Restaurant Group maintains dividend ahead of transitional year

Frankie & Benny’s and Garfunkel's owner Restaurant Group said 2016 was challenging following poor trading across its leisure brands with like-for-like sales down.

Revenue was up 3.7% to £710.7m but like-for-like sales were down 3.9% compared to to the previous year.

Adjusted pre-tax profit fell 11.2% last year to £77.1m, as expected by analysts, and adjusted earnings per share was down 11.2% to 30p, while the statutory loss before tax was £39.5m and the statutory loss per share was 20.1p.

Earnings before interest, tax, depreciation and amortisation (EBITDA) dropped 5.5% to £121m.

The FTSE 250 company said that in 2016 there was a “consistently disappointing trading performance” which exposed “fundamental issues” across its main leisure brands, which includes Frankie & Benny’s, Chiquito and Coast to Coast, and have taken steps for a review for all of its leisure brands, although it did benefit from a strong performance from the pubs and concessions division.

Restaurant Group incurred an exceptional charge of £116.7m due to site closures, asset value impairments and provision for onerous leases and despite headwinds it maintained its full year dividend at 17.4p per share.

The company said that it is currently trading is in line with expectations with 2017 being a transitional year for the business, given the significant change underway and substantial investment in price and marketing.

It anticipates momentum improving towards the end of the year as initiatives start to take effect and as it opens between 16 to 20 units with associated capital expenditure of between £16m-£20m, as well as refurbishment and maintenance capital expenditure of between £20m-£25m.

Chief executive Andy McCue said: "Having completed the strategic reviews of our brands, we are now pursuing a new and focused plan to turnaround and grow the business.

“However, there is much to change in our leisure businesses to provide customers with better value and an improved experience while, at the same time, ensuring we continue to grow our pubs and concessions businesses. It will take time to effect the scale of change required and for customers to respond."

George Salmon, equity analyst at Hargreaves Lansdown, said: “With profit warnings an unwelcome feature of 2016, full year results were never going to be pretty. However, while like-for-like sales and group profits are both down, it seems ex-Paddy Power CEO Andy McCue has got investors onside. His plans include £10m in cost savings and work to breathe new life into the group’s ailing brands.

Shares in Restaurant Group were up 8% to 353.49p at 1307 GMT.