Watch: Wagamama owner goes cap in hand to shareholders as losses deepen
Wagamama-owner The Restaurant Group (RTN.L) swung to a loss as revenue took a major hit amid the pandemic, but managed to raise £175m ($243m) of capital and is optimistic about 2021, as lockdown restrictions are meant to ease.
Shares were up about 5% Wednesday morning.
The company, which also owns Frankie & Benny’s, Chiquito, and dozens of pubs, had earlier announced it had secured £500m of new debt facilities in place.
“The capital raise announced today, alongside the debt re-financing announced last week, represents the last important step in our re-structuring process and provides TRG with the long term flexibility to invest in growing our business," said CEO Andy Hornby.
"Whilst the sector outlook remains uncertain, and we are mindful of continuing restrictions across the UK, we are confident that the actions announced today will allow us to emerge as one of the long term winners,” he added.
The company’s total revenue for 2020 was down 57% to £459.8m and adjusted losses before tax were £87.5m, down from a profit of £74.5m in 2019.
The group believes it has “strong capability to deliver an accelerated reopening plan,” once the current restrictions for hospitality businesses end
Its chairman, Debbie Hewitt, said 2020 was an "extraordinarily difficult period for the hospitality industry, which has arguably been more affected by the repercussions of COVID-19 pandemic than almost any other sector."
"As we look forward, despite all of the challenges of the pandemic, the business is well positioned to deliver long-term shareholder value," she noted.
She said the company's board is encouraged by the news of the initial success of the vaccination programme currently being rolled out in the UK, "and is confident that the actions that we have taken provide us with strong foundations to emerge as one of the long-term winners once restrictions ease."
Earlier, Wagamama has said that it expects to burn through £5.5m every four weeks during the current coronavirus lockdowns.
As a result The Restaurant Group had secured a £500m lifeline in order to stay afloat as the UK edges closer to definitively opening up again.
The group said £380m of the new long-term loans, alongside a drawing of the revolving credit facility, would be used to repay and refinance all of the company’s existing debt facilities, including the government’s coronavirus large business interruption loan scheme.
"There is no doubt the group is in pretty dire straits right now....Pent up demand from diners appears to be there, but it will take time to be unleashed. Many of The Restaurant Group’s sites have limited outdoor seating so are unlikely to fully benefit from the phased opening of the hospitality industry from 12 April," noted Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.
"When indoor dining does resume from 17 May, social distancing measures will continue to limit volumes for some time. The cash injection from this latest rights issue will give it some breathing space but there may well be more restructuring pain to come, as a slimmed down version of Restaurant Group emerges from the crisis," she added.
Included in chancellor Rishi Sunak's latest budget announcement was a new programme of state-backed loans to support businesses through the final months of lockdown, an extension of the businesses rates holidays until June and a 60% cut for the remainder of the year.
He also said there would be a six-month extension to the VAT holiday for the hospitality and leisure sectors, followed by a tiered uplift. The tax breaks is worth £5bn.
Watch: What UK government COVID-19 support is available?