Management at Restaurant Group (RTN) is focused on expanding the pubs and concessions business; so much so that these areas now generate more than half of group cash profits. That proportion is likely to increase by FY2019, since the £14.9m acquisition of Food & Fuel, a pub group with 11 locations in London, was announced on results day. These locations reported £1.9m in cash profits during the last financial year, but chief executive Andy McCue reckons that £2.3m in cash profits from the newly acquired assets is feasible after cost synergies and projected growth.
So far this calendar year the company has won 17 new concession sites, mainly in UK travel hubs, with five more expected by year end. Total sales in this division are expected to grow by 10 per cent over the next year. Restaurant group has a good track record on concessions so far, with contract extensions on 85 per cent of sites, at three-quarters of the original term.
In the leisure business, Mr McCue said previous price cuts on Frankie & Benny’s had continued to perform well, and feels that the business was “well placed” with no need for further price changes. Cost pressures across the business, along with the negative impact of bad weather and the World Cup, meant that the operating margin fell from 7.9 per cent to 6.4 per cent. But Mr McCue said that measures are in train to partially mitigate cost pressures, which should enable the company to return to like-for-like sales growth in the second half.
Analysts at Numis expect pre-tax profits of £52.6m during 2018, giving EPS of 20.7p, compared with £56.7m and 22.3p in 2017.
| RESTAURANT GROUP (RTN) | ||||
| ORD PRICE: | 282p | MARKET VALUE: | £ 0.57bn | |
| TOUCH: | 282-283p | 12-MONTH HIGH: | 363p | LOW: 229p |
| DIVIDEND YIELD: | 6.2% | PE RATIO: | 18 | |
| NET ASSET VALUE: | 94p | NET DEBT: | 12% | |
| Half-year to 1 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 333 | 12.6 | 4.53 | 6.8 |
| 2018 | 326 | 11.7 | 4.01 | 6.8 |
| % change | -2 | -7 | -11 | - |
| Ex-div: | 13 Sep | |||
| Payment: | 11 Oct |
