The Restaurant Group has put 33 of its worst performing sites up for sale or potential closure after its leisure-focused dining business encountered a difficult first half of the year.
The 500-unit restaurant giant’s first half results incurred an associated charge of £39.3m as a result of the move, while the asset value of a further 29 sites were written down, which was reflected in a £17.8m non-cash impairment charge. TRG has not stated which of its brands the under-performing sites relate to or where they are based.
TRG bosses said the company had faced a “challenging” trading period across its leisure brands, but seen a good performance from its pubs and concessions business for the 27 weeks to 3 July 2016.
Total revenue fell 3.4% to £359m with like-for-like sales down 4%. Operating profit declined 4% to £37.5m.
The company admitted that Frankie & Benny’s performance had particularly suffered due to insufficient focus on value, unsuccessful menu development and poor operational execution. It acknowledged that increased competition has had some impact, but was not the major factor behind the weak performance.
Chairman, Debbie Hewitt, said that TRG will now take action at Frankie & Benny’s on pricing, proposition and customer service. Greater focus will be put on its core customer base of families, and new value offers will be tested and trialled. It will also add popular dishes back to the menu.
“The brand remains relevant and popular and we are confident that improved performance will be achieved by being more customer-focussed and data-driven, and through better operational execution,” said Hewitt.
Despite the disappointing figures, TRG reminded investors that its leisure brands, which also include Chiquito, remain relevant and operate in a growing market place. Overall it said that seven new sites had opened in the first half of the year, while trading has improved slightly in recent weeks, with like-for-like sales for the first 34 weeks of 2016 down 3.7%.
“This has been a challenging trading period for our leisure brands, albeit with a good performance from our pubs and concessions businesses,” said Hewit. “The board has moved quickly to undertake a review of the operating strategy and we now have clarity on the issues facing our leisure brands, particularly Frankie & Benny’s.”
A new executive team is in place to lead the implementation of the first phase of the review and to apply the learnings to its other brands.
“The company is profitable, highly cash generative and has a strong balance sheet, and given our confidence in the current trading forecast, we are declaring an interim dividend of 6.8 pence per share, unchanged from last year,” said Hewitt.