Numis analyst Douglas Jack has said The Restaurant Group’s new openings are generating sales 15% above the group average.
Following this morning’s interim results for the six months to 28 June, Numis is holding its forecasts.
Jack said he estimated the 2.5% rise in like-for-like sales was broken down into 2% volume and 0.5% price, ahead of the 1.3% increase for the restaurant component of the Coffer Peach Tracker over the same period. He said while like-for-likes had slowed to being up 2% as at 23 August, comparatives should now ease from 3.5% in September/October to 0% in November/December, when the cinema release schedule will be very strong.
Jack said:“We are holding our forecasts, which assume 3% LFL sales, 15bps EBIT margin growth and 45 new openings. Our LFL sales assumption reflects strong prospects in Q4, which could result in margin outperformance. In our view, faster expansion (our forecasts assume 45 new sites pa through to 2017E) is the most likely source of upgrades, due to strong new openings and management targeting a doubling in the estate’s size over 8-10 years.
“Despite a 12% increase in the interim dividend and c.45 new openings, we expect net debt to be unchanged over the full year. Our Buy recommendation reflects high and increasing returns, strong market positioning (away from high streets where the majority of market expansion is occurring) and a strong site pipeline.”
Meanwhile, Nick Batram of Peel Hunt has said the numbers reflect “another solid delivery from a company that is the model of consistency.
He said: “H2 comps get easier from here and the film slate for Q4 is very strong. Further out, the living wage will see costs rise but Restaurant Group is better placed than most. This, together with the strong cash, means the company remains a core holding in the sector.”
