TIDMRTN
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
GBP7m, representing a next 12 months ("NTM") run-rate EBITDA
multiple of 4.4x
-- Choosing to make an early repayment of GBP44m of term-loan facilities
-- The purchase of interest rate caps on GBP125m 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.GBP10.
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(**) YTD(***) YTD outperformance
to date 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 GBP7m 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 GBP1.7m and as at 26 September 2021 its gross assets
were GBP3.9m. 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.GBP1.6m and c.GBP0.8m
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 GBP44m of its term loan in June 2022, thereby
reducing its total available debt facilities to GBP361m. The debt
facilities currently comprise a GBP241m term loan and a GBP120m RCF
facility which is undrawn. The Group currently has cash headroom(4)
in excess of GBP190m against these facilities.
To manage the risk of interest rate increases on its debt
facilities, TRG purchased interest rate caps as follows:
-- On GBP125m of debt limiting the SONIA base rate to 0.75% for
a total cost of GBP2.2m from November 2022 to November 2025;
and
-- On GBP100m of debt limiting the SONIA base rate to 0.75% for
a total cost of GBP0.9m 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 GBP44m 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 GBP24 and GBP25m,
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 GBP40m.
Enquiries:
The Restaurant Group plc
Andy Hornby, Chief Executive
Officer
Kirk Davis, Chief Financial
Officer
Umer Usman, Investor Relations 020 3117 5001
MHP Communications
Oliver Hughes
Simon Hockridge 020 3128 8789/8742
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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END
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