Shares in Wagamama owner Restaurant Group (RTN) were the biggest gainers on the FTSE 250, surging 17% to 93p after the company increased its full year profit guidance.

In an unscheduled trading update, the company said the strong trading it reported at the half year results on 15 September had continued across its restaurant, pub and leisure operations, with like-for-like sales growth ahead of the market.

There were also signs of life in the airport concessions business with the company reporting a ‘minor’ improvement in UK passenger volumes after the government’s confusing traffic light system was scrapped.

Consequently, management increased expectations for full year adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation) to a range of between £73 million and £79 million.

In addition, net debt is expected to be below £190 million compared with the £200 million target flagged a month ago. Overall profit and debt expectations for the 2022 financial year remain unchanged.

EXPERT VIEWS

Clive Black, head of research at Shore Capital, said given restaurant industry data for September and October showed growth of 14% and 8% respectively he would have expected Wagamama and the leisure estate to have achieved double-digit like-for-like sales growth while the group’s pub estate likely benefited from the recent mild weather.

Following today’s update, Black said he expected to increase his EBITDA forecast by 38% to £76 million, the middle of the latest guidance.

Black continued, ‘The shares trade at the lower end of their historic range, despite a much higher quality business emerging in a market which has seen significant capacity reduction over the last 18 months.’

Russ Mould, investment director at AJ Bell, said: ‘After a period when there has been very little appetite for the shares, serving up an upgrade was always likely to get a hearty welcome from the market and so it proved this morning.'

Disclaimer: The author and editor own shares in AJ Bell, the owner and publisher of Shares

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Issue Date: 16 Nov 2021