Hunger for profits takes a bite from Chiquito owner’s shares

Marc Sidwell
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THE FTSE 100 is at a four-year high, but you’d still have been better off plumping for mid-range dining rather than blue chip heavyweights over the last six months. The index hasn’t even managed a 10 per cent increase since mid-July, but the Restaurant Group’s shares have risen some 30 per cent over the same period.

The group, which owns familiar brands such as Chiquito, Frankie and Benny’s and Garfunkel’s, announced yesterday that its revenues were up nine per cent year-on-year in 2012. That is partly due to an ongoing expansion programme of around seven per cent a year – the group owns 400+ sites, with 28 new restaurants opened in 2012 and 28-35 more planned for addition in 2013. However, like-for-like sales were up 4.5 per cent, so growth remains healthy, if not so stratospheric, in its existing outlets.

Both of these growth rates are also notable for being up on 2011. Also, while profits for the year are not yet announced, profit before tax is anticipated to come in around £64m for the year, with the group indicating it expects to just beat consensus forecasts. That is against a background of adjusted profit before tax at £60.3m the year before, up from £54m in 2010, on revenues of £487.1m and £454m respectively.

And yet for all these bright-looking numbers, the group’s announcement triggered a fall in its share price – the FTSE 100 certainly showed significantly better performance than this stock over the last twenty-four hours. Why such gloom? Profit-taking for the most part, no doubt, as those who have done so handsomely since last summer looked to book some of those profits.

Is there reason to suspect the Restaurant Group or its peers can’t continue to perform so well in a tough marketplace? BDO figures showed that Restaurant Group and Wetherspoons both saw a bump in sales in September and October. It could prove temporary, if the economy deteriorates again or simply as a post-Olympics effect subsides.

And if the Restaurant Group’s first six months of this year are like 2012, then investors are wise to move their money elsewhere. A repeat performance would see two volatile quarters that end up well below their starting point. A great six months is one thing, but the fall of Jessops is one sign that it looks set to be a tough year.