The Restaurant Group (TRG), the owner of restaurants such as Wagamama and Frankie & Benny’s has made a better-than-expected start to 2023, Shore Capital believes.
Revenues were up 8% in the first eight weeks of the year, compared to predictions of 3%-4%.
Management at the hospitality company has also set out plans to improve margins by 2.5% and 3.5% by the end of its 2025 financial year.
“This could drive a material uplift in profitability beyond our current 2025 EBITDA estimates of £100mln and towards £130mln,” said the broker.
To hit the target, TRG requires recovery in its concession operations, strong like-for-like growth, increased cost-savings, and development of new units – Shore Cap added.
Concessions are already up 48% compared to last year, but the investment group added that comparatives then were weak as some Covid regulations were still in place.
Other parts of the London-based company are also performing strongly,
Wagamama sales are up 9% year-to-date while the other pub and restaurant businesses have seen gains of 14%.
Shore Capital still believe the company’s stock is a 'buy' and worth 120p on a three-year view.
TRG shares began trading at 38.7p when markets opened on Friday, with the stock up 17% so far in 2023.