REG - Restaurant Group PLC - Business Update

RestaurantAnnouncement

12/07/2022 07:00

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RNS Number : 0783S  Restaurant Group PLC  12 July 2022

The Restaurant Group plc

 

The Restaurant Group plc ("Group" or "TRG")

 

Acquisition of Barburrito, early debt facility repayment and purchase of
interest rate caps

 

TRG provides an update today for:

·     The acquisition of Barburrito Group Ltd ("Barburrito") for £7m,
representing a next 12 months ("NTM") run-rate EBITDA multiple of 4.4x

·     Choosing to make an early repayment of £44m of term-loan facilities

·     The purchase of interest rate caps on £125m of debt

Acquisition of Barburrito

Background: Barburrito is an award-winning Mexican style fast-casual
restaurant chain, focused on serving fast, fresh and healthy Mexican food.
 The business currently operates across 16 sites in high-footfall locations
across a range of formats (i.e. shopping centres, city centres and transport
hubs).

Strategic and financial rationale:  The Barburrito proposition is well
aligned with key consumer trends including healthy eating, convenience,
customisable cuisine and offers high quality products at attractive prices
with an average spend per customer of c.£10.

The strength and established nature of the proposition and its alignment to
these key consumer trends has resulted in an impressive trading performance as
laid out in the table below:

YTD FY22 Like-for-like ("LFL") sales (%) vs. 2019 comparables

 

             Q1(*)  Q2(**) to date  YTD(***)      YTD  outperformance vs Coffer Peach restaurant tracker
 Barburrito  +22%   +18%            +20%          +14%

* Q1 refers to the 13 weeks to 03 April 2022 and includes the benefit from VAT
being at 12.5%. This boosted LFL sales for the restaurant and pub sector by
approximately 5 to 6%.

**Q2 refers to the 12-week period to 26 June 2022, with VAT at 20%.

***YTD refers to the 25-week period to 26 June 2022.

Barburrito's strong current trading gives us confidence in its ability to
align with and extend TRG's track record of market outperformance.

The sites have historically generated strong returns on invested capital(1) in
excess of 30% and TRG believes there is significant scope to further develop
and expand the brand, particularly in the south of England, where there is
limited presence.  The initial expansion plan would be to double the existing
estate over the next four years.

Barburrito will be integrated into TRG's Leisure & Concessions division,
with the key operational team from Barburrito retained. The Leisure &
Concessions team is very familiar with the business having operated two sites
previously as franchises in UK airports.

Transaction overview:  The total consideration of £7m will be paid entirely
in cash by TRG and represents a 4.4x run-rate EBITDA multiple.  The
transaction has been done on a debt-free and cash-free basis.  TRG is
acquiring the business from its existing shareholders(2).

 

For the period ended 26 September 2021, Barburrito's profit before tax was
£1.7m and as at 26 September 2021 its gross assets were £3.9m.  The profit
before tax ("PBT") figure for the period benefitted from significant temporary
government support (i.e. VAT reduction and property grants).

 

The 16 existing sites are expected to contribute Adjusted(3) company level
EBITDA and PBT of c.£1.6m and c.£0.8m respectively to TRG over the next 12
months.

Update on early debt facility repayment and interest rate caps

Given the Group's significant cash headroom and confidence in the underlying
cash generation across our businesses, TRG chose to repay a further £44m of
its term loan in June 2022, thereby reducing its total available debt
facilities to £361m.  The debt facilities currently comprise a £241m term
loan and a £120m RCF facility which is undrawn.  The Group currently has
cash headroom(4) in excess of £190m against these facilities.

 

To manage the risk of interest rate increases on its debt facilities, TRG
purchased interest rate caps as follows:

 

·     On £125m of debt limiting the SONIA base rate to 0.75% for a
total cost of £2.2m from November 2022 to November 2025; and

·     On £100m of debt limiting the SONIA base rate to 0.75% for a
total cost of £0.9m from November 2025 to November 2026.  These caps
significantly reduce the impact of interest rate changes on our debt over the
next four years

 

As a result of the £44m early repayment of the term-loan, the Group maintains
its previous guidance for the expected P&L interest charge (pre-IFRS 16)
for FY22 at between £24 and £25m, despite the significant increase in the
SONIA base rates that have come into effect and possible further interest rate
increases to come.  The purchase of the interest rate caps provides further
protection for TRG over the next four years.

 

Notice of results

TRG's next update is scheduled to be the interim results announcement on 8
September 2022.

 

 

 

(1) Return on invested capital (ROIC) defined by outlet EBITDA for the twelve
months to March 2020/initial capex invested

(2) Existing shareholders comprise "Abbeyway Commercial (3) Limited, Morgan
Davies, Stephen Herring, Graham Turner & Neil Lidguard"

(3) Pre IFRS 16 Adjustment and exceptional charges

(4) Cash headroom position as at 29 May 2022. Current facilities subject to
minimum liquidity covenant of £40m.

 

Enquiries:

 The Restaurant Group plc                                    020 3117 5001

 Andy Hornby, Chief Executive Officer

 Kirk Davis, Chief Financial Officer

 Umer Usman, Investor Relations

 MHP Communications                                          020 3128 8789/8742

 Oliver Hughes

 Simon Hockridge

 

 

Notes:

 

 

1.   The Restaurant Group plc operates approximately 400 restaurants and
pub restaurants throughout the UK as at 12 July 2022. Its principal trading
brands are Wagamama, Frankie & Benny's and Brunning & Price.  It also
operates a multi-brand Concessions business which trades principally
in UK airports.  In addition, the Wagamama business has a 20% stake in a JV
operating five Wagamama restaurants in the US and over 50 franchise
restaurants operating across a number of territories.

 

2.  Statements made in this announcement that look forward in time or that
express management's beliefs, expectations or estimates regarding future
occurrences are "forward-looking statements" statements and reflect the
Group's current expectations concerning future events.  Actual results may
differ materially from current expectations or historical results.

 

 

 

 

 

 

 

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