Wagamama and Frankie & Benny's owner Restaurant Group (RTN) warned on profits and said it was discussing convenant 'holidays' with its lenders, as the company revealed the impact of coronavirus-related restrictions on its sales.
Amid some see-saw trading, the shares rose 4.6% to 26.7p as investors at least appreciated some clarity on the situation.
Like-for-like sales in the last two weeks had plunged 12.5% and the company predicted they could fall 25% in the 2020 financial year.
The guidance assumed like-for-like sales across the leisure, pubs and Wagamama businesses sinking 68% in the second quarter, including 10 weeks of shutdown, before normalising through the second half. However, this could prove overly optimistic.
Annual adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was expected at between £95m and £105m, with leverage of between 2.2 times and 2.5 times.
COVENANT HOLIDAYS
'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,' Restaurant Group said.
AJ Bell investment director Russ Mould noted that, with restaurants likely to switch to essentially being takeaway operations, the majority of the company’s brands are not necessarily best placed to make this transition.
He said: ‘Wagamama might see an increase in takeaway business via platforms such as Deliveroo, what with households in lockdown mode, yet the rest of the company’s brands aren’t the type of eateries one might immediately desire when thinking about ordering food to be delivered to the home.
‘The pub and restaurant sector has already suffered from rapid expansion in the casual dining space reaching saturation point a few years ago, triggering closures and price discounting. Now it is going through an even tougher time with customers effectively forced to stay away.’
