NOT
FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART,
DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM ANY JURISDICTION WHERE
TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR
REGULATIONS OF SUCH JURISDICTION.
This announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and
is disclosed in accordance with the Company's obligations under
Article 17 of MAR.
6 August 2024
Hostmore
plc
Update on Corporate
Transactions and Trading
Hostmore plc (the "Company" and,
together with its subsidiaries, the "Group"), provides an update on
corporate transaction activity and current trading.
Corporate Transactions Update
The Board continues to work to reach
binding terms regarding the proposed all-share acquisition of TGI
Fridays, Inc. ("TGI Fridays") which was announced on 16 April 2024
(the "Acquisition").
Assuming that the Acquisition is
completed, the Company and TGI Fridays now intend that the combined
business (the "Combined Group") will transition to an "asset light"
fully franchised model with no corporate stores. Under this
structure, TGI Fridays' 92 existing corporate stores and the
Group's 87 corporate stores will be sold to existing or new
franchisees, who will then operate the stores and pay a royalty to
the Combined Group. This transition has already commenced at both
the Group and TGI Fridays, with TGI Fridays having entered into
agreements to sell a substantial portion of its corporate stores
for in excess of $40 million.
A prerequisite to entering into
binding terms for the Acquisition had been the completion of a
refinancing at closing for the Combined Group. As a result of the
revised business model, ongoing funding requirements of the
Combined Group will be significantly reduced and, therefore, a new
long-term debt financing package is no longer the preferred
outcome. Instead, the parties are in discussions with their lenders
and other stakeholders to repay or reduce existing indebtedness
using proceeds from the sale of corporate stores and/or new
facilities from related parties.
This revised business model and
financing structure, while ultimately more cost-effective and
accretive to shareholder value, involves a longer timeline than the
third-party refinancing process that had been commenced earlier in
the year. As a result, the Acquisition, assuming terms are agreed,
will likely not close by the end of Q3 2024 as previously
announced. The Board and TGI Fridays continue to work closely and
collaboratively towards a positive result, as the Boards of both
businesses believe that the Acquisition is the optimal outcome for
both sets of shareholders.
In addition to undertaking a sale
process for the Group's corporate stores as a part of the
Acquisition, the Board is working with advisers to evaluate other
potential options to secure value for the Group should the
Acquisition ultimately not complete (the "Strategic
Review").
A further update on the Acquisition
and the Strategic Review will be provided in due course.
Trading Update
Hostmore's H1 2024 LFL sales
declined by 10%, which is in-line with the 10% decline through 26
May as announced on 3 June 2024. Sales in June were variable, with
LFL sales for the first two weeks declining by 2%, while the final
two weeks declined by 20% due to the Euros football tournament and
unseasonably warm weather, both of which had a similar effect on
the Group's competitors in the casual dining sector.
These conditions continued into
July, resulting in LFL sales for the first three weeks of July
declining 23% and taking year-to-date LFL sales to a decline of 12%
compared to the same period in 2023.
EBITDA (FRS102) in H1 2024 delivered
a loss of £1.2 million, which was £2.6 million better than the £3.8
million loss in H1 2023. It is noteworthy that this
improvement in EBITDA was after a reduction in revenue of £9.5
million for the period and, therefore, the EBITDA delivered
underscores the positive impact of the cost reduction programme
implemented in 2023 and the Group's ongoing strong operational
discipline.
As a result of trading in the
period, H1 2024 ending net debt (FRS102) was £29.7 million as
compared to £25.1 million at 31 December 2023.
The Board continues to expect that
the Group's standalone peak net debt for the year, without giving
effect to the closing of the Acquisition or any sales of the
Group's corporate stores, will occur around the end of Q3 2024 due
to routine working capital outflows, lower revenues in the period,
and payment of transaction fees relating to the Acquisition.
Borrowings during this period are likely to exceed the Group's
existing borrowing capacity and so, as a part of the Strategic
Review, the Board is in discussions with various parties regarding
additional financing.
The person responsible for releasing
the announcement is Matthew Bibby, CFO of Hostmore plc.
- ENDS
-
Enquiries
Hostmore plc
Matthew Bibby, Chief Financial
Officer
Tel: +44 (0)330 460 5588
Email: enquiries@hostmoregroup.com
DGA
Group
Jonathon Brill, James
Styles
Tel: +44 (0)20 7664 5095
Email: Hostmore@dgagroup.com