Frankie & Benny’s owner The Restaurant Group PLC (LON:RTN) has blamed the World Cup and the Great British weather for a slump in profits last year.
Total sales rose 1.0% in 2018 to £686.0mln (2017: £679.3mln), although that growth came entirely from the 42 new pubs and restaurants it opened in the year.
Like-for-like sales, which strip out the impact of the new openings, dropped 2.0% year-on-year as people stayed at home during the Beast from the East, while during the hot summer months they opted for beer gardens and sports bars as England reached the semi-finals of the World Cup.
The fall in like-for-likes, coupled with soaring staff and purchasing costs and higher business rates and taxes, meant pre-tax profits more than halved to £13.9mln (2017: £28.2mln).
The restaurant made the “transformative” £550mln acquisition of Asian cuisine chain Wagamama – a move that surprised many in the City given the troubles facing UK pubs and restaurants.
Wagamama, which officially joined The Restaurant Group stable in December, enjoyed a strong start to the new year, with like-for-like sales surging 9.1% in the three months to the start of February.
Wagamama off to a flyer
For the group as a whole, like-for-like sales are up 2.8% so far this year compared with the opening few months.
Given that the UK retail and leisure industry was being battered by the Beast from the East this time last year, it is perhaps unsurprising that like-for-like sales have improved. Management itself had expected them to pick up.
But Wagamama is no doubt pulling its weight: like-for-likes are up 9.7% in its financial year-to-date and bosses think there are “clear opportunities” to grow those further in 2019.
“We have made significant progress in 2018, acquiring a differentiated, high growth business in Wagamama, opening a record number of new sites in both our Pubs and Concessions businesses, and driving improved like-for-like sales momentum in the Leisure business throughout 2018,” said chief executive Andy McCue who shocked the Square Mile last month when he said he would be stepping down.
“We now have a business that is orientated strongly towards growth and we continue to focus on delivering shareholder value.”
Results ‘a sideshow’
“2018 results themselves can be regarded as somewhat of a sideshow given the acquisition at the back-end of the year,” wrote Shore Capital in a note to clients.
“The group’s strategy remains on track [and] synergy guidance from Wagamama remains unchanged at £22mln.”
“Like-for-like sales since the turn of the year is +2.8%, which is consistent with our full year expectations of 2-3% growth.
“Within this, we expect Wagamama LFL sales remain in the high single-digit implying flat to modest growth in the legacy TRG business, with Pubs/concessions positive and Leisure remaining modestly negative.”
But analysts at Peel Hunt disagreed, saying that the pick-up in like-for-likes would be “difficult to sustain”.
Shares surged 12.2% to 142p in early deals on Friday.
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