TRG: Profits soar as Wagamama owner defies drab outlook for casual dining market
The Restaurant Group (TRG) raised its annual profit expectations following a surge in revenue in the half year, defying gloomy expectations for the UK’s casual dining market.
TRG, which owns a slew of casual dining chains and pubs, its most popular being Japanese inspired eatery Wagamama, reported a 10 per cent rise in total revenue during the term to £467.4m.
The London-listed firm also reported a 15 per cent rise in adjusted EBITDA as it was boosted by a return to travel and sunny weather via its Brunning & Price Pubs chain and concessions stand business.
Its positive trading notice comes amid a challenging period for the UK’s hospitality sector, with many businesses battling a slow down in trade due to rising living costs.
A spending report published earlier this week by Barclays showed restaurateurs suffered a 5.8 per cent monthly decline in sales in August, as customers cut back on eating out to save money.
Despite the challenging environment, Wagamama, the firm’s golden goose, showed signs of performing well with sales surging four per cent on a like-for-like basis.
Speaking to City A.M., TRG boss Andy Hornby said that post-pandemic customers are more “discerning” about where they choose to dine as they have become more cautious about spending during a period of soaring inflation.
“I think we have to be realistic that customers post-Covid are definitely being more discerning,” he said. “Your food quality and value for money has to be really good to get customers back.”
Earlier this year, TRG said it would reduce its estate, which includes the Frankie and Benny’s and Chiquito chains, by about 30 per cent, as it looked to cut loss making sites to boost profit.
It was also battling doubts from one of its shareholders Oasis, who argued that the chain needed an “immediate” change of governance because it had “one of the worst performing share prices of any UK leisure company”.
“Strong trading is the company’s best defence whilst it remains under pressure from activist shareholders,” said analysts at Peel Hunt, who rated the company a buy this morning. “We believe the best solution is to allow this to continue, giving management time to grow sales, cut costs, recover profits and pay down debt over the next two years.”
TRG has plans to open six Wagamama sites during the year and is setting a target to open between eight to 10 sites per year from 2024 onwards.