Financial Planning in Uncertain Economic Times, Greggs
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Transcript of Financial Planning in Uncertain Economic Times, Greggs
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Financial Planning in
Uncertain Economic Times
DUNCAN SMITH
Head of Finance
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Contents
The Greggs Story Business Structure The High Street Financial Planning Challenges Summary Questions
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The Greggs Story
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Bakery Heritage 1930s Bike delivery – yeast, eggs, flour 1951 First shop in Newcastle 1960s Bakery, vans and shop expansion 1970s Scotland, North West and Yorkshire 1984 Business floated on Stock Exchange 1980s Midlands, Wales and the South East
Acquired Bakers Oven 1990s Cumbria and savoury plant. Re-
branded Greggs 2009 Business Centralisation
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The Business Today
1,500+ shops – high street and ‘smart’ 19,000 employees 10 regional bakeries 375 delivery vehicles Central savoury plant 2 distribution centres 6 million customers / week Turnover £662m, PBT £52m (2010)
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Product Focus
Bakery - making and baking Bread and cakes in early days Supermarket strength Growth of FOTG Growth of hot and cold drinks 2011 - coffee, breakfast, hot sandwiches
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Changing Sales Mix
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8The 1960s
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9The 1980s
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10The 1980s
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Today
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University
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Petrol Filling Station
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Business Structure
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Structure & Planning 1,500 shops->150 area managers->30 regional
managers ->7 heads of retail->retail director=> Multi tiered, week by week plan Hundreds of SKUs->30 sub categories->5 categories=> Multi tiered category forecast & margins 10 bakeries, 3 production plants and 2 distribution
centres=> Supply chain a series of cost centres Overhead costs at head office and across the country=> Top down v bottom up
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Structure Challenges
Vertical Integration – 1 P&L Structural Complexities 2 views of sales Large quantity of data Manufacturing
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The High Street
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Like-for-like sales: % change year-on-year
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-6
-4
-2
0
2
4
6
8
D J2009
F M A M J J A S O N D J2010
F M A M J J A S O N D J2011
F M A
% c
ha
nge
on
a y
ear
ag
o
3-months ended:
Non-food
Food
All sales
Source: BRC-KPMG RSM (food & drink data from IGD)
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Footfall – town centres & retail parks
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Inflation - CPI 4.5%, RPI 5.2%
Annual inflation rates - 12 month percentage change
Source: Office of National Statistics
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Average Weekly Earnings
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The High Street
Retail like-for-like growth Town centre footfall Competition tough Consumers facing higher inflation with
lower pay rise Family spending power ↓7.1% in April
(Asda)
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Financial Planning Considerations
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Uncertain External Factors Economic forecast
interest rates? inflation? unemployment?
Consumer squeeze Commodity prices - harvests & World supply Fuel and energy prices - Middle East stability The weather…
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Volatile commodity markets
Coffee
Electricity
Oil
Wheat
Lastsix
yearsprice
trends
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The Weather
Source: Met Office website
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Planning Considerations
Retail – consumer wealth Conservative sales forecast? Efficiency improvement Capital spend Long v short term…
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Planning Horizons
Long term (3-5 years) – directional Annual budget – commitments 1/4ly forecasts – adjust for changes Monthly – detailed sales and margin Weekly – ad hoc modelling & scenarios
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Systems & Processes
No more spreadsheets! Business wide co-ordination Fast data crunching Scenario building System integration Focus on management insight not accounting
processes
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Summary
• Complexities in business structure
• Uncertainty in the economy
• Need for multiple plans and scenarios
• Backed by great planning systems
• Focus needs on management insight not finance process
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Questions?