The owner of Wagamama is seeking to raise millions of pounds after many of its restaurants had to close their doors amid lockdown restrictions.
The Restaurant Group (TRG) will seek to raise £175m from its shareholders to pay down debt and use as a buffer in case of any Covid resurgence.
Its boss said the pandemic had presented “enormous challenges” for the sector.
Total sales dropped by 57% to £459.8m in 2020 as many TRG sites were closed.
Dented sales and pandemic costs meant the group, which also owns other restaurant chains such as Frankie & Benny’s, reported a £127.6m pre-tax loss last year, compared to a £37.3m loss in 2019.
It added that its short-term outlook remains “uncertain” while lockdown restrictions remain in place.
Chief executive Andy Hornby said that TRG has “responded decisively” to restructure the businesses while preserving the “maximum number of long-term roles for our colleagues”.
“Whilst the sector outlook remains uncertain, and we are mindful of continuing restrictions across the UK, we are confident that the actions announced today will allow us to emerge as one of the long-term winners.”
Under the prime minister’s current “roadmap” for easing lockdown restrictions, hospitality venues will be able to reopen for customers dining outside 12 April at the earliest, with indoor dining set for 17 May.
During the pandemic, TRG started a major restructuring, closing about 250 sites, which largely affected staff across its Frankie & Benny’s, Chiquito and Food & Fuel brands.
It also tapped investors for cash last April, raising £54.6m from a share placing.
The firm, which now has about 400 restaurants, pubs and concessions, said the additional funds it planned to raise would be the “last step” in the restructuring plan as it prepares to reopen sites once restrictions lift.
It said Wagamama delivered “exceptional” like-for-like sales growth when it was open for dine-in trading and that the Wagamama restaurants operating takeaways and delivery services saw sales two and a half times higher than pre-Covid levels.
But Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said that it could take some time for pent-up demand to “unleash” as restaurants reopen.
“Many of The Restaurant Group’s sites have limited outdoor seating so are unlikely to fully benefit from the phased opening of the hospitality industry from 12 April,” she said.
“The cash injection from this latest rights issue will give it some breathing space but there may well be more restructuring pain to come, as a slimmed down version of Restaurant Group emerges from the crisis.”
Takeaways take off
Separately, the owner of delivery giant Just Eat said on Wednesday that it expected orders to ramp up further in 2021.
Dutch-based Just Eat Takeaway.com reported a sharp increase in sales of €2.4bn (£2bn) in 2020, up 54% from €1.6bn the previous year. It said this was due to a 42% leap in online orders.
UK food orders increased 35% over the year and the group said this had accelerated further under current lockdown measures.
Just Eat Takeaway said UK orders were 88% higher in the first two months of 2021, with delivery orders up by more than 600% compared with a year earlier.
Partnerships with chains such as Greggs and McDonald’s were particularly popular with UK customers, it added.
However, despite the high demand for home deliveries, the platform reported a pre-tax loss of €147m euros against €88m in 2019. It said the figure reflected costs associated with the group’s takeover of GrubHub in the US and the merger of Just Eat with Takeaway.com.
Richard Hunter, head of markets at Interactive Investor, added that a “number of potential clouds” could be on the horizon for the group.
“Competition in the space is intense and, in the post-pandemic world, it is impossible to guarantee that its business model will continue to generate such strong growth as the easing of lockdown restrictions allow the global population to visit restaurants in person once more,” he said.