biscuits-bread-bun-461378

Strong H122 trading and progress on strategy

Greggs plc 4 August 2022 Update
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Greggs

Strong H122 trading and progress on strategy

H122 results

Retail

4 August 2022

Price

2,162p

Market cap

£2,206m

Net cash (£m) at 2 July 2022 (excluding IFRS 16 liabilities)

145.7

Shares in issue

102.1m

Free float

100%

Code

GRG

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

18.7

(5.8)

(20.6)

Rel (local)

13.7

(4.1)

(21.4)

52-week high/low

3,416p

1,808p

Business description

With 2,239 shops and 12 manufacturing and distribution centres, Greggs is the leading UK ‘food-on-the-go’ retailer. It uses vertical integration to offer differentiated products at competitive prices. Its ambition is to grow revenue to £2.4bn by FY26.

Next events

Q322 trading update

4 October 2022

FY22 trading update

January 2023

Analysts

Russell Pointon

+44 (0)20 3077 5700

Sara Welford

+44 (0)20 3077 5700

Greggs is a research client of Edison Investment Research Limited

Greggs’ (GRG) strong H122 results and trading to July demonstrate the resilience of its value-based product offering to customers in more challenging macroeconomic conditions and it is making good progress in generating incremental revenue from its new growth initiatives. Management’s reiteration of profit expectations for FY22 is welcome in the face of increasing input cost pressures. The near-term P/E multiple of 18.3x is only in line with its long-run average multiple despite the aspiration to grow revenue at a higher rate than it has delivered historically.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/20

811.3

(12.9)

(12.1)

0.0

N/A

N/A

12/21

1,229.7

145.6

114.3

97.0

18.9

4.5

12/22e

1,451.0

146.8

118.0

59.1

18.3

2.7

12/23e

1,654.7

165.3

122.0

61.4

17.7

2.8

12/24e

1,930.8

188.0

135.1

67.9

16.0

3.1

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

H122 results: Many moving parts

H122 revenue grew by 27.1% as GRG enjoyed a strong recovery versus the COVID-affected H121. More importantly, compared with the non-COVID-affected H119, like-for-like (l-f-l) growth is strong, ie low double digit and relatively consistent. PBT was broadly flat at £55.8m (£55.5m in H121), with a number of moving parts in the cost base, specifically increasing input cost inflation and the return of some costs (VAT increases and business rate relief) to the income statement, offsetting volume leverage. The closing net cash position reduced to £145.7m (from £198.6m at end FY21) as lower operating cash generation resulting from a return to typical working capital absorption funded the expected increase in capital investment, together with ordinary and special dividends.

Forecasts: Revenue increased; profits unchanged

Strong year to date trading and confidence in the early stages of the five-year growth plan enabled management to reiterate its FY22 profit outlook, which is no material profit progression versus FY21. This is despite management increasing its expectations for FY22 l-f-l cost inflation to around 9% (before VAT and business rates) from 6–7% previously. Our profit forecasts for FY22–24 are broadly unchanged, with higher estimated revenue growth than previously expected offset by the assumption of a lower gross margin.

Valuation: Trading in line with long-term average P/E

The P/E multiple for FY22e (18.3x) is broadly in line with GRG’s long-term average since FY13 (when the strategy began to evolve) of 17.9x, which we feel is too low given the enhanced growth prospects under the new FY26 revenue growth target. Our DCF-based valuation reduces to £29.70/share from £31.60/share previously as we increase our estimated WACC to 8.7% from 8.2% to reflect the increase in the UK 10-year bond yield, suggesting strong upside to the current share price.

Review of H122 results

Income statement: Many moving parts

Exhibit 1: Summary income statement

£m

H121

H221

FY21

H122

Revenue

546.2

683.5

1,229.7

694.5

Growth y-o-y

81.7%

33.8%

51.6%

27.1%

- Company-managed stores

488.3

609.9

1,098.2

622.6

Growth y-o-y

86.0%

34.7%

53.5%

27.5%

- B2B

57.9

73.6

131.5

71.9

Growth y-o-y

52.0%

27.1%

37.0%

24.2%

Gross profit

349.9

432.1

782.0

433.8

Gross margin

64.1%

63.2%

63.6%

62.5%

Distribution and selling costs

(257.8)

(309.8)

(567.6)

(339.3)

As % of sales

47.2%

45.3%

46.2%

48.9%

Admin. expenses

(32.7)

(28.5)

(61.2)

