Annual earnings jump as Restaurant Group shakes off Covid impact

The owner of Wagamama, Frankie & Benny’s and Chiquito reported total sales of £636.6m for the 52 weeks to 2 January, compared to £459.8m a year previously.

Adjusted earnings before interest, tax, depreciation and amortisation rose to £81.2m from £8.7m, ahead of the group's revised guidance, while pre-tax losses narrowed to £32.9m from £132.9m. Net debt was cut to £171.6m from £340.4m a year previously.

The last two years were both affected by the pandemic and a range of restrictions placed on the hospitality sector.

In the most recent year, restrictions were lifted between May through to early December. In the 33 weeks from 17 May to 2 January, underlying sales at Wagamama were ahead 15%. They also rose in the pubs division, by 9%, and in its leisure arm, by 14%. Concessions - the bulk of which are based in airports and train stations - were down 41%.

Andy Hornby, chief executive, said: "2021 was a year of substantial progress. The recapitalisation of the balance sheet and strong trading performance have allowed us to deliver a robust set of financial results despite the various restrictions that have impacted the sector."

Looking to the current year, TRG said management expectations were unchanged although it remained "mindful" of any inflationary impacts arising from the conflict in Ukraine.

In the 8 weeks to 27 February, like-for-like sales sharply outperformed the wider market. They rose 21% at the Wagamama chain - which TRG acquired in 2018 - and by 11% in both pubs and leisure. Concessions were down 35%.

As at 1015 GMT, shares in TRG were ahead 5% at 73.1p.

Russ Mould, investment director at AJ Bell, said: "There are plenty of headwinds facing the leisure sector and all you can ask of businesses in this space is they do better than the wider market - and on this front, TRG is delivering. The company continues to outpace its rivals in the recovery from the pandemic.

"Wagamama remains a star turn, but the company has also worked hard to fix the parts of the group which weren’t living up to expectations. This is probably most notable in its leisure sites, typically located in retail parks close to cinemas, bowling alleys and other entertainment venues. Brands like Frankie & Benny’s and Chiquito [had] looked tired, but the fat has been trimmed, with underperforming sites closed, and there has been substantial investment in food quality."

Richard Finch, analyst at Edison Group, said: "Concessions remain an area of caution, with only 60% of sites open. But the recent easing of Covid-19 restrictions gives management confidence that most of the remainder of the estate will reopen during the summer."