Buying Wagamama has had a transformational effect on the fortunes of The Restaurant Group, said the business as it released its results for the 52 weeks to 29 December 2019.
It said total sales were up 56.4% from £686m to £1,073.1m, while adjusted pre-tax profits were £74.5m. It recorded an exceptional pre-tax charge of £111.8m due to “impairment” in its leisure arm, primarily made up of Frankie and Benny’s and Chiquito, leaving a statutory loss before tax of £37.3m.
And it said current trading was “encouraging” with like-for-like sales up 5.3% for the first six weeks of 2020.
“Having joined the business in August last year I am particularly pleased with the continued and significant progress made following the acquisition of Wagamama and the integration of the business into the Group, which has transformed the Group’s growth trajectory and momentum,” said CEO Andy Hornby.
“Our three growth businesses of Wagamama, Concessions and Pubs are all out-performing their respective markets and have clear potential for further growth. I am also acutely aware of the challenges facing our Leisure business and the wider casual dining sector.
“It is therefore clear that our strategic priorities need to evolve in order to maximise shareholder value in the medium term. Following extensive review we have defined three clear strategic priorities for the next two years, to grow our Wagamama, Concessions and Pubs businesses, to rationalise our Leisure business and to accelerate our deleveraging profile
“In order to support these strategic priorities, the Board has taken the decision to temporarily suspend the dividend. This will allow us to continue investing in our three high growth businesses, whilst facilitating an acceleration of our Leisure estate rationalisation and reducing our net debt.”
Focusing on Wagamama, TRG said UK growth remained “significantly ahead of the wider market, with like-for-like sales up 8.5% in the period. Adjusted EBITDA (on a rolling 12 months basis) in 2019 grew to £60.7m from £44.6m in 2018.”
It added that delivery sales rose to 12% of total sales in 2019, up from 10% in 2018 due to the “implementation of operational and technology improvements such as bespoke delivery stations, Deliveroo tablets and a switch to fully recyclable packaging.”
It also completed five refurbs, adding 200 covers with an expected ROI of 50%, with five more planned for 2020.
And it said it was making “excellent progress” on its cost synergy programme, “achieving £8m in 2019 and expect to achieve £15m in 2020, effectively delivering the cost synergy plan in only two years. In line with the acquisition plan, we prioritised the renegotiation of supply contracts for food, drinks and consumables, and have implemented a number of other initiatives across the Group.”
It also completed eight conversions in 2019, and said the converted sites were “generating an average weekly sales uplift of 120%, with an expected return on invested capital of over 40%. We are planning to convert five to six more sites in 2020 and believe there is scope for further conversions in 2021.”
It opened ten new sites in 2019 and plans to open another ten in 2020, including five to six conversions from existing sites. It also said it would spend the next six months evaluating the Mamago spin-off before deciding whether to roll out more.
TRG also said it had launched a JV with Conversion Venture Capital to grow the Wagamama brand in the US and plans to open between 30 and 40 restaurants over the next five or six years.
In terms of its concessions business, TRG said like-for-like sales rose by 4.1% and it opened four new sites in 2019.
And it said its 72-strong pub business, including Brunning & Price, had been “continuously outperforming the market” with like-for-like sales up 4%, with particularly strong trading over the Christmas period with like-for-like sales up 8%.
It also updated plans to rationalise its leisure arm, due to “chronic overcapacity in the sector and significant cost pressures particularly due to labour costs”.
It said it had identified 118 sites in “structurally unattractive locations and we anticipate that we will exit at least 50% of leases when we are able to exercise a break clause or lease expiry”.
It closed 18 Leisure sites in 2019, eight of which were converted to Wagamama, leaving 350 sites as at 29th December 2019.
It plans to cut that down to between 260 and 275 sites by end of 2021 through a combination of exercising break clauses, lease expiries, selective conversions and disposals.
Wagamama “has transformed” The Restaurant Group says Hornby
Buying Wagamama has had a transformational effect on the fortunes of The Restaurant Group, said the business as it released its results for the 52 weeks to 29 December 2019. It said total sales were up 56.4% from £686m to £1,073.1m, while adjusted pre-tax profits were £74.5m. It recorded an exceptional pre-tax charge of £111.8m due to “impairment” in its leisure arm, primarily made up of Frankie and Benny’s and Chiquito, leaving a statutory loss before tax of £37.3m.