(Alliance News) - Restaurant Group PLC on Tuesday reported a sharp swing to a half-year loss on a GBP100 million impairment charge for shutting 16 restaurants but was pleased with the strong like-for-like sales growth from its recently acquired Wagamama chain.
The FTSE 250 stock was down 4.2% in early London trading at 147.70 pence.
In the 26 weeks to June 30, the restaurant chain operator recorded a sharp swing to a pretax loss of GBP87.7 million from a GBP12.2 million profit a year before.
Restaurant Group recorded GBP115.7 million in exceptional costs in the first half, compared to just GBP8.4 million a year before. In the first half, the company recognised GBP100 million in impairments in its Leisure unit, after closing 16 sites that were "structurally unattractive".
"In addition, given the well documented over capacity and continued like-for-like sales decline in the casual dining market, and ongoing cost headwinds we have taken a more cautious medium-term outlook when assessing the Leisure business for impairment," Restaurant Group added.
At June 30, Restaurant Group operated 356 Leisure sites, including 240 Frankie & Benny's, 80 Chiquito, 13 Coast-to-Coast, eight Garfunkel's, six Filling Station, five Firejacks and four Joe's Kitchen. The company also operates 135 Wagamama sites, 70 Concessions and 82 Pub restaurants.
Revenue jumped 58% year on year to GBP515.9 million from GBP323.1 million, reflecting the addition of Wagamama. Like-for-like sales were up 4.0%.
Wagamama's like-for-like sales growth "remained significantly" ahead of the wider market, Restaurant Group said, with sales up 11% in the first half.
Restaurant Group declared an interim dividend of 2.1 pence, in line with its policy of paying a dividend covered two times by adjusted profit after tax. A year ago, the company paid an interim dividend of 6.8p.
"We have traded well throughout the first half of the year, delivering like-for-like sales growth, driven by the market outperformance of Wagamama and our Concessions and Pubs businesses," said Non-Executive Chair Debbie Hewitt.
Hewitt continued: "Our Leisure business delivered a marginal decline in like-for-like sales despite benefiting from the weaker comparatives following last year's extreme weather and football World Cup. We continue to focus on improving our brand offerings and delivering the best possible experience to our customers whilst optimising our Leisure business to enhance the overall group performance."
In the first 35 weeks of the financial year, Restaurant Group said its group like-for-like sales are up 3.7%, largely benefiting form "soft" comparators the year before.
"We are mindful of the headwinds in the casual dining sector and the meaningful uncertainties created by the potential of a 'no-deal Brexit' and are planning with this in mind. However, our business is now better diversified and purposefully positioned to benefit from multiple opportunities for growth," added Hewitt.
Like-for-like sales in the most recent six weeks are up marginally, at 0.2%. Restaurant Group attributed the slight rise to growth from Wagamam, Concessions and Pubs but was largely offset by Leisure.
Restaurant Group said its trading remains broadly in line with its own full year expectations.