Greggs : Interim Results for the 26 Weeks Ended 2 July 2022 02/08/22

2 August 2022

INTERIM RESULTS FOR THE 26 WEEKS ENDED 2 JULY 2022

Greggs is a leading UK food-on-the-go retailer,

with more than 2,200 retail outlets throughout the country

Trading in line with plan and good strategic progress

First half financial highlights

	H1 2022	H1 2021
Total sales	£694.5m	£546.2m
Pre-tax profit	£55.8m	£55.5m
Diluted earnings per share	44.8p	43.2p
Ordinary interim dividend per share	15.0p	15.0p

• Total sales up 27.1%, with 22.4% LFL* sales growth in first half of 2022 (Q1: 36.9%,
  Q2: 11.2%)
• First half LFL sales 12.3% higher than comparable period in 2019
• Flat profit outcome primarily reflects re-introduction of business rates, increase in VAT and higher levels of cost inflation
• Strong cash position and good liquidity, with net cash at period end of £145.7m, having paid a special dividend of 40p per share (£40.6m total) in April 2022
• • Like-for-like(LFL) company-managed shop sales performance against comparable period in 2021

Operational and strategic developments

• Shop opening progress: 70 new shops opened in first half, 12 closures; 2,239 shops as at 2 July 2022. Strong pipeline, anticipate circa 150 net new shop openings in 2022
• Growth channels: extension of evening hours going well, delivery service continuing to prove incremental despite recovery of 'walk-in' trade
• Greggs App: strong growth in usage driving loyalty engagement. New services such as Click + Collect and product customisation progressing well
• New product development: menu development focused on healthier choices, hot food and evening daypart
• Infrastructure: new manufacturing capacity progressing well, technology development now focused on digital

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• Greggs Pledge: Science-based targets for emissions submitted for verification. National Equality Standard accreditation achieved and first "Eco-Shop" opened to test solutions to minimise environmental impact of retail operations
• Chair succession: Matt Davies announced today as Chair Designate, succeeding Ian Durant from 1 November 2022

"Greggs delivered an encouraging performance in the first half of the year with sales ahead of 2019 levels. These results demonstrate the continued strength of the Greggs brand and demand for our great tasting, quality and value for money offering.

"During the period we continued to make good progress with our strategic priorities, including expanding our shop estate and making Greggs more accessible to customers through extended trading hours and digital channels.

"In a market where consumer incomes are under pressure Greggs offers exceptional value for customers looking for food and drink on-the-go. We are well positioned to navigate the widely publicised challenges affecting the economy and continue to have a number of exciting growth opportunities ahead, with a clear strategy for expansion. We remain confident in Greggs' ability to deliver continued success."

- Roisin Currie, Chief Executive

ENQUIRIES:
Greggs plc	Hudson Sandler
Roisin Currie, Chief Executive	Wendy Baker / Hattie Dreyfus
Richard Hutton, Finance Director	Nick Moore / Emily Brooker
Tel: [phone]	Tel: [phone]

An audio webcast of the analysts' presentation will be available to download later today at http://corporate.greggs.co.uk/

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CHIEF EXECUTIVE'S REPORT

Greggs has continued to trade well in 2022 with like-for-like (LFL) sales in company- managed shops growing by 22.4% (Q1: 36.9%, Q2: 11.2%) when compared with the equivalent period of 2021. As expected, the rate of growth in the second quarter began to normalise but remained encouraging as we passed the anniversary of restrictions being lifted in 2021. Total sales for the 26 weeks to 2 July 2022 were £694.5 million, an increase of 27.1% (H1 2021: £546.2 million).

We are making good progress with our strategic priorities, growing the shop estate at a faster pace and making Greggs more accessible to customers through extended trading hours and digital channels. At the same time, we continue to invest in further improving the sustainability of Greggs as a major brand in the food-on-the-go market.

Operational review

Sales levels were encouraging in the first half of 2022. Performance in the first quarter was flattered by comparison with restricted trading conditions in the same period of 2021 but we are now reporting against a more similar year-on-year base. Comparing with the pre-pandemic level, first half like-for-like sales in company-managed shops were 12.3% per cent higher than the equivalent period of 2019 despite footfall remaining below 2019 levels.

The breadth of the Greggs estate continues to provide geographical diversification as consumer behaviour adjusts coming out of the pandemic. Our strong presence in towns and suburbs, along with a growing portfolio of convenient roadside shops, has counter-balanced the slower recovery seen in large city centres and public transport hubs.

Our estate expansion has been focused away from traditional shopping areas while, at the same time, we have taken the opportunity to grow in catchments where Greggs has traditionally been underrepresented, such as central London and rail hubs. In the first half of 2022 we opened 70 new shops (including 26 franchised units) and closed 12 shops, giving a total of 2,239 shops (of which 401 are franchised) trading at 2 July 2022.

