THE owner of the Restaurant Bar & Grill and Piccolino chains is determined to drive ahead with expansion plans, after asking shareholders for £2m to reduce debt.
Individual Restaurant Company (IRC) needs room to manoeuvre after bank loans were extended from £13.5m to £18.5m.
Attempts to raise the extra cash will be made via an offer to shareholders, which include Iceland chain boss Malcolm Walker and Liverpool investment house Rathbones.
IRC is proposing to raise approximately £2.1m, at 13p a share, which is a discount of 29.7% on the June 19 closing price of 18.5p.
Reducing the debt burden is intended to allow the group to take advantage of the ailing commercial property market and grab some bargain locations, particularly with landlords keen to offer capital incentives. Any new venues would be acquired through cash flow.
Trading this year has been ahead of expectations, with both Liverpool restaurants performing well. Chief executive Steve Walker said: “While trading conditions are likely to remain tough, current trading is ahead of expectations.
“Against this backdrop, the company has successfully renegotiated its £18.5m facility with Lloyds. However, this requires regular payments, starting in December, 2009, culminating in a bullet repayment of £13m, in January, 2012.
“This repayment restricts the expansion plans of the business, and the board does not believe that financing new restaurant openings though additional debt is sustainable.
“We have considered a wide range of options to raise additional capital and firmly believe the fundraising is the most suitable method.”
The previous business plan envisaged a combination of debt and cash flow would underpin six new openings a year.
Mr Walker said the economic instability experienced in 2008 has had a significant adverse effect on the commercial property market and left opportunities to acquire new sites with incentives from landlords which would help reduce fit-out costs.
The average site makeover has historically cost approximately £1.2m. Chairman Robert Breare added that quality in the restaurants would not be compromised. He said: “Many operators have increased discounting, but we will avoid margin erosion and concentrate on quality of food, people and customer service.”
In the year to December, 2008, revenue was ahead at £52m, although profits dipped to £1.8m from £2.5m.
