The likely evaporation of business has prompted a number of pub and restaurant groups to issue warnings and withdraw financial guidance, after Prime Minister Boris Johnson asked the British public to cease meeting in their regular leisure spots.
Pub and brewing group Marston’s (MARS) said on 18 March that it hadnot experienced a drop off in sales over the last fortnight. But, it expects a significant deterioration over the coming weeks. With a reduction in social activity set to last for months, Marston’s said that it was unlikely to put its interim dividend to shareholders in May, in a move that would allow the business to keep hold of around £20m.
Marston’s has cut capital expenditure and is in the process of lowering its variable costs. It has also entered into discussions with banks over covenant waivers for its second half. Peel Hunt analysts said that the company should save £30m from the business rates holiday granted by Chancellor of the Exchequer Rishi Sunak this week, and that with all its measures in place the company could operate with sales down 30 per cent for six months. Marston’s shares soared by as much as 44 per cent after its announcement, making it the second biggest climber in the FTSE 350 index.
Those with exposure to the restaurant sector have already seen coronavirus push down trading levels. Mitchells & Butlers (MAB), which runs restaurants as well as pubs, said it had been “severely impacted” and withdrew its financial guidance for the year. The group said that it had sufficient headroom on its balance sheet to “suffer a significant loss in the remaining four weeks to the test date and still clear covenant levels”. It has £50m of cash and has drawn down facilities of £150m, which the group expects should sustain it well into its second half. It will benefit from a £100m fall in business rates from next month.
Restaurant Group (RTN), which operates restaurant brands including Wagamama’s and Frankie and Benny’s, watched its share price fall 10 per cent after warning that it expected a 68 per cent fall in like-for-like sales over its second quarter in its leisure, pubs and Wagamama segment, and concessions business, which is mainly based in UK airports, to decline 92 per cent over the same period. Overall sales are expected to go down by 25 per cent. Restaurant Group will slash its capital expenditure by at least £45m from its previous guidance of £75m, and also intends to secure covenant holidays from banks.
Under its current forecasts, Restaurant Group expects to retain £75m in cash liquidity for the rest of 2020, and said that an entire shutdown of the business would reduce its cash levels by no more than £15m per month.
