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Interim Results

Restaurant Group profit slumps as sales fall

31 August 2017 07:38

Restaurant Group, the owner of the Frankie & Benny's and Chiquito casual dining brands, saw its adjusting operating profit (EBIT) fall by 29.5% to £26.5 million in the first half as like-for-like sales dropped by 2.2%.

It said the sales decline reflected the investments it made in price and proposition across the leisure brands, partially offset by a good performance from the pubs and concessions businesses.

The adjusted operating margin fell by 2.6 percentage points to 7.9%.

Adjusted profit before tax was £25.5 million, down from £36.6 million the year before.

It warned that continuing headwinds on labour costs, food and drink input costs, utilities and occupancy costs are anticipated to continue through the second half of the year and into next year at a similar level.

Free cash flow was £35.1m, down from £35.8m a year ago, reflecting lower operating profit offset by lower maintenance capital expenditure and tax payments, the latter as a result of the statutory loss for the year ended 2016.

The company opened 12 new restaurants and pubs in the first half and expects to open 18 to 20 sites for 2017 as a whole versus 24 sites in 2016.

"Customers are enjoying better value and improved quality of offer in our leisure brands. As a result, we are beginning to see some early signs of volume improvement," the company said.

"As we have highlighted before, 2017 is a transitional year. As we make the necessary investments in price to correct for our previously weak value position, and in quality to ensure consistency of our food offer, like-for-like sales and margins will come under inevitable pressure in the short term.

"We are on track to finish the year with a more competitive offering, a strengthened team, and a more efficient business, positioning us well for 2018 and beyond."

The board proposed to maintain the interim dividend of 6.8 pence per share.

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Related Company: RTN

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