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Wagamama-owner TRG shares soar as earnings expectations boosted

Restaurant Group shares soar as airports, pubs and leisure performance boosts earnings expectations at Wagamama owner

  • Shares jump 18% as earnings forecast boosted from £61.5m to up to £79m
  • Trading has been better than expected since the firm’s September update
  • Net debt is also now expected to fall as a result of ‘robust trading performance’

The Restaurant Group shares are trading 18 per cent higher after the Wagamama owner boosted earnings expectations on the back of better-than-expected performance in the last two months.

Investors were enthusiastic as Restaurant Group upgraded its earnings expectations for the year to 2 January 20202 from previous guidance of £61.5million to a range of between £73million to £79million.

TRG told investors it had outperformed the market across its Wagamama, pubs and leisure businesses, while its airport locations were also boosted by a ‘minor improvement’ in passenger volumes.

TRG noted better-than-expected performance in the last two months since its interim results

In addition, TRG’s net debt is now expected to be less than £190million as a result of ‘robust trading performance’.

The group, which has approximately 400 restaurants and pubs throughout the UK, cautioned that the new guidance is subject to ‘no unexpected Covid related disruptions being announced before the end of the financial year’, having been badly impacted by lockdown restrictions since March last year.

Its expectations for 2022 remain unchanged.

In September, TRG hailed ‘good progress’ over the past half-year and forecast an increase in 2021 profit.

TRG, which also also owns Frankie & Benny’s, Chiquito, Coast to Coast and Firejacks, reported profits of £11.2million for the 27 weeks ended 4 July, compared with a loss of £18.3 million pounds last year.

However, it highlighted challenges around labour shortages and supply chain constraints, which saw its shares fall by around 3 per cent.

TRG shares were up 18.2 per cent by late morning on Tuesday to 93.7p.

The shares remain down 59 per cent since the start of 2021, but analysts at Peel Hunt insist TRG remains ‘undervalued’ and maintain a target price of 110p.

Peel Hunt said: ‘Post-Covid, the company will have to deal with rapidly rising labour costs and act to prevent rising delivery volumes from undermining the in-store experience.

‘However, we believe it has the scale and quality to manage this whilst market supply continues to fall.’