Franco Manca owner Fulham Shore shares sliced by profit warning

 
Alys Key
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The company said it still has faith in its pricing (Source: lilivanili on Flickr)

Shares in Franco Manca's owner dropped over 20 per cent this afternoon after the company issued a profit warning.

Fulham Shore, which also owns The Real Greek, said it expects earnings before interest, tax, depreciation and amortisation (EBITDA) to be below market expectations.

This was attributed to the outer London restaurants which it has previously said are underperforming. These sites are "still busy", according to the company, but serving fewer customers and have higher operating costs.

Turnover and EBITDA for the year to 25 March 2018 are still expected to increase.

Although the company has opened 13 new restaurants in the financial year so far and has two more in the pipeline, it has now decided to reduce its planned new openings.

"We are operating in an uncertain economic outlook for both the UK and the restaurant sector in particular," the statement said.

"As a consequence, we will bring forward our plans only to fund new restaurant openings from our internally generated free cash flow by reducing the number of new restaurant openings for the coming year. We will also choose those locations that we believe will give us above average returns and sensible property deals."

Read more: Franco Manca owner shares drop 22 per cent on gloomy trading update

Shares fell as low as 8.5p following the announcement. The company entered the market in 2014 with a 7.5p price.

Fulham Shore added: "We continue to offer freshly prepared food at great prices which, we feel, has led to our continuing profitability. All of our cash generated is reinvested back into the business. With this policy we keep our prices low and create jobs in new restaurants. Many of our employees are shareholders, creating a 'super family' of investors. In addition, our restaurant sites have been chosen with care and we have avoided property leases with excess space or particularly high rents.

"This affordable menu position is where we believe we should be placed within the restaurant sector. We believe that this, along with a prudent opening plan, puts us in a good position when the UK economic environment improves."

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