9th Mar 2016 12:30
LONDON (Alliance News) - Restaurant Group PLC shares sank on Wednesday after the company took a bearish view on its outlook for 2016, as like-for-like sales look set to remain depressed and revenue growth will be driven solely by new store openings.
The caution came as the group posted pretax profit, revenue and like-for-like sales growth in 2015, plus a hike to its dividend, as the new store openings proved a boon.
Shares in the company dropped 18% to 444.40 pence, the worst performer in the FTSE 250 and hitting three-year lows.
The restaurant operator, which runs the Frankie & Benny's, Chiquito and Garfunkel's chains, said its pretax profit rose to GBP86.8 million in the 52 weeks to December 27 from GBP84.9 million a year earlier, with revenue rising 7.9% to GBP685.4 million from GBP635.2 million.
The group will pay a final dividend of 10.6 pence per share, taking its total dividend up to 17.4p, a 13% rise year-on-year.
But as the 2015 numbers came in relatively robust, the group warned the tougher trading conditions which emerged in late 2015 had continued into the new year, with little sign of any improvement on the horizon.
Restaurant Group said that while total sales increased 6.0% year-on-year in the first 10 weeks of 2016, like-for-like sales dipped 1.5%, as the more challenging trading conditions seen in the latter part of 2015 continued into this year, with softer consumer demand and weaker overall consumer confidence. Restaurant Group had flagged these concerns in its post-close update in January sending its shares down 15%.
Though early in the year, Restaurant Group said it expects these trends to continue through the year and while total sales will rise due to new openings, like-for-like sales growth will likely be "difficult to generate".
"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," said Chief Executive Danny Breithaupt.
Restaurant Group said trading patterns during 2015 had proved "volatile" at times, with weekends generally strong but midweek trading softer. The first half was strong for the group, but the second half was hit by both lower shopper footfall, driven by the growth of online shopping, and by flooding in the north of England, which also served to sap consumer demand.
Frankie & Benny's, its Italian family dining chain, saw revenue, profit and margins grow in 2015, but is the most exposed of all the company's brands to the challenges around falling retail footfall and an increasing number of competitors opening restaurants.
Restaurant Group sees growth being driven by Chiquito, its Mexican restaurant chain, and Coast to Coast, its premium-skewed, American restaurant and bar brand. Both performed well in 2015 and new openings should drive a further solid performance this year, the company said.
By Sam Unsted; [email protected]; @SamUAtAlliance
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