The beleaguered casual dining operator, which has faced months of pressure from activist investors, saw its total revenue rise 10% to £467.4m in the 26 weeks to 2 July 2023, up from £423.4m in the same period last year.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) rose 15% to £36.3m on a pre-IFRS 16 basis versus the VAT adjusted basis of £31.4m in its half year results from 2022.
Profit before tax stands at £7.2m on a pre-IFRS 16 basis, well ahead of the VAT adjusted comparable loss of £0.1m in H1 2022.
TRG says the trading performance supports a ‘moderate increase’ in management’s adjusted EBITDA expectations for the 2023 financial year (FY23)
“We are encouraged by the significant progress made in the first eight months of the year, delivering strong LFL sales growth despite the consumer backdrop,” says Andy Hornby, chief executive at TRG.
“In light of the strong trading we are increasing our expectations for FY23 adjusted EBITDA.”
Sales growth across TRG’s c.380 strong portfolio was helped in part by a rise in year-to-date LFL sales across its Wagamama (+7%) and pubs (+8%) divisions, the latter of which encompasses the Brunning and Price chain.
However, the major driver came from the ‘strong recovery’ of the group’s airport-based concessions business, which ‘exceeded management’s expectations’ with LFL sales growth of 27% in Q2 and Q3 to date of this year versus 2022.
Year-to-date LFL sales across the division for the 34 weeks are up 29%.
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 13% in Q3 to date.
TRG adds that now expects passenger volumes will recover to 2019 levels in 2024, a year earlier than it originally expected.
‘Excellent progress’ to medium-term plan
Back in March when delivering its full year results for 2022, where it posted a statutory loss before tax of £86.8m, TRG set out a medium-term plan to build back profits over the next three years.
This included a rationalisation of the leisure estate, which encompasses the Frankie & Benny's and Chiquito brands, with the group announcing plans to offload 35 sites from the division over two years.
In this latest update, TRG says it has accelerated the rationalisation of the trading estate, which will now be completed within 12 months and achieved through a combination of exercising break clauses, lease expiries, selective conversions and accelerated disposals.
The leisure business has traded more resiliently in Q3 of the year, with a strong recent cinema slate helping LFL sales to 6% over the quarter to date.
However, the division has traded below the market and achieved a LFL sales decline of 2% in Q2 and Q3 to date, with year-to-date LFL sales falling by 3%.
In addition to the estate rationalisation, TRG is also working to ‘enhance the core offer’ for both Frankie and Benny’s and Chiquito’s. This includes investing in staff training and retention programs, and ‘focusing on offering high-quality food and service at a competitive price in order to attract and retain customers’.
“We continue to improve the customer offer and operational delivery in order to maximise the cashflow from the business,” the business says.
Another element of the strategy where the group says it has made ‘excellent early progress’ is in its margin accretion and deleveraging plans.
As previously reported in its trading update at the start of May, £5m of incremental annualised cost savings have been identified and will in part benefit FY23 EBITDA with the full £5m of cost savings flowing through to FY24.
In addition, other central cost saving initiatives have been identified and will deliver as part of the margin accretion plan in FY24.
Finally, the group says the increase in planned new openings for Wagamama to eight to 10 a year, combined with the accelerated rationalisation of the leisure portfolio, further enhances the profitability of its portfolio.
“We are making excellent progress on our medium-term plan and the board continues to actively explore strategic options to further accelerate margin accretion and deleveraging,” Hornby adds.
