Greggs PLC

LSE:GRG

Earnings Call Transcript 2017-Q4

[Roger Whiteside, Chief Executive Officer and Director]

We're going to follow the usual format. So at the moment, Richard will take us through the financial highlights in detail, and then I'll update on strategic progress and the current trading and outlook. And then, of course, we'll take questions as usual at the end. Before I just hand over to Richard, just to quickly summarize then, so 2017 was another strong year for us. It's the fourth year of our plans to implement the transformation of Greggs from traditional bakery to food-on-the-go. Total sales grew by 7.4% to GBP 960 million and like-for-likes were up 3.7%, which is another good strong year of like-for-likes against the 4.2% the year before. Cost inflation was the big news of last year, and so we warned then that margins would come under pressure but it's only slightly.[Audio Gap]various levels of profit lines you can see in the statement. And then, of course, consistent with our dividend policy, dividends are up in line. So no surprises in any of those. So essentially, the plan to focus on food-on-the-go continues to deliver results. We're making good progress, and we've still got changes to make, both in systems and supply chains, that Rich and I will describe later in terms of activities over the next couple of years. I'll do that in a few moments, but for now, I'm just going hand back to Richard.

[Richard John Hutton, Finance Director and Executive Director]

Quick run through then the sales and profits. We go through a few different lines here, and it is probably just helpful just to unpick, and just make sure everybody is clear where we are. So we start with sales up 7.4%, and then we've got what we would deem the underlying, sort of, profit for the year. So that's before property profits. We're not a property business, but we do have property profits occasionally, and exceptional items. So at that level GBP 81.7 million, which was up 4.6% year-on-year. And then you can see the reason we've pulled out the property disposal gains, because last year was a particularly unusual year, with GBP 2.2 million which related to a particularly large freehold disposal of a shop in London, and also our traditional head office in Newcastle, which was a freehold disposal as well. So GBP 0.5 million this year. That's much more like the sort of figures that we tend to see in a normal year. So at that level then, we made GBP 82.2 million of EBIT, including the property disposals, and we got a finance charge which largely relates to the final salary pension scheme. Looking forward, the deficit on that scheme is actually much improved at the end of the year, so you would expect the year ahead charge to be about half of that. And then, we've got the exceptional charge at GBP 9.9 million, which we've been flagging for some time. So obviously, that merited a deeper dive, which we do on Slide 6. You'll see the components -- they are the key components of it being the actual charge in respect of the supply chain restructuring that we've been talking to you about was GBP 10.5 million. We had a connected property gain, which was the disposal of our Edinburgh bakery in May of last year, which realized a profit of GBP 0.4 million. So GBP 10.1 million overall net charge for the supply chain restructuring and then a bit of truing up of some of the prior costs that we've got in as exceptional, which obviously get released back through as exceptional. Means you've got a net charge of GBP 9.9 million. And for those of you that really want to see the detail and the cash flow implications of that, on Slide 7, we've laid it out for the next -- for the 5-year period, really, that covers the period of the supply chain investment program. So working down from the top, initially you've got the charge to the P&L there and the different components of it which add up to GBP 24.7 million, and that's phased by year. And if you remember, we said the cash cost of one-offs would be about GBP 25 million and then there would be another charge for asset write-downs and accelerated depreciation, which we said would be about GBP 7 million. We now think that, that will be closer to [Audio Gap] relating to Edinburgh this year, and you'll see in the statement that we have now exchanged contracts for the potential development of our Twickenham site in Southwest London. So we would expect that if all the conditions and planning is approved for that, that in time there'll be further revenue to come from the disposal of that. It won't be this year; it could be in the next couple of years after that. So the net position there is shown and then the very bottom line gives you the phasing of that. And the reason why there's such a big outflow in terms of cash terms in 2018, it's because we took the charge for a number of the redundancy provisions that were made for consolidation of production and site closures in 2016 and '17. And those will actually start to go out in 2018. So coming back to the sales line then, we've got on Page 8 the trend over the last couple of years in like-for-like sales. You'll see at the back end of '16, start of '17, this is what we talked about last year with some of the adjustments