The Restaurant Group 'genuinely pleased' with results

The Restaurant Group (TRG) has announced its half-year results, with 90% of its retained estate trading, the group’s performance is ‘considerably better than anticipated’.

Covid-19’s affect on the group has seen a 30% capacity reduction announced to date across its multi-site casual dining brands – with a number of units still yet to reopen or officially close in lieu of owners’ decisions on their operational future.

TRG placed its Chiquito Limited and Food & Fuel Limited businesses into administration, resulting in the the permanent closure of 52 sites, and also conducted a Company Voluntary Arrangement (CVA) of The Restaurant Group (UK) Limited, which contains the majority of its Leisure business, leading to Group exiting the leases on 128 trading sites permanently closed as a result of the national lockdown.

In order to improve TRG’s liquidity position, the business raised £54.6m of equity via a placing and accessed an additional £25m of debt facilities, which ‘further strengthened the balance sheet’.

As such, the group’s net debt of c.£311m (excl. IFRS 16) is ‘considerably better than anticipated.’

Wagamama

Wagamama’s results (which accounts for 37% of the group’s retained estate) show like-for-like (LFL) sales growth of 11%, despite central London LFL sales declining 24%.

Long-term ambitions for Wagamama (pictured) include a significant, measured roll-out to expand both in the UK to c.200 restaurants (from 146 today) and in international markets via franchise and joint ventures in the US.

Since re-opening the restructured Leisure business has been trading broadly in line with the market with the division achieving LFL sales growth of 4% (again, central London LFL sales again decline by 68%, though this comprises c.1% of the estate).

“It has been an extraordinary and difficult period for the hospitality sector but one in which we have pulled together to achieve a great deal,” comments Andy Hornby, chief executive officer of TRG, who took a voluntary salary reduction of 40% during furlough, and waived his bonus for the 2019 financial year.

“The priority throughout has been the safety of our colleagues and customers, and we have also accelerated the reshaping of our portfolio, resulting in a higher quality, diversified estate.

“Since reopening, I am genuinely pleased with the strength of our trading performance and would like to sincerely thank each and every one of our colleagues for their extraordinary efforts.

Whilst the sector outlook is uncertain, and we are mindful of recent restrictions across the UK, we are confident that the actions we have taken provide us with strong foundations to emerge as one of the long-term winners.”

Strength in delivery

The performance of the delivery (‘off-trade’) channel for Wagamama and Leisure businesses during lockdown was very strong, and it has continued to perform well since the end of the Eat Out to Help Out scheme, with LFL delivery sales up 66% and LFL takeaway sales up 52% in the last four weeks (period ending 20 September).

For this four week period, delivery and takeaway sales rose to c.24% of total sales from c.16% in the comparative period.

The group also said: “For illustrative purposes only, the restructured group as it stands today would be capable of delivering annualised EBITDA of between £110m to £125m (on an IAS 17 basis) if its retained estate were to achieve 2019 sales levels.

“Clearly in these uncertain times, it is incredibly challenging to accurately predict when or if this will happen. For the avoidance of doubt, this is not intended to be a profit forecast and is purely illustrative in nature, showing what the annualised EBITDA could have been on the assumption that 2019 sales levels were achieved.

“Prior to the lockdown, the results for the first eight weeks of trading to the 23 February were very encouraging with the business delivering LFL sales growth of 4.5%.

“All businesses were in LFL sales growth, with Adjusted EBITDA (on an IAS 17 basis) of £15.9m, which was ahead of the comparative period by approximately 40%.”