Frankie & Benny’s owner TRG raises profit forecast after sales outperform wider hospitality sector
- TRG also owns the restaurant brands Wagamama, Chiquito’s and Garfunkel’s
- LFL sales at TRG’s pubs and leisure arms in December were lower than in 2019
- Plan B curbs in England have severely damaged the hospitality sector’s trade
Frankie & Benny’s owner The Restaurant Group has upgraded its projected profits despite sales taking a blow from the Omicron variant in December.
The company’s trading update in November saw it hike its adjusted underlying earnings guidance for 2021 to between £73million and £79million, following a market-beating recovery in business as coronavirus restrictions loosened.
Citing continued outperformance during the last three months of the year and strong cost management, the group said it now expects to post profits towards the high end of this forecast.
Boost: Frankie & Benny’s owner The Restaurant Group said it expects adjusted earnings for 2021 to be towards the high end of its £73million to £79million forecast
Like-for-like sales at its Wagamama outlets in October and November were up 11 per cent and 8 per cent, respectively, on pre-pandemic volumes before growth dwindled to just 1 per cent in December.
Sales at TRG’s pubs and leisure outlets fell by 2 per cent and 7 per cent in December respectively, whilst they plunged by more than a third at its concessions business, which tend to be located at UK airports.
But, according to the hospitality industry sales monitor Coffer Peach business tracker, UK restaurant revenues fell 4 per cent in December, whilst pub restaurant sales plunged by over a third and airport passenger numbers dived 47 per cent.
The UK Government’s introduction of ‘Plan B’ restrictions in England last month in response to rising Covid-19 infection rates discouraged more people from eating and drinking out.
Authorities in Scotland and Wales have imposed even harsher guidance on hospitality venues, with the latter mandating groups no larger than six in pubs and two-metre social distancing rules in public places.
As a consequence, already struggling hospitality businesses lost a considerable amount of sales during the critical Christmas and New Year trading periods and many were left on the brink of collapse.
Trade Like-for-like sales at TRG’s Wagamama outlets in October and November were up by 11 per cent and 8 per cent, respectively, on pre-pandemic volumes
Prime Minister Boris Johnson’s announced on Wednesday an end to work-from-home guidance and the lifting of all Plan B rules by the end of next week, which should provide a much-needed lifeline to the industry.
Though TRG, which also owns the Chiquito and Garfunkel’s restaurant brands, has welcomed the move, it said consumer confidence may take longer to revive.
Yet, it remarked: ‘Despite the near-term uncertainties, the Board remains confident in the Group’s prospects given the strength of our brands, substantially reduced net debt and outperformance versus the market.’
Danni Hewson, a financial analyst at AJ Bell, said the company was ‘pretty heroic’ for expecting results at the high end of forecasts ‘given all the challenges currently facing it’.
She praised the group’s ability to keep a lid on costs and said the leisure division’s performance would be ‘particularly pleasing for investors’ considering the difficulties it has historically experienced’.
But she warned: ‘All areas of the business are continuing to outperform the wider market, and the company might well need to keep this up if it is going to continue to thrive against the backdrop of a cost of living crisis. This will put pressure on household budgets and likely reduce appetite for eating out.
‘More positively the lifting of restrictions and the opening up of travel again, which would boost its airport-based concessions, could provide the business with a tailwind.’
The Restaurant Group’s shares were up 1.25 per cent at 101.25p during the late Friday morning, meaning their value has climbed by about a quarter in the past month.