The Restaurant Group plc

Strong first half and confidence in delivering medium-term plan

The Restaurant Group plc ("The Group" or "TRG") today provides a trading update for the first 28 weeks of the financial year (year-to-date) covering the period from 2 January to 16 July 2023.

Very encouraging year-to-date Trading performance

Total Like-for like ("LFL") sales (%) vs 2022 comparable split by quarter

VAT benefit boosted LFL sales by approximately 5 to 7% for the restaurant and pub sector in Q1 2022 (13 weeks to 3 April 2022)

Dine-in trends have been particularly strong

Year To Date ("YTD") LFL sales (%) vs 2022 comparable split by category

·    Wagamama has continued to trade strongly. Despite trading being temporarily impacted by the hot weather in late May and June, Wagamama still outperformed the market in Q2. Very encouragingly, dine-in covers are also in year-on-year growth.  Our recent openings are trading ahead of expectations and we have confidence that our expansion plan will continue to deliver highly attractive returns for shareholders.

·    Brunning & Price Pubs ("B&P) has delivered another exceptional trading performance in the first half of the year, with dine-in covers in year-on-year growth.  B&P has continued its long term trend of out-performing the market and the business has recently been recognised as the best Pub Group in the UK by the CGA PubTrack survey, further illustrating the core strength of the B&P proposition. 

·   Despite our Leisure business being the most impacted by the current cost-of-living pressures,  good progress has been made on further improving cash generation within the business, with costs being well-managed through further operational efficiencies and the estate rationalisation plan progressing ahead of expectations.

·    Concessions trading has strengthened even further in recent weeks, benefitting from the rapid recovery of passenger volumes and strong operational delivery leading to exceptionally strong LFL sales vs 2022.  The strength of the Concessions performance is further illustrated by comparing the trading run-rates against pre-Covid levels, with LFL sales versus 2019 up 3% in Q1, up 10% in Q2 and up 15% in Q3.

Property update

Leisure estate rationalisation programme: As part of the previously announced Leisure estate rationalisation plan, the Group will have closed approximately 35 sites by the end of this financial year.  The 35 sites include 8 freehold sites.

The TRG Property team have made good progress in efficiently managing the disposal programme and protecting net cash.  We have seen encouraging levels of interest across both the freehold and leasehold disposal sites across a variety of alternative potential tenants and expect to have exited or sold the majority of the 35 sites by the end of FY24.  The Freehold sales are expected to generate approximately £8m to £10m of cash proceeds.

New sites:  In the current financial year we have opened four new Wagamama sites and one Pub restaurant.

The new Wagamama sites have enjoyed an extremely strong start and are trading ahead of expectations.  We remain confident in our ability to deliver 7 to 8 new Wagamama openings annually from FY24 onwards, capitalising on the favourable property market dynamics.

Our latest new pub, The Mytton and Mermaid in Shrewsbury, has been particularly successful and has delivered our highest ever level of sales for a new opening.

Update on Strategy

At TRG's full-year results presentation in March, we set out the medium-term strategy for the Group.  The plan targets significant EBITDA¹ margin accretion over the next three years² as well as deleveraging to reduce net debt / EBITDA¹ to below 1.5x by the end of FY25. 

Since then, the Group has made an excellent start in execution of the plan consisting of:

·    Strong LFL trading performance in the first half of the year

·    Incremental cost savings of £5m p.a.

·    Acceleration of both new Wagamama openings and the rationalisation of the Leisure estate

Whilst we are pleased with the progress being made in delivering these medium-term plans, the Board   has continued to review its wider strategic options with the assistance of independent advisors in order to examine the potential to accelerate TRG's deleveraging profile and further enhance EBITDA¹ margin accretion.  In evaluating strategic options including potential disposals, the Board remains mindful that any transaction must be at attractive levels for shareholders and must reflect both the strength of current trading and the long-term prospects of our businesses.

Outlook

Given the very encouraging trading performance in the first 28 weeks of the financial year, TRG is confident in delivering management's expectations for FY23.

¹ Pre IFRS 16 Adjustment and exceptional charges

² FY25 year-end run-rate

Enquiries:

Notes:

1.   The Restaurant Group plc operates approximately 400 restaurants and pub restaurants throughout the UK as at 18 July 2023. Its principal trading brands are Wagamama, Brunning & Price and Frankie & Benny's.  It also operates a multi-brand Concessions business which trades principally in UK airports.  In addition, the Wagamama business has a 20% stake in a JV operating seven Wagamama restaurants in the US and over 50 franchise restaurants operating across a number of territories.

2.    Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" statements and reflect the Group's current expectations concerning future events.  Actual results may differ materially from current expectations or historical results.