30 October 2020

Tasty plc

("Tasty" or the "Group")

Unaudited Interim Results for the 26 weeks ended 28 June 2020

Key Points:

·    Revenue £8.7m (2019 - £21.1m), significantly impacted by Covid-19 related restrictions

·    Adjusted EBITDA¹ loss (pre IFRS16) of £2.5m (2019: £0.1m)

·    Adjusted EBITDA loss (post IFRS16) of £0.1m

·    Impairment charge of £7.6m (2019: £nil)

·    Loss after tax for the period (post IFRS16) of £11.0m (30 June 2019: loss of £0.8m (pre IFRS16))

·    Loan as at 28 June 2020 of £nil (30 June 2019: £1.9m)

·    Cash balance as at 28 June 2020 of £3.2m (30 June 2019: £2.4m)

·    Net cash as at 28 June 2020 of £3.2m (30 June 2019: net cash £0.5m)

·    Sale of More London dim t completed in January 2020 for gross proceeds of £2m

·    Oakham Wildwood lease surrendered in September at £nil premium post period-end

·    All sites closed from 24 March 2020 including takeaway

·    Phased reopening of some sites for takeaway from end of May 2020 and gradually reopened most sites for eat-in from July 2020

·    Currently trading from 48 of 55 restaurants with one recently closed due to localised lockdown

·    Six sites that have not reopened are at risk of permanent closure

¹                      Adjusted for depreciation, amortisation, share based payments. Pre IFRS16 has been applied.

Chairman's statement

2020 has been an extremely difficult year which required swift action to mitigate the extraordinary challenges faced.   Tasty was quick to react to the Covid-19 outbreak, implementing various measures to stabilise the business and safeguard and preserve the wellbeing of our people and customers.  The Board would like to thank the loyal teams, suppliers and landlords that have supported us through these unforeseen times.

Having steered the Group to a debt free position following the sale of More London dim t for £2m in January; we were in the fortunate position to have no banking covenant pressure during the shutdown of the estate due to Covid-19 restrictions implemented in March.  Cash preservation became a key priority in order to maximise the chances of the Group surviving the unprecedented impact caused by the pandemic. In light of the continued economic uncertainty and the impact of Covid-19 related restrictions, the Group announced in September that it had secured a £1.25m, four year term loan from the Group's existing bankers, Barclays Bank, in order to strengthen its balance sheet and provide additional working capital support.  The facility is available to be drawn down until 7 February 2021. However, drawdown is restricted until the future of the Group is assured through restaurant closures and creditor arrangements.

Whilst the trading environment continues to be extremely challenging and ever-changing, with the additional bank facility and support from our creditors and landlords, we are hopeful that we will be able to navigate our way through these difficult times due to our agility and restructured operational base.  Our focus on cash preservation and maintaining the wellbeing of our staff and customers, has provided us with the opportunity to find a new way of operating the business, which is Covid-19 safe.  There are opportunities to build on the stability in the Group and the lower operating cost base which will allow us to take advantage of reduced competition.

Introduction and Covid-19

The beginning of 2020 was generally encouraging, and we started the year with 57 trading sites; 51 Wildwood and six dim t restaurants.  Following the sale of dim t More London in January for £2m and the surrender of Oakham at a £nil premium in September, we currently have 55 sites.

In line with Government announcements we closed all of our restaurants for eat-in on 20 March and the Group made the decision to close all remaining open sites for takeaway and delivery on 24 March. At the end of May, we gradually started to reopen for takeaway whilst strictly following social distancing and health and safety guidelines. From 4 July the Group began a phased reopening programme for eat-in, and we currently have 48 restaurants open for eat-in; six remain closed with no immediate plans to reopen them and one currently closed due to restrictions in Wales.

The reduced estate and social distancing measures have impacted capacity and sales; however, the full financial impact on the year cannot currently be quantified due to the changing and uncertain threat of Covid-19.  Whilst the Government lockdown measures introduced in March have been gradually eased across the UK, the risk of local outbreaks and further local lockdowns continues as witnessed in Leicestershire, Greater Manchester, Aberdeen, Liverpool, Wales and Northern Ireland.

The "Eat Out To Help Out" ("EOTHO") Scheme was a welcome initiative and helped trade in August. The Group experienced a positive level of sales during August, temporarily supported by the increase in UK residents staying in the UK this summer, Government initiatives and pent up demand following the relaxation of lockdown restrictions since March.  However, with the stricter measures imposed on 24 September including the 10 pm curfew, "work from home if you can", increased control measures and the likelihood of further local lockdowns, we continue to face uncertain times for the foreseeable future.

Government support

The Government initiatives, including the Job Retention Scheme, business rates holiday, deferral of HMRC payments, EOTHO and reduction in VAT, have proved invaluable and supported the Group during this difficult time. 

At one stage, 98% of our employees were furloughed and, while unfortunately we have not been able to retain all our staff, we still employ approximately 700 people.  However, the support is not set to continue as the Job Retention Scheme comes to a close at the end of October and is being replaced by a less generous scheme; the Job Support Scheme for open and closed restaurants.

Suppliers

When we were confronted by an impending shutdown in March we worked with our food and beverage suppliers to negotiate extended payment terms and / or discounts; when we re-opened for trade they supported us in mobilising the business again. We are most grateful to everyone that supported, and continues to support us, through these difficult times.

Rent negotiations

The Group has been successful in achieving rent reductions and lease concessions on a number of sites but needs to extend negotiations to cover any period of reduced revenue. We have commenced consensual negotiations with landlords and other creditors in respect of the outstanding rents and anticipate that this process will be completed by the end of November. It is difficult to predict the outcome of those negotiations but on the whole there seems to be a willingness to assist.

