Restaurant Group – there are early signs of improved volume, like-for-likes down 2.2%: The Restaurant Group has claimed early signs of improved volume momentum as like-for-like sales dropped 2.2% in the 26 weeks to 2 July. It reported a ‘fundamentally improved value positioning and food offer in Frankie & Benny’s’ and a restaurant technology roll-out complete to facilitate serving customers better. It also reported a ‘healthy pipeline of opportunities to advance growth in Pubs and Concessions’. Total sales were down 1.9% on a 26 week comparable basis; down 7.1% on a statutory basis. Adjusted profit before tax was £25.5m (2016: £36.6m). Statutory profit before tax was £2.8m (2016: loss of £22.5m). The company reported an exceptional charge of £22.7m (2016: £59.1m). It said current trading in line with expectations and it expects to deliver an adjusted PBT outcome for the full-year in line with current market expectations. Andy McCue, chief executive, said: “We have made good progress against our strategic initiatives outlined in March. Our leisure customers are enjoying a better value, higher quality product; our growth plans for our Pubs and Concessions businesses are advancing well and we have made good progress in delivering cost efficiencies. I’ve been impressed with our colleagues’ receptiveness to change and thank them for their contribution to stabilising the business.” The company added: “We have made good progress on the four key elements of our strategy that we set out earlier in the year, to: re-establish the competitiveness of our Leisure brands; serve our customers better and more efficiently; grow our Pubs and Concessions businesses; and build a leaner, faster and more focused organisation. Customers are enjoying better value and improved quality of offer in our Leisure brands. As a result, we are beginning to see some early signs of volume improvement. As we have highlighted before, 2017 is a transitional year. As we make the necessary investments in price to correct for our previously weak value position, and in quality to ensure consistency of our food offer, like-for-like sales and margins will come under inevitable pressure in the short term. We are on track to finish the year with a more competitive offering, a strengthened team, and a more efficient business, positioning us well for 2018 and beyond. We continue to benefit from a strong balance sheet and free cash flow generation and as a sign of confidence in our plan, the board is proposing to maintain the interim dividend of 6.8 pence per share.” Of its major brands it stated:

Frankie & Benny’s (258 units): “We have focused on restoring our value credentials, deepening the distinctiveness of our offer to families and marketing to attract back lapsed customers. In January, we trialled and then launched an improved, cheaper fixed price menu (£9.95 for two courses) which continues to perform well. We launched our new core menu in two waves in March and May. The new menu is considerably more competitive than the previous version, with entry prices reduced by 22%, and like-for-like dishes, on average, 7% cheaper. As a consequence, our prices on key value indicator dishes are now significantly lower than our peer set. We have invested in improved food quality to ensure we can produce dishes consistently well, introduced new sharing dishes which are proving popular among our target family audience, and created new dishes which have shown encouraging early adoption. In June we launched a new kids’ menu taking on board feedback from our younger customers and their parents. The menu is genuinely differentiated in the sector, with a much more engaging food offer and presentation, as well as being better value. Our marketing is focused on attracting back lapsed customers, in part with discounts, which are increasingly channelled through affiliate partners, as well as seasonal campaigns such as our ‘win a holiday every day’ promotion during the school summer holidays. Later in the year, we plan a marketing re-launch, enabling us to highlight the distinctive family appeal of the brand, delivered with more relevance and consistency. While there remains a lot to do, there are early signs of customer awareness of our changes, with recent data showing an uptick in value for money ratings, net promoter scores and the brand rankings for quality of ingredients and freshness of food. The pace of change in the business is accelerating and in the second half of the year we will refine our menus, making changes based on insights gathered to date, as well as trialling a series of new product innovations which, if successful, will feature more broadly in 2018. Towards the end of the year, we also plan on piloting a low cost ‘capital refresh’ of some of our older properties which will focus on improving the look and feel of customer facing areas.” 

Chiquito (83 units): “In February this year, we re-introduced fixed price value menus to Chiquito offering two courses for £10.95 and three courses for £14.95, generating a significant improvement in the proportion of sales channelled via fixed-price menus and highlighting the value-conscious nature of our customer base. Consistent with our intention to broaden the appeal of the brand, we have been trialling a fundamentally changed menu in 20 sites, which has received encouraging feedback. This new menu provides the customer with the ability to custom-build tortillas and vary the spiciness of their sauce, all at a highly competitive price point of £9.95. We will make some changes to that menu in the coming weeks, extending the trial to a further 20 sites, with a view to rolling out the proposition across the estate thereafter.” 

Other Leisure brands (38 units): “Coast to Coast’s like-for-like trading performance continues to be challenging, albeit we have managed to improve the trading trajectory in recent months through discounting. Our focus has been on developing a new proposition, Firejacks, which offers high quality flame-grilled steaks and burgers at highly competitive prices. We have converted the Coast to Coast in Northampton to Firejacks, and re-launched the restaurant earlier this month. This pilot site will enable us to test and refine the concept and determine the potential for roll-out via conversions of further Coast to Coast sites. Our remaining brands, Garfunkel’s, Filling Station and Joe’s Kitchen are performing solidly. We don’t consider these brands to be strategic priorities that justify significant focus or resource at this time.” 

Brunning & Price: “Our Pubs have performed well in the period, helped in part by favourable weather but also driven by strong operational delivery. We have focused on improving the consistency of our execution, which has contributed to an increase in our customer ratings to an all-time high. We have also deepened our links with the communities in which we operate by hosting popular beer and gin festivals. We have committed increased resources to identifying sites to enable us to increase the rate of openings, and consequently, the pipeline of prospective sites is steadily growing. Our Concessions business continues to perform strongly, driven by both solid growth in passenger numbers and by strong execution in maximising the throughput of customers. Our pipeline of new opportunities has strengthened in recent months and we expect to secure several new contract wins in the second half of the year.” 

Current trading and outlook: “Current trading is in line with our expectations, with year to date like-for-like sales for the 34 weeks to 27 August down 2.5%.2017 is a transitional year as we continue to address the competitiveness of our Leisure businesses and focus on achieving a sustainable volume-led turnaround. Where opportunities to accelerate our progress present themselves, we will invest appropriately. As a result of the investments we have made in our new menus and promotional activity in the year, our full year 2017 cost of goods sold margin is expected to be between 1.5 and 1.8 percentage points higher than 2016. Accordingly, we continue to expect to deliver an adjusted profit before tax outcome for the full year in-line with current market expectations. We expect to open between 18 and 20 units in 2017 with associated capital expenditure of between £18m and £20m. Refurbishment and maintenance capital expenditure, including technology investment, in 2017 is expected to be c.£20m. We anticipate opening between ten and 20 units in 2018.”