Following positive trading updates from leisure companies including The Restaurant Group PLC (LSE:RTN), Hostelworld (LSE:HSW), The Gym Group PLC (LSE:GYM), On the Beach Group (LSE:OTB), Ten Entertainment Group PLC (LSE:TEG) and SSP Group plc (LSE:SSPG), analysts at Liberum believe the industry is fighting back against several headwinds which have shrunk the industry since the pandemic.
Rampant inflation, employment shortages, interest rate hikes and lower consumer spending caused many share prices of listed hospitality companies to fall, but with more and more businesses posting interims which keep forecasts intact, Liberum sees the chance for more upgrades going forward.
Liberum said in a note: “Against the backdrop of improving consumer confidence but wet summer weather, we have seen reassuringly ‘in line’ trading updates, with more expected as we head into the post-summer reporting season.”
Generally, the trend of recent leisure results has been small revenue bumps, reiterated forecasts with margins still lagging behind pre-Covid levels.
“Leisure spending remains resilient, with trackers all showing solid year-on-year growth. The latest positive news on inflation and interest rates adds to the improving sector sentiment, increasing the potential for margin recovery to drive future upgrades,” the UK investment group added.
Wagamama-owner The Restaurant Group, which recently faced a series of calls from activist investors leading to the departure of chair Ken Hanna as well as the spinning off of non-core brands Frankie & Benny’s and Chiquito’s, has been one of the best performers over the last month, lifting more than 18%.
Liberum's leisure price targets Source: Liberum
Liberum added that its own leisure index was currently outperforming the FTSE All-Share by 2% in the last three months and by 16% in the last six months.