The Restaurant Group saw like-for-like sales slide again in the 20 weeks to 21 May.
This morning the group released an update on the period, which chairman Debbie Hewitt will present to its AGM today.
It showed like-for-like sales down 1.8% for the period and total sales falling 1.5%.
The group said it had seen a strong performance from the Concessions business - benefitting from strong growth in passenger numbers - and from the pubs estate - helped by favourable weather
It said the turnaround continued in the leisure business, which benefited from cinema admissions having a good start to the year.
However, it said that for the remainder of the year, growth in passenger numbers and cinema admissions is anticipated to moderate
Hewitt said the implementation of turnaround strategy was “progressing well as we make the required investments in price, marketing and our offer”.
On the outlook, Hewitt said: “2017 is a transitional year. We continue to address the competitiveness of our Leisure businesses and are focused on achieving a sustainable volume-led turnaround. Where opportunities to accelerate our progress present themselves, we will invest appropriately.
“Accordingly, we continue to expect to deliver a PBT outcome for the full year in-line with current market expectations.”
TRG expects to offer a final dividend for FY2016 of 10.6p, making the full year a total of 17.4p per share.
Leading analysts welcomed the update, with Simon French of Cenkos describing it as “better than expected”, with predictions from some analysts that like-for-like could be down as much as 5%.
He said: “This better than expected performance will be well received by the market as it provides the first tangible signs of recovery under relatively new CEO Andy McCue. Whilst the desire to hold forecasts is understandable at this stage of the year, we think the risk is clearly on the upside. This is the first ‘positive’ update from The Restaurant Group in over two years and the valuation of 2017E adj EV/EBITDAR of 7.3x is undemanding particularly given the 5.5% yield support. We strongly reiterate our Buy recommendation.”
Meanwhile, Douglas Jack at Peel Hunt pointed out that the vast majority of this trading period was before the 7% LFL (9.5% average) drop in Frankie & Benny’s menu price
He said: “In our view, the new Frankie & Benny’s menu is sufficiently attractive to encourage a recovery in volumes, with big changes to follow at Chiquito’s and Coast to Coast. In our view, it would have been unrealistic to expect RTN’s prices to fall as low as parts of the pub restaurant sector, but their product range, service, location and customer occasion are different.”
He added: “We believe there has to be two phases to RTN’s recovery: first volumes; and then margins, after the full impact of price reductions and cost increases has been reflected in the accounts. This point (March-May 2018) will coincide with the anniversary of Frankie & Benny’s price reductions, and represents the timeframe when LFL sales could return to growth.”