The Restaurant Group PLC proposes to raise £175mln after slumping to loss

The Restaurant Group PLC () has proposed to raise £175mln after slumping to full-year loss as trading was hammered by the COVID-19 pandemic.

The Wagamama owner looks to place 95mln via a firm placing and 79mln via a placing and open offer, all at the price of 100p each, which represents a 10.5% discount to the closing price on Tuesday.

The proceeds will be used to bolster the balance sheet in case of new waves of COVID-19 infections and to potentially expand the estate if there are convenient opportunities.

Over the past year, the firm exited 60% of Leisure estate deemed structurally unattractive and 50% of Concessions sites considered uneconomical to trade in the medium term. It also cut lease liabilities by 50% to £480mln.

The pubs and restaurants operator said the short-term outlook is uncertain while restrictions are in place, though average standalone delivery and takeaway sales in Wagamama and Leisure have grown two- and five-fold respectively in the four weeks to February 28.

However, the cash burn has been £5.5mln per month in the new financial year.

In the year to December 27, revenue tumbled 57% to £459mln while the firm slumped to an £87mln adjusted loss before tax from a £74mln profit in 2019.

It had available facilities of £470mln at year-end and had cash headroom of £127mln with a minimum liquidity requirement of £50mln.

“Restaurant Group is unlikely to be able to open all of its Wagamama, Frankie & Benny’s and Garfunkel’s restaurants from mid-April because of its limited scope for outdoor seating. Instead its pub operations will have to lead the charge in the hope that its restaurants catch-up over the summer months,” analysts at Third Bridge commented.

“Whilst demand is expected to recover strongly over the summer months, The Restaurant Group is still in hot water. Its bias towards urban restaurant locations is just where sales are likely to be weakest. Where demand will settle after the initial rush in bookings also poses a risk, especially with the furlough programme set to finish in September.”

Shares jumped 12% to 123.3p on Wednesday at the opening bell.