July 28, 2020 / 6:50 AM / 15 days ago

UPDATE 3-UK's Greggs almost back to breakeven as sausage rolls in demand after lockdown

* Sales at company-managed stores at 72% of 2019 level

* Expects to break even when sales back at around 80%

* H1 pretax loss 65 mln stg vs 37 mln profit a year ago (Adds further CEO comments, updates shares)

By Paul Sandle

LONDON, July 28 (Reuters) - Sales at UK baker Greggs have almost recovered to breakeven levels following the lifting of the coronavirus lockdown, the company said on Tuesday, as Britons recovered their appetite for sausage rolls, sandwiches and savoury bakes.

The company said it plunged into the red in the first half of the year after having to close more than 2,000 stores for most of the second quarter due to the lockdown.

It said its shops had re-opened by July, offering a limited range of its best-sellers to takeaway customers, and sales at company-managed stores stood at 72% of 2019 levels in the most recent week.

Greggs, which scored a hit last year with a vegan sausage roll followed by other vegan snacks, said it could break even when sales reach about 80% of last year’s level.

CEO Roger Whiteside said Greggs had made a great start to 2020 before the pandemic hit. It has now brought about 75% of staff back to work.

“Greggs is now well prepared to deal with the challenges of social distancing and operate through the conditions we are faced with,” Whiteside said.

Shares in Greggs, however, fell 6% on the day to 1,369 pence as investors fretted about the extent of the first-half loss and the impact social distancing was having on sales volumes at re-opened stores. The shares have fallen from a record high of 2,550 pence in January.

Whiteside said Greggs would use the UK government’s furlough scheme until the end of October to keep employees on the payroll.

“We want to give as much time as possible for demand to rise,” he said. “At some point we will have to make a call as to what level of demand is there, and how many people we will need back to service that demand.”

The health crisis pushed Greggs to a pretax loss of 65.2 million pounds ($83.9 million) for the six months to June 27, against a profit of 36.7 million pounds a year earlier.

Sales fell to 300.6 million pounds from 546.3 million.

The company burned though 4.4 million pounds a week during the lockdown, despite furloughing staff and benefiting from business rate relief. It saw in total a cash outflow of 102.5 million pounds in the second quarter.

The company used a Bank of England-backed facility to issue 150 million pounds of bonds to increase its liquidity, and said it was in talks about further medium-term financing.

It was also negotiating rent reductions, it said.

$1 = 0.7774 pounds Reporting by Paul Sandle, editing by Louise Heavens/Mark Potter/Susan Fenton

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