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Restaurant Group shares slide as sales dip in 2018

The owner of Frankie & Benny’s said LFL sales for the year ended 30 December were down 2%, although this did not include one-week sales figures from recent purchase Wagamama

Wagamama
The firm acquired Wagamama in a controversial £550mln deal that was approved in November

Restaurant Group PLC (LON:RTN) shares dropped in early deals Thursday after its like-for-like (LFL) sales dipped in 2018, however, profit guidance for the full year was reiterated.

The FTSE 250 owner of Frankie & Benny’s, Garfunkel’s, and (as of November) Wagamama said LFL sales for the year ended 30 December were down 2%, although this did not include one-week sales figures from Wagamama.

READ: Restaurant Group gets a boost from Wagamama’s latest numbers

Total sales, which did include numbers from the new acquisition, were up by 1%.

RG acquired Wagamama last year in a controversial £550mln deal that was approved by shareholders in November.

At the time, nearly 40% of those voting had opposed the deal, while analysts voiced concerns over both the additional debt and price paid for the Asian food chain.

READ: The Restaurant Group gets shareholder approval for £550mln Wagamama takeover, although nearly 40% voted against

The company said it had seen LFL sales growth since the World Cup in July with its pubs business trading ahead of the pub restaurant sector while its concessions segment had “traded strongly”.

RG added that it had opened a record number of 21 new pubs in 2018, inclusive of acquisitions, as well as 21 new concessions.

The leisure business had also shown improved LFL sales momentum, the company said, although added that it had been impacted by weaker cinema admissions in December.
RG said it expected adjusted pre-tax profits for the full year to be in line with current market expectations.

Andy McCue, chief executive, said 2018 had been a “pivotal year” for the group and that the newly enlarged business was “now orientated strongly towards growth with a number of exciting opportunities”.

“We are focused on executing on our multi-pronged growth strategy and plans for the site conversions and cost synergies are progressing well."

Commenting on the update, Helal Miah, investment research analyst at The Share Centre, said investors “should be pleased” that the group had delivered LFL sales growth since summer, adding that the acquisition of Wagamama was expected to “diversify its brand portfolio, enhance earnings and deliver material cost synergies”.

“For 2019, there will not be major sporting events to cause disruption to the same extent as last year but we can only have our fingers crossed with regards to the British weather. Hopefully, there will also be a defined outcome on the Brexit situation before too long, allowing consumers to feel more reassured about their future and begin to spend again.”

Shares were down 6.6% at 144.8p.

--Adds analyst comment and share price--

Quick facts: Restaurant Group PLC

Price: 144.1 GBX

LSE:RTN
Market: LSE
Market Cap: £708.25 m
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