The Restaurant Group owner Wagama needs to pay down existing debt
The Restaurant Group (LON: RTN), owner of Wagamama, is aiming to raise £175m from shareholders as a number of its restaurants had to close during the pandemic.
The company plans to use this money to pay down its existing debt, as well as a buffer in the event that lockdowns are prolonged.
During 2020 The Restaurant Group saw a 57% drop in its sales to £459.8m as many of its restaurants closed.
The impact on sales during the pandemic, in addition to its ongoing costs, meant the group confirmed a loss before tax of £127.6m, compared to a £37.3m loss in 2019.
Danni Hewson, financial analyst at AJ Bell, commented on the size of the fundraising as well as the group’s association with the Eat Out To Help Out Scheme.
“The Restaurant Group might be forever linked with the government’s Eat Out To Help Out scheme because of that photo of The Chancellor enjoying a Wagamama’s but now the business is hoping investors will “Buy In”,” said Hewson.
“The £175m it hopes to raise would be the sixth biggest secondary raising of the year so far in the UK and the business promises it is “well positioned to deliver long-term shareholder value.”
The pandemic has had a debilitating impact on the industry throughout the lockdown as causal dining firms recorded 30,000 job losses.
Andy Hornby, chief executive of the Restaurant Group, commented on the year-gone, as well as the proposed impact of the capital raising.
“The COVID-19 pandemic has presented enormous challenges for our sector but the TRG team has responded decisively to re-structure our business and preserve the maximum number of long term roles for our colleagues. TRG is operationally a much stronger business than twelve months ago,” said Hornby.
“The Capital Raising, announced today, will significantly strengthen the Group’s balance sheet and provides TRG with the flexibility to invest in growing our business. 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.”
According to the UK Government’s current plans to ease lockdown restrictions, restaurants and other hospitality venues will reopen for outside dining on 12 April, while indoor dining is set to return on 17 May.
