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Fri 18th Dec 2020 - Update: Fulham Shore and The Restaurant Group
Franco Manca operator ‘well positioned’ to capitalise on opportunities ‘as normality resumes’, targeting higher return on capital than historically achieved: Franco Manca operator Fulham Shore has said it is “well positioned” to capitalise on opportunities “as normality resumes” with the “ongoing damage to the property and restaurant sectors allowing us to prospect for new sites at much reduced rents and lower capital costs”. As a result chairman David Page said over the next few years the group will “target a higher return on capital than we have historically achieved”. As of yesterday (Thursday, 17 December), the group had net debt (excluding lease liabilities) of £3.7m with undrawn debt facility of £11.5m out of total facilities of £25.75m. From tomorrow (Saturday, 19 December), Fulham Shore will have: 58 restaurants in tier three (of which seven are temporarily fully closed); 12 in tier two (or equivalent); none in tier one and two restaurants “closed possibly until spring 2021”. It comes as Fulham Shore reported revenue decreased 44.9% to £19.9m for the six months ending 27 September 2020, compared with £36.0m the previous year with its Franco Manca and The Real Greek restaurants closed for more than half the period as a result of the first national lockdown. Headline Ebitda fell to £3.7m from £8.4m the year before and generated positive headline Ebitda during the second quarter. It reported an operating loss of £3.0m, compared with a profit of £2.1m the year before. During the period Fulham Shore raised further funds of £2.25m (before expenses) from an equity placing and subscription and agreed a new loan facility of £10.75m under the UK government's Coronavirus Large Business Interruption Loan Scheme. It had net debt (excluding lease liabilities) of £3.3m (2019: £8.8m); down from £9.5m as at 29 March. Since the period end it has opened one further Franco Manca, in Borough Market, London, taking the total to 53. A further The Real Greek has opened in The Lexicon, Bracknell, taking the total to 19. Page said: “We are pleased to have delivered a creditable performance during the first half of the current financial year despite all Franco Manca and The Real Greek restaurants being closed to dine-in customers for more than half the period. The group generated positive headline Ebitda during the second quarter (July to September) reflecting the popularity of our businesses and their great value proposition. This performance was driven by the ability of our teams at both Franco Manca and The Real Greek to adapt quickly to the continuing changes implemented by the UK government in its response to covid-19. We continue to explore new opportunities and are encouraged by the positive customer response to our recently launched Franco Manca and The Real Greek ‘Meal at Home’ kits and new e-gift cards, both of which were launched during the November lockdown. The ongoing damage to the property and restaurant sectors will allow us to prospect for new sites at much reduced rents and lower capital costs per site. As such, over the next few years and once normal trading conditions return, we will target a higher return on capital than we have historically achieved. Following the period end, on 5 November most of our restaurants closed again to dine-in customers following the UK government's second national lockdown. These restaurants were then permitted to reopen on 2 December to dine-in customers, with certain restrictions. However, as at the date of this report and from 16 December, the majority of our estate is once again closed to dine-in customers as London entered tier three restrictions, while Surrey and Berkshire will enter tier three restrictions from 19 December. The situation is fluid and changes frequently and with little notice. Despite the near-term uncertainty, the board remains confident in the long-term strength of the group and believes it is well positioned to both deliver strategic growth and capitalise on opportunities as a sense of normality resumes.”

