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Morning Briefing for pub, restaurant and food wervice operators

Wed 9th Mar 2016 - Restaurant Group reports sales up 7.9% as it passes 500 sites for first time, LfLs down 1.5% in first ten weeks
Restaurant Group reports sales up 7.9% as it passes 500 sites for first time, LfLs down 1.5% in first ten weeks: The Restaurant Group has reported sales rose 7.9% to £685m in the year to 27 December 2015. Ebitda was up 9.4% to £128.0m and profit before tax increased 11.2% to £86.8m. A total of 44 sites opened in the year, taking the company past 500 venues for the first time, and the company said it expects to open a similar number to last year in 2016. It added new sites were generating consistently strong returns on investment and the business was well positioned for further profitable growth in 2016 and beyond. The company said all its brands have substantial roll-out scalability in the UK and is confident it can expand the group to 850-plus restaurants, all financed out of internally generated cashflow. The company reported after ten weeks of trading in 2016, total sales were up 6% but like-for-like sales were down 1.5% with the current environment meaning “increases are likely to be difficult to generate”. Chief executive Danny Breithaupt said: “The Restaurant Group has made good progress in 2015 and, despite difficult trading conditions, delivered double digit growth in profits and earnings per share. Our strategy of improving the balance of the portfolio is starting to take shape. During the year we opened 44 new restaurants and pubs, taking us past 500 sites for the first time, an important milestone for the business. Our new sites are set to deliver strong returns. In common with most consumer businesses we will again have some challenges to face in 2016. However, I am confident that the underlying strengths of our business will enable us to successfully navigate our way through this more challenging external environment. The Restaurant Group is a people business and these results could not have been achieved without the hard work, dedication and commitment of all our teams across the country. I would like to take this opportunity to thank all of our people for their contribution and I look forward to leading them through what I am sure will be another exciting year for The Restaurant Group in 2016.” Chairman Alan Jackson said: “I am pleased to report that the group has delivered another record set of financial results in 2015, with double-digit growth in profits and earnings per share and strong growth in cash flow generation. This has been achieved despite a more challenging trading backdrop. We made good progress on our opening programme with a total of 44 new restaurants opened during the year, taking us past the 500 mark for the first time. The group has a consistent and successful track record established over a number of years of opening new restaurants. We expect to open a similar number of restaurants during 2016. During the year the group created over 1,500 new jobs and at the end of the year, we employed over 16,000 people. Good people are the lifeblood of our business and the continued growth and success of the group is the product of the hard work, experience and dedication of all our staff. On behalf of the board, I would like to record our thanks and appreciation to all our colleagues across the country. As a result of this record financial performance, the board is recommending a final dividend of 10.6 pence per share to give a total for the year of 17.4 pence per share, an increase of 13% on the prior year. The dividend is covered 2x by earnings per share in line with our stated dividend policy. Subject to shareholder approval at the Annual General Meeting (AGM) to be held on 12 May 2016, the final dividend will be paid on 6 July 2016 and the shares will be marked ex-dividend on 16 June 2016. This is my last chairman’s statement. As announced earlier this year I will be retiring at the end of the AGM on 12 May 2016. This will be the end of a 15-year journey for me during which time we have transformed the company from being loss making in 2001 to the successful business of today. It has been a terrific journey but now is the time to hand over to my successor Debbie Hewitt. As I said earlier this year when Debbie’s appointment was announced, I am delighted that she has agreed to succeed me. Debbie has strong business credentials and I know she will add insight and guidance to the board as she leads the Company through the next stages of growth. The Restaurant Group has a great team of people led by Danny Breithaupt and a strong roster of market-leading brands and offerings, backed by the financial resources to maximise the opportunities over the coming years. I am therefore confident that The Restaurant Group will continue to make strong and profitable progress.”
Frankie & Benny’s (261 units): Frankie & Benny’s delivered growth in turnover, margins and profits. The new menu launched during the year included some rationalisation to reduce the total number of items, while at the same time introducing a greater element of freshness. Breakfast continues to be a growing and successful part of the business and further improvements to this are being introduced during 2016. A new app for the brand was launched towards the end of the year which is proving popular with our guests and enables us to collect much more granular information about our customers, their spending patterns and preferences. Of all our brands, Frankie & Benny’s is the most exposed to some of the underlying challenges around retail footfall and the increased number of competitor openings and we have certainly seen the impact of this, particularly in the more retail focused locations. During the year we opened 14 new restaurants in this brand and we expect to open a similar number in 2016. The breadth of appeal of Frankie & Benny’s, particularly to families, combined with high levels of customer recognition both contribute to its enduring success. This is evidenced by strong performances from our new openings and continuing high levels of individual site profitability.
Chiquito (86 units): Chiquito had another good year with strong growth in turnover, margins and profits. The major changes introduced into this brand some years ago continue to generate significant improvements in trading performance. During the year we opened nine Chiquito restaurants, which are trading extremely well. We expect to open a similar number during 2016 and we see this as a key growth engine for the Group over the next few years. The core target market for this brand is young adults, a distinct market segment to both Frankie & Benny’s and Coast to Coast.
Coast to Coast (21 units): Coast to Coast also had a good year with growth in turnover and profits. Having opened our first Coast to Coast in Brighton at the end of 2011, this brand has carved out a distinctive market position for itself as a brand very much focused on the adult market looking for a more premium offering in a more sophisticated environment. During the year we opened eight Coast to Coast restaurants and we are very pleased with how these are performing. Stand out new openings for this brand during the year were at the Trafford Centre and the Aberdeen Union Square development. We expect to open between five and seven sites in 2016. As with Chiquito, this brand will become an increasingly important driver of growth for the Group going forward.
Pub restaurants (54 units): Our pub restaurant business performed extremely well in 2015. There is a growing market for this traditional, quality, food-led pub offering. Our pubs have broad appeal and in particular attract the affluent grey market. During the year we opened three new Pub restaurants. We are broadening the geography of this business, which has historically been focused on the North West and South East. In particular we are now opening sites in the Midlands. The pipeline for 2016 is well developed and we expect to open between five and seven new pubs during the year.
Concessions (61 units): Concessions had a year of strong growth in turnover and profit. During the year we opened seven new units, notable among which were three prominent units at the redeveloped Stansted Airport, including the first Coast to Coast in an airport environment. During 2016 we expect to open two to four new concession outlets. We have a market-leading position in this sector, which continues to have strong underlying fundamentals in terms of passenger growth and dwell times. 

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