The owner of restaurant chains including Wagamama and Frankie & Benny’s said it expected full-year profits to hit the top end of its forecast despite a dramatic slowdown in sales last month because of the impact of the spread of the Omicron variant.
The Restaurant Group (TRG), which owns 650 restaurants and pubs and operates 70 concessions mostly in airports, expects adjusted profits for 2021 to be at the top end of its £73m to £79m guidance to investors. It welcomed the government’s decision to lift plan B restrictions but warned that consumer confidence might take longer to recover.
The company said its performance had been achieved through good cost control and strong trading, with sales at its Wagamama chain up 11% in October and 8% in November compared with pre-pandemic levels.
However, TRG, which owns brands including Garfunkel’s, the Tex-Mex chain Chiquito, Brunning & Price and Coast to Coast, said that sales slowed to only 1% growth in December as Omicron hit.
TRG’s concessions business reported revenue declines of 34%, 24% and 34% in the final three months of last year compared with 2019.
“The introduction of the UK government’s plan B in early December, which included advice to work from home, calls for further caution in socialising and increased testing requirements for international travel, reduced consumer confidence and put additional restrictions on the hospitality sector,” the company said. “[However], TRG continued to trade ahead of the market demonstrating our ability to outperform in all market conditions.”
The company expects a sustained recovery to be some way off, though, as consumers continue to go out less and international travel lags pre-pandemic levels.
“While we are encouraged with the recent government announcement that all plan B restrictions will be lifted next week, we expect consumer confidence may take longer to recover,” it said. “We are also mindful that the recovery in air passenger volumes remains dependent on the timing of changes to both UK and international restrictions.”
TRG also expects to better its net debt forecast of about £190m and end the year at less than £180m.
“Management reacted quickly to reduce food and staff costs, which allowed it to protect margins through December,” said James Ainley, an analyst at Citi. “In addition, [capital expenditure] projects were shelved or delayed, which has also supported a better than expected net debt performance.”
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