TRG to see restaurant closures climb to 103 as a result of latest tier restrictions: The Restaurant Group (TRG) has said it will have 103 sites shut from tomorrow (Saturday, 19 December) as a result of the latest tiering restrictions – an increase of almost 40 sites from previously. TRG said the closures were because trading from these restaurants would be “uneconomical”. The company will now have one restaurant in tier one in England, as opposed to none previously, but will see the number in tier three rise from 80 to 142. There will be 100 sites in tier two, down from 202 previously. The company stated: “As per the latest tiering restrictions announced by the UK government, The group will have approximately 145 sites that will trade for dine-in across the UK , 142 sites which will provide delivery and takeaway services only, with the remaining 103 sites closed. This is significantly worse than when the initial tiering restrictions came into effect. Clearly the mix of locations impacted across the tiers will continue to evolve, but if UK tiering allocations were to remain the same as currently in place throughout the first quarter of 2021, this will have a significant adverse impact on the group, and indeed the wider hospitality sector. While the tiering restrictions make the outlook for the first quarter of 2021 extremely challenging, the board is encouraged by the welcome news of the covid-19 vaccine being rolled out in the first half of next year. The board believes the group is well positioned to benefit from a sustained removal of restrictions given its previous strong trading performance following the first lockdown. We therefore expect a strong recovery when there is a return to more normal levels of customer activity. The timing of that will depend primarily on government restrictions being eased.” TRG also stated through a range of “decisive” management actions, cash-burn during the November national lockdown was minimised to circa £5.5m for the month. This is £2.0m higher than during the first lockdown due to rents payable under the terms of the leisure division company voluntary arrangement as well as employer contributions towards furlough payments. Additionally the working capital outflow and increased cash exceptional costs as a consequence of the November lockdown totalled £15m.

Thwaites chairman – the continued ‘nightmare’ of restrictions on industry is ‘hangover we will not recover from’: Rick Bailey, executive chairman of brewer and retailer Daniel Thwaites, has warned the government the continued “nightmare” of restrictions on the sector is a “hangover we will not recover from”. In a letter to Downing Street, he described being in the middle of a rainforest and “our industry is burning down around me”. He said: “The lack of movement downwards in the tiers in favour of universal tightening, arbitrary decision making, lack of transparency, lack of evidence, five days of Christmas, ‘Project Fear’, new strain scaremongering to frighten us further, illogical targeting of pubs, opening of retail, gyms and massage parlours, takeaway kebabs, leg waxing, synchronised swimming and the rest of it is now totally dysfunctional. Is anyone actually looking at this from above? If they were, why construct this depressing cocktail to torture and poison us all over Christmas or at any other time – we won’t recover from this hangover. It is difficult for me to air louder my anger at these latest developments – particularly with this furlough extension – why do that now, in the middle of December, unless you have no confidence about the efficacy of the vaccine roll out and want to roll back off the ‘it will be fine by Easter’ message? None of this has any integrity anymore and it reflects in the most appalling way upon the leadership of this country. We could all buy into a plan, even if it has to change, if we are properly communicated with rather than being treated like idiots with no wider awareness or perspective. I am in the middle of the rainforest and our industry is burning down around me – our business will in some way, I hope, find our way through this; however for our tenanted pubs, bars and night economy across the nation their livelihoods and lives are being destroyed. We have been running, and helping to run, community pubs for more than 200 years; they are the absolute beating heart at the centre of their communities and the good that they do for social health is misunderstood, unrecognised and is being destroyed – this continuing closure of these social hubs even when infection levels are low, and with the safety measures they have taken, is now just plain wrong, on every level. These landlords are the ones who will have no Christmas and for whom 2021 will be their lowest point as they are destroyed by this – purposefully, on a gut feel pubs are bad. How much more misguided could our crisis management team or government cabinet be – these poor pubs have now been abandoned by them; and yet if protected they would be the ones to pick up our communities, who they know so well, when we reach the other side. Better still, once they recover, their tills will start to refill the coffers of the Treasury from the enterprise they deliver. There is no real prospect of relief at the next tier review as the health Stasi will want to frighten the cabal into waiting to see what damage has been done from their strategy over Christmas and the NHS will frighten everyone it might be overwhelmed, even though it has more capacity than last year with no covid – it really is hopeless this Christmas, and actually very, very sad. All we can do is shout louder to save our pubs and hospitality sector – in the hope the faint echo of our pain will reach the two to three people that can change this nightmare and that this Christmas they will care enough to act.”

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