18th Mar 2020 09:39
(Alliance News) - Restaurant Group PLC reassured on Wednesday it is a "resilient" business which can withstand the expected significant drop in trading due to Covid-19.
Shares were 4.6% higher on Wednesday morning in London at 26.66 pence each.
Restaurant Group, which owns the Wagamama chain of restaurants, said like-for-like sales in the first eight weeks of its year ending December 27 were up 4.5% on the year before, unaffected by Covid-19.
However, in the last two weeks like-for-like sales have fallen 13%. Concessions sales are down 22% like-for-like in the period and are getting worse "by the day" given travel bans.
London-headquartered Restaurant Group said it is clear trading is going to get worse. As a result, it sees annual like-for-like sales falling 25%, which assumes a 45% decline in its first half and a 5% fall in the second.
Concessions like-for-like sales will decline "significantly", falling 92% in the second quarter, and they are expected to fall 31% in the second half.
Restaurant Group believes like-for-like sales in Leisure, Pubs and Wagamama will fall 68% in the second quarter, before normalising in the second half.
The company has guided for earnings before interest, tax, depreciation and amortisation in its current financial year on an adjusted basis to be between GBP95 million and GBP105 million. In its year ended December 29, 2019, adjusted Ebitda was GBP136.7 million.
As a result, it is putting in place measures to preserve cash. Capital expenditure for financial 2020 is being cut by GBP45 million, and it is looking for another GBP45 million in savings at least.
Restaurant Group will work with landlords to get some rent relief, and it will also be seeking some covenant holidays from lenders throughout 2020.
"Under this scenario, we would retain a minimum of GBP75 million of cash liquidity throughout the remainder of the 2020 financial year. The group estimates in the event 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 GBP15 million for each further month of shutdown," said Restaurant Group.
"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," it added.
By George Collard; [email protected]
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