Goodbody on TRG

Restaurant Group will report a Q4 trading update in late January. At this point last year RTN gave full year LFL’s for the group and total sales. We forecast FY LFL sales growth of -0.8% in the Legacy business with LFL sales growth of 8.8% for Wagamama UK (implying a group FY LFL of just above 2%). As a reminder group LFL growth was +3.7% in the first 34 weeks.

It is unlikely that the group will split out the Wagamama performance (Q4 is the only missing piece). If it does, LFL growth in the year to the end of Sept was 8.9% which is broadly inline with our FY expectations. Waga’s growth slowed slightly to +6.3% in the quarter to the end of September (against a difficult comp) so any evidence of a good performance in Q4 would be well received.

View – We retain our BUY recommendation on RTN with 165p PT. Our analysis indicates that cash flow remains healthy in RTN despite quite negative assumptions around legacy leisure brands like for likes. We believe all the growth elements of the business (c.75% of profits) are attractive and an end to the legacy brands related downgrades would be well received.