Restaurant Group warns on profits as Covid-19 batters sales

Wagamama owner Restaurant Group warned on profits on Wednesday saying trading in its concessions business was getting worse “by the day” as the coronavirus hit sales.

Like-for-like sales in the last two weeks had fallen 12.5% as the group forecast a full year fall of 25%. The government on Monday advised people to stay away from pubs and restaurants in a bid to stem the pandemic's spread, leading to a slump in footfall and share prices in the sector.

On Tuesday, Finance Minister, or Chancellor, Rishi Sunak was forced to unveil a £330bn loan package and business rates holiday to help businesses.

The company's guidance assumed like-for-like sales across the leisure, pubs and Wagamama businesses slumping 68% in the second quarter, including 10 weeks of shutdown, before normalising in the second half.

It forecast adjusted earnings before interest, tax, depreciation and amortisation of £95m - £105m, with leverage of 2.2 - 2.5 times. The group added that it would cut capital expenditure for 2020 by at least £45m from previous guidance of £75m with an overall savings target of £45m.

'The group will work with lending banks to seek covenant holidays throughout 2020 in order to preserve maximum flexibility to operate the business through this challenging period,' Restaurant Group said in a statement.'

It added that it would also work with landlords to ensure no minimum guarantees are enforced within its concessions, where rents are largely turnover based; and to ensure that the rent roll for 2020 across our other businesses “equitably reflects the unique and unforeseeable situation”.

“The forecast assumes at least a 50% reduction in fixed rent across all our Wagamama, concessions, pubs and leisure restaurants, and reflects the business rates holiday for three quarters of 2020 as announced yesterday in the Chancellor's statement.”