that we made to try and give you more of an underlying position adjusting for the funniness that related to Christmas and New Year trading then. Nothing like that this year, so I think you've got a fairly clean read coming out of 2017 and into '18. So you can see that we finished quarter 4 '17 with a 3% like-for-like, and we've come into '18, for the first 8 weeks, we've had 3.2% so far this year. So looking at the structure of the P&L. Reasonably, consistent year-to-year, and I think that's been a little bit of a surprise to people at the gross margin level, but then this is what we saw at the half year as well, that actually even though, there's been a lot of pressure from ingredient costs [Audio Gap] some of the benefit coming through the structural changes that we've made to the supply chain. So cost of sales has benefited from the closure of 2 sites that are Enfield and Twickenham bakeries. And there'll be a little bit more to come as that annualizes in the last half of this year. Distribution and selling costs, the pressure there has come from wage rates and also some of the training costs of what we did last year putting in the shop replenishment systems. Against that, to mitigate that you've got some operational leverage that's come from the decent sales growth that we had last year. So overall, a fairly marginal impact on distribution and selling. And then admin expenses in line in terms of percentage, but up in absolute terms. And the pressure there really comes from the systems investments that we've been making carrying a larger cost in terms of IT. So overall, a small reduction in net margin. I think this time last year when I was talking to you, I was flagging that we expected to be slightly more than that. So we're quite pleased with where we've come out for the year, overall, and you can see the impact property gains had on last year there. If we look at that as a bridge analysis, so this is now going from margin percentage back to millions of pounds. You can see the movement year-on-year, and I think it's just interesting, just to see just how impactful cost inflation was. So the big bar -- red bar on the left there shows you that cost inflation was just over GBP 30 million worth. So it's a huge hurdle you have there and have to overcome, and you do that, obviously, by delivering like-for-like growth and delivering cost efficiencies, and you can see between those 2, we recovered the cost inflation. We deliberately set out to say that we would not necessarily look to recover all of that through price inflation and that we want to stay competitive in terms of our price points and our deals, and we've done that. So you can see that the main components of profit progress were like-for-like growth, growth in the estate and then the cost efficiencies program, which delivered GBP 9.7 million in the year. Working against us, obviously the investments that we've had in IT and in a shorter refit cycle on our shops pushing up the depreciation rate. And there were a number of other, sort of, bits and pieces, including some of the costs of rolling out the new replenishment system, which have impacts on both product waste and on shop wages. But it gives you the main components there for movement year-on-year. Now obviously, input costs have been the big story. So just focusing on those on Slide 11. Couple of charts here showing you the year-on-year progress on the 2 main components of our cost base. So wages and salary costs are about 40% of the cost base and ingredients are about a quarter. So among -- between the 2 of them, they make up the majority of our cost base. What you can see on the left side, wages and salaries have progressed from a level of 3.5% cost inflation in 2016, up -- down to 3.1% in '17. And looking forward, we expect 3.6% in the 2018 year, and that will include the impact of national living wage. On top of that we've got an additional cost this year, which will be the pension's auto enrollment. Rates are increasing, and that will be an additional cost over and above that of about GBP 2 million in the year ahead. So another inflationary pressure.The picture is slightly different when you look at food inputs, and you can see there the trend over the last couple of years where we've moved from a deflation reposition in '16 through to 6.5% inflation in 2017, which is pretty much where we flight to we thought it would be. Current expectations for the year ahead are that it will be somewhere in the 3% to 4% range. So we're still seeing inflation on mostly proteins. The dairy market is improving. So we expect overall that there'll still be inflation, but it will be at lower level. And there is bit of a range there, but we're reasonably comfortable with that because we've got about half of that covered at the moment. So we're between 5 and 6 months covered from a forward buying perspective. In terms of tax charge. The tax charge at 20.7% is slightly lower than we had originally guided, and that's because we've settled a number of prior year tax computations and been able to release some of the buffer that we'd held against those. Looking forward, we would expect the 2018 charge to be about 21.25%. And if you look forward, it should continue