Restaurant Group post close update

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 released today their post close update and details of their Christmas trading period.  The statement was a positive one declaring that turnover for the 52 weeks ending 28 December was up 9.6% on the prior year, and like-for-like sales increased by 2.8%.  LFL growth was up on the first six months of the year that showed 2.5% growth, but down on that reported for 35 and 45 weeks that were 3.5% and 3.0% growth respectively. 

 

The Christmas trading period was impressive, with like-for-like sales growth of 5% over the 2 week holiday period to 4^th January.

 

During 2014 they opened a total of 40 new restaurants, compared to 35 in the last year.  Management have said that they anticipate opening between 42 and 50 new restaurants during 2015.

 

Management have said that the full year results will show material growth in both earnings and cash flow versus the prior year; the range of external forecasts for profit before tax for 2014 is from £77.5m to £80.9m.  My own estimates on sales of £635m is for a pre-tax of ~£79m, ~8.7% up on last year.  

 

The statement stated that the outlook for 2015 and beyond is very positive with growth in disposable consumer incomes, an increasing number of new site openings, and a considerably improved outlook for UK Cinema performance (many of their restaurants are located in areas near cinemas and other social entertainment).

 

At today's price of 702p (up 2.5%) the shares are valued at 23x earnings and are probably fully valued, but deservedly so for a well run business with an economic back-drop of rising disposable incomes, low inflation and low financing costs for expansion.