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Fri 9th Jan 2015 - Trading updates: Restaurant Group and SSP
Restaurant Group reports LfLs up 5% over two-week Xmas period: The Restaurant Group has reported like-for-like sales grew 5% over the two week holiday period to 4 January 2015. For the 52 weeks ending 28 December, total turnover was up 9.6% on the prior year, and like-for-like sales increased by 2.8%. Christmas trading was strong with like-for-like sales growth of 5% over the two-week holiday period to 4 January. The company stated: “During 2014 we opened a total of 40 new restaurants, compared to 35 in the previous year. We are very pleased with how these are trading and they are set to deliver strong returns. Since 2009 we have increased the number of openings each year and we expect to do so again in 2015. We have excellent visibility on the composition of this opening programme and anticipate opening between 42 and 50 new restaurants during 2015. The Group’s full year results will be announced at the end of February, and are expected to be within the range of market forecasts. The results will show material growth in both earnings and cash flow versus the prior year, notwithstanding the cost issues noted at the time of the November IMS. The outlook for 2015 and beyond is very positive with growth in disposable consumer incomes, an increasing number of new site openings, and a considerably improved outlook for UK cinema performance. Following 2014, which has been the weakest year for cinema admissions for many years, 2015 and 2016 are expected to show significant growth as a result of much stronger film release schedules. After five years of decline, we are now starting to see increasing real incomes, a trend which is expected to become more strongly established during the course of 2015.These factors are all clearly positive for the future prospects of the Group and underpin our confidence in delivering further profitable progress in 2015 and subsequent years.”

Douglas Jack issues Restaurant Group ‘Buy’ note: Numis Securities leisure analyst Douglas Jack issued a ‘Buy’ note on Restaurant Group shares with a 760p price target after this morning’s trading update. He said: “Like-for-like sales rose 2.8% in 2014E. We are holding our 2014E forecast of 7% PBT growth which we view as a good result given that cinema market attendance fell circa 6%. Investor focus is increasingly on 2015E, for which we believe prospects are strong. Like-for-like sales rose 2% in Q4 (the last seven weeks) against a backdrop of weak cinema attendance (-7.2%) and airport passenger volume growth slowing to 3.3% (from 4.6%) in November. We believe Concessions, Garfunkels and the pub restaurants outperformed in Q4 and over the full year. Like-for-like sales rose 5% over the two weeks to 4 January, of which the second week falls within 2015E. Total sales rose 9.6% in 2014E. We can derive two conclusions from this. (1) We estimate margins must have slipped by c.30bps, due to higher labour costs and higher pre-opening costs at the end of the year. (2) Sales growth from expansion was 6.8%, which is exactly in line with the increase in the average number of units, by our estimates. This implies that the new units are already trading strongly, in line with the group average of £26.5k average weekly sales. 40 new outlets opened during 2014E and a further three have opened during early 2015E. We forecast 45 new restaurants in 2015E (guidance: 42-50), comprising: 17 Frankie & Benny’s, nine Coast to Coast, nine Chiquito, four pub restaurants and six Concessions (including three new Concessions units at Stansted). We are holding our forecasts (2014E PBT: £77.8m; consensus £78.7m). We forecast 13% earnings growth in 2015E, based on just 2.75% like-for-like sales, 20bps margin growth and no change in debt, despite our assumption of 45 restaurant openings. We believe there is upgrade risk to 2015E forecasts (PBT: £87.4m; consensus £88.7m) due to: increasing consumer disposable income; easy cinema, weather and sports-related comps; and a strong cinema film slate. Although only half of The Restaurant Group’s sites are next to cinemas, its upgrade risk in 2015E should be at least as strong as Cineworld’s. For Cineworld, a 1% increase in UK admissions should boost group PBT by 1.5% (held back by subscriptions); for Restaurant Group, a 1% increase in leisure park restaurant footfall should boost PBT by 3%, by our estimates. Our 2015E forecasts for both companies assume minimal growth in cinema admissions.”
 
SSP reports first quarter like-for-likes up 2.7%: SSP Group, the transport hub foodservice specialist, ha reported its first quarter trading, covering the period from 1 October 2014 to 31 December 2014 has been in line with expectations. On a constant currency basis, total Group revenues for the period from 1 October 2014 to 31 December 2014 increased by 2.9%, with like-for-like sales growth of 2.7%, compared with the same period last year. At actual currency rates, given the strengthening of sterling compared with the prior year, total Group revenues decreased by 0.1% year-on-year. The company stated: “Like-for-like sales growth benefited from strong performances in the UK, North America, the Middle East and Asia Pacific, although, as expected, trading has remained challenging in some parts of Continental Europe, notably France and Germany. In terms of new business, we are making good progress in developing our pipeline, and continue to expect a stronger net contract gains performance in the second half of this financial year. The outlook for the Group remains unchanged from that given in our full year 2014 results on 27 November 2014. Whilst a degree of uncertainty continues to exist around passenger numbers in the short-term, the Group remains well positioned to capitalise on the underlying positive trends in its markets.”
 
Chop Chop launches crowd-funding campaign to raise cash for expansion: Chop Chop, the Edinburgh restaurant which appeared on Gordon Ramsay’s F-Word, is planning to open sites around the UK after launching a crowdfunding appeal to finance its expansion. Chop Chop Restaurants, which was voted Britain’s Favourite Chinese Restaurant in both 2010 and 2012, has teamed up with crowd-funding platform Angels Den in order to raise almost £500,000 for a national expansion. Bill Morrow, director of Angels Den, said: “We worked very closely with the team at Chop Chop in their quest to get the funding needed to become a national chain. With an anchor investor on board, they were able to offer their customers the choice of vouchers or shares in one pitch and gained a mix of funding from their own crowd and our experienced angel investors. It’s brilliant to see a Chinese restaurant leading the way on crowdfunding in Scotland and the UK.” Chop Chop, which was set up with two outlets in the Scottish capital in 2006, closed its Leith branch last year as it prepared to expand with a focus on city centre locations. Co-owner Roy King said several small chains of ethnic restaurants and noodle bars had taken off in Britain over the past five years, but he saw a gap in the market for “a recognisable chain of Chinese restaurants”.

Noble Inns opens Bad Egg concept: London gastro-pub operator Noble Inns has opened its Bad Egg concept, its modernised version of a classic diner developed in partnership chef Neil Rankin. Based loosely on contemporary Chicago diners and featuring an eclectic all day menu, the usual Diner menu has been scrapped in favour of dishes that showcase Rankin’s bold flavours. Founder Scott Hunter said: “The concept is one we have been working on for some time. We wanted to create an affordable, fast-paced and fun restaurant that would allow Neil the opportunity to create dishes and combinations that wouldn’t necessarily work in Smokehouse.” Neil Rankin added: “I took my inspiration from the Chicago diner and emerging fusion scene but it is unlike anything that is around here in the UK or in the US. There is some downright dirty food on the menu but also a nod towards balanced eating. I’m not saying it’s healthy but you can eat healthily if you like!” The menu features an eclectic mix of baked egg dishes from around the world, fried ribs, tacos, burger and a range of slaws and salads. Breakfast is served from 8am. The venue is located at City point, Ropemaker Street, London.


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