to be about 2% above the headline rate due to the disallowables in the tax computations. So that means that the underlying earnings per share move ahead by just over 4%, and no surprise, the ordinary dividend is pretty much in line with that with a 4.2% increase to 32.3p. And we've just reiterated, at the bottom of Slide 12, what our distribution approach is. So at the half year, we set the interim dividend to be 1/3 of what we had the full year dividend for the previous year to be. And then we just top that up at the end of the year to make sure that we're in line with our level of earnings 2x covered. And in terms of special dividends, which people always ask about, we basically will if we've got material surplus capital. By that we mean that we have a target for our cash position, which is to have about GBP 40 million of cash at the end of the year. And if we get to a position where we're materially ahead of that and don't have other plans for it, then we would make a distribution, likely to be through a special dividend. Now I'm going to tell you why that is highly unlikely in the year ahead, because we got a big capital program, which you knew was coming. In 2017, we spent GBP 70 million of CapEx, and if you wind the clock back to this time last year, we were flagging it was like to be about GBP 85 million. So there has been some slippage in terms of the phasing, particularly of the supply chain investment program. But also a little bit in terms of shop numbers, because if you recall, we were expecting to open about 9 -- about a 100 new shops in 2017. We came in about 90 and some of those have tipped into 2018. So we had a busy start of the year in terms of opening new shops. But also it means that we're going to have a peak year this year in terms of the investment in supply chain. And you can see that in the 2018 plan there, where we expect to be spending GBP 45 million this year on the real consolidation phase of our investment in supply chain. So this is investing in new platforms for production across our sites to enable us to make products in a consolidated fashion compared with the regional, sort of, bakery approach that we've had in the past. And Roger will talk to you more on that shortly. Other trends you can see looking forward to the year ahead, we've got a slightly higher CapEx on new shops, which reflects a higher number of gross openings, where the company-managed shop openings are likely to be about 95 compared with 86 last year. Slightly less on shop fittings, because we reached the, kind of a low point in the shop fit cycle. We've just over 100 shops to refit this year. That will step up as we go forward, and you'll see that in just a second. And within a couple of years, we should be getting back towards the, sort of the 200 level for shop fit. And then we've got a pickup in our IT expenditure, because of a particularly busy year within the systems replacement program, and this should be the last big year of that. The IT figure should come down thereafter. So just to give you a slightly longer view on Slide 14, we've tried to give some forward visibility of how the CapEx program looks. So you can see that the next 2 years are at the high level albeit with a slightly different dynamic, because we do peak on the supply chain program this year and start to step it down thereafter. But the step up on the retail side really reflects that refit program I've just talked about. So although we were in just over 100 refits this year, that's likely to rise to 160, 170 in the year ahead 2019. And then it goes north of 200 from 2020 as we get back on cycle with a 70-year refit program for our estate. So with that much CapEx going on, it seems appropriate to talk about how we manage return on capital, which is fundamentally how we run the business. So the slide on Page 15 reiterates the business case we're following for the investment in supply chain. So we set you at the start, we'll spend GBP 100 million, of which GBP 75 million will be CapEx and GBP 25 million will be the one-off change costs. But still on track, and you can see the latest phasing on the chart there. And then we've already given you the P&L phasing of the one-offs, but again they're reiterated below. And then the extra information in the bottom shows when we expect the accumulative net benefits to come into the P&L. So, so far in 2017, we've seen about GBP 2 million of the net benefits, and we will get to GBP 7 million by 2020. And then the massive, the ROC fundamentally is that, that GBP 7 million is net of depreciation. It's about GBP 10 million annual cash benefit by then, and that's a return on a net investment of about GBP 30 million, once you allow for the alternative manner of creating the same capacity, which would have been to build a couple of traditional bakeries, and what we still expect the site disposal proceeds to be across the Edinburgh and Twickenham sites in due course. So no dramatic changes there, but it just gives you an update to the phasing. Then turning to the retail side. So it's just worth reflecting on how we manage return on capital for our shop expansion. The 2 charts on this, the one on the left, the blue chart reflects new shops, so when we invest in new