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Greggs halts new projects to save £45m but will finish existing schemes

Greggs healthy shop, New Cross Hospital, Wolverhampton

Greggs will defer new shop openings and planned refurbishments in a bid to remove £45m from its planned capital expenditure programme this year.

The move – announced as the chain prepares to shut all 2,000 stores this evening in the wake of the coronavirus crisis – is designed to save it cash until it begins trading properly again.

However, the firm said it will complete existing shop projects and continue to spend where necessary to maintain continuing operations.

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All building work will be delayed, with the exception of its major automated cold store project which it called “strategically important”.

Chief executive Roger Whiteside said the company has always maintained a strong balance sheet and at the end of this week it expects to have cash at bank of £60m, having made its 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,” he explained.

Greggs will also save £40m by not paying a previously-announced final dividend for 2019, which was due in May, and stopping the programme of share purchases by its Employee Benefit Trust.

Mr Whiteside said sales during the past week had dropped by 10% following a period of consistent weekly year-on-year growth. It now faces the prospect of sales completely grinding to a halt.

“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,” he said.

“Our weekly cash outgoings in such a situation are estimated to be £5m, 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 £11m 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.”

Mr Whiteside said Greggs is 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,” he said.

Greggs opens three new stores for every one it closes

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Andrew Seymour

The author Andrew Seymour

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