21st Jan 2022 11:55
(Alliance News) - Restaurant Group PLC on Friday said full-year profit will be in the top end of its previous guidance range despite the impact of Covid-19 on the company's sector.
Restaurant Group had originally expected adjusted earnings before interest, tax, depreciation and amortisation in a range of GBP73 to GBP79 million for 2021 and net debt of less than GBP190 million.
The London-based pub and restaurant owner, which owns brands such as Wagamama and Frankie & Benny's, now expects that its 2021 adjusted Ebitda will be at the top end of the range and year-end net debt will be less than GBP180 million.
Danni Hewson, financial analyst at online investment platform AJ Bell, said: "It is pretty heroic for Restaurant Group to be guiding for earnings at the top end of expectations given all the challenges currently facing it. The impact of Omicron disruption was evident in a slowdown in December but when it comes to the things Restaurant Group has been able to control it has done a decent job – perhaps most notably keeping a tight rein on costs at a time of rapid wage and input cost inflation."
Restaurant Group explained that like-for-like sales in its leisure, pubs, and concessions sectors had taken a hit in December. These were all down in comparison to the same period in 2019, though its leisure and pub sectors were up in October and November.
AJ Bell's Hewson said that this news would be "particularly pleasing" for investors as the company's leisure division was historically a part of the business that has really struggled.
"It suggests the restructuring of this part of the business, which includes chains like Frankie & Benny's and Chiquito, is paying off," he added.
"The jewel in the crown is still Wagamama," Hewson continued, "while its acquisition in 2018 was widely seen as over-priced at the time, owning it has been priceless for Restaurant Group given the strength of the brand. You dread to think how it might have coped in the pandemic without it."
Wagamama's like-for-like sales throughout the period saw growth when compared to the same period in 2019. October was the brand's best month for like-for-like sales with growth at 11%, but the chain even notched growth of 1% in an Omicron-hit December.
The company continued that though it is encouraged with the recent UK government announcement that all 'plan B' restrictions will be lifted next week, it expects consumer confidence may take longer to recover.
It added that it was also mindful that the recovery in air passenger volumes remains dependant on the timing of changes to both UK and international restrictions.
Analysts at Jefferies said Restaurant Group's performance during December's "quasi-lockdown" bodes well for the future.
Douglas Jack, analyst at Peel Hunt, upgraded Restaurant Group's 2021 Ebitda forecast by GBP3 million to GBP79 million and reduced its net debt forecast by GBP10 million to GBP178 million. However, Peel Hunt downgraded the company's 2022 Ebitda forecast by GBP6 million to GBP99 million to reflect an Omicron-affected start to the year.
Greg Johnson of Shore Capital said the firm has performed well in 2021, but softer trading in January and into February is expected to hit profit by around GBP5 million. Johnson continued that the broker expects a return to prior trends from March and building into the summer.
Shor trimmed its 2022 Ebitda estimate by GBP5 million to GBP95 million, though kept outer year forecasts unchanged.
Shares in Restaurant Group were up 1.2% at 101.20 pence on Friday in London.
By Heather Rydings; [email protected]
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