Shares in convenience food maker Greencore (GNC) soured 7.1% to 158.9p on Monday after the Dublin-headquartered company suspended guidance for the 2020 financial year.
In a bid to preserve cash, the sandwiches, salads and sushi supplier also warned it would waive the interim dividend and defer ‘a substantial portion’ of capital spend due to ‘the ongoing level of uncertainty around the possible duration and impact of COVID-19’.
This ‘should no longer be considered current’ warned Greencore, with the dreaded COVID-19 continuing to reshape the business world with the global economy on hold.
Focused on balance sheet strength and liquidity, Greencore stressed it ‘retains substantial and increased financial headroom’, with cash and undrawn committed bank facilities of approximately £265m at 27 March 2020. This includes a newly-agreed additional £75m committed debt facility which matures in March 2021.
To protect profitability and cashflow, the supplier of chilled ready meals and Yorkshire puddings is ‘tightening’ its food to go production network and furloughing impacted staff, using the government’s Job Retention Scheme. Greencore is also cutting non-essential operating costs and the board and executive directors have voluntarily agreed to pay cuts.
FEEDING THE NATION
The fresh prepared foods play, whose staff have been designated by the government as ‘key workers’, insisted it is playing ‘a systemically important role in a reset food industry that has become a critical component of the UK infrastructure through this pandemic’. The company is playing its part in making food available to NHS sites.
Since the government put the country into lockdown, Greencore notes a rapid change in consumer demand and shopper behaviours. With most city-centre offices in the UK closed, Greencore has seen a downturn in demand for food-to-go products, although its ready meal and grocery activities are experiencing strong growth.
THE SHORE CAPITAL VIEW
Shore Capital commented: ‘‘All in all, the speed and enormity of the tasks Greencore is taking reflect the magnitude of the adjustments taking place in the UK food system at this time. Cost reduction and the suspension of investment projects should, in our view, noting that it remains a materially trading entity, ensure that Greencore has sufficient liquidity and so remain a firmly solvent business, to face into whatever commercial life is going to be after coronavirus.’