The comments followed the announcement of Greggs securing a commercial paper worth £150m from the Bank of England for the duration of 11 months, approved under the Government’s Covid Corporate Financing Facility.
The money was made available to the baker under the assumption that this would sufficiently meet its liquidity needs for a prolonged closure period. This included a scenario where its shops were not able to trade for the rest of the year.
Commenting on the baker’s announcement, Shore Capital’s Clive Black said: “With this facility in place, Greggs’ management believes it has ‘sufficient’ liquidity to meet the group’s financial needs, including under a scenario where its shops do not open in CY2020.
‘Only food-to-go baker on the high street’
“We clearly hope this does not turn out to be reality – if that were to be the case, one could reasonably assert that Greggs may be the only food-to-go baker on the high street.”
Questions over when normality will return to the UK’s economy and the state of the wider food-to-go industry would determine the future of Greggs and the rest of the food and drink industry, warned Black.
“Full-year 2021 and maybe full-year 2022 could be dragged back by Coronavirus too for the food and beverage and wider retail segments of the UK economy – the shadow at this time feels long and maybe very dark,” he added.
“While all these rather sobering thoughts are yet to be played out, in a UK food and beverage market where there could be a notable fall in capacity through business failures and rationalisation strategies too, we feel reasonably confident to state that Greggs has the capability to ‘tough it out’ and press on when time and conditions permit.”
Greggs’ financial outlook
The £150m deal followed an update on Greggs’ financial position and outlook for the year ahead.
In a statement last month (23 March) the baker estimated that the impact of the closure on all its outlets would cost the company £5m a week, plus £11m each quarter for property rental costs.
However, since the clarification of the details of the Government’s Job Retention Scheme (Furloughing) and a further examination of its cost base, the net cash outflow would be closer to £3.5m per week till the end of June, it said.
This figure would further increase to £4.5m per week including the cost of all property rents.
In a statement on Greggs’ financial position, chief executive Roger Whiteside said: “While many uncertainties remain, we have ensured that Greggs and its many stakeholders will be well-supported through this difficult period and that the company will be in a position to return to profitable growth as soon as conditions allow.”
Meanwhile, manufacturers supplying foodservice firms will struggle to secure investment after the coronavirus passes, according to mergers and acquisitions (M&A) specialist Oghma Partners.
