The parent company of the Warrens Bakery chain is shedding jobs after making huge losses which have been further compounded by the coronavirus crisis.
Cornwall-headquartered Provenance Brands is making another round of redundancies at Warrens Bakery just 10 months after it shut 20 stores and axed up to 80 jobs.
The 160-year-old bakery business and its parent company have seen footfall drop at key hospital outlets, as patients and visitors stayed away during the height of the pandemic.
Documents filed at Companies House reveal Provenance Brands is now in danger of breaching banking covenants with potentially disastrous results and is relying on another subsidiary, the profitable Cornish Sea Salt Ltd, to get it out of trouble.
Warrens Bakery made redundancies from its workforce of 500 in November 2019 and shut 18 outlets blaming Brexit uncertainty and fickle consumers who were attracted to a host of rivals among diminishing high street business.
It said at the time the chain would move away from its loss-making high street bakeries and concentrate on more lucrative cafes and outlets inside large hospitals. But the COVID-19 crisis appears to have had a negative effect on the company.
Warrens Bakery has now started a redundancy procedure for staff in Plymouth, but has not revealed the number of workers affected.
A company spokesperson said: “Due to significant decline in the hospital footfall related to COVID-19 we have had to take the hard decision to scale teams accordingly in the hospital catering facilities. We are consulting fully and comprehensively with staff throughout the process.”
This comes after years of mounting losses for the firm, which has a head office in Helston. Documents filed at Companies House in August 2020 show the business made a £821,801 operating loss for the year to the end of June 2019. This follows a £974,712 loss in 2018 and a £31,000 loss the year before.
The annual report and consolidated financial statements for Provenance Brands revealed retail growth of 9.4% but a 2.5% drop in “trade and wholesale”, mainly due to a fall in exports for its Great British Crisp Company.
In late 2019 the firm entered a creditor voluntary arrangement (CVA), an insolvency process whereby it negotiates on payments to creditors, and closed 18 loss-making stores, including five in Plymouth.
It also shut its pasty factory at St Just, in Cornwall after more than 40 years, because it was “no longer economically viable”.
The coronavirus outbreak and subsequent lockdown have made life even tougher for the firm with the report saying they had “significantly impacted Warrens Bakery” with all sites, other than hospital ones, closed and staff put on furlough from March.
Although all its units were back in action by July, and the firm saved £301,000 via the Government’s Business Rates holiday and received a grant of £600,000, the business is still facing issues.
The report said there is a proposal to revise the CVA so it can slash creditor payments from £24,000 a month to just £5,000.
And, more worryingly, it said there is a risk that bank covenants, which govern loan repayments, may not be met. Breaching a covenant can lead to banks calling in the loan, hiking interest rates or restricting further finance.
The report said: “There is a material uncertainty in relation to going concern for both Provenance Brands and its subsidiary, Warrens Bakery Ltd.”
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However, the parent company is able to lean on the success of another trading entity, Cornish Sea Salt Ltd, which has been “performing strongly, exceeding forecasts and providing a positive cash input to the group”.
Its predicted profit for the year to the end of June 2020 is £891,000, which would be enough to satisfy the wider business’ bank debt repayments.
Warrens is Cornwall’s oldest commercial pasty maker, set up in St Just in 1860. It has grown to become the largest chain of bakeries in the South West with still about 50 retail outlets across Cornwall, Devon, Somerset and as far as Manchester.
It has been voted Cornwall’s favourite pasty maker by the public in four independent radio and newspaper polls, won The World Pasty Championship and picked up a Highly Commended honour and a gold award at The 2016 British Pie Awards.
Alongside pasties, it also produces a range of savouries, breads, cakes, scones and sweet bakery products. In February 2017 it launched its first vegan pasties on the back of a huge surge in people giving up meat and dairy produce.
