The Restaurant Group reports 'very encouraging trading' in interim results
In its interim results for the 26 weeks ended 28 June 2020 it reported a drop in revenue from £515.9m to £227.2m but that trading for the 11 weeks from 4 July to 20 September across its Wagamama, leisure, pubs and concessions brands following the lifting of the lockdown in England had been strong.
The groups says that 90% of its estate has now reopened.
Since reopening Wagamama for dine in customers, The Restaurant Group has reported like-for-like sales growth of 11%, representing a 5% outperformance of the market.
It has also reported that trade has been broadly in line at its newly restructured leisure division following the removal of more than 120 underperforming Frankie and Benny’s sites through a CVA, and 45 underperforming Chiquito restaurants through administration.
The group is also in the process of exiting around 40 concessions in travel hubs that it believes to be economically unattractive based on expected future passenger trends over the medium term.
It says it has achieved improved terms with the majority of its airport partners for the remaining 30-35 sites including a waiver of rental payments for non‐trading periods and temporary suspension of minimum guaranteed rents.
“It has been an extraordinary and difficult period for the hospitality sector but one in which we have pulled together to achieve a great deal,” says CEO Andy Hornby.
“The priority throughout has been the safety of our colleagues and customers, and we have also accelerated the reshaping of our portfolio, resulting in a higher quality, diversified estate.
“Since reopening, I am genuinely pleased with the strength of our trading performance.
“Whilst the sector outlook is uncertain, and we are mindful of recent restrictions across the UK, we are confident that the actions we have taken provide us with strong foundations to emerge as one of the long-term winners.
In terms of its future, the group says it will remain cautious outlook for the short term given ongoing impact of pandemic and Government‐imposed restrictions but that its restructured business was ‘well positioned to adapt to the challenges being faced and deliver long term shareholder value’.
"The entire casual dining sector faces an immense challenge and some brands simply wont survive into the new year. Although these insolvencies will mean less competition for Restaurant Group's brands they probably wont mean more customers, and that's the problem," says Harry Barnick, senior analyst at Third Bridge, commenting on the results.
"Delivery has sky-rocketed during lockdown and whilst government schemes like 'Eat Out to Help Out' encouraged diners back to restaurants, Wagamama is likely to focus its attention in this space. A growth in the number of delivery kitchens is expected in areas where Wagamama lacks a physical presence. This has margin implications as delivery trades at a lower profitability level than dine-in."
"Historically, Wagamama has outperformed the casual dining sector thanks to its commitment to fresh food, innovation, and perceived health-halo. Wagamama's strengths look set to be be amplified post-Covid and it may well be the saviour of Restaurant Group."
