Jay K2
04 May 2016
broker updates, + Investors Chron view broker notes, post fall....Numis: Buy. The Frankie & Benny's brand is 38 per cent exposed to retail-only sites, which are seeing lower footfall and increased competition. The current priority for management is to reduce exposure to retail-only outlets and the Frankie's brand; more than 50 per cent of the portfolio is Frankie's and the aim is to reduce this to around 40 per cent to better balance the portfolio. The poor share price performance since the prelims suggests that the market has been anticipating a profit warning. Expectations have now been set at a realistic level and, while there are challenges ahead, on a PE ratio of 13 the shares are attractive. We have cut our target price to 475p.Canaccord Genuity: Hold.Peel Hunt : Hold.Investors Chronicle VIEW: Buy.The group's shares have almost halved in value this year. This is in sharp relief to their stellar performance subsequent to the financial crisis. And though management doesn't "anticipate any improvement to underlying like-for-like trends", the group remains highly cash generative and net debt is relatively modest. So while the rebalancing of the portfolio isn't achievable overnight, the group's shares now trade at a sizeable earnings discount to their peer group, against a double-digit historic premium. It's difficult to imagine there's no upside from the current share valuation, particularly with a yield pushing 6 per cent. Buy.03/05/2016 –Restaurant Group had its “Neutral” rating reiterated by analysts at JP Morgan Cazenove. Target price GBP 400.00
TX2
03 May 2016
Re: Analyst conference call Interesting.A major part of the problem I conclude from the presentation seems to be that Frankie & Bennys is an indirect victim of the shift to on-line buying;as a consequence fewer people are visiting retail parks & shopping centres & hence lower footfall.I get the impression that turnover could be down at least 10% in these outlets.Difficult to see an obvious answer to this problem.
mutandis13
02 May 2016
Analyst conference call Well worth listening to this:[link] so much the statement, as that is just repetition of the announcement, but for the Q&A session. CEO Danny Breithaupt does not deal well with questions over the dividend, starts off by saying that the dividend target is 2x cover and when pushed on that point agrees that means a dividend cut. Later on he says that the business is highly cash generative and management are supportive of the dividend. When pressed he says that the dividend will be supported and there will be no cut.Other information supplied is that maintenance capex will be £30-35m for the year (a good amount being spent on the problem - Frankie & Benny's) and total capex will be £80-85m (£75m LY). Despite this much higher level than I expected, the net debt guidance is just £30-35m for the year-end (£31.7m @ 31.12.15). Which with dividends of £35m, would imply FCF of say £32m (£42m LY) and OCF of say £112m (£117m LY).
TX2
02 May 2016
Re: Valuation Seems a lot,but in reality lease payments represent only a little over 10% of the companies overheads & are spread over approx 400 restaurants,assuming circa 100 are freehold;wages are a far bigger overhead at around 40% of costs.For the rent bill,the company is getting the use of about £1 billion worth of property.Prime retail properties of the type occupied by RTN sell on a gross yield of circa 6.5%.So it is quite cheap.Sure if customers stop coming into the restaurants it has got problems but it will not be the rent bill that kills the business but the remaining 90% of overheads assuming it cannot cut these back.But I suspect a few percent can be found.Sure lease payments are ongoing but can of course be assigned to other retailers.But if there is a major collapse of trade in any business,especially one where labour & other non rental costs are the biggest overhead it will be dead from other overheads anyway.However this business presently seems likely to remain profitable-but perhaps not as highly profitable as previously in the immediate future.
mutandis13
01 May 2016
Re: Valuation "...To me it is less the balance sheet that it is stretched, but more the future operating lease commitments of £700m plus..." - schweeQuite so, £799m at last year end. In about 3 years these will appear on the balance sheets of all companies, rather than in the notes.There is £67m due this year and an average £58m pa over the following four years. The rest is more than five years away. So represents less than 10% of turnover and about 11% of all costs pa.The decline in LFL sales would have to be substantially greater than they have currently indicated, for these future commitments to be a major issue.Interestingly Greggs take a different view* on operating leases and run with around £40m net cash on their balance sheet specifically as an offset (their operating lease commitment is £128m; £38m in the current year, representing ~5% of sales).*"...The Board continues to be mindful of the leverage inherent in the Group's predominantly leasehold shop estate (which will in due course appear as part of the balance sheet in line with new accounting requirements) and of working capital requirements. As a result we have concluded that it is not currently appropriate to take on structural debt and we will aim to maintain a year-end net cash position of around £40 million to allow for seasonality in our working capital cycle..."
schwee
01 May 2016
Re: Valuation To me it is less the balance sheet that it is stretched, but more the future operating lease commitments of £700m plus. Who knows what nasties lie therein.
