In its latest trading update for the 28 weeks from 2 January to 16 July 2023, Wagamama LFL sales were up 9% in Q1 and 5% in Q2 vs the same periods in 2022, and continued to trade strongly since, with LFL sales up 21% in the two weeks to 16 July (Q3 to date).
TRG says concessions trading has strengthened due to the recovery of passenger volumes and ‘strong operational delivery’, with LFL sales rising by 44% in Q1, and then by 23% and 34% respective in Q2 and Q3 to date.
The group adds that 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, 10% in Q2 and 15% in Q3.
Elsewhere, the group’s Brunning & Price Pubs (B&P) division has ‘continued its long-term trend of out-performing the market’, with dine-in covers in year-on-year growth.
Sales across the division rose by 10% in Q1, 13% in Q2, and 7% in Q3 to date.
By contrast, the group’s long-beleaguered leisure division, which includes the Frankie & Benny, Chiquito and Barburrito brands, with total LFL sales for the year to date down 4% across the division.
TRG notes that the leisure division continues to be the ‘most impacted’ by cost-of-living pressures, but adds that 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’.
The rationalisation plan relates to a wider medium-term strategy announced back in March, where TRG confirmed plans to exit 35 sites from its leisure estate, including eight freehold sites.
Giving an update on the programme, TRG says its property team has ‘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.”
In the current financial year, the group has opened four new Wagamama sites and one pub restaurant.
The group adds that while it is pleased with the progress it has made on its medium-term strategy, which aims to build back profits over the next three years, it 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 EBITDA 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," the group says.
This latest trading updates comes amid an ongoing period of investor pressure for TRG.
Over the past few months, activist investors including Oasis Management, Coltrane and TMR Capital have called for change at the company, and protested over the remuneration of directors.
Earlier this month, Irenic Capital Management, which has a 2.4% stake in TRG, called on the company’s board to replace chairman Ken Hanna.
The New York-based investor has also previously suggested TRG dispose of its ‘non-core assets’ and focus its attention solely on owning and growing the Wagamama brand.
Update: Following the publication of this story, a spokesperson from Irenic Capital Management released a statement in response to TRG's trading update.
It said: “TRG’s improving trading results highlight the substantial gap between the company’s intrinsic value and its significantly lower share price.
“This gap exists because shareholders have lost confidence in the company’s willingness to take the actions – reducing excessive corporate cost, aligning executive pay with shareholder returns, and completing non-core asset sales to focus on Wagamama – necessary to unlock value.
“TRG will not achieve an appropriate valuation until there is new Board leadership and decisive strategic action.”