weren't they and we've seen a much softer position on those markets this year. Pork is another one that's obviously important for Greggs, both for our breakfast market and some of our core products and again that's been a better market for us buying pork. So a number of things that have moved our way and I guess at the start of the year you can't be sure of that and particularly as we came through Q1 with all that was going on in the world there we were slightly more fearful but we did carry good cover and I think the procurement team have done a great job buying into markets at the right times. So I don't think we'll need any incremental pricing in the autumn, which was something that we'd held the option open on. But I think what we have in place already will be sufficient. So that's a good place to be, not having to go back to the market for more pricing. And then in terms of capex to respond to menu changes... Ice drinks are the main thing and we've been doing this for the last couple of years going around the estate trying to put ice machines into as many shops as we possibly can. We've got them in I think about three quarters of the estate now. There are some that are more difficult and will need to come when we refurbish the shop. It's not possible to retrofit them. Thank you very much. Thank you. I'm going to come over to the side now, Kate.

Kate Calvert from Investec, two questions for me but first of all a personal thanks Richard for all your help over the years and I hope you do get a black Greggs card as part of your retirement present. In terms of questions, the first one's just on the bite-sized Greggs which seems to be working well. can you just give a little bit more detail in terms of how much smaller the range is and is there a sort of ratio in terms of the profit or turnover of three bite-sized Greggs equals one full range store is there some sort of ratio we should think about and in terms of the Greggs Express how do you think the agreement is going to work who's going to pay for the cabinets and you take a franchise fee you know how do you think that's going to work thank you

Thanks Kate. Let me talk bite size and I'll let Richard talk convenience retail. So I guess the way to think about bite size is if an average Greg shop is around 1200 to 14 square foot, we can fit a bite size opportunity in about 800 square foot. So it takes significantly smaller space and that's pretty much because... Thank you very much. and you will get the drinks range both hot drinks and ice drinks so therefore that makes it a much more compelling opportunity the reason that we've put it into London Bridge so that's now our third shop in London Bridge we've got the large shop in the concourse we've got the shop just outside London Bridge now and this one's been able to fit on a platform that you would otherwise not be able to access They're doing exceptionally well. From a sales perspective, they take very slightly less than an average full-sized shop. Not significantly, but very slightly. And the returns currently are very good. What I would caveat it with is we've only got four. So therefore, when you've only got four, you're a bit reliant on having a cup of the winters. and then a couple that you're still sort of trying to work on but just now it's a very compelling opportunity we've got a pipeline for the end of this year that we'll have several more that we will put down I think once we get to around 10 you'll then be able to really understand what the returns are and actually what that delivers for us but just now very pleasing indeed and you know if you think about the white space review across the UK this just allows us to infill in areas that previously we didn't think we could put a full-size Greggs well actually this bite-sized opportunity allows us to go to those areas where space is much more compromised I'll let you talk about convenience retail

Yeah, so that's Greggs Express, which is our way of inserting self-service Greggs into, say, a petrol forecourt or potentially other convenience locations over time. All I can really do is explain the basis of the trial that we've got underway. So if you imagine at the moment in our trial shops, we've got... Thank you very much. The one variation at the moment is that at this stage we are procuring and funding the coffee machines. So the coffee machines are on a slightly different basis in that we own the coffee machines, we deploy them and then rather than being on the franchise basis they're on a share of revenue. So we take a proportion of the revenue in return for having our machine in the shop. and we're just experimenting. It's an open experimentation between us and the franchise partner to make sure it works and evolves something that's good for both parties and that will be the objective.

Thank you Darren, we'll come to you next.

Thank you, and just to Richard, sorry for being a pain in the backside for 20 years, so I'll have one last go. I wonder if you could give us a sort of a profit bridge for the second half to get to your gardens, because essentially you've got sort of four million of savings to come for a part of your programme. There's a couple of million of rates benefit. I think you talked about a 10 million headwind from Derby.

You've picked out a lot of the component parts. There'll be a little bit of tailwind from annualisation of some of the grocery growth that we've seen as well. and so there's a few things going on there and then I guess the other thing working the other way is just what happens in the like for like environment because underlying the like for like performance although it's been cash positive it's been volume negative still and it's been broadly aligned with what we've seen in the market which has been a minus two so what you're doing with all those other factors is offsetting a like for like sort of underlying volume position and driving more volume through the network as a whole Those are probably the biggest moving parts, I would say, along with some effective margin gained from the slight disparity between cost inflation and price inflation as well.

I'm thinking you're requiring a 10 million negative delta in the second half to get to where consensus is?

