The Restaurant Group (LON:RTN) has paid £7.5m to Big Table Group for them to take 75 underperforming sites off their hands.
The Restaurant Group has announced the sale of its loss-making Leisure business to the Big Table Group. The Leisure division comprises 75 sites operating under the Frankie & Benny’s and Chiquito brands.
Restaurant Group shares were trading around 6% higher in early trade on Monday.
According to TRG, offloading the underperforming Leisure business will allow the company to focus on its better-performing divisions – Wagamama, Pubs and Concessions. These core operations have delivered strong sales and profit growth in the first half of 2023.
The sale is expected to be completed in early Q4 2023 and will accelerate TRG’s margin improvement and debt reduction goals. Specifically, TRG stated the deal will boost its adjusted EBITDA margin by over 100 basis points in the 2024 fiscal year. It is also anticipated to be marginally earnings per share accretive in 2024.
Additionally, the sale will reduce TRG’s lease liabilities by approximately £50 million, further improving the company’s balance sheet. TRG is targeting a net debt to adjusted EBITDA ratio below 1.5x before the end of 2025.
As part of the transaction, TRG will provide transitional services to Big Table Group through March 2024 to ensure a smooth transfer of the Leisure sites. TRG will also make a £7.5 million cash contribution to Big Table, subject to adjustments.
Overall, divesting the underperforming Leisure division will allow TRG to focus on its better-performing businesses and accelerate the company’s deleveraging and margin goals. The sale is viewed as a strategic positive that will create a stronger core business going forward.
“A sale of our Leisure business significantly accelerates our medium-term strategic plans to increase Adjusted EBITDA margins and reduce leverage,” said Andy Hornby, Chief Executive Officer of TRG.
“On behalf of TRG, I would like to express our massive thanks to the extraordinarily hardworking and dedicated teams across the Leisure business who have made huge improvements in the customer proposition over the last few years. We wish them all well as part of the Big Table Group.”