Wagamama owner Restaurant Group (RTN) reported full year profit through the top end of recent guidance and said current trading remained ‘strong’ as it continued to outperform the market.

Management maintained expectations for 2022 despite potential inflationary impacts resulting from the Ukraine conflict, giving the shares a 6% boost to 73.7p. They are down around 43% over the last six months.

STRONG REBOUND

Revenues for the year ended 2 January jumped 38.5% to £636.6 million driven by strong trading from 17 May when dine-in reopened.

On a like-for-like basis all group divisions outperformed the market with Wagamama up 15% compared with market growth of 7%, pubs up 7% against a falling market and leisure up 14%, double the market gain.

Cost containment measures and government support drove adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) to £81.2 million from £8.2 million in 2020.

Crucially the business reduced net debt from £340.4 million to £171.6 million, below the £180 million guidance given at the 21 January trading update.

GROWTH PLANS

A strong rebound in trading and profitability alongside the additional £166.8 million of fresh capital provided by shareholders puts the group in good financial shape to deliver on its growth plans.

The company said it had a healthy pipeline of new openings planned for 2022 and the following years. This year it expects to open seven-to-nine new Wagamama’s and four-to-five delivery kitchens and three new pubs.

Outside the UK the firm expects to open three or four Wagamama’s in the US under a joint venture agreement with the first two in Florida.

The company also plans to open five-to-eight new franchise sites predominantly in Italy and the Middle east. Restaurant Group said it is selectively considering acquisition opportunities that may arise.

STRATEGIC GOALS

Management expects to made good progress against strategic plans which include continuing to outperform the market, delivering good returns on invested capital and reducing net debt to EBITDA to below 1.5 times over the medium term.

The company said the 10 Wagamama restaurants opened over the last two years have delivered a return on invested capital of over 45% while kitchens have delivered over 60% and pubs over 20%.

EXPERT VIEW

Gregg Johnson, leisure analyst at Shore Capital, left his EBITDA forecast for 2022 unchanged at £95 million but maintained his Buy recommendation on Restaurant Group.

Johnson commented: ‘Against the current backdrop, trading remains resilient, the balance sheet is improving, and a far higher quality estate is emerging.

‘Beyond a recovery in trade, we continue to see opportunity for continued site expansion, notably across Wagamama and Bruning & Price.’

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Issue Date: 16 Mar 2022