Shares in the Restaurant Group PLC (LON:RTN) have crashed on Wednesday, as the firm noted that it would be suspending dividends.
On Wednesday morning, the Restaurant Group released their annual results – and shareholders have not reacted so optimistically.
Shares in the firm trade at 109p (-6.55%). 26/2/20 10:59BST.
The Restaurant Group, who own a range of different brands including Wagamama said that no final dividend will be paid for 2019.
In 2019, notably the firm did pay a dividend of 2.1p however this fell significantly below the interim dividend reward of 6.8p in 2018.
The Restaurant Group said that the dividend would be suspended to allow the business to grow Wagamama along with its Concessions and Pubs businesses.
Interestingly, the firm also said that it will close sites and operations within its Leisure Unit, with a reduction between 260 and 275 by the end of 2021.
Across the yearly period, the firm did note that like for like sales rose 2.7%, as total sales rose 56% to £1.07 million – the firm praised the strong performance of Wagamama across this period.
However – The Restaurant Group posted a pretax loss of £37.3 million, as it swung to a loss from £13.9 million profit from the year before.
Profit was bruised by an £111.8 million impairment, largely spawning from the Leisure business.
In the first six weeks of the year, the firm noted that it had seen year-on-year like-for-like sales growth of 5.3%.
Andy Hornby, Chief Executive Officer, commented:
“Having joined the business in August last year I am particularly pleased with the continued and significant progress made following the acquisition of Wagamama and the integration of the business into the Group, which has transformed the Group’s growth trajectory and momentum.
Our three growth businesses of Wagamama, Concessions and Pubs are all out-performing their respective markets and have clear potential for further growth. I am also acutely aware of the challenges facing our Leisure business and the wider casual dining sector.
It is therefore clear that our strategic priorities need to evolve in order to maximise shareholder value in the medium term. Following extensive review we have defined three clear strategic priorities for the next two years:
· Grow our Wagamama, Concessions and Pubs businesses;
· Rationalise our Leisure business; and
· Accelerate our deleveraging profile
In order to support these strategic priorities, the Board has taken the decision to temporarily suspend the dividend. This will allow us to continue investing in our three high growth businesses, whilst facilitating an acceleration of our Leisure estate rationalisation and reducing our net debt.
We have made an encouraging start to the new financial year with like-for-like sales up 5.3% for the first six weeks of 2020.”
Restaurant Group see turbulence
In November, the firm saw its shares crash despite a strong performance from its headline brand, Wagamama.
The FTSE250 listed firm reported that Wagamama had continued to outperform the market in tough trading conditions.
Wagamama reported strong second quarter gains, as revenues rose 11% year-on-year to £93.5 million, with like-for-like revenue growth coming in at 6.3%. Restaurant Group’s own financial year aligns with the calendar year.
Overall, the brand delivered a 5.1% outperformance of the UK market, the company said, and has consistently outperformed over the past five years.
Certainly – this is an interesting update from the Restaurant Group. Wagwama is the biggest brand under their wing, and hopefully the plans to expand will produce results in the future.