(Alliance News) - Restaurant Group PLC on Wednesday suspended dividends to allow a new strategy to be implemented, which will include reducing debt and shutting sites.
Restaurant Group, which owns the Wagamama chain of restaurants, paid a dividend of 8.27 pence per share for 2018, but there will be no final dividend for 2019.
At the half-way stage of 2019, it paid a dividend of 2.1p, well below the interim dividend of 6.8p in 2018.
The dividend has been halted as London-based Restaurant Group embarks on a plan to grow Wagamama, as well as its Concessions and Pubs businesses. It will also begin closing sites in the Leisure unit, targeting between 260 to 275 sites by the end of 2021, with 350 currently open.
Lastly, the company is looking to reduce its net debt to earnings before interest, tax, depreciation, and amortisation ratio to below 1.6 times, from 2.1 times currently.
"In order to support these strategic priorities, the board has taken the decision to temporarily suspend the dividend. This will allow us to continue investing in our three high growth businesses, whilst facilitating an acceleration of our Leisure estate rationalisation and reducing our net debt," said Chief Executive Andy Hornby.
Asian food chain Wagamama was purchased in 2018 for an enterprise value of GBP559 million, though the acquisition price was GBP357 million. Restaurant Group also owns casual dining brands such as Frankie & Benny's, Chiquito, and Garfunkel's.
Only 60% of voting shareholders backed the Wagamama deal, which was part-funded by a deeply discounted rights issue.
Turning to results for the 52 weeks to December 29, like-for-like sales rose 2.7%, with total sales rising 56% to GBP1.07 million due to the addition of Wagamama.
Restaurant Group posted a pretax loss of GBP37.3 million, compared to a GBP13.9 million profit the year before. The adjusted pretax profit figure was 40% higher at GBP74.5 million.
The company's profit was hit by a GBP111.8 million impairment, largely relating to the Leisure business.
Restaurant Group said Wagamama did well during 2019. Sales in Concessions were ahead of passenger growth, with like-for-like sales increasing by 4.1%. In Pubs, Restaurant Group has once again outperformed the market, it said.
In the first six weeks of 2020, Restaurant Group achieved year-on-year like-for-like sales growth of 5.3%.
"Having joined the business in August last year I am particularly pleased with the continued and significant progress made following the acquisition of Wagamama and the integration of the business into the group, which has transformed the group's growth trajectory and momentum," said CEO Hornby.
"Our three growth businesses of Wagamama, Concessions and Pubs are all out-performing their respective markets and have clear potential for further growth. I am also acutely aware of the challenges facing our Leisure business and the wider casual dining sector."
"It is therefore clear our strategic priorities need to evolve in order to maximise shareholder value in the medium term," Hornby continued.
Shares were 2.7% lower in early trade on Wednesday in London at 114.37p apiece.
By George Collard; georgecollard@alliancenews.com
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