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Tue 12th Jan 2021 - Leon sets out post CVA forecasts, promotes Burford to CFO
Leon sets out post-CVA forecasts, promotes Burford to CFO: Natural fast food brand Leon, which received approval for its company voluntary arrangement (CVA) proposals last month, has promoted Chris Burford to chief financial officer, as it set out its post restructuring forecasts for the next 12 months. Burford, who joined Leon six years ago from Wagamama, steps up from his director of finance role. He replaces Antony Perring, the former Wagamama finance director, who joined the John Vincent-led business in February 2015. Vincent said: “I am really happy Chris is taking on the role of chief financial officer. He has been a great number two to Antony and has held the role of director of finance for the past six years. I look forward to continuing to work closely with him to realise our next phase of growth. Antony has been a wonderful partner to me and a highly regarded and much admired chief financial officer. I would like to thank him very much indeed for his work and his friendship.” The group’s CVA, which will see a small number of its restaurants close, was approved alongside the business securing amended and extended banking facilities. As part of the restructuring, Leon’s shareholders also agreed to inject £3m into the company if its cash reserves fall below £2.25m for more than 28 consecutive days. In its full-year accounts, the company stated: “While the ongoing impact of covid-19 remains uncertain, the board anticipates covid-19 would have resulted in an impairment of four of the company’s restaurant locations had it been an adjusting event. The financial impact of the impairment would be an additional charge totalling £437,000, as £515,000 has been previously provided against two of the restaurants in a prior year. The board anticipates the remaining restaurants in the estate will return to previous levels of profitability within two years. The group is financed by bank loan facilities that, on the balance sheet date, were fully drawn (£13.5m) and were repayable on 29 July 2022 and subject to covenants tested quarterly. As a result of the covid-19 pandemic, the group breached a) the financial covenants in June 2020 and September 2020 and b) a number of the other informational covenants in the bank loan facilities agreement. The group has obtained waivers for all the covenant breaches, has renegotiated the covenants from December 2020 onwards and has extended the bank loan facilities until January 2025 with partial repayments commencing in January 2022. The covenants comprise a minimum consolidated cash balance, which is measured quarterly from December: 2020 until December 2021 and then financial covenant ratios from March 2022 onwards. The group has negotiated with a significant majority of its landlords to amend the terms of its UK restaurant leases partially waiving 2020 rents due, and temporarily moving to rents based on restaurant sales. As at the end of November 2020, the group had consolidated cash of £9.5m and fully drawn loan facilities of £13.5m (net debt of £4m). The directors have prepared a base case forecast cash flow and covenant model. The key assumption in the model are forecast sales for 2021, which are based on forecast footfall and represent the following like-for-like decreases compared with FY19: first quarter of 2021 minus 50%, second quarter of 2021 minus 30%, third quarter of 2021 minus 25% and fourth quarter of 2021 minus 15%. Under the base case model, the company and the group is forecast to have sufficient cash to continue as a going concern and to meet the bank loan facility covenants for a period of 12 months from the date of signing these financial statements. The directors have also prepared a severe but plausible downside scenario that assumes a further 18% sales decline against the base case across 2021. Under the severe but plausible downside scenario, the group would breach the minimum cash requirement covenant in December 2021 after receipt of the full £3m from the majority shareholders.”


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