sites and new catchment areas. And the one on the right, the orange one reflects capital that we put into relocating shops within their own catchment. The red and green dots show the actual capital investment that we need to pay back. So these are simple payback charts. The red dot shows the amount of capital we would put into a shop, and then the green dot shows the total capital once you've added in the long-term cost of our internal supply chain. So you can see broadly on the left-hand side that we would invest about GBP 200,000 in a shop, and then it's more like GBP 280,000 or so by the time you've invested in supply chain as well. The one on the right is slightly more, the relocations tend to be slightly bigger shops, and so you get to close to GBP 300,000 in terms of the full capital commitment to relocation. And then you can see the maturity in terms of how quickly you get your money back. So on a new shop, you will get the shop capital back after 3 years, and in the fourth year you will recover the full supply chain cost. Relocations grow more quickly and start off at a higher level and tend to mature to be bigger shops. So on that side you're getting your shop capital back in 2 years and the full capital back in 3. So it gives you an idea about the, sort of, the payback. We actually manage that internally using an ROI basis. So we challenge our team to get back that capital by looking at an ROI hurdle. And we set the target ROI hurdle at a 25% cash return on the capital being committed. And actually, we've had a very strong performance over recent years. So we are actually getting that back and beating those hurdles handsomely, and particularly on the relocations, which tend to mature very quickly indeed. Just finishing then on cash flow and balance sheet. It was another good year for cash generation with similar levels to 2016. So although profits moved ahead, we had some of the one-off costs of the exceptional charges coming out and therefore there's a broadly similar level of cash generated. That was sufficient to fund all of our requirements in terms of CapEx, the dividend and the exceptional cost, and that will continue to be the case in the year ahead. We go into that year with close to GBP 55 million of cash on the balance sheet, which is slightly higher because of this delay to the CapEx program in 2017. And we aim to have about GBP 40 million there at the end of the year, and it looks like we'll be around about that target if we keep to the plan that I have outlined to you today. And we think that capital structure is still right, given the leverage that's in our leasehold estate, and as I've said, that will become -- and then be clear in the next couple of years as the accounting catches up with that. So that's it from me. I have to take questions later, but I'll now hand you back to Roger to take you through the strategy.

[Roger Whiteside, Chief Executive Officer and Director]

Okay, so just a moment. I'm sure you're all familiar with it, but the plan hasn't changed. We refreshed it last year in that we've now set out to become the customers' favorite for the food-on-the-go and shown that we can be a winning brand in that marketplace. And it's based on the same 4 pillars, so, obviously: great-tasting, freshly-prepared food; best customer experience; a competitive supply chain and first-class support systems; and teams all built on the premise that we want to conduct our business in a way that has a positive impact on people's lives. So food is obviously what lies at the heart of the business, great value, great-tasting, freshly-prepared food, and we've continued to make changes. The strategy hasn't changed, and effectively what we do is protect and grow our market-leading positions in traditional bakery categories that we've been established in for decades. And at the same time, start to develop a reputation in other areas that will provide new reasons to visit Greggs alongside those traditional bakery favorites. And the areas that we've chosen to focus on that are providing us with that growth are breakfast and the hot drinks that go with it. Breakfast is strategically important for us beyond the sales per se, in that it provides a degree of protection against concentrating demand in shopping missions driven activity. So basically it means we're less reliant on people going general shopping, because this is about trading it before the shops have opened, 6 in the morning to 9 in the morning. And it's less sensitive to weather. People still get to work one way or another. So in that way it provides us with others who have demand patterns, which is strategically important to us in the context of what we're doing with the estate, for example, which I'll talk about later. Hot drinks, obviously, are still growing for us. And we're number #4 in the coffee market now, and that allows us, as we build scale, to add to the repertoire and introduce flavors and all those other things which take us on in that marketplace. Most of the hot drinks we sell is sold with food. So as people aren't coming to Greggs predominantly to buy just a cup of coffee or just drink, they're coming in to buy that together with the food, because that's how you unlock the value