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The Restaurant Group has announced its intention to close 125 Frankie and Benny’s restaurants and seek rent reductions for a further 85 sites after instigating a company voluntary arrangement.
The CVA applies to the group’s leisure division, which primarily comprises of the Frankie and Benny’s estate.
It said the measures will have “no impact” on the group’s Wagamama, airport concessions and pub operations.
If the CVA is approved and successfully implemented, this will leave a remaining trading estate in the group’s Leisure business of approximately 160 sites. The CVA will also include a mechanism to exit approximately 25 previously closed leisure sites, thereby further reducing the existing onerous lease provision held on the group’s balance sheet.
TRG said the proposals reflect its “proactive approach to ensuring a long-term sustainable business for all stakeholders in the face of unprecedented disruption to the UK’s casual dining sector”.
CEO Andy Hornby said: “The issues facing our sector are well documented and we have already taken decisive action to improve our liquidity, reduce our cost base and downsize our operations.
“The proposed CVA will deliver an appropriately-sized estate for our Leisure business to ensure we are well positioned despite the very challenging market conditions facing the casual dining sector. I would like to wholeheartedly thank all of my TRG colleagues for their continued understanding and extraordinary commitment during this unprecedented period.”
Melanie Leech, CEO of the British Property Federation, added: “These situations are never easy, particularly now for the retail and hospitality businesses on our high streets at the sharp end of the Covid-19 pandemic.
“Property owners, however, need to take into consideration the impact on their investors, including the millions of people whose savings and pensions are invested in commercial property, as they vote on any CVA proposal.
“The Restaurant Group and Alix Partners engaged with the BPF before launching this CVA proposal. This has provided us an opportunity to improve understanding of property owners’ interests and concerns, but ultimately it will be for individual property owners to decide how they will vote on the CVA.”
TRG identified 210 trading sites that are either underperforming, on unfavourable lease terms or not expected to generate future profitable returns going forward.
The nominees for the CVA will be Clare Kennedy, Peter Saville and Catherine Williamson of AlixPartners.
Restaurant Group’s shares have risen 2.7% to 72.5p in morning trading.
Morning update
UK consumers remain deeply cautious about returning to shops, despite the lifting of the coronavirus lockdown across the UK, according to the EY Future Consumer Index.
According to the survey of 1,017 UK consumers, four in five (80%) said they would be uncomfortable trying on clothes in a store. Even though visiting a grocery store has remained a necessity for many people during lockdown, only a quarter (25%) said they currently feel comfortable going.
The report also showed that 45% of UK consumers believe the way they shop over the next one to two years will change, with 64% saying they expect to go shopping less frequently, but will spend more when they do. Similarly, 57% say they will be more aware of hygiene and sanitation when shopping in person.
Before COVID-19, factors such as whether a product was organic or sustainable, was defined as a luxury item, or could be personalised were important for many consumers. According to the survey, consumers are now prioritising product availability (59%), price (43%) and health (41%).
Overall, EY’s report highlights that consumers are gearing themselves up to live more risk-averse lives. More than half (67%) expect it to take months or years before they will return to a restaurant, with similar sentiments for visiting cinemas (80%) and bars/pubs (73%).
Silvia Rindone, partner in consumer product & retail at EY, comments: “UK consumer companies will need to be aware of consumers’ heightened concerns and make every effort to mitigate anxiety if they are to prosper in this new market. Adaptability has always been crucial for any consumer-facing business, but it will be more important than ever for companies if they are to emerge stronger from this pandemic and serve understandably anxious consumers.
“Companies need to think about reinventing their customer experience so that consumers feel reassured that the risk has been minimised. They must go the extra mile to help them feel safe and entice them back into a communal space. The browsing experience, for example, will change. With social distancing, a person’s presence in-store could prevent someone else from entering, lessening browsing time, and making the shopping experience far more transactional. Simplifying the choice for consumers would also be a sensible move, so that every item can be easily seen and purchased.”
On the markets this morning, the FTSE 100 has regained 0.5% to 6,368.5pts after yesterday’s falls.
Early risers include Premier Foods, up 8.9% to 51.8p, Nichols, up 5.3% to 1,329.4p and Coca-Cola European Partners, up 3.7% to €36.35.
Fallers include PureCircle, down 5% to 88.2p, Applegreen, down 3.8% to 351p and McColl’s, down 3.2% to 48.3p.
Yesterday in the City
The FTSE 100 fell back 2.1% to 6,335.7pts yesterday to check the strong share price rally of last week.
British American Tobacco fell back 3.1% to 3,026p after it lowered its earnings guidance despite ‘resilient’ lockdown performance.
There were a number of food retail fallers, including McColl’s, down 6.7% to 49.9p, WH Smith, down 6.2% to 1,307p, Greggs, down 5.8% to 1,262.5p, and SSP Group, down 3.3% to 314p.
Coca-Cola European Partners fell back 8.6% to €35.05, while Nichols dropped 5.8% to 1,262.5p, Greencore fell 3.8% to 145.3p, Hilton Food Group dropped 3.8% to 1,174p and DS Smith fell 3.3% to 336p.
The day’s few risers included Science in Sport, up 5% to 36.6p, Ocado, up 4.5% to 2,072p, Just Eat Takeaway.com, up 1.6% to 8,774p and Marks & Spencer, up 1.1% to 120.5p.
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