RTN.L Regulatory News (RTN)

The Restaurant Group plc

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.

Market Update

The Restaurant Group's ("TRG" or the "Group") key priority at these unprecedented times continues to be the health and safety of our employees, customers and business partners.

In light of the rapidly changing developments regarding Covid-19, we have modelled a pessimistic scenario for the current financial year. This takes account of management actions taken to conserve cash, the benefit from the government announced initiatives and updated financing arrangements with the Group's lending group.

This scenario assumes that all our restaurants and pubs will remain closed until the end of June. Furthermore, with the Government indicating that social distancing measures will remain in force post lockdown, we believe that there will be a slow recovery in footfall during the rest of this financial year. We therefore assume that we would be extremely disciplined in the phased reopening of our restaurants through July to December 2020 and would expect to reopen around 400 of our 600 restaurants and pubs across that period, potentially with some restrictions on operations immediately following lockdown. 

This scenario results in the following revenue assumptions:

- An overall decline in Group like-for-like sales of c. 45% in FY2020 assumed to be down 60% in the first half and c. 30% in the second half (with Q3 down 45% and Q4 down 10%), and

- An overall decline in Group total sales of c. 50% in FY2020 (assumed down 60% in the first half and c. 45% in the second half (with Q3 down 60% and Q4 down 30%).

Since the market update provided on 18 March 2020 the Group has completed the following cash preservation activities:

- capital expenditure has been reduced to no more than £30m for FY2020,

- costs have been reduced to a minimum and (excluding payroll costs supported by the Government), ongoing cash expenditure is now only c. £3m per four week period

- the Group has accessed the Government furlough scheme to ensure the ongoing employment of over 20,000 employees and included the business rates holiday for three quarters of 2020,

- the Food and Fuel and Chiquito statutory entities have been placed into administration, and

- the Group is 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 reflects the slow and gradual return of trade following the lockdown period.

As a result, the Group now estimates under this scenario that Adjusted EBITDA for the financial year ending 27 December 2020 will be between £45m and £55m with net debt in the region of £310m to £320m. Importantly, in Q4, despite a continuing decline in like-for-like sales, the Group estimates that between £35m to £40m in Adjusted EBITDA will be generated given the significant cost restructuring completed.

Under this scenario, we forecast a minimum of £60m of cash liquidity throughout the remainder of the 2020 financial year. The Group believes that in the event that all our restaurants and pubs are shut down for a period in excess of that assumed in this scenario, then the adverse impact on cash would be no more than £5m for each further month of complete closure plus the cost of furloughing employees.

As announced on 6 April 2020, we have secured an additional £15m increase in Santander's super senior revolving credit facility to Wagamama from £20m to £35m, which further improves our liquidity. Additionally, after consultation with a number of major shareholders on the rationale and the structure, we are seeking to raise further equity through a Cash Box Placing of up to approximately 19.9% of the Company's existing ordinary share capital (the "Placing"). Based on our current scenario planning set out above, we believe this additional equity would provide sufficient liquidity to deal with the current challenging environments and enable the Group to continue to operate, where possible, through this extraordinary period whilst ensuring that it is well positioned for the eventual normalisation. 

The Board of Directors has concluded the Placing is in the best interests of shareholders and wider stakeholders and will promote the success of the Company. This conclusion has been endorsed by shareholder consultation. The Placing structure minimises cost and time to completion at an important and unprecedented time for the Company.

Clearly the situation continues to evolve rapidly and there is no certainty around the severity and duration of the impact on the business. However, the Restaurant Group is fundamentally a resilient business with a strong asset base, substantial cash liquidity and strong cash flow.

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.

Enquiries:

About The Restaurant Group plc

1. The Restaurant Group plc operates over 600 restaurants and pub restaurants throughout the UK. Its principal trading brands are Frankie & Benny's, Wagamama 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 TRG'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 TRG'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 TRG'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 TRG's control. TRG'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 TRG, 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 TRG's estimates in respect of Adjusted EBITDA for the financial year ended 27 December 2020 and Adjusted EBITDA in Q4 of that year, no statement in this announcement is intended to be a profit forecast and no statement (including such estimates of Adjusted EBITDA) should be interpreted to mean that earnings per share of TRG for the current or future financial years would necessarily match or exceed the historical published earnings per share of TRG. The estimates of Adjusted EBITDA have been prepared based on numerous assumptions and forecasts, including those set out in this announcement, some of which are outside of TRG's influence and/or control, and is therefore inherently uncertain and there can be no guarantee or assurance that it will be correct. The estimates of Adjusted EBITDA have 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 persons responsible for arranging the release of this announcement on behalf of TRG is Kirk Davis, the Chief Financial Officer of TRG.

The LEI for TRG is 213800V4LJ2FXMQKKA46.