(35.5)

As % of sales

6.0%

4.2%

5.0%

5.1%

Operating profit

59.4

93.8

153.2

59.0

Margin

10.9%

13.7%

12.5%

8.5%

- Company-managed stores

86.9

120.2

207.1

92.2

Margin

17.8%

19.7%

18.9%

14.8%

- B2B

12.1

16.4

28.5

12.6

Margin

20.9%

22.3%

21.7%

17.5%

Net finance costs

(3.9)

(3.7)

(7.6)

(3.2)

Profit before tax

55.5

90.1

145.6

55.8

Tax

(11.1)

(17.0)

(28.1)

(9.9)

Tax rate

20.0%

18.9%

19.3%

17.7%

Profit after tax

44.4

73.1

117.5

45.9

EPS fully diluted (p)

43.2

71.1

114.3

44.8

DPS - ordinary (p)

15.0

42.0

57.0

15.0

Source: Greggs, Edison Investment Research

GRG reported H122 revenue of £694.5m, which represented y-o-y revenue growth of 27.1%. The strong growth included a full period of trading for the estate, unlike the prior year, which suffered from COVID-related closures (see Exhibit 2). On a l-f-l basis, revenue in company-managed stores grew by 22.4% in the period with a slowing rate of growth from Q122 (36.9%) to Q222 (11.2%) as comparatives naturally became tougher due to the easing of restrictions through H121. Management does not quantify the positive effect of product price increases on revenue growth, but believes that selective price increases were comparable to those of its peers, suggesting GRG’s price advantage has been maintained. Prices were raised in November 2021 and May 2022 to help recover increasing cost inflation and cover the recent return of VAT rates to pre-pandemic levels. According to management, customers received the most recent price increases as well as could be expected, with no negative effect on transaction numbers. With expectations of higher cost inflation than at the start of the year (see below), further selective price increases are likely.

Exhibit 2 illustrates how GRG’s l-f-l revenue (company-managed stores) to the end of July 2022 has fared versus the COVID-affected H121 and H119, the last period not to be affected by COVID. We note that through H122, l-f-l revenue growth has been a relatively consistent double-digit rate versus H119, which is very encouraging, despite footfall remaining below pre-pandemic levels.

Exhibit 2: Greggs’ revenue recovery

Source: Greggs H122 results presentation

Before looking at the individual cost lines, we summarise the overall drivers of GRG’s H122 operating profit of £59m, which was marginally below H122’s operating profit of £59.4m. Management attributes the 240bp decline in operating margin from 10.9% in H121 to 8.5% to positive volume leverage offset by higher cost price inflation than price inflation, the return of business rates following temporary relief in the prior period (£15m or 2.1% of H122 sales) and the return of VAT on food and non-alcoholic beverages to pre-pandemic levels, with phased increases from October 2021 to April 2022 (1.8% of H122 sales).

Gross margin declined by 160bp to 62.5% in H122 through a combination of the return of VAT, higher cost inflation than price increases and a minor impact from business rates (a small part of the £15m is allocated here). A stated lower relative contribution from delivery revenue to the group total, to what management describes as a more normalised level post lockdowns, was not a drag on gross margin, as had been the case in prior periods.

The c 32% increase in distribution and selling costs to £339m and growth relative to revenue (H122 48.9% versus 47.2% in H121) reflects the return of business rates (the majority of the quoted incremental costs of £15m is allocated here), implying some operating leverage when adjusting for this. There was also some operational leverage in administration expenses, which grew by only 9% to c £36m.

With limited growth in profit expected for FY22 and a consistent dividend policy (ordinary dividend covered around 2x by underlying earnings), the interim dividend was held flat at 15p per share.

Cash flow: Funding capital investment and dividends

The decline in operating cash flow generation to £91.5m in H122 from £120.2m in H121 was predominantly due to the £30m relative swing to working capital absorption from a release of capital in the prior period, as expected with the strong recovery in sales. The lower operating cash flow and higher anticipated capital investment as part of the five-year growth strategy (c £36m versus c £19m in H121) led to a decline in free cash flow of c £58m from c £102m in H121. Dividend distributions increased significantly versus the prior year as the ordinary dividend was resumed at the H121 results and a special dividend of £40.6m (40p per share) was paid.