In June 2022 we opened our 400th franchised shop in Selby in partnership with our newest franchise partner, Rontec, one of the leading players in the UK forecourt industry. Other notable shop openings in the first half of 2022 included three 'drive-thru' sites, of which we have a growing pipeline, and our in-store café concept in Primark Birmingham. In the most recent two weeks we have also opened shops in London's Leicester Square and Liverpool Street Station.

Strategic development

We have a clear plan to address the many attractive growth opportunities available to Greggs over the coming years. This was set out at our Capital Markets Day in October 2021 and we have made good progress in the first half of 2022 as we seek to make Greggs more accessible to customers across multiple channels and dayparts. Our strategic investment in the Greggs estate, brand and support infrastructure over recent years puts us in a strong position to move forward at pace.

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Estate growth

We see a clear opportunity for Greggs to expand its UK estate to at least 3,000 shops, and have increased the rate at which we are opening in new locations given the increased availability of good sites. Our confidence in the scale of opportunity is underpinned by the success we have already had in catchments where Greggs currently has a relatively low presence such as retail parks, railway stations, airports, supermarkets and central London.

The Greggs brand, and our strong, proven covenant is attractive to landlords and has resulted in a strong pipeline of opportunities. In 2022 we expect to open 150 net new shops and believe that this rate of growth is sustainable beyond the current year. At least a third of this annual growth is expected to be achieved with franchise partners; we currently have fourteen such partners covering travel and convenience shopping catchments.

Shop refurbishment will also play a part in enabling the strategic growth agenda. Our latest shopfitting standard, which is already being deployed for all new shops and relocations, supports operational excellence in serving new channels such as delivery and Click + Collect, as well as presenting an attractive, modern environment for customers. We expect to refurbish around 100 shops to this standard in 2022, progressing to 250 annually in the medium term.

Evening trade

The evening daypart represents the largest segment of the food-to-go market by value, but is the area where Greggs currently has the lowest penetration. By extending trading hours, addressing menu options and offering delivery we believe that Greggs can increase its participation in the evening market, further leveraging our investment in facilities that are under-utilised after 4pm.

In the first half of 2022 we extended trading hours in the company-managed estate. 300 shops now trade until at least 8pm (July 2021: 130). In the second half of 2022 we will extend trading hours in more shops as we better understand the extent of demand in different locations. The evening daypart is now our strongest-growing trading time, albeit from a low base.

Ranging trials have reinforced the importance of hot food options in the evening daypart, as well as the demand for our core food and drink range. In developing the range our aim is to stock options that are in demand throughout the day, in order to minimise operational complexity and maintain strong availability for customers.

Delivery

Delivery, through our partnership with Just Eat, is now available across the UK from 1,180 of our shops, up from 1,000 at the start of the year. Delivery is a channel that presents further growth potential for Greggs as we learn to serve it more effectively and increase availability into the evening.

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The recovery in out-of-home activity over the past twelve months has seen a market-wide trend whereby a proportion of delivery customers have switched their purchases back to the walk-in channel. It is clear, however, that the majority of the new trade we have generated through delivery is incremental and that it offers additional access to Greggs at times when customers are unable to visit our shops themselves.

Greggs App

The Greggs App, relaunched in 2021, offers a convenient platform for customers to access additional services from Greggs whilst also being rewarded for their loyalty. Use of the app has grown strongly, aided by increased marketing of the benefits. From a strategic perspective the Greggs App offers:

• Rewards - our loyalty proposition rewards customers for their purchases via the accumulation of 'stamps', which can then be exchanged for free products. The scheme is increasing the frequency with which app customers visit us whilst enhancing further Greggs' market-leading reputation for great value.
• Click + Collect - customers can skip the queue by pre-ordering, and guarantee availability before they visit. In the first half of 2022 we launched personalised pizza toppings as an option for customers who use Click + Collect to pre-order. In time we expect customisation to be extended to other elements of our made-in-store range.
• Deeper customer understanding - our investment in technology to help us better understand our customers' behaviours and preferences will enable us to tailor our communications and experiences with them. Our new CRM platform is now live and a key step forward in our vision to truly understand our customers' needs across all of our channels and to enable us to serve them even better, every day.

Menu development

Menu development supports our strategic growth objectives as well as the commitments made in the Greggs Pledge.

In the first half of 2022 we broadened our healthier choices through the launch of two salad meal boxes - Smoky Cajun Rice with BBQ Chicken & Sweetcorn Fritters and Sweet Potato Bhaji & Rice, which is a vegan option. Both can be eaten cold or taken away to heat. We also continued to incentivise healthier choices by offering fruit pots for just 75 pence as an add-on to our meal deals.

To meet demand for hot food options we continued to roll out hot food cabinets, particularly to those shops that are targeting the evening trade. 867 company-managed shops now have hot food cabinets and we plan to add a further 400 in the second half of the year.

To support further our objective of growing the level of trade in the evening we have added two new pizza flavours, Mexican Chicken and Pepperoni Hot Shot. Our great-value pizza offer can now be accessed through the walk-in, Click + Collect and delivery channels. Customers can customise their pizza toppings when ordering through our digital channels and we intend to trial the customisation of sandwich fillings in the second half of 2022.

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