Restaurant Group interims

The Restaurant Group plc (TRG) is engaged in the operation of restaurants and pub restaurants. The principle brands are  Frankie & Benny’s, Chiquito, Coast to Coast, Garfunkel’s, Home Counties Pub Restaurants and Brunning & Price.  I have a holding in my income portfolio (epic code: RTN).

The Restaurant Group issued their interim results today and continue what has been an excellent income and growth story for investors.  Total revenue increased 10% to £308m with like-for-like sales increasing by 2.5% and operating profit margins up by 22bps to 11.32%.  Although this does compare with a stronger like-for-like growth at the 19 week point of 4%, the lower growth for the six months was due to a negative June as a result of the impact of the football World Cup on takings; like-for-like sales for the 34 weeks to 24 August 2014 were 3.5%

 

Excluding non-trading items EPS rose 14.7% to 12.78p and reported EPS rose 45.5% to 16.21p, reflecting the £6.9m profit made on the disposal of part of its interest in The Living Ventures group by selling the Gusto business.  RTN  distributed the net proceeds of this disposal by way of a special dividend of 3.45p in July. 

 

The interim dividend was increased by a very substantial 16% to 6.1p and is still covered 2.1x by trading earnings.

 

Free cash flow (FCF) at £11.0m was up from last year's £10.8m and with no dividend payments (both final, interim and special are paid in the second half), £7m from the Gusto sale and a £5.3m purchase of shares for the employee trust, net debt declined by £12.6m to £32.5m, representing gearing of just 13%.  Average FCF performance over the last 3 years has returned just over 12% on average capital employed, above its 7.7% weighted average cost of capital (WACC).

 

Expansion of the estate continues with 17 new sites opened in the first half and they plan 38 to 43 new sites for the full year, part of management's plan to double in size over the next eight to ten years.

 

The Chairman stated that "...With an improving economic outlook, lower inflation and higher levels of employment the prospects for TRG continue to look good.  I am confident that the Group is well placed to deliver another year of profitable progress..."

 

Andrew Page the outgoing CEO hands the company over in robust health to Danny Breithaupt on 1 September, in marked contrast to the situation at Tesco.