TRG predicts 2020 sales decline of 25%

The Restaurant Group has predicted an overall decline in like-for-like sales of 25% in FY2020 as it has experienced an “increasing and material impact” of COVID-19 in recent weeks.

In the last fortnight, lfls across the group have dropped 12.5%, with the concessions business suffering significantly (lfls down 21.7%) and “getting worse by the day”.

As well as an overall sales decline of 25% (45% in H1, 5% in H2), the group has said a sustained reduction in footfall across its leisure, pubs and Wagamama stores will see lfls down 68% in Q2, including 10 weeks of shutdown, before normalising through H2.

It expects the concessions business to suffer well into the second half of the year, with sales down 92% in Q2, and 31% in H2.

In order to protect profitability and conserve cash, the group will reduce capital expenditure for the year by at least £45m, will work with landlords to ensure no minimum guarantees are enforced with concessions, and to ensure rent roll for 2020 across other businesses equitably reflects the unforeseen situation.

The forecast assumes at least a 50% reduction in fixed rent across Wagamama, concessions, pubs and leisure restaurants, as well as the business rates holiday for three quarters of 2020.

As a result of these measures, the group estimates adjusted EBITDA for the FY ending 27 December 2020 to be between £95m and £105m with leverage of between 2.2x and 2.5x, maintaining a minimum of £75m of cash liquidity throughout the remainder of FY20.

In the event of a prolonged shut-down period, the group estimates the adverse impact on cash would be no more than £15m for each month of closure.

“The Restaurant Group is fundamentally a resilient business with a strong asset base, substantial cash liquidity and strong cash flow,” it said. “The Group has a strong management team in place and the capability to adapt and respond quickly to changing market conditions.”

“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.”