Restaurant Group serves up big loss but September sales impress

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The Restaurant Group PLC (LON:RTN) has reported a massive GBP235mln loss before tax for the first half of the year but served up a profitable trading performance since reopening after the coronavirus lockdown.

Its Wagamama chain saw like-for-like (LFL) sales growth of 11% in the 11 weeks from July 4 to September 20, 2020, which the group said was a 5% outperformance of the wider restaurant market.

The former core group brands of Frankie & Benny’s and Chiquito, now clumped together as the Leisure business with its former 350-strong estate on track to be reduced to 140 outlets, saw LFL sales growth of 4%.

Pubs, of which the group has 75, many managed as part of the Brunning & Price chain, grew LFL sales by 14%, with suburban and rural locations far outperforming city centre, but with central London LFL sales down 38%.

Travel concessions have understandably been hit hard by the pandemic, with LFL sales plunging 58% from the 16 sites open out of 30-35 that are planned to remain in the business in the medium term.

For the group as a whole in the 26 weeks ended June 28, 2020, revenues shrank 56% to GBP227.2mln, with last year’s operating profit of GBP36.5mln swinging to a GBP41.3mln loss this time and the full statutory loss reflecting GBP132mln of estate restructuring costs.

Net debt of GBP311mln was down slightly, though it excludes GBP827.2mln of capitalised lease liabilities.

In the results statement, Andy Hornby, the former banking boss who was bought in as Restaurant Group’s chief executive in May last year, said: “It has been an extraordinary and difficult period for the hospitality sector but one in which we have pulled together to achieve a great deal.”

He added: “Whilst the sector outlook is uncertain, and we are mindful of recent restrictions across the UK, we are confident that the actions we have taken provide us with strong foundations to emerge as one of the long-term winners.”

Restaurant Group shares rose 6% to 57.66p on Tuesday morning.

Analysts at broker Liberum said the results “illustrate the significant improvement in the quality of the retained estate” with the LFL performance and better than expected debt thanks to cost reduction measures.

Trading since reopening on July 4 has been helped by an estimated 30% reduction in competition, and the group’s technology and delivery capabilities and the business is back to profitability.

The analysts, who reiterated their ‘buy’ rating, said they expect to “significantly upgrade” full year EBITDA forecasts of GBP16mln although the cautious outlook is likely to keep 2021 forecasts of GBP78.2mln unchanged.

–Adds broker comment–

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