Restaurant Group lifts FY earnings expectations

Restaurant Group lifted its full-year earnings expectations on Tuesday as it said it has traded well since its last update in September, with like-for-like sales outperformance versus the market across its Wagamama, pubs and leisure businesses.

It now expects FY21 adjusted earnings before interest, tax, depreciation and amortisation of between £73m and £79m, subject to no unexpected Covid related disruptions being announced before the end of the financial year.

"We have also seen a minor improvement in UK airport passenger volumes leading to a partial recovery in the sales run rates in our concessions business," the company said.

Year-end net debt is expected to be less than £190m, with the improved position driven primarily by the company’s group's "robust" trading performance.

Restaurant Group’s expectations for FY 2022 remain unchanged from the outlook given at the interim results.

At 0905 GMT, the shares were up 14% at 90.20p.

Broker Shore Capital said it had pencilled in FY group adjusted EBITDA of £55m and would now expect to upgrade this estimate by £21m to around £76m, in the middle of the guidance range. It also said the new forecast for net debt is around £27m better than its prior estimate.

Shore reiterated its forecast for FY22 and FY23 EBITDA of £100m and £120m respectively. This compares with a pro-forma pre-Covid figure for FY19 of around £125m.

Russ Mould, investment director at AJ Bell, said: "Most shareholders will be thanking their lucky stars that Restaurant Group successfully captured Wagamama back in 2018.

"While the deal attracted some criticism at the time as being too expensive, without it, Restaurant Group would have headed into the most testing period for the restaurant industry in generations with fairly pedestrian and in some cases downright tired franchises.

"Having such a popular format at least gave Restaurant Group a fighting chance and it now seems to have emerged as a more robust business with an increasingly streamlined estate and revived fortunes.

"A more robust Restaurant Group should also benefit from the significant amount of operators which have withdrawn from the market thanks to Covid, leaving it with a greater share of Britons’ eating out spend."