Greggs PLC Update on trading and impact of coronavirus (2634H)
March 23 2020 - 11:15AM
UK Regulatory
TIDMGRG
RNS Number : 2634H
Greggs PLC
23 March 2020
23 March 2020
GREGGS plc
UPDATE ON TRADING AND IMPACT OF CORONAVIRUS
Greggs is the leading bakery food-on-the-go retailer in the
UK,
with more than 2,050 retail outlets throughout the country
PROTECTING OUR PEOPLE, CUSTOMERS AND BUSINESS
Greggs is a great business that employs over 25,000 people, and
prides itself on the way that it deals with the many stakeholders
we rely on in order to make good freshly prepared food available
across the UK. However, given the current and likely impacts of
coronavirus we are now planning for the closure of our shop estate
by close of business on Tuesday 24 March in order to protect our
people and customers. Whilst it is impossible to provide clarity on
the outlook for the weeks and months ahead, we have set out the
information that we are able to in this update.
Protecting our people and customers
Greggs has acted quickly to follow Government guidelines,
helping to prevent the spread of the virus in our shops and supply
chain. In addition to increased hygiene and separation measures we
converted all of our shops to provide a solely take-away service
accepting card payments only and have been advising all customers
to follow social distancing guidelines while waiting to be served.
It is now clear that to protect our people and customers we need to
go further and temporarily close our shops completely. During this
period, with support from the Government's Coronavirus Job
Retention Scheme, we intend to maintain employment of colleagues at
full contract hours for as long as is practicable.
Whilst our shops will be closed for a period Greggs will
continue to provide support to our local communities by
distributing any remaining unsold food, and offering support for
those in hardship through the Greggs Foundation.
Impact on sales
We, like other consumer-facing businesses, have seen a sharp
reduction in footfall in many of the areas where we trade over the
last week. Initially the impact was seen in transport hubs and in
central London, and has since affected other towns and city centres
across the UK. Suburban areas have seen the lowest levels of
decline. At our preliminary results announcement on 3 March we
disclosed that Company-managed shop like-for-like sales grew by 7.5
per cent in the nine weeks to 29 February 2020. For the two weeks
that followed Company-managed shop like-for-like sales growth
averaged 4.1 per cent and in the most recent week to 21 March 2020
we saw a 9.9 per cent decline. The rate of decline has been
increasing each day as more and more customers heed the Government
advice on social distancing, and we would expect this to increase
further if we were to continue to trade.
Financial position
Greggs has always maintained a strong balance sheet and at the
end of this week we expect to have cash at bank of GBP60 million,
having made our normal payments to staff, suppliers and landlords
(including March quarterly rent payments). In order to protect our
financial position, we are reducing cash expenditure to protect our
liquidity in the short term whilst continuing with key long-term
strategic programmes. We have reevaluated our capital expenditure
plans, and intend only to complete existing shop projects, whilst
deferring new shop openings and planned refurbishments. In our
supply chain we will only spend where necessary to maintain
continuing operations and will delay building work, with the
exception of our major automated cold store project which is
strategically important and will continue. Overall we expect to
remove GBP45 million from this year's planned capital expenditure
programme.
We will not now pay the previously-announced final dividend for
2019, which was due to be paid on 21 May 2020, and have stopped the
programme of share purchases by our Employee Benefit Trust. These
two actions will avoid around GBP40 million of cash outgoings this
year.
We welcome the Government's swift action in suspending business
rates for a year and the support for continued employment through
the job retention scheme. These will be essential for any
consumer-facing business at this time.
Liquidity outlook
There are many forward scenarios but we are planning our
finances around the most severe, being that our shop operations
remain closed for a prolonged period. Our weekly cash outgoings in
such a situation are estimated to be GBP5 million, assuming
Government relief for business rates and that employment support is
available to maintain all of Greggs jobs. This includes rents paid
monthly in advance but not those paid on quarterly in advance,
which total GBP11 million per quarter and next fall due at the end
of June. Assuming that there continues to be material disruption,
we will be asking our landlords to accept a monthly, as opposed to
quarterly, payment basis from June.
This minimum level of cash outflow will only be reached once we
have met our existing supplier obligations relating to recent
trading and our capital investment programme. We are in the process
of arranging financing to cover the possibility of a closure period
of anything from six weeks to three months. We start from a
position of having no debt, and believe that Greggs should meet the
eligibility requirements of the Covid Corporate Financing Facility
(CCFF) scheme, being a UK incorporated company that makes a
material contribution to economic activity in the United Kingdom.
We have approached the Bank of England for support from the CCFF
and are working with our banking partners to determine the most
effective overall solution.
Looking forward
Providing forward guidance is impossible in the current
environment but the Board no longer expects to make year-on-year
profit progress, which we stated was our expectation at the time of
our preliminary results announcement on 3 March 2020. As and when
we are able to provide further information we will do so.
Whilst the outlook during this crisis remains uncertain Greggs
is a resilient business with strong growth credentials and we
should be confident of its ability to navigate this event and
return to growth when the economy recovers.
Roger Whiteside OBE
Chief Executive
ENQUIRIES:
Greggs plc Hudson Sandler
Roger Whiteside, Chief Executive Wendy Baker / Hattie Dreyfus
Richard Hutton, Finance Director
Tel: 0191 281 7721 Tel: 020 7796 4133
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