in Greggs. So most of our hot drinks are sold on some sort of meal deal. And then healthy eating is a growing trend, and we're obviously working with that trend to offer choice conveniently to customers all over the country. Balanced Choice has been the way we've chosen to do that because those products will offer less than 400 calories. They're all -- offer good nutritionals, and what we've done is made those available nationwide, and we give them prominent footage in our stores in order to try to encourage people to make those choices alongside, obviously, treating themselves to bakery favorites. And that's continuing to grow strongly, and we'll see further product development as we extend menu choice in those areas in the months and years ahead. We are trying to take a proactive start, so we have combined with the likes of Public Health England to work on all of the agenda that society is concerned with regards to obesity. So sugar reduction targets, we've signed up to making good progress there. We've already made progress over the years past already on fat and sugar and the like. And there's more development still to come as they start to get involved in guiding people towards calorie intake levels and all those sorts of things, all of which we're well positioned to help them with.Hot food is the other area of growing customer demand, again strategically important for us. We've already got hot food sales and hot sandwiches, things like hot soup. They're all growing well. And we think that provides us with a platform to develop the menu further. And then ultimately, we're hoping that if can establish a reputation in hot food choices that, that might help us unlock a later day part in the evening, 6 till 9, rather than closing as we probably do at 6, although we do open late in some of the locations like travel locations, for example, which shows there is demand for that type of product at that time of day. So again, an area strategically important to us over the longer term.Customers care about where the food comes from more and more; that's becoming a feature of the marketplace. We think we're particularly well placed to respond to that, because basically we make the food, so in that sense, we handle base ingredients, and we think that allows us to adopt a position of food you can trust in a way that some of us might struggle with. So we are a large-scale food manufacturer. That is effectively what we are alongside being a retailer. And we've invested really quite heavily over the recent years in trying to make sure that we gain independent accreditation for what we do in terms of sourcing and the manufacturing credentials. And we are trying to lead the way in terms of eliminating or certainly reducing any ingredients that are thought to be unnecessary in the process of producing food for general consumption, and being totally transparent about the information, so that people can make informed choices about the type of food they want to eat. So there's no change really, to the strategy we put in place a few years ago, and there's more to come. So looking ahead, it's just looking at those, looking to do the same in terms of keeping the catalog refreshed in terms of traditional bakery products, but at the same time building menu choice and a reputation in all those areas I've just described that provide new reasons to visit Greggs alongside those products. So that's the food story, but food alone won't do it in food-on-the-go. So as we know, our customers are short of time. They demand convenience and fast and friendly service, again, a reputation that we already enjoy. And we rely on amazing teams to handle vast volumes of customer activity in our shops day in, day out. But we want to invest and continue investing to simplify the processes and increase productivity, because we want to release time effectively for customer service, and that's proving to be very successful. Last year, the big news as far as that was concerned was the rollout of our new shop ordering process, which relieved our management teams in shops, the job of having to place their own orders. The computer, in fact, was doing that for them, provided they kept stocks accurate. And that's got off to a good start. And then alongside that, we've got a program we call The Greggs Way, where we effectively have been taking apart every process we have in our shops and trying to get to a standardized way of doing things so that everybody adopts best practice throughout the chain, which is more difficult than you can imagine when you come from a decentralized history, getting everybody to do it one way. It takes time and persuasion. So -- but that's been very successful, and we've got more to do as far as that's concerned. Greggs Rewards, we still think as being a strategically important for us as, obviously, the world becomes digital. And we are at the point now where customer insight that's providing is very useful to us in terms of ranging pricing and that type of decision. And we've moved to stage now of introducing customer satisfaction ratings. So we're able to get some feedback direct from those most loyal customers about how they feel about the service they've received in our shops. And