The Board believes that given the recently announced additional Covid-19 related regulations and the probability of tighter restrictions in the near future, all potential options for the Group's future should continue to be explored but, with creditor assistance, a more formal procedure such as a Company Voluntary Arrangement, may be avoided.

The Group will continue to review its existing estate to consider whether a number of restaurants should close permanently.

Financial stability

As we entered lockdown, we reviewed all costs to see where we could reduce our outgoings, including measures such as salary reductions and maintaining operating costs to a minimum. During lockdown, we operated at a  minimum level  with over 98% of our staff being furloughed but to secure the longer-term future of the Group and to support the maximum people, we made the agonising decision to make approximately 32% of our staff redundant across our restaurants and head office.  This was a very difficult decision and process, but our priority was to save the business and to support those that have been affected.

We continue to negotiate with landlords and have secured a loan facility of £1.25m which can be drawn down until 7 February 2021. However, drawdown is restricted until the future of the Group is assured through restaurant closures and creditor arrangements. 

Appointment of strategic advisers

As announced on 30 September, the Board confirms that, whilst no decision has yet been made regarding a restructuring or potential Company Voluntary Arrangement (CVA), it is continuing to work with its advisers, KPMG, to assess the potential impact of Covid-19 on the business and the various strategic options available to the Group.

People

This has been a very challenging time for everyone and the Board would like to thank our teams at every level but would particularly like to acknowledge the small group of head office staff who worked tirelessly throughout lockdown often in difficult circumstances, made more difficult through remote working and reduced teams. Their efforts, and thereafter the streamlined team who reopened the restaurants, have helped us navigate the business through these unusual times. Despite personal and professional challenges our colleagues have shown huge dedication and support throughout, for which we are extremely grateful.   

Post period end, Adam Kaye stepped down from the Board on 15 September to allow him to focus on his other commercial interests. The Board would like to thank Adam for the enormous support and invaluable experience that he has provided to the Board from Group's inception.   He remains a substantial shareholder and we expect his involvement to continue.

Results

Due to the lockdown and Covid-19 restrictions, sales were down 59% on the corresponding period to £8.7m (2019: £21.1m). In the period leading up to the closure, revenue had been ahead of management expectations. The adjusted EBITDA loss before IFRS16 adjustments was £2.5m (2019:  £0.1m).  EBITDA loss post IFRS adjustments was £0.1m.

Operating loss before highlighted items was £2.7m (Pre-IFRS16 equivalent: loss £3.2m, 2019: loss £0.6m).

The impact of the implementation of IFRS16 has resulted in depreciation on right-of-use (ROU) assets and the interest charge on lease liabilities being greater than the charge for rent that would have been reported pre-IFRS16;  net impact on reported loss is £0.7m. The interest charge on the lease liabilities is higher in the earlier years of a lease.

We have reviewed the impairment provision across the ROU assets, fixed assets and goodwill and have made a net provision of £7.6m (30 June 2019: £nil).  After taking into account all non-trade adjustments, the Group has a stated loss after tax for the period of £11.0m (2019: loss of £0.8m).

Cash flows and financing

Cash outflow from operations was £1.5m (2019: £0.5m). During the period, the net proceeds from the sale of property were £1.9m (2019: £0.5m).  Repayment of the bank loan amounted to £1.7m (2019: £4.6m).  Net equity raised during the period was £nil (2019: £3.0m).

Overall, the net cash outflow for the period was £1.4m (2019: outflow £2.0m).  As at 28 June 2020, the Group had net cash of £3.2m (30 June 2019: net cash of £0.5m). 

Outlook

The outlook for the sector remains extremely challenging and uncertain.  The actions that the Group has undertaken to restructure, reduce the size of the estate and potentially reduce the Group's rental cost base should ensure that we are in a better place for the future.  However, the Board expects future trading to remain unpredictable and exceptionally difficult with the threat of further local lockdowns, tighter restrictions and the possibility of full lockdown still remaining.  We will continue to monitor the situation and remain ready to respond.

The future of the Group

At the time of approving the interims, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. In reaching this conclusion the Directors have considered the financial position of the Group, together with its forecasts for the next 12 months and taking into account possible changes in trading performance. The going concern basis of accounting has, therefore, been adopted in preparing the interim financial report. However, the Directors note that there may be material uncertainty in relation to going concern due to the effects of Covid-19 and the impact of ongoing losses.

Whilst no decision has yet been made regarding a restructuring or potential Company Voluntary Arrangement (CVA), the Board is continuing to work with its advisers, KPMG, to assess the potential impact of Covid-19 on the business and the various strategic options available to the Group. 

Finally thank you to the staff, shareholders, suppliers, landlords and everyone else who has helped our business in these difficult times.

K Lassman

Chairman

Tasty plc

30 October 2020

Enquiries:

Tasty plc                                                               Tel: 020 7637 1166

Jonny Plant, Chief Executive

Cenkos Securities                                               Tel: 020 7397 8900

Mark Connelly/Katy Birkin/Cameron MacRitchie

Certain of the information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the EU Market Abuse Regulation (596/2014). Upon publication of this announcement via a regulatory information service, this information is considered to be in the public domain.

Consolidated statement of comprehensive income
for the 26 weeks ended 28 June 2020 (unaudited)

Other income includes: Government Coronavirus Job Retention Scheme ("CJRS") (£3.3m), grants (£0.2m) and sub-let property income (£0.15m).

The table below gives additional information to shareholders on key performance indicators:       

Consolidated statement of changes in equity
for the 26 weeks ended 28 June 2020 (unaudited)

Consolidated balance sheet
At 28 June 2020 (unaudited)

Consolidated cash flow statement
for the 26 weeks ended 28 June 2020 (unaudited)