THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE REGULATION EU 596/2016. UPON THE PUBLICATION OF THIS ANNOUNCEMENT THE INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
18 March 2020
The Restaurant Group plc
Current Trading & Covid-19 Update
In light of current equity market conditions and the rapidly changing developments regarding Covid-19, The Restaurant Group plc (the 'Group' or the 'Company') provides the following update.
Current Trading Update:
Group like-for-like sales for the first eight weeks of the financial year were up 4.5%, in a period unaffected by Covid-19.
In the last two weeks we have seen an increasing and material impact of Covid-19 across our businesses with Group like-for-like sales being down 12.5%. In particular, our Concessions business has been significantly impacted with like-for-like sales down 21.7% and getting worse by the day given International travel bans.
The Restaurant Group's key priority at these unprecedented times is the health and safety of our employees, customers and business partners.
The Group has been reviewing the rapidly evolving situation relating to Covid-19 and has modelled a scenario of the potential financial outcome in the coming months. It is now clear that the increasing effects of Covid-19 will result in a material reduction in our expectations for revenue and profit across the business for the first half of this financial year (the period ending 28th June 2020).
Today, the Company is therefore providing guidance on the potential impact on our full year results of Covid-19. This guidance is predicated on the following revenue assumptions:
- An overall decline in Group like-for-like sales of 25% in FY2020 (assumed down 45% in the first half and 5% in the second half).
- A significant decline in our Concessions business (down 92% in Q2) with significant disruption persisting through the remainder of the year (down 31% in H2).
- A sustained reduction in footfall across Leisure, Pubs and Wagamama, with like-for-like sales across these businesses down 68% in Q2, including 10 weeks of shutdown, before normalising through H2.
In response to the uncertain environment, the Group is taking a number of actions to protect profitability and to conserve cash:
- The Group will reduce capital expenditure for 2020 by at least £45m from the previous guidance of £75m.
- The Group is highly focused on delivering maximum operational efficiency across all areas of our business over the course of 2020 and is targeting to save at least £45m.
- The Group will be working with landlords across all business areas to ensure that no minimum guarantees are enforced within Concessions, where rents are largely turnover based; and to ensure that the rent roll for 2020 across our other businesses equitably reflects the unique and unforeseeable situation. The forecast assumes at least a 50% reduction in fixed rent across all our Wagamama, Concessions, Pubs and Leisure restaurants, and reflects the business rates holiday for three quarters of 2020 as announced yesterday in the Chancellor's statement.
- The Group will work with lending banks to seek covenant holidays throughout 2020 in order to preserve maximum flexibility to operate the business through this challenging period.
As a result, the Group currently estimates Adjusted EBITDA for the financial year ended 27 December 2020 to be between £95m and £105m with leverage (pre-IFRS 16 net debt to EBITDA) of between 2.2x and 2.5x.
Under this scenario, we would retain a minimum of £75m of cash liquidity throughout the remainder of the 2020 financial year. The Group estimates that in the event that the entire group is in shutdown for a period in excess of that assumed above, then the adverse impact on cash would be no more than £15m for each further month of shutdown.
Clearly the situation is evolving rapidly and there is no certainty around the severity and duration of the impact on the business. The Company is continuing to consider its funding options, both equity and debt, on an ongoing basis.
The Restaurant Group is fundamentally a resilient business with a strong asset base, substantial cash liquidity and strong cash flow. The Group has a strong management team in place and the capability to adapt and respond quickly to changing market conditions.
The Board remains confident in the strategy over the longer term and believes the Group will be well positioned to benefit from the normalisation in trade with its diversified set of brands.
The Restaurant Group plc
Andy Hornby, Chief Executive Officer
Kirk Davis, Chief Financial Officer
0203 117 5001
MHP Communications (Financial PR adviser)
Oliver Hughes / Simon Hockridge
07709 496 125 / 07885 224 532
About The Restaurant Group plc
1. The Restaurant Group plc operates over 650 restaurants and pub restaurants throughout the UK. Its principal trading brands are Frankie & Benny's, Wagamama, Chiquito and Brunning & Price. It also operates a multi-brand Concessions business which trades principally in UK airports. In addition the Wagamama business has 6 restaurants in the US under a Joint Venture (JV) partnership and over 50 franchise restaurants operating across a number of territories.
2. This statement is based on information sourced from management accounts.
A variety of factors may cause the Company's actual results to differ materially from the forward-looking statements contained in this announcement. This announcement may include statements that are, or may be deemed to be, 'forward-looking statements'. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms 'believes', 'estimates', 'plans', 'projects', 'anticipates', 'expects', 'intends', 'may', 'will' or 'should' or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements reflect the Company's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business, results of operations, financial position, liquidity, prospects, growth and strategies. Forward-looking statements speak only as of the date they are made. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future or are beyond the Company's control. The Company's actual operating results and financial condition and the development of the industry in which it operates may differ materially from the impression created by the forward-looking statements contained in this announcement. In addition, even if the operating results and financial condition of the Company, and the development of the industry in which it operates, are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to, general economic and business conditions, industry trends, competition, changes in government and other regulation, including in relation to the environment, health and safety and taxation, labour relations and work stoppages, changes in political and economic stability and changes in business strategy or development plans and other risks.
In particular, except for the Company's estimation in respect of Adjusted EBITDA for the financial year ended 27 December 2020, no statement in this announcement is intended to be a profit forecast and no statement (including such estimate of Adjusted EBITDA) should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company. The estimate of Adjusted EBITDA has been prepared based on numerous assumptions and forecasts, including those set out in this announcement, some of which are outside of the Company's influence and/or control, and is therefore inherently uncertain and there can be no guarantee or assurance that it will be correct. The estimate of Adjusted EBITDA has not been audited, reviewed, verified or subject to any procedures by our auditors and you should not place undue reliance on it and there can be no guarantee or assurance that it will be correct.
The person responsible for arranging the release of this announcement on behalf of the Company is Kirk Davis, the Chief Financial Officer of the Company.