again, that's helping inform us make that -- the decisions around changes we need to make in the shops and the way things work. So all of those things are good. Shops and sells, of course, the important thing, because the most important thing when you talk to customers about where they decide to shop is convenience. That's the #1 thing. So you need a lot of shops. And we've been busy opening more and more shops in areas that we typically wouldn't have put a bakery shop in the past. So last year, we opened 131 new shops, but we carried on closing some. We closed 41. So we're up to 1,854 as of the end of last year. That included our 202nd franchised shop, because franchise has been a big growth area for us in the last few years. And we've got -- started to enter new territories. So we opened for the first time in Devon. We'd already opened the year before in Northern Ireland. And we're trying a new format. So we gotten our first ever Drive-Thru up and running and successful in the Manchester area. So the estate continues to grow, and what we're showing is the brand is extremely versatile. So basically, we've got everything now from Drive-Thrus to kiosks. And a lot of what we're building, being away from high streets, are new builds, so in that sense you can make them look as you like. And we're seeing really quite dramatic results, as a result of being able to influence things of that stage of the design. And we're at the point now where we're prepared to experiment in really quite testing areas. So next week, for example, we will open our first shop in a London tube station. So Westminster tube, before the ticket barriers, will have a Greggs in it, if all goes to plan. That's interesting. We haven't done that before, and obviously, that unlocks another pipeline if that proves to be successful. But certainly travel locations, we know we're growing very rapidly within our estate as more and more people clearly take to the roads on public transports to go about their lives. So actually going to be quite interesting to see how that turns out.This next slide just tries to give us summary of what we've been up to these past few years. And strategically, again, go back to the beginning of the program. We were all clear that Internet shopping was going to change the way people went about their shopping activity, and it's been a strategic aim of ours to become less dependent, therefore, on shopping locations as such. So what, actually, has happened when you look back is, with all the to and fros of everything we've been up to, we've closed around 300 shops but we've opened about -- and those have all been in high streets pretty much. We've opened around about 300 shops, mostly away from high streets. And then, on top of that, we've added a couple of hundred franchise shops, all internal locations. So effectively what we've been doing is moving the mix away from high streets. So back in 2013, when we first launched this, Rich and I were standing here saying it was 80% high street, 20% non. And as we stand, we're 34% non-high street now, and we're aiming for that 60, 40 split that we announced back then, as what we believe to be the right balance between high streets and non-high street locations. So that's all good, new regions, though, of course, like the north -- like the Southwest and Northern Ireland, we opened both high street and non-high street there, because we're literally looking at virgin territory in it, obviously looking about 60, 40 split in those new areas. So plenty of activity. It'll mean, because we, as Richard's, I think, already hinted at, we're going to spend more money opening more shops. So we're going to open 110 to 130 this year. That will bring us very close, not quite, to the 2,000 mark that we talked about a few years back. So at the end of this year, we'll be very close to 2,000, but at that point we will publish the next target. I promise that I would do it at that point, to suggest where we'd be going next. Although knowing where the end of that shop runway is, I still don't have full visibility of that, because convenience being such a driver of it, we're finding our competitors are ahead of us, finding more and more sites to open. And we know we trade very well alongside those competitors, so there is no reason why we shouldn't aspire to similar numbers. So it's certainly well beyond 2,000. And so that's all good news and reasons to be optimistic about the growth prospects for the business. We move on. Obviously, competitive supply chain is part of our model, vertically integrated unlike many others. This time last year, we were announcing the next phase of our major investment program. And basically it's to increase our logistic capacity, support shop growth and to gain efficiency through consolidating manufacturing operations into what we've been calling centres of excellence. It's complicated. It's going to take us until 2020 to finish the job completely. But we made a good start last year. So we're up and running now, having closed our Edinburgh operation. We're up and running in our Glasgow bakery with our first centre of excellence for Yum Yum's, and we completed the second centre of excellence, which was the cakes and muffins in Leeds. So