Wagamama owner Restaurant Group (RTN:AIM) said trading post-pandemic had been encouraging with around 90% of its estate now open. Wagamama like-for-like sales were up 11% in the 11 weeks to 20 September, 6% ahead of the market, while pubs registered an ‘exceptional’ performance up 14% or 20% ahead of the market. The shares gained 5% to 57.4p.
SLIMMED DOWN GROUP GETTING MORE TRACTION
Leisure saw like for like growth of 4%, in line with the market, although the company noted this was the best performance in over five years, while the concessions business saw like for like sales decline by 58%.
The company is in the process of terminating between 36 and 41 concession sites deemed economically unattractive based on expected footfall trends over the medium term.
The remaining 30 to 35 sites have achieved improved terms including a waiver of rental payments for non-trading periods and the temporary suspension of minimum guaranteed rents or reduced rents linked to customer numbers.
Solid trading over the last quarter left the group’s balance sheet in a healthier position than management expected with net debt of around £311 million.
The performance was driven by stronger takeaway and delivery businesses, with suburban and retail park sites outperforming metropolitan areas like London, in common with many leisure companies which have reported in recent weeks.
Takeaway now represents 24% of Wagamama’s turnover and 12% across the leisure estate. The estate has been radically slimmed down in recent months and is expected to be around 400 sites compared with 653 at the end of 2019.
UPGRADES
Broker Shore Capital is looking to increase its forecasts for full-year EBITDA (earnings before interest, taxes, depreciation and amortisation) to between £25 million and £30 million from the current estimate of £15 million on the basis of improved trading.
Management believes the group in its current from is capable of delivering annualised EBITDA of between £110 million and £125 million in the medium term, assuming the retained estate of 400 sites were to achieve 2019 levels of revenues. However the company was keen to stress this wasn’t an official forecast.
Shore Capital’s base scenario has the group achieving this by 2023 with EBITDA of £100 million by financial year 2022 and profitability back to historic levels by financial year 2024.
