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Fulham Shore reports turnover and Ebitda boost, Franco Manca makes minority investment in Made of Dough

Real Greek and Franco Manca operator Fulham Shore has reported turnover for the six months ended 24 September 2017 rose to £27.5m, compared with £19.9m the year before.

The company reported headline profit for the period of £2.8m (2015: £2.6m). It achieved headline Ebitda of £4.5m, compared with £3.8m the previous year.

Operating profit increased to £600,000 compared with £500,000 the previous year. The company also revealed Franca Manca had made a £200,000 minority investment in London-based pizza concept Made of Dough.

Chairman David Page said: “The group’s growth has been driven primarily by new restaurant openings. During the six months ended 24 September 2017, the group opened three The Real Greek restaurants, seven Franco Manca pizzerias in the UK and one Franco Manca franchise pizzeria in Salina, Italy.”

“In line with the group’s expansion strategy, these openings included a number of locations outside London, including Bournemouth and Reading. In September 2017, the group announced in its annual general meeting statement and trading update that it had taken the decision to simplify operations and focus on the group’s core brands by selling its business and property at D’Arblay Street, Soho. Discussions have commenced with suitable parties and as such we have, in the results, impaired the asset by some £0.3m and reflected the property as held for sale and a discontinued operation in the interim results. We have continued to invest in our teams and infrastructure to support our long-term growth plans. During the six months ended 24 September 2017, and as previously indicated, we commenced investing in the central team of The Real Greek as this business begins its national expansion.”

“We also continued to invest in the team we have in place to support the continued expansion of Franco Manca. During the period ended 24 September 2017, the group had lower net cash inflow from operating activities of £3.3m (2016: £6.4m) due primarily to the group benefiting last year from an increase in trade and other payables.”

“During the same period the group invested £7.0m (2016: £6.0m), the majority of which was in new restaurant openings. Included in investing activities is a minority equity investment of £200,000 by Franco Manca in Made of Dough, a new pizza concept, as part of Franco Manca’s pursuit of best in class pizza operations. Overall there was a net cash inflow for the period of £0.8m (2016: £1.1m). At the beginning of the current financial year, the group increased its facilities with HSBC Bank from £6.5m to £15m. Net debt as at 24 September 2017 was £9.7m (2016: £3.0m). No dividend is being proposed by the board. It remains the board’s policy that, subject to the availability of distributable reserves, dividends will be paid to shareholders when the directors believe it is appropriate and prudent to do so.”

“Since 24 September 2017, the group has opened one The Real Greek restaurant in Bristol and two Franco Manca pizzerias in Kings Cross (London) and Bristol. This takes the number of restaurants operated today by the Group to a total of 58 in the UK, made up of 16 The Real Greek, 41 Franco Manca and one Bukowski Grill. We expect to open a further one or two new restaurants by the end of the current financial year to 25 March 2018. Some of our planned openings this year have been delayed by as much as six months as we seek better deals from landlords thus protracting lease negotiations.”

“These delays have had the beneficial side-effect of improving our cash position and lessening our peak borrowings. We will keep under review our opening programme for the rest of the current and following financial years. We intend that our new restaurants will be selected to give us an average return on capital at the higher end of the scale previously recorded.”

“We will achieve this with more rigorous site selection and increased contributions from landlords thereby lowering our costs, in cash terms, for new sites while at the same time negotiating rents off the lower levels that are increasingly evident. We also intend to commit to sites which follow our returns requirement rather than to sign up purely to fill a formulaic pipeline. As indicated in September 2017, the summer should have been one of the busiest periods of our financial year and the weak trading across the dining out market that we also experienced has impacted this year’s overall performance.”

“Some of our pre-2017 restaurants, particularly in the London suburbs, are still experiencing revenue below the equivalent period a year earlier with increased volatility and some expected cannibalisation from our new restaurants in nearby locations. However, revenue from these restaurants have seen slight improvements from the poor summer period of July to September. Although we believe our half-year figures to 24 September 2017 were satisfactory, our full-year headline Ebitda to 25 March 2018 will depend on how our suburban estate performs in the second half of the year and also on the timing and performance of new openings.”

“The slowdown in the UK retail and restaurant sector has been noted by many commentators, and is, we believe, the result principally of rising inflation, poor consumer confidence and a weakening economy. These factors, together with a number of rising costs, means that our pre-2017 estate, while profitable, is contributing less, on an average site by site basis, than last year.”

“We will respond to the economic climate in the next 24 months as we find it, as we believe these factors will continue to affect the restaurant sector in the coming years, limiting our visibility for the second-half and beyond.”

“Despite this challenging backdrop I am confident Fulham Shore is well placed; we have an experienced management team, who have navigated through several industry cycles, two strong brands that are renowned for their great quality, ambience and value, and a good site portfolio. We believe that our brands have significant customer appeal, which is underpinned by the food quality and value of their offerings. As a result, and despite the challenging backdrop, we are confident that the group will continue to grow over the coming years.”

 

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