Greyinvestor
30 Apr 2016
Re: Valuation I am wrong Mutandis, so thanks for that. Paul Scott is right.But.....Liabilities of £184m at year end.Current assets £38m.So to my way of thinking there is £146m of debt, offset by £108m of freeholds. So still £38m of debt.Now there is a ton of short leasehold property, which notionally well exceeds the debt. Is this really worth the value in the balance sheet? I'm not qualified to answer that, having no personal experience of this sort of business.My thinking is still the same as yesterday. It's an elephant which at the moment is reasonably well balanced on a pin. As long as the management run the business well, it will be fine, but there isn't much scope for mistakes. They could sell the freeholds, but doing it will 'only' release cash.On the trading side, business doesn't sound that awful. So I don't see that so much has changed. Not enough to justify such a knock to the price.For people who don't mind gearing, I think that this will probably be OK. For me, there are better opportunities out there, with lower gearing.....
mutandis13
30 Apr 2016
Re: Valuation Some important points you make Greyinvestor, but I feel a bit harsh; net debt is just £32m with net liabilities (excluding debt and cash) of £97m, so in total £129m. On the balance sheet Freehold land & Buildings are £109m (buildings are depreciated at 2% and land does not appear to have been revalued).That's not an outrageous offset and, in contrast to the problem TSCO found themselves in, they have historically generated reasonable amounts of free cash flow and consequently have been successful in lowering their debt level from £46m in 2013 and £50m in 2010. They have said they will open just 30 new restaurants this year compared to 44 last year, so capex should be in the £50-60m range (£75m LY) and if pre-tax profit estimates are hit of £74 - £80m, operating cash flow should exceed capex, although probably insufficient to totally pay for the dividend that costs about £35m.It's the CFO immediately leaving that's the worry - most odd. If my memory serves me right he sold about half his holding back in November for about 675p.
Greyinvestor
29 Apr 2016
Valuation Had a quick look at this today. I expect that a few punters will make a quick buck, but........It's the balance sheet. Even Paul Scott of Stockopedia says it's fine, and he seems like a good bloke, but is it?What I see is a huge amount of debt which is apparently offset by a small amount of current assets plus £100m odd of property.The trouble is that most of the property value isn't freeholds, it's leaseholds. So where is the value? Is it 'investment' ie tables, chairs and so on, or is it the notional value of a lease that can be sold on? Following Tesco, I am dubious about the real value backing the balance sheet. Can it ever be realised? So I'm staying out on the basis that if I don't feel confident in the assets, I shouldn't buy. I could easily be totally wrong though, so DYOR.
spankaroo
29 Apr 2016
Looks over sold on fundamentals.. but markets in no mood for prisoners. This has to be on someones bid radar, low debt, healthy assets and good cash generation.
tejo
29 Apr 2016
Bad news I should have followed my own advice rather than IC recommendation. Sold out now for myself and family holdings. The sudden resignation of the FD foretells of more bad news to come, I suspect.
dotlink
15 Apr 2016
fill your boots, charts looking good, shorters are closing more AT buys than AT sells, £4 next week imo DYOR and gla
The Revenge of Meredith Hunter
15 Mar 2016
Investors Chronicle BUY tip The IC tipped the share as a BUY, after the recent disappointing announcement. I think it was tipped at 448p.
tejo
10 Mar 2016
Re: major concern RTN is a well managed business and no worries over accounting.. Shared similarity is over consequences of supplier financing on cash flow when sales fall. Time to move on, end of subject and good luck to RTN
AdrianHerneBay
09 Mar 2016
Huge Fall in SP Ouch ! another huge fall in the share price. A short while ago this share was trading at over £7.00, another bad day tomorrow means that in the last quarter the SP will have fallen a whopping 50% !What is going on ????
