7:59 cut – FