The Restaurant Group PLC (LON:RTN) saw its shares slump on Wednesday after the owner of Wagamama decided to suspend its dividend as part of plans to invest in its business and cut down on debt.
Andy Hornby, chief executive of the FTSE 250 firm, said the investments will focus on growing the three main strands of its business, Wagamama, concessions and pubs, as well as rationalising its leisure business and accelerating its deleveraging.
READ: Restaurant Group sinks as Wagamama warns it is not immune to sector slowdown
The decision to suspend investor payouts accompanied the firm’s results for the year ended 29 December, which reported that like-for-like (LFL) sales had increased 2.7% while total sales were up 56.4% to £1.07bn.
Adjusted pre-tax profits had also risen to £74.5mln from £53.2mln in 2018, however, the company also reported a £111.8mln pre-tax charge related to its leisure business.
The uptick in sales had been driven heavily by Wagamama, where LFLs had increased by 8.5% and cost synergies were proceeding “ahead of plan”, while LFLs for concessions and pubs rose 4.1% and 4% respectively.
Leisure, meanwhile, was the weak link, reporting an LFL sales decline of 2.8%, although the firm said this was an improvement on previous years.
RTN also said it had made “an encouraging start” to its new financial year, with LFL sales up 5.3% in the first six weeks of 2020.
The dividend suspension, however, seemed to have made some investors queasy as the shares fell 2.7% to 114.4p in early deals.