After a challenging 2016, The Restaurant Group (TRG) said it is ready to pursue a new turnaround plan to grow its business.
The Frankie & Benny's owner said total like-for-like sales fell 3.9 per cent while revenue increased 3.7 per cent to £710.7m, in line with expectations for the year to 1 January.
Adjusted pre-tax profit fell 11.2 per cent to £77.1m. The group had an exceptional charge of £116.7m, primarily reflecting site closures, asset value impairments and provision for onerous leases.
The group maintained its full-year dividend at 17.4p a share.
The FTSE 250 firm's share price rose 6.17 per cent at 347.5p in morning trading.
Why it's interesting
Chair Debbie Hewitt said 2016 was a challenging year with a "consistently disappointing trading performance exposing fundamental issues across our three main leisure brands".
From a strategy review, the group found menu changes to its businesses hadn't been sufficiently tested, it had added an unsustainable premium to pricing and the business operating model had become inefficient.
TRG has overhauled its board and executive leadership team over the last year. Andy McCue, former boss of Paddy Power, was appointed as chief exec in September, and Barry Nightingale joined as chief financial officer in June.
Things aren't expected to get better right away. In 2017, TRG will face cost pressures like increases to the national wage, the apprenticeship levy, revalued business rates and the devalued pound.
"We expect the trading performance of the business in the first half of 2017 to remain difficult but anticipate momentum improving towards the end of this transitional year as our initiatives start to take effect," Hewitt said.
What the Restaurant Group said
Andy McCue, chief executive, said:
Having completed the strategic reviews of our brands, we are now pursuing a new and focused plan to turnaround and grow the business. TRG has significant scale advantages, a diverse portfolio of brands with strong brand awareness and is highly cash generative.
However, there is much to change in our leisure businesses to provide customers with better value and an improved experience while, at the same time, ensuring we continue to grow our pubs and concessions businesses. It will take time to effect the scale of change required and for customers to respond but I’m proud of how our colleagues are rising to the challenge.
What analysts said
Greg Johnson, analyst at Shore Capital, said:
Overall, the update and strategy review are broadly consistent with our expectations, and we are relieved on the dividend and that current trading is said to be in line with expectations. We currently forecast 2017 financial full-year profit before tax of £57m which we believe has captured most of the commentary around trading and costs (albeit scope for further marketing investment).
We have a "buy" rating noting the current valuation fails to reflect the value in its pubs and concessions businesses along with favourable cash flow.