we're off to a good start. This coming year's a peak year for us, and the key platform to put in place, the key centre of excellence to put in place to unlock a lot of the rest is the centralized donut production facility, which will be in our Gosforth Park bakery in Newcastle. That started then decamp those products from other bakeries and allows you to make the remaining changes in the remaining 2 years of the program. So that's a big year for us, and obviously, explains why there is a peak in capital expenditures in the year as Richard has just described.I always take this opportunity because it's easy to say these things, but the amount of change that our supply chains teams have to cope with is enormous. And it wouldn't be possible without their continued commitment, and the fact that we've been able to do this and keep service standards and service levels up to our shops. Shops have noticed no difference, when many bakeries are working harder than they have ever worked before, because they're having to make products for other bakeries whilst [indiscernible] Greggs starts investing in infrastructure. So I'm eternally grateful to our teams for having supported the program and continue supporting our program as we carry on with these changes. Systems, that program isn't over either. So we announced a major part of the investment in new systems to centralize the business at the beginning of this plan 4 years ago. We made more progress again last year, as obviously, you've heard about the fact that we have rolled down the central ordering systems to replace shop ordering. That was the biggest program we've ever accomplished in systems rollout for Greggs, and it's gone very well. Profitability has already benefited from it. We did see some spike in the first few months of deployment in terms of product wastage, but we were expecting that number to come down as the year progresses and we become more accustomed to working with the system and the new ways of working the needs from our shops. So that all seems to be on track. In the second half of this year -- or second half of last year, rather, we piloted logistics and manufacturing in 2 of our supply chain locations with success. And that therefore forms the basis on which we start to roll out the supply chain systems across the estate. That will happen over the course of the next 2 years as we approach 2020, as it needs to go in line with the changes we're making in the bakeries themselves. And it will begin with our Balliol sausage roll and savory plant this year. So a lot of change still to come in systems. And then to complete the program, we've got the remaining SAP support modules to put in place, all of which will happen this year. So you've got HR, you got payroll, and you got property management all to complete the fully integrated ERP platform that we're looking to put in place. So plenty going on.On top of all that, of course, as you know, as a business we've got a long-standing tradition, a one that we're particularly proud of as a socially responsible business. We want to go about our business in a way that has a positive impact on people's lives. We know, because we're a bakery-led food-on-the-go retailer, that many of the products we sell are traditional favorites and they are best eaten in moderation. So as such, we want to capture as much of the market as we can in those products, but at the same time we want to encourage customers to see Greggs as a food-on-the-go retailer selling a variety of products, not just those products. And that includes healthier options, so you've heard me talk about some of that already. So we're committed to that course. We want to encourage customers to make those healthier food-on-the-go choices, and we're taking active steps by making sure that range is arranged in all shops. We're making sure that we provide access to everybody, therefore, because it's all about convenient access to that type of choice. And we're allocating prominent space, so when you walk in the shops you're not going to miss products choice. It's got pride of place in terms of wanting to encourage people to make that choice more and more. So alongside that, we're working with Public Health England and others to lead the search for sugar reduction, salt reduction and all those things that I mentioned already. Customers like ourselves care where their products come from. So fair trade is the mark we've backed in terms of trying to show people that we care too about where those products come from. We want tea, coffee, hot chocolate, orange juice, apple juice, bananas. They all come from certified fair trade sources. It's actually Fairtrade Fortnight as I speak. We're backing that initiative. We've made strides in terms of sustainable sourcing with things like prawns and chino who come from sustainable sources, and we put effort into our animal welfare activities. So we now rank alongside all the other leading brands at Tier 2 in the business benchmark of animal welfare. All of these things are important to gaining customers trust in the food that we sell, obviously, make us feel that we're doing the right thing in terms of having a positive impact. So all very important and whirring away in the