Yes, that's broadly it. We may be wrong, of course. If things go well, we could be ahead of that. But I guess there is some doubt as to ingredient costs for the back end of the year. And you just don't know what's going to happen in the world. But sitting here today, I think we're pleased with where we've got to. But as ever, there's a little bit of caution in the outlook.

Gary Martin here from Davies. First of all, Richard, I'll queue up behind the people that's wishing you a happy retirement. Thanks for all the help along the way. And I wish you the best. Just a couple questions from my side. I'll start with the cost outlook. First of all, it's a bit of a tricky one might need a bit of a crystal ball, but I'm Cost into FY27 and rollover risk. How do you think about that? Would be my first question. And then, Roisin, just one on the like-for-like piece. I'd just like to gauge how important is the value component, like how much promotion is currently going through the system in terms of meal deals and how important is that to overall growth? Thanks.

Sure. Let me take the value question first and then I'll hand over to Richard on the cost outlook, Gary. So, yeah, I mean, I think... Thank you very much. So, holding our breakfast meal deal at £3.25 is critically important to make sure that we continue to take share in the breakfast market. Our big deal, our lunch deal, our three-part deal at £5.25, where you can get both freshly prepared, you can get hot food, you can get customised food, again, differentiates us out there in the market. Whenever we talk about value, we talk about the quality and price equation here. so it's got to be about compelling price for the customer but you've got to make sure that the quality is there there as well and that's why you know the chart that we showed earlier where you can see where the Greg set on that quality and price equation is so focused and so important for us i think in terms of the cost outlook What's helpful is knowing that we have managed the costs well for this year and inflation has come down. Protecting the price point for the customer then through to the end of the year I think is exceptionally important as well in driving that value. On cost outlook for next year?

Our procurement team's view is that essentially there's a stored up pressure coming from energy costs within supply chains which flows through into things like fertilisers and then into agricultural crops and then into feed costs into proteins and it does take a while to flow through the system so their expectation is that they start to see some of that inflation coming in around the end of the year and coming into next year more so. We can't be sure of course but that's you know as you say it is crystal ball gazing to a degree but I think there's a logic to that kind of progression but I think in that context I would say you know we've dealt with a lot of inflation haven't we over the last three four years I mean some extraordinary inflation and it's affected the whole market it's unhelpful to consumers but what we've shown over the time is that as retailers we've all acted fairly rationally and been able to pass that through albeit we've put some pressure on the market overall and I think that's what we're seeing now. So we'd like it to be less but you know relative to our competition we still have that deep value and therefore I think we should feel confident that we can deal with inflation if it rears up. It doesn't feel like though it's anything like the

sort of experience that we've had over the last few years um sorry was there a follow-up quick follow-up um just just out of curiosity then let's just assume that potentially inflation steps up into next year is there an elasticity risk as you pass those prices through I mean is that the reason why you didn't choose to increase prices in the autumn this year is that due to the fear of elasticity across the portfolio or how do you think about that do you have any good data points

Well, we do to some degree, but it's more about taking the long-term value position and not wanting to compromise that and not wanting to be opportunistic and risking eroding that because it's what's made Greggs great over the years is being able to come in. to these categories and offer a comparable product at a discounted price. So we tend to take the long view on these things. And I think we'll have a decent year without needing to do that, frankly. So that then, effectively, you keep that capacity for the future when you might actually need it. And that's the view we would take. Make sense of that or not? Can I very quickly take a couple of online questions, because I don't want to neglect the online questioners. So just very quickly, Salman, you asked about how we would distribute cash. I think I've addressed that. You also asked about what happened in the latter part of the first half to bring down the overall like-for-like on company-managed shops to 2.1 from the previous level. Thank you very much. and then Ben at Panmure Liberum who's asked a bit about what's driving B2B profits and margins more at the moment. Is it the franchise element or the grocery side? Traditionally it's been the franchise element of that that's been growing because grocery has been relatively mature. Grocery is taking a step up and that's as I say starting to annualise through the second half of this year so Great, thanks Richard. We'll take a question here if we've got a mic. Thank you, Henry.