GRG finished H122 with a relatively high net cash position of c £146m (£199m at end FY21 and £118m at end H121), which is consistent with management’s prior indication of aiming for a higher-than-average cash balance ahead of the peak investment levels in FY23 and FY24 under the five-year plan. Including IFRS 16 liabilities of c £291m, the net debt position increased to c £145m (c £85m at end FY21).

Update on FY26 growth strategy: Good progress

Management believes it is making ‘good progress’ on its strategy to grow revenue to £2.4bn by FY26, ie a doubling from the FY21 revenue base as set out at the capital markets day in October 2021.

As previously indicated by management, there is some uncertainty about the expected timing and size of the identified new revenue streams given the overlap between initiatives. However, management’s belief is that growing the evening daypart has evolved faster than originally expected and that delivery is a little behind expectations, likely due to the normalisation of trading post COVID-related restrictions and closures. Progress on the four key drivers of expected growth is as follows:

Estate growth: management states that the store opening programme is on track to deliver the targeted 150 net new stores per year from FY22. With 58 net new stores opened in H122, the opening programme in FY22 is H2 weighted. The period-end store portfolio of 2,239 compares with the current target of more than 3,000 stores.

New digital channels: although slightly behind expectations, the delivery channel continues to bring incremental growth. The partnership with Just Eat has been extended to cover 1,180 stores from 1,000 at the start of FY22.

Grow sales in the evening daypart: the evening daypart (management estimates it as c 35% of the food-on-the-go market) is now the strongest-growing trading time, albeit from a low base which reflects an increase in the number of stores trading between 4pm and 8pm to 300 from 130 in H121.

Making the Greggs brand more relevant to more people: the Greggs app, which was relaunched in FY21, has seen a strong increase in usage and registered customers are visiting the store more according to management.

The four key growth drivers above are supported by higher investment in the supply chain and systems.

Outlook and changes to forecasts

As shown in Exhibit 2 above, GRG continues to trade well into H222, with l-f-l revenue growth in company-managed stores of 13.1% in the first four weeks to the end of July. Albeit against an easier comparative of 3% before a higher comparative of 6% in August 2021, growth would likely have been better were it not for the extreme heatwave experienced by the majority of the country. This is testament to GRG’s value proposition against a backdrop of deteriorating macroeconomics.

With expectations of higher cost inflation on a l-f-l basis of around 9% in FY22 than the prior 6–7%, as well as headwinds from the return of business rates and VAT, revenue buoyancy year to date and confidence in the new growth initiatives enables management to reiterate its profit expectations for FY22, that is no material profit progression. In food and energy, the areas of greatest input price inflation, the average forward cover is five months.

Our forecast changes for FY22 and FY23 are summarised in Exhibit 3 below. We increase our assumption for l-f-l revenue growth in company-managed stores to 12% in FY22 from 10% previously to take account of the strong growth reported to the end of July. Naturally, further price increases would be supportive of revenue growth and margin. This leads to an upgrade to revenue forecasts in FY22 and beyond of 1.5%, so that total forecast revenue growth is 18% in FY22 and 14% in FY23. We trim our forecast for FY22 gross margin to 62.7% from 63.1% to allow for further input cost pressures highlighted by management. The dilution in gross margin is offset by expected better operating leverage than previously assumed, and as demonstrated in the H121 results.

Exhibit 3: Forecast changes

£m

FY22e new

FY22e old

Change

FY23e new

FY23e old

Change

Revenue

1,451.0

1,429.0

1.5%

1,654.7

1,630.0

1.5%

Growth y-o-y

18.0%

16.2%

14.0%

14.1%

Gross profit

910.3

901.6

1.0%

1,032.6

1,022.2

1.0%

Gross margin

62.7%

63.1%

(0.4%)

62.4%

62.7%

(0.3%)

Operating profit

154.4

154.2

0.1%

173.0

172.9

0.0%

Operating margin

10.6%

10.8%

(0.2%)

10.5%

10.6%

(0.2%)

Source: Edison Investment Research

Valuation

Our DCF-based valuation reduces to £29.70 per share from £31.60 per share previously. The increase in valuation derived from rolling forward the valuation in time is more than offset by the higher debt position at the end of H122 and an increase in our estimated WACC to 8.7% from 8.2%, which reflects an increase in the UK 10-year bond yield to 1.8% from 1.2% since our last update. Our WACC estimate includes a market premium of 6%.

Below we show GRG’s sales growth, profitability and valuations versus three peer groups: UK restaurants and pubs, US restaurants and UK food retailers, all annualised to GRG’s December year-end. The EV-based multiples include the capitalisation of leases.

