Shares in Wagamana and Frankie & Benny’s owner Restaurant Group (RTN:AIM) gained 1.4% to 101.4p after the firm raised its full-year profit guidance to the top of its forecast range.

Despite the impact of the Omicron variant and government ‘Plan B’ restrictions, good cost control and stronger than market trading means that management now expect full-year adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to be at the upper end of the £73 million to £79 million range.

In addition, net debt is forecast to be below £180 million compared with £190 million guided in November.

The company provided data which showed all divisions sharply outperforming the market as represented by the Coffer Peach surveys, compared with pre-pandemic trading.

Lead brand Wagamana saw like-for-like sales growth drop from 11% in October to 1% in December, well ahead of the market which saw growth drop from plus 8% to minus 4%.

RESTRUCTURING PAYS OFF

Encouragingly, the leisure division which comprises the Frankie & Benny’s and Chiquito brands saw strong relative growth with like-for-like growth falling from 16% in October to minus 4% in December, representing outperformance of 16% and 10% respectively.

AJ Bell investment director Russ Mould commented: ‘What will be particularly pleasing for investors is the fact that the leisure division, centred around entertainment venues, is doing well when historically this part of the business 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.’

POSITIVE VIEW

Shore Capital leisure analyst Gregg Johnson said he expected the group to see softer trading in January and February before returning to prior trends from March. Consequently, he has reduced his 2022 EBITDA forecast by £5m to £95 million.

However, Johnson maintained his positive view on the company saying ‘Given the robustness of trade last autumn we see scope to continue outperforming the broader market, with a faster recovery in air travel a potential positive delta to forecasts.’

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Disclaimer: The author of this story Martin Gamble and editor Ian Conway own shares in AJ Bell, which owns and publishes Shares.

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Issue Date: 21 Jan 2022