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Morning Briefing for pub, restaurant and food wervice operators

Mon 1st Mar 2021 - The Restaurant Group signs £500m of new debt facilities, reports strong trading for delivery and takeaway at 200 sites
The Restaurant Group signs £500m of new debt facilities, reports strong trading for delivery and takeaway at 200 sites: The Restaurant Group has successfully signed commitments in relation to £500 million of new debt facilities, which comprises a £380 million term loan facility and a £120 million super senior revolving credit facility. The new facilities provide the group with enhanced liquidity and long-term financing with the maturities of the term loan and the RCF being in 2026 and 2025, respectively. The group’s financing arrangements will be simplified, as the group will be consolidated into one finance group at the TRG level which will provide a more efficient funding structure to support the group’s strategic initiatives. The company added: “The group released a ‘Further covid-19 update’ announcement on 18 December 2020, which detailed a cash burn rate of circa £5.5m per four week period of national lockdown. The cash burn rate is expected to stay at this level until the end of the current restrictions for hospitality businesses, which as per government guidance on 22 February are due to end no earlier than 17 May 2021. Net debt (on a pre IFRS16 basis) as at the year-end (27 December 2020) is expected to be approximately £340m, in line with our expectations. Additionally the working capital outflow post year-end as a consequence of the January national lockdown totalled £40m due to the unwind of supplier creditor positions. The group currently has approximately 200 sites trading for delivery and takeaway across its Wagamama and Leisure businesses. The trading performance of those sites in the current financial year (FY 2021) has been very encouraging with average standalone delivery and takeaway sales in Wagamama and Leisure at approximately 2.5x and 5.0x pre-covid-19 levels respectively during the current national lockdown. With this strong operating platform in place, the group has good capability to deliver an accelerated reopening plan for dine-in trading, once the current restrictions for hospitality businesses end, with all viable sites being reopened within two weeks.”

Lord legal case forced drop of “substantial meal” policy; focus now switched to reopening with non-essential retail: The government was forced to drop its “substantial meal” policy for hospitality following judgement in the legal case brought by Sacha Lord, night-time adviser for Greater Manchester. Judges in the case have ruled that the substantial meal restriction imposed on wet-led pubs during England’s tiered lockdown system was arguably discriminatory towards certain sections of society. Lord said: “This is a landmark victory for the hospitality industry. We are pleased with this judgement and that the court case compelled the government to remove the substantial meal requirement in their recent roadmap. We have continually stated that this measure actively discriminates against and unfairly impacts the poorest and most disadvantaged sectors of our society, and was lacking in scientific evidence to support it. We will continue to work with those most affected across the night time economy and hospitality sectors to ensure all measures imposed on the industries going forward are fair, not only to the operators and businesses struggling to survive, but to the general public. My legal team and I are already in discussions regarding the lack of evidence to justify the delay of the reopening of hospitality compared with non-essential retail and this is an area we will be updating on in the weeks to come.” Oliver Wright, a partner at law firm JMW Solicitors, who represented Lord, said: “This case highlighted the lack of real scientific evidence to support the government’s policy, and their failure to understand its discriminatory effects on BAME communities.”

Government looks at alcohol duty freeze: The government has discussed a boost for pubs which would see the business rates holiday extended and all alcohol duty frozen, The Daily Telegraph has reported. The newspaper stated: “Treasury officials have been in talks with the hospitality industry to continue business rates relief and a VAT cut for pubs, restaurants and clubs beyond June 21 – when lockdown restrictions could be fully lifted – and potentially into the New Year, sources have told The Telegraph. Beer and other alcohol duty could also be frozen in the Budget on Wednesday, although a proposed plan to cut tax on alcohol served in pubs while maintaining it on shop-bought drinks will not be included. It came as 45 Conservative MPs Northern ‘Red Wall’ seats urged Rishi Sunak, the chancellor, to make ‘a bold move to reduce business rates’ on retail as soon as possible. However, the Treasury is concerned that a major extension of rates relief would mean a giveaway for supermarkets, which have profited during the pandemic and could not be legally segregated from any support package. On Sunday, Mr Sunak signalled that the furlough scheme, bounceback loans, targeted VAT cuts and the stamp duty reductions would remain in place until June 21 to align them with Boris Johnson’s roadmap from restrictions at an estimated cost of £15 billion.”

Delayed re-opening will cost hospitality sector £9bn: The delayed reopening of hospitality will cost the sector £9bn, bosses have warned, as MPs demanded the chancellor ramp up support for businesses at the Budget on Wednesday. In a letter sent to Rishi Sunak, a group of 80 MPs warned that pubs, restaurants and hotels have been “ravaged” by the coronavirus crisis and urged the chancellor to invest in the sector to support the recovery. New figures by trade body UKHospitality revealed that the delayed reopening of businesses would cost £9bn in lost sales and other costs compared with reopening from 1 April and lifting all restrictions by 21 June. Under the PM’s roadmap out of lockdown, pubs and restaurants in England could be allowed to serve customers outside from as early as 12 April but will have to wait until May 17 to reopen indoors. Hotels and B&Bs will also be required to wait until May to reopen. UKHospitality warned the staggered reopening plan puts at risk a further 99,000 jobs unless the government’s furlough scheme is extended beyond April. The sector has lost an estimated 660,000 jobs since the crisis hit. The Treasury has already confirmed the Budget will include a £5bn scheme to provide grants of up to £18,000 for high street and hospitality firms. However, the all-party parliamentary group for hospitality and tourism called on Mr Sunak to also extend the temporary VAT cut for a further year and to apply the relief to alcoholic drinks sold on-premise, as well as extending it to the broader leisure sector and weddings. They urged Mr Sunak to replace the scrapped job retention bonus, extend business rates relief and introduce improved loan repayment terms and HMRC tax deferrals. “These sectors have proved historically, and even in the last twelve months, that they can drive economic growth,” the letter said. “Following the last financial crisis, hospitality drove the ‘jobs miracle’ boosting its workforce by half a million in a decade.” It came as a group of almost 400 firms called for Mr Sunak to scrap repayments on government-backed loans to prevent a wave of insolvencies. In an open letter last week, business leaders urged the chancellor to write off debt accumulated by small and medium-sized firms that took on business interruption loans and bounce back loans. It estimates the cost of writing off loan repayments would cost the Treasury roughly £68bn. “SMEs need a lifeline and writing off government-backed loans would give companies the best possible opportunity to keep trading long into the future,” it read. It comes despite Mr Sunak recently extending the repayment time for the 1.4m small firms who took on bounce back loans to ten years, rather than six, reducing monthly payments which are due to start in May. Businesses can also choose to make interest-only payments for six months, or pause repayments for up to six months.

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