Exhibit 4: Peer valuations

Share price (local ccy)

Ccy

Market cap (local m)

Sales growth CY22 (%)

Sales growth CY23 (%)

EBIT margin CY22 (%)

EBIT margin CY23 (%)

EV/
Sales CY22 (x)

EV/
Sales CY23 (x)

P/E CY22 (x)

P/E CY23 (x)

Div. yield CY22 (%)

Div. yield CY23 (%)

Domino's Pizza Group

291

GBp

1,255

6

6

19.8

19.9

2.9

2.8

14.5

14.3

3.4

3.6

Loungers

206

GBp

212

40

15

10.4

8.8

1.3

1.1

16.7

19.9

0.0

0.0

Marston's

49

GBp

309

60

5

15.6

16.8

2.4

2.3

9.9

6.2

0.0

0.5

Restaurant Group

51

GBp

385

32

10

7.1

7.7

1.2

1.0

18.8

11.8

0.0

0.3

SSP Group

260

GBp

2,058

98

28

2.3

6.4

1.4

1.1

N/A

21.6

0.4

2.0

J D Wetherspoon

560

GBp

716

52

8

4.2

6.5

1.2

1.1

38.1

12.1

0.7

1.7

UK restaurants and pubs median

46

9

8.8

8.2

1.4

1.1

16.7

13.2

0.2

1.1

Domino's Pizza

390.1

USD

13,999

6

7

16.8

17.4

4.1

3.8

30.8

26.0

1.1

1.2

McDonald's

264.2

USD

195,410

(2)

3

43.4

46.5

10.0

9.7

26.8

25.0

2.1

2.2

Starbucks

84.9

USD

97,383

10

9

14.9

15.7

3.3

3.0

28.6

24.1

2.4

2.6

Wendys

21.2

USD

4,546

9

5

16.9

18.1

3.5

3.3

25.6

21.3

2.4

2.7

Yum! Brands

122.7

USD

35,001

4

8

32.2

33.1

6.7

6.2

26.5

22.9

1.8

2.0

US restaurants median

6

7

16.9

18.1

4.1

3.8

26.8

24.1

2.1

2.2

J Sainsbury

221

GBp

5,133

2

1

3.3

3.2

0.4

0.4

10.1

10.3

5.7

5.7

Tesco

265

GBp

19,697

3

2

4.3

4.3

0.5

0.5

12.5

11.9

4.1

4.2

UK food retailer median

3

2

3.8

3.8

0.4

0.4

11.3

11.1

4.9

4.9

Greggs

2,127

GBp

2,171

18

14

10.6

10.5

1.6

1.4

18.0

17.4

2.8

2.9

Greggs premium/(discount)
to UK restaurants median

13%

21%

8%

32%

N/A

N/A

Greggs premium/(discount)
to US restaurants median

(62%)

(64%)

(33%)

(28%)

31%

28%

Greggs premium/(discount)
to UK food retailer median

258%

220%

59%

57%

(43%)

(42%)

Source: Refinitiv, Edison Investment Research. Note: Priced at 2 August 2022.

Our forecast revenue growth for GRG of 18% in FY22 and 14% in FY23 compares favourably with the majority of peers in both periods. Growth rates in CY22, particularly for UK pubs and restaurants, are elevated given the negative effects of COVID-19 in FY21 and subsequent expected recovery. Our estimated EBIT margins for GRG of 10.6% in FY22 and 10.5% in FY23 are attractive versus the median for UK restaurants and pubs (8.2–8.8% in both years) and food retailers (3.8% in both years), but lower than for US restaurants (c 17–18%), which tend to have a more global presence and business model, for example including high levels of franchises.

GRG’s share price is trading at a premium to its UK-based peers on most metrics, which we believe is justified by its better expected revenue growth rates and profitability.

Exhibit 5: Financial summary

£m

2020

2021

2022e

2023e

2024e

Year-end December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

811.3

1,229.7

1,451.0

1,654.7

1,930.8

Cost of Sales

(299.6)

(447.7)

(540.6)

(622.1)

(732.5)

Gross Profit

511.7

782.0

910.3

1,032.6

1,198.2

EBITDA

 

 

115.4

259.0

267.1

307.5

355.1

Operating Profit (before amort. and excepts.)

