The Restaurant Group Expects Higher Full-Year EBITDA

The Restaurant Group (LON: RTN) expects its adjusted EBITDA for 2021 to be higher and its net debt to be lower than previously announced. 

The Restaurant Group is a British chain of restaurants and pubs.

EBITDA At Top End of Guidance 

In TRG’s latest market update on November 16, 2021, the group indicated that it expected adjusted EBITDA for FY21 to be between £73 million and £79 million, and net debt at the end of FY21 lower than £190 million.   

Due to good cost control and continued strong trading against the market, management now expects the group’s adjusted EBITDA for the year 2021 to be at the high end of the range and year-end net debt to be below £180 million. 

The introduction of the U.K. government’s Plan B in early December, which included advice for working from home, calls for greater caution in socializing, and increased testing requirements for international travel has reduced consumer confidence and imposed additional restrictions on the hospitality and travel sector.

To illustrate the impact on customer demand across the industry, the Group has provided a business trend update for the fourth quarter of 2021 by month. 

The trends show that in the restaurant and pub markets, like-for-like sales (measured by Coffer Peach) were 10% to 12% lower in December compared to October and November. 

TRG continued to trade ahead of the market. 

Slow Recovery in Consumer Confidence 

Management said that while it is encouraged by the government’s recent announcement that all Plan B restrictions will be lifted next week, it expects consumer confidence to take longer to recover. 

It is also aware that the recovery of air passenger volumes remains dependent on the timing of changes to U.K. and international restrictions. 

Wall Street’s Take

Last week, Berenberg Bank analyst Owen Shirley kept a Buy rating on RTN with a 125p price target. This implies 23.5% upside potential. 

Overall, RTN scores a Strong Buy analyst consensus rating based on five Buys and one Hold. The average The Restaurant Group price target of 135.40p implies 33.8% upside potential to current levels.  

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