Restaurant Group: pubs trading well

The Restaurant Group (TRG) has reported an increase in margins and profits at its pub restaurants for the 53 weeks to 2 January.

TRG, which runs the Brunning & Price pub estate as well as Frankie & Benny's and Chiquito, reported a 12% increase in adjusted pre-tax profit to £56m for the 53 weeks to 2nd January 2011.

The group, led by chief executive Andrew Page, experienced a 7% increase in revenue during the year to £466m.

The company, which operates 389 restaurants and pub restaurants, saw a 1% decline in like-for-like sales against what it described as a "tough backdrop".

However, TRG said 2011 trading had started well, with like-for-like sales 3% ahead of last year, and total sales 8% ahead.

Pub Conversion​

The company said that its leisure division, which incorporates Frankie & Benny's, Chiquito, Garfunkel's and its pub restaurants, performed well, delivering a 6% increase in revenues and profits.

Its pub restaurants increase margins and profits and the conversion of its Bluebeckers sites to Brunning & Price style operations remains on track for completion during 2011.

It opened a new pub, the Nevill Crest & Gun, near Tunbridge Wells, in December and reported it was trading "superbly". It expects to open two to three new pubs in the year.

Ash cloud​

Despite some major challenges resulting from the ash cloud problems in April and the harsh weather at the end of the year, the group said that its over 50-strong concessions division "performed superbly", with profits up 29%.

The group opened 24 new restaurants last year, which it said were trading well. It expects to open a similar number this year.

Page said: "We are continuing to focus our efforts on giving our customers great value, service and hospitality; sticking to our areas of expertise, delivering high returns on investment and further strengthening our market positions.

"The Restaurant Group is in good shape, we have an outstanding team of people and we look forward to making further profitable progress this year.

"Our business has experienced some very tough trading conditions over the past two years and during that time sales, profits and cash flow all grew. TRG is well placed to cope with challenging conditions and, very importantly, to benefit substantially from the upturn in consumer confidence that will, in due course, prevail."

Investment​

During the year the group invested a total of £32m in capital additions, a slight increase on 2009. This included development expenditure of £20.7m and £11.3m of refurbishment and maintenance expenditure.

It said that its 2010 new sites were generating levels of sales and profitability at least in line with, and in most cases "substantially ahead of, feasibility".

Cost pressures​

The group reported that cost pressures were relatively benign during 2010,with average food and beverage cost inflation at about 1.5%, whilst wage cost inflation was driven by the National Minimum Wage increases of 1.2% in October 2009 and 2.2% in October 2010.

Page said: "Looking forward to 2011, there is clearly some upward pressure on food and beverage costs. Although the group has a strategy of fixing costs wherever possible, we do expect to see a somewhat higher level of average inflation compared to 2010.

"At this stage in the year, taking into account the benefit of the fixed and capped price contracts already secured, we expect average inflation across all our food and beverage inputs to be between 2% and 3%."

Page said that taking all these factors into account, the group estimated that it needs to have total sales growth of 2-3% to cover off the cash costs of these inflationary cost increases.

After nine weeks the group's total sales are up 8%, more than double what is necessary to cover the expected cost increase.