 

 

(6.2)

153.2

154.4

173.0

196.1

Intangible Amortisation

0.0

0.0

0.0

0.0

0.0

Exceptionals

(0.8)

0.0

0.0

0.0

0.0

Operating Profit

(7.0)

153.2

154.4

173.0

196.1

Net Interest

(6.7)

(7.6)

(7.5)

(7.6)

(8.1)

Profit Before Tax (norm)

 

 

(12.9)

145.6

146.8

165.3

188.0

Profit Before Tax (FRS 3)

 

 

(13.7)

145.6

146.8

165.3

188.0

Tax

0.7

(28.1)

(25.7)

(39.7)

(48.9)

Profit After Tax (norm)

(12.2)

117.5

121.1

125.6

139.1

Profit After Tax (FRS 3)

(13.0)

117.5

121.1

125.6

139.1

Average Number of Shares Outstanding (m)

101.0

101.5

101.7

102.0

102.0

EPS - normalised fully diluted (p)

 

 

(12.1)

114.3

118.0

122.0

135.1

EPS - (IFRS) (p)

 

 

(12.9)

115.7

119.1

123.1

136.3

Dividend per share (p)

0.0

97.0

59.0

61.0

67.6

Gross Margin (%)

63.1

63.6

62.7

62.4

62.1

EBITDA Margin (%)

14.2

21.1

18.4

18.6

18.4

Operating Margin (before GW and except.) (%)

(0.8)

12.5

10.6

10.5

10.2

BALANCE SHEET

Fixed Assets

 

 

631.0

622.3

740.2

879.4

1,005.8

Intangible Assets

15.6

14.9

26.9

35.4

41.9

Tangible Assets

345.3

343.8

435.1

551.1

656.5

Right-of-Use Assets

270.1

263.6

278.2

292.8

307.4

Other

0.0

0.0

0.0

0.0

0.0

Current Assets

 

 

98.7

264.1

217.8

193.1

197.9

Stocks

22.5

27.9

33.7

38.8

45.7

Debtors

39.4

37.6

44.4

50.6

59.0

Cash

36.8

198.6

139.7

103.8

93.2

Other

0.0

0.0

0.0

0.0

0.0

Current Liabilities

 

 

(144.1)

(206.9)

(238.7)

(266.7)

(304.5)

Creditors

(91.1)

(153.4)

(185.2)

(213.2)

(251.0)

Leases

(48.6)

(49.3)

(49.3)

(49.3)

(49.3)

Short term borrowings

0.0

0.0

0.0

0.0

0.0

Other

(4.4)

(4.2)

(4.2)

(4.2)

(4.2)

Long Term Liabilities

 

 

(264.0)

(252.3)

(266.9)

(281.5)

(296.1)

Long term borrowings

0.0

0.0

0.0

0.0

0.0

Leases

(243.1)

(233.9)

(248.5)

(263.1)

(277.7)

Other long-term liabilities

(20.9)

(18.4)

(18.4)

(18.4)

(18.4)

Net Assets

 

 

321.6

427.2

452.4

524.3

603.1

CASH FLOW

Operating Cash Flow

 

 

61.6

312.1

290.4

328.1

381.6

Net Interest

(6.7)

(7.4)

(6.9)

(7.6)

(8.1)

Tax

(10.7)

(19.2)

(25.7)

(39.7)

(48.9)

Capex

(59.8)

(54.0)

(169.0)

(205.0)

(214.0)

Acquisitions/disposals

0.0

0.0

0.0

0.0

0.0

Equity financing

3.7

4.6

4.6

4.6

4.6

Dividends

0.0

(15.3)

(100.8)

(62.3)

(69.0)

Borrowings and lease liabilities

(42.1)

(49.0)

(51.4)

(54.1)

(56.8)

Other

(0.5)

(10.0)

0.0

0.0

0.0

Net Cash Flow

(54.5)

161.8

(58.9)

(36.0)

(10.5)

Opening net debt/(cash)

 

 

91.3

36.8

198.6

139.7

103.8

Other

0.0

0.0

0.0

0.0

0.0

Closing net debt/(cash)

 

 

36.8

198.6

139.7

103.8

93.2

Closing net debt/(cash) excluding leases

 

 

(36.8)

(198.6)

(139.7)

(103.8)

(93.2)

Closing net debt/(cash) including leases

 

 

254.9

84.6

158.1

208.6

233.7

Source: Greggs, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Greggs and prepared and issued by Edison, in consideration of a fee payable by Greggs. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Greggs and prepared and issued by Edison, in consideration of a fee payable by Greggs. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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