Fulham Shore has reported revenue up 41% to £27.5m for the six months to September, with headline EBITDA increasing from £3.8m last year to £4.5m.
The Real Greek and Franco Manca operator said it had experienced weak trading across the summer, in line with the wider eating out market and that some of its pre-2017 restaurants, particularly in London suburbs, are still experiencing revenue lower than last year with increased volatility and some expected cannibalisation from its new restaurants nearby. However, it said revenue from these restaurants had seen slight improvements from the poor summer period of July to September.
The group opened three The Real Greek restaurants, seven Franco Manca pizzerias in the UK and one Franco Manca franchise pizzeria in Salina, Italy, during the period.
During H2, the group has so far opened one The Real Greek in Bristol and two Franco Manca in Kings Cross and Bristol, taking it to a 58-strong estate. One or two openings are planned for the rest of the current financial year. The group also confirmed its acquisition of a minority stake in pizza concept Made of Dough, as revealed by MCA.
The group stressed that some planned openings had been delayed by as much as six months as better deals arte sought from landlords, thus protracting lease negotiations. It said it would keep its openings programme under review for the for the rest of the current and following financial years and that new restaurants would be selected to give an average return on capital at the higher end of the scale previously recorded. It plans to achieve this with “more rigorous site selection and increased contributions from landlords thereby lowering our costs, in cash terms, for new sites while at the same time negotiating rents off the lower levels which are increasingly evident”. It added: “We also intend to commit to sites which follow our returns requirement rather than to sign up purely to fill a formulaic pipeline.”
In September 2017, the group announced in its AGM statement and trading update that it had taken the decision to simplify operations and focus on its core brands by selling its business and property at D’Arblay Street, Soho. Discussions have commenced with suitable parties and as such we have, in the results, impaired the asset by some £0.3m and reflected the property as held for sale and a discontinued operation in the interim results.
During the period ended 24 September 2017, the group had lower net cash inflow from operating activities of £3.3m (2016: £6.4m) due primarily to the Group benefiting last year from an increase in trade and other payables. During the same period the Group invested £7.0m (2016: £6.0m), the majority of which was in new restaurant openings. Overall there was a net cash inflow for the period of £0.8m (2016: £1.1m). At the beginning of the current financial year, the Group increased its facilities with HSBC Bank PLC from £6.5m to £15m. Net debt as at 24 September 2017 was £9.7m (2016: £3.0m).
Chairman David Page said: “The slowdown in the UK retail and restaurant sector has been noted by many commentators, and is, we believe, the result principally of rising inflation, poor consumer confidence and a weakening economy. These factors, together with a number of rising costs, means that our pre-2017 estate, while profitable, is contributing less, on an average site by site basis, than last year. We will respond to the economic climate in the next 24 months as we find it, as we believe these factors will continue to affect the restaurant sector in the coming years, limiting our visibility for the second half and beyond.
“Despite this challenging backdrop I am confident that Fulham Shore is well placed; we have an experienced management team, who have navigated through several industry cycles, two strong brands that are renowned for their great quality, ambience and value, and a good site portfolio. We believe that our brands have significant customer appeal which is underpinned by the food quality and value of their offerings. As a result, and despite the challenging backdrop, we are confident that the Group will continue to grow over the coming years.”