Revenue rises but earnings take a tumble at Fulham Shore

Restaurant operator Fulham Shore reported a 26% improvement in first-half revenue on Friday, to £49.9m.

The AIM-traded firm, which operates the Real Greek and Franco Manca chains, said its headline EBITDA slipped slightly to £10.5m from £10.6m, while adjusted headline EBITDA for the six months ended 25 September fell to £6m from £6.9m.

Its board put that down to the absence of the business rates holiday, lower VAT rate, and Covid-19 grants that were in place during the prior-year period.

Operating profit slid to £2.4m from £4.5m, which were said to reflect higher one-off pre-opening costs incurred on more new restaurant openings during the half.

Profit after tax tumbled to £0.3m from £2.4m, while operating cash inflow came in at £12.9m, down from £15.6m.

Net cash at period end, excluding lease liabilities, totalled £2.8m, down from £5.1m year-on-year.

Since the end of the first half, Fulham Shore had extended its revolving credit facility of £17m with HSBC by one year, to now expire in November 2025.

As at 15 December, the company said it had net cash excluding lease liabilities of £0.7m, and undrawn debt facilities of £16.9m out of a total of £17.75m.

“The group traded in line with management expectations during the period despite challenging trading circumstances,” said executive chairman David Page.

“This creditable performance was underpinned by continued strong revenue growth at both Franco Manca and the Real Greek reflecting both businesses' high-quality food and excellent value-for-money propositions.

“During the six month period, the group made solid strategic progress, opening a total of 11 net new restaurants in the UK and since the period end have agreed the terms of a new franchise agreement for Franco Manca in Spain which will see the opening of two restaurants in the country early next year.”

Page said its UK restaurant expansion was now complemented by the launch of its first range of cook-at-home Franco Manca sourdough pizzas into 500 UK supermarkets.

“The customer reception to the range has been encouraging since its launch in November, and we look forward to seeing this develop further over the coming months and years.

“Trading during the first two months of the second half of the financial year was well ahead of the comparable periods in 2019 and 2021, at 46% and 12% respectively.

“Furthermore, the Franco Manca loyalty programme continues to grow in user numbers with 350,000 users and over 50,000 loyalty pizzas enjoyed by our loyal customers.”

Notwithstanding that momentum, David Page said the board was mindful that it was operating against an “unstable” political and economic backdrop, which in turn was impacting consumer confidence and driven up costs, as well as facing “significant challenges” from the ongoing transportation disruption.

“Reflecting on this, our aims over the coming 12 months are to conserve cash for our shareholders, to proceed cautiously, and take advantage of ever-decreasing rents.”

At 1251 GMT, shares in the Fulham Shore were down 11.56% at 9.95p.

Reporting by Josh White for Sharecast.com.