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Restaurant Group maintains dividends despite falling profits
The Restaurant Group maintained its full year dividend, boosting investor confidence as the Frankie & Benny's and Chiquito chain operator delivered its strategic plan despite falling profits and sales.
Adjusted pre-tax profit of £56.7m for the calendar year was down 26% on the year before as revenues receded 4.4% to £679.3m. Earnings per share contracted 26% to 22.3p. The negative performance reflects the major price cuts management has made to re-position the leisure brands as well as cost pressures being faced by the casual dining industry.
The London-based group, which operates a total of 498 restaurants and gastropubs across Britain, saw like-for-like sales fall back 3% in 2017, which, while still a decline, represented an improvement on the fall seen twelve months earlier.
However, Restaurant Group seemed mostly unfazed by its declining profits, opting to pay its final dividend of 10.60p per share, making a total payout for the year of 17.40p, unchanged on the previous year, saying the move was taken in order to reflect "the board's confidence in delivery of the plan".
Management highlighted propositional enhancements at the Frankie & Benny's brand as the key catalysts driving improving in volume momentum, while its pubs continued to outperform the market.
The group, which scaled back net debt to £21.6m from £28.3m, delivered its groupwide cost reduction programme of £10m ahead of plan throughout the year, enabling it to make significant reinvestments in leisure business.
Andy McCue, chief executive of TRG, said, "As expected, 2017 was a transitional year for the Group, with significant investments made in price and proposition within our Leisure business, which is improving volume at the moment."
"We start 2018 with a significantly more competitive offering in our leisure business, a strengthened pipeline of growth opportunities in both our pubs and concessions businesses, and a leaner, faster and more focused organisation," he added.
Current trading was said to be "broadly in line" with expectations, which normally means slightly below, while the performance of the business in the first half of 2018, McCue said, will reflect the significant price investments made in the middle of last year, suggesting continued pressure on profits. "We expect to benefit from our strategic initiatives gaining further traction as the year progresses."
As of 1215 GMT, shares had collected an extra 8.26% to 257.00p.