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Fulham Shore considers more openings

The owner of Franco Manca and The Real Greek hasn't been deterred by increasing competition in the casual dining sector
December 12, 2018

Fulham Shore (FUL) chairman David Page is so encouraged by the group’s progress during the first half, he’s considering increasing the rate of new site openings. The group reported a 35 per cent increase in operating profit to £1.63m during the first six months of its financial year, having opened two Franco Manca pizza restaurants – and another post period end – bringing the total to 43 locations. That said, Allenby Capital estimates like-for-like revenues for Franco Manca only grew by 0.5 per cent as some new openings cannibalised existing sales.

IC TIP: Sell at 11p

Even so, such optimism in the casual dining sector is highly unusal, as a punitive cost environment has been exacerbated by intense competition. The Franco Manca and The Real Greek owner hasn't been immune to this, either, particularly when it comes to rising labour costs and climbing business rates. As such, underlying cash profit margins contracted from 16.3 per cent this time last year to 13.8 per cent.

Allenby retains "a level of conservatism" given the difficulties facing the industry, and forecast a full-year like-for-like sales contraction of between 2 and 3 per cent for Fulham Shore. Analysts also expect pre-tax profits of £546,000 during the year to March 2019, giving a loss per share of 0.05p, compared with a £110,000 pre-tax loss and 0.1p loss per share in FY2018.

FULHAM SHORE (FUL)   
ORD PRICE:11pMARKET VALUE:£61.4m
TOUCH:10.5-11p12-MONTH HIGH:15pLOW: 8.5p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:6.8p*NET DEBT:23%
Half-year to 23 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201727.51.100.1nil
201833.01.480.2nil
% change+20+35+100-
Ex-div:na   
Payment:na   
*Includes intangible assets of £26.2m, or 4.6p a share