background. I think you all know that right from the very earliest stage of the business when it was founded, we wanted to share success of the business with the communities in which we trade. And we keep -- we've maintained our efforts as far as that's concerned. There are a number of things going on that occasionally reach in the papers [indiscernible], but one is obviously what to do with the food that is there at the end of the day that hasn't been sold. And we've had another good year. We've increased the amount of food we've given away to charities and other organizations dealing with distribution of food of that type, up by 40% last -- 45% last year. So that's progress in the right direction and that's on top of having doubled it the year before and doubled it again the year before that. And obviously, the Greggs foundation, which as you know is long established, in fact it's -- we continue to support that with donations from profit plus activities from our shop staff, et cetera. But that's up -- that had a 30th-year anniversary last year. So a long-standing tradition that we're proud of in terms of that type of effort. And then, of course, most of you, I guess, would have watched Blue Planet II, and like you, we're concerned about the impact on the environment of all of this commercial activity and have been for a long time. We already hold the carbon trust standard in recognition of work on carbon efficiencies, and we have an ISO 14001 certified environmental management system. But there are certain things that spike up in terms of consumer interest, and therefore, have a crossover into sales and things like that. So one is coffee cup recycling. And we know that's a significant issue, and as a responsible business group, we're working hard to try to do our bit to overcome the problems there. We're conducting trials in Manchester and Liverpool to see how we can collect some of these cups, because the infrastructure doesn't exist to separate these cups from the general recycling that's needed because of the specialist nature of recycling these cups. They are recyclable, but only in a couple of plants. But we've also reintroduced -- introduced a reusable cup with a discount, 20p discount to try and encourage more people to carry a cup with them, although, that's obviously not as convenient as buying a disposable one. And we're working with those in the industry trying to deliver longer-term solutions to either a recycling infrastructure that will deal with the special nature of these cups, or better still, working with the suppliers of the cups themselves to invent a cup that is more easily recyclable than the one that already exists. So lots of activity going on in coffee cup recycling, and I don't think that's going to go away anytime soon. Plastic is the other issue, so we know there's a challenge in society and the world at large with regard to plastic. We have a natural advantage because most of the food we sell is specially prepared and it's not in packaging, and therefore we already use a lot less plastic than supermarkets do. In fact, if everybody just ate at Greggs that would solve the problem. But listen, we know we've got plastic in the system too, and we need to get rid of plastic. We don't have plastic straws, and we don't have any straws in any of our products already, so we can't do the easy thing and get rid of the plastic straws, but there are other ways in which plastic can be reduced. One thing that we do, do already, have done for decades, is we use plastic trays that just go around the system, are washed and reused all the time to distribute our food. So that's a closed loop, which we're particularly proud of. But there's more to do, and we will certainly be working to get rid of as much single-use plastic as we possibly can. And then, of course, we want Greggs to be a great place to work, as you know. And we've got a profit-sharing scheme and that distributes 10% of profits to our employees. So once again, this year we're going to be sharing, this time it's GBP 8.2 million as a result of performance in 2017. So we're proud of all of the efforts of the business in all of these areas that describe us as a socially responsible business.So and finally in terms of outlook, it's still challenging. There's still inflation in the economy, which gives industry-wide cost pressures. I think we've sort of demonstrated in the slides that Rich has shown you, how we're able to mitigate that through our efforts and through our scale. But we expect those pressures to continue this year, even though it's at a slightly lower level. We don't got quite the same level of cost of including ingredient inflation to go alongside the wages. But it's still a feature, and certainly a feature in terms of customers' disposable income. But we've had a good start so far. It's 8 weeks in. It's always difficult to call a trend in 8 weeks of the early part of the year, because obviously weather has a big impact this time of year, but 3.2% overall like-for-likes is pretty much we hoped for, so we're in a good place. It's going to be another massive year for us. So massive year for supply chain and a massive year for shop openings, and more system deployments, so busy as ever.