Thank you. Good morning. It's Tim Ramsgill from Bank of America. I guess I'll take a different slant on the congratulations to Richard and congratulate him on the fact that the share price went down when the news broke, which I think is a great endorsement of you. So well done. You and I emailed each other about that. Richard John Hutton, Sarah Dickson, Emma Walton, Raymond Reynolds, Malcolm Copland you've given more explicit guidance I would say today on medium-term openings I know it's been a long-standing debate but you're pretty clear now on the kind of at least 100 that's perhaps a little bit less than some people have got so is that a reflection of your comments around you know recent openings doing really well and the point you make about you know quality over over quantity but then also within that just interested in sort of how much opportunity you still see with franchisees to be a contributor to that I'll pass Darby and Kettering to Richard and then I'll pick up on your medium term opportunities and your grocery opportunity terms

Yes, so next year is a bit of a pinch point for the Derby Kettering costs in that we've got annualisation of Derby at the same time as we start to introduce Kettering. So I think we've been clear in our guidance that we wouldn't expect a huge amount of progress next year as we absorb those new costs. But obviously that does depend on overall like-for-like volume performance as well. so we gave some guidance a little while ago that said broadly sort of 40 basis points for each site over a couple of years the phasing matters but broadly we would expect to be absorbing most of that cost next year and then from 28 we should be moving to a point where we start to leverage that as we grow the estate and grow volumes through the network we should start to see some recovery then so if you look at both margins return on capital for the business as a whole We should see some broad stability over the next couple of years, followed by a steady increase as we get back towards a more normal level. I think there's no real change in the overall pattern of it. The timing is slightly different, but I think it's pretty much in line with what we've guided.

so if I touch on grocery opportunity I think the thing to say on grocery opportunity currently is there is still more to be done with our existing partners so although we've been a partner with Iceland for many years now we've just recently extended our range with Iceland so we've just introduced two new pizza products into Iceland the um Margarita Pizza and the Pepperoni Pizza have both now gone into Iceland that is doing exceptionally well. We believe with innovation there'll be more to do with them. With Tesco actually there's still significantly more to be done currently so we've just recently launched the vegan sausage roll into the largest Tesco shops and we have just gone into their smaller format shops with two of the most popular lines. Where we are just now is almost let's maximise those two relationships and let's see what else we can be doing with those partnerships and the reach that they've got into their customer base but we keep a watching brief on and where else could that go in the future but for now it's about let's maximise the two great relationships we've got and let's see how we can extend that range. In terms of medium-term opportunities, yeah, we've said at least 100 net new openings going forward. Back to Richard's previous point, it's always been about quality of opportunity and not simply chasing a number. Could there be upsides in certain years? Yes, there could. Are we doing more with partners? Yes, we are. And there's probably some other opportunities that we're trying to work on just now that... Thank you very much. In terms of franchise opportunity, franchise is currently 22% of the total estate. We've always said that we would feel very comfortable moving that towards a quarter of the total estate. So with our 15 current franchise partners, we are constantly looking at other opportunities and working with them to try and find the right balance and catchments around what's a franchise opportunity versus what's a company managed opportunities but you know if I look at if I sit with the property director and I look at the pipeline going forward it is a very healthy pipeline which is why we've got the confidence to say actually in the white space review we believe there is a space for at least 3,500 shops across the UK and so we're confident in that number but it will always be about the quality of the returns.

Hi there, Ross Broadfoot from RBC. Just one on like-for-like growth at the company managed sites in a couple of parts. Which segments of the estate are driving the like-for-like growth? Is there anything you would pick out about different locations and then secondly could you give any colour on how much of that like-for-like is being driven by the maturation of newer sites? Obviously just trying to get a bit of steer on how the mature estate is performing. Thanks.

At the rate we're growing, Ross, typically the tailwind for maturity from new shops is about 20 basis points in the like-for-like number, so it's not huge. So if we stopped growing today, I would expect it to drop by about that sort of rate. But and in terms of different performance across the estate, I think the mature high street estate is slightly slower than the newer locations that we're moving into where typically you would be accessing them by car. It's not a huge difference though but there is a slight bias towards those which is why we're keen on getting more of those over time. The interesting thing is how they perform in the heatwave though is very different. So I mean it's kind of logical but those walk-in locations are much more affected by the heatwave and particularly later in the day. The breakfast period tends to be quite robust as that temperature builds later in the day. If you're out in the heat, you're much more affected. If you're in an air-conditioned shopping centre or office area or indeed a drive-through where you're in your own car, actually demand holds up much, much better. So it's about the customer and what kind of environment they're in as they're shopping makes quite a profound difference. Now, you can't change that shape of the estate overnight, obviously, but it's been quite interesting just to see.

We'll probably take two more questions in the room and then we'll check if you get anything online. Russell? Yeah, you go first and then hand it over to Russell.

Conroy Gaynor, Bloomberg Intelligence. So Richard, as you reminded me, you do still have a few months left in the role. So in case I don't get to say this at 3Q, I just want to say congratulations. Thank you for everything and wish you the very best. So question number one on going back to the heat waves. You know, while it's still a challenge, it seems like you're doing a better job of managing things on the revenue side and the cost side. how does that actually work in practice like how do you maintain that degree of flexibility from like a labor scheduling point of view or menu point of view because that still must be a challenge in itself right and then the second one just to to pick up on AI has there been any areas of you know real positive surprise or maybe even negative surprise in an ROI perspective that perhaps is less obvious to us from the outside looking in thank you

Let me probably take those. So yes, it's a fine art in terms of managing costs when you've got the heatwave coming. I think what we have done this year though is we have been using data analytics much better to predict when we've got these heatwaves coming. So to your point about managing labour, you're sort of always trying to manage that three weeks out. I would say that the retail operational team have done a fantastic job at trying to spot three weeks out those trends. Keep labour at a level that we think is right for the sales that we're going to take and then you can increase it because you can almost offer overtime shifts and allow people to come in. should you start to see an uptick or should the weather not be as hot so I think there's been lots of learning from last year and the team have done a brilliant job this year I think the other thing is we're doing lots of experimentation on menu so we took some learning last year around what do you want to eat when it's hot and actually some of our freshly baked options you don't want to eat so what we've actually done in certain locations particularly down south on certain key weeks we've reduced that range we've actually just said from a production bake plan that we send to the shops every evening before we bake less of these products and again that's trying to sort of take some learning around actually do you still have availability but you're reducing your waste your thank you bye you're reducing your wage costs so therefore the whole cost scenario becomes much stronger which is why The profit drop through has been much stronger this year, even though we've had the hit on sales. I think there's more learning to be taken. So just now, part of the reason that we're doing some small experimentation is what else can we learn this year? Because the hot weather patterns are just now a feature of the UK. Therefore, we just need to build resilience. And we've also got in about 250 shops, we've got very slim self selectors that have got ice lolly ice cream type products. Again, it means that if you come in for your ice drink, There is another product that you might want to buy. So really trying to focus on that resilience is absolutely critical. But being agile, both in the range that we've got out, because if you think about it, our colleagues every morning choose how many sandwiches we're putting out. We send down a production plan to them, then they make those sandwiches. We can reduce that should we think we need to. You've also then got products with life. You've got your salads, you've got your fruit pots, you've got your yoghurts. they've got with life so again they help sort of bolster the range and then you can pull down the big plan as well so there's a number of levers that we are getting better at managing which is part of the performance this year. In terms of AI I wouldn't probably talk about it in terms of ROI terms I think it's more about the pace that you can do things so we've had a few presentations that have come along to us as a sort of executive team in the business that are actually showcasing to us particularly areas like our software engineers and areas like maintenance in our shops where actually we're able to do things much quicker because we're using AI so 80% of what the software engineers are doing now Thank you very much. a faster pace and better productivity. In our customer service areas and our colleague service areas we're finding that the throughput of queries that the team can deal with so the SLAs are just getting quicker and quicker which should lead to efficiencies then in terms of the number of queries you get or the number of people you need in those teams. So it's probably many faceted benefits but it's all about driving efficiency and pace.

Thank you.

Russell we will come to you as the last question in the room and then we'll just check is there anything online?

Well I guess the honour of the last question comes to me but unfortunately the last question that I had was just asked so I'll move on to my weaker question but before that I just want to say thank you for Richard for your help and hope to see a good improvement in your cycling times going forward. um so not really much has been asked on Tenerife and I appreciate it's very small but could you just talk about the seasonality of that business and how that you know what you do might change through the year because I assume it's busier in the summer and a bit a bit quieter through the winter

Interestingly, I think the learning for those of us that maybe aren't regular visitors to Tenerife, we're actually in low season just now in Tenerife. So we've opened in low season and actually in Tenerife, I guess it's the Canary Islands, you move into high season as you come out. Thank you very much. when we opened actually we didn't open at breakfast time we actually opened after breakfast time we've now pulled the hours back to get the team to do breakfast that's providing a very compelling opportunity and then what we're also doing I mean Lagardere are a very strong travel operator what they are doing is they're now working with Tenerife South Airport around the flight schedules coming up because I think the key piece in an airport like that Thank you very much.

A really interesting thing that's starting to emerge, and we've seen this in shopping centres as well in the UK, is that some of your demand isn't just coming from travellers, it's coming from people who work at the airport. And as your reputation for what you provide and what the value proposition cuts through and the word gets around in the airport, people are starting to use you and there's a base trade that's building, which is the employees of the airport as well. And that's really interesting, I think, because many of them will perhaps not be familiar with Greggs, so that's a great experiment.

Anything online that we've not got to?

We're good thank you.

Excellent so well I think just a final thank you to Mr Richard Hutton for his interim results and all the support personally that he has given me and thank you for your time today.