A leading analyst has said that he expects The Restaurant Group’s first half performance to have been strong and that its second half will be even stronger, where like-for-like sales comps are much easier (2% vs. H1’s 5%).
For the company’s interim results, due on 29 August, Douglas Jack at Numis is forecasting PBT to be up 10% to £33.0m (consensus: £32.9m), based on assumptions of 2.75% LFL sales, 17 new restaurant openings and 5bps EBIT margin growth
He said: “If the company achieves our H1 forecast, there should be increasing visibility on potential upgrades given that we are forecasting similar (11%) growth in H2.
“Our FY forecasts assume LFL sales rise 3.0% (H2: 3.25%). Although the World Cup (ending on 13 July) and mediocre recent film releases are unlikely to have helped early H2, airport passenger volumes rose 2.5% in July and cinema attendance comps have eased. Against the 10-year moving average, 2013 cinema attendance rose 3.5% in Q1, rose 7.7% in Q2, fell 8.6% in Q3 and fell 4.9% in Q4.
“We believe margins rose slightly in Q1. Amid no increase in promotional activity, we expect cost inflation to be similar to our 2.75% LFL sales forecast in H1. Encouragingly, wholesale food cost inflation fell to 0.0% in June vs. +2.1% as at December and pump petrol prices are now down 5.5% year-on-year. Against this improving consumer and margin backdrop, we forecast margins rising 20bps in H2 (vs. 5bps in H1).”
17 new outlets should have opened in H1 vs. eight in H1 2013, resulting in 2014E expansion being less H2-weighted.
Jack said: “We forecast 39 new openings this year (36-43 guidance), comprising 18 Frankie & Benny’s (average cash return: 40-50%), five Coast to Coast (30-35%), five pubs (20-40%), six Chiquito (30-35%) and five Concessions (c.50%). There is a three-to-four year site pipeline.
“We expect to hold our FY forecasts (PBT: £80.5m / consensus: £81.0m), for which we believe LFL sales are the most likely source of possible future upgrades. Although the shares have recovered in recent weeks, our recommendation remains Buy, reflecting easy weather/sport-related comps in 2015E and a very strong cinema release schedule in both 2015E and 2016E.”