-Full-year guidance reiterated

-Wagamama and pubs continue to outperform market

-Cost inflation doubles

Wagamama owner Restaurant Group (RTN) maintained its full-year guidance despite rising cost pressures as year-to-date trading remained robust.

The Wagamama and pubs businesses delivered like-for-like sales growth of 15% and 10% respectively through 15 May, compared with 2019 trading, outperforming the market by double digits.

The Leisure division grew like-for-like sales by 6%, in line with the underlying market. The company noted an acceleration in the recovery of the concessions business and now anticipates full-year fiscal 2022 revenues to be at least £100 million.

RISING COST PRESSURES BITE

Overall, the businesses appear to be operating well although rising input prices are starting to bite. Since the full-year results in March, food and drink inflation has accelerated to between 9% and 10% compared with 5% previously.

Investors latched on to the cost negatives rather than robust trading, marking the shares 0.6% lower at 54p.

Strong trading has improved the group’s financial position and net debts have dropped by around £6 million since the year-end figure of £371 million. The group has financial headroom in excess of £220 million.

In today’s annual general meeting statement, the company emphasized its flexibility to both invest in growth and reduce leverage over the medium-term.

EXPANSION ON TRACK

The group is making good progress on new site openings with at least eight Wagamama’s and three delivery kitchens expected to open in 2022. Three new pubs are expected to open their doors during the year.

Gregg Johnson, leisure guru at Shore Capital, left his 2022 EBITDA (earnings before interest, taxes, depreciation, and amortization) forecast unchanged at £95 million.

Johnson commented: ‘We see the update as encouraging, especially with regards to the recovery in concessions, and the ongoing momentum in Wagamama, although cost inflation continues to bite.’

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Issue Date: 24 May 2022