The Restaurant Group’s annual profits declined as it booked higher costs relating to store closures and the recent £559 million acquisition of Wagamama.
The owner of Garfunkel’s and Chiquito made a pre-tax profit of £13.9 million in 2018 compared with £28.2 million the year earlier.
The firm booked a £39.2 million charge related to the closure of 28 sites, onerous leases on stores, the acquisitions of Wagamama, Food and Fuel and Ribble Valley Inns as well as an impairment associated with certain restaurant assets.
The Wagamama acquisition was formally completed in December, bringing almost 200 branches into the group’s portfolio.
However, when the Wagamama deal was first announced last October, it raised eyebrows as it came at an increasingly challenging time for the eating-out sector, which is suffering from a slowdown in consumer spending.
Meanwhile, revenue rose 1% to £686 million, but like-for-like sales fell 2%, which the company said were affected by adverse weather and the 2018 football World Cup, although it noted that this was an improvement on 2017.
Shares nonetheless rose 11% in early trade to 140.7p after the company said that Wagamama continues to “outperform the sector”.
Russ Mould, investment director at AJ Bell, said the group’s future “lies heavily on the success of Wagamama”, highlighting that recent trading has been good at the restaurant chain with numerous initiatives under way to drive sales, including a “grab and go” takeaway offering.
He added that the company’s stock has been “brutally punished” for its problems over the past three years, as reflected by the share price falling from 500p at the start of 2016 to a low of 123p last week.
But that Friday’s market reaction suggests the firm has provided “enough evidence that it has a fighting chance of bouncing back”.
The company said it is currently trading in line with expectations, with like-for-like sales up 2.8% for the 10 weeks to March 10.
Outgoing chief executive Andy McCue said: “We have made significant progress in 2018, acquiring a differentiated, high-growth business in Wagamama, opening a record number of new sites in both our pubs and concessions businesses, and driving improved like-for-like sales momentum in the leisure business throughout 2018.
“We now have a business that is orientated strongly towards growth and we continue to focus on delivering shareholder value.”
Mr McCue announced in February that he will leave the company due to “extenuating personal circumstances” and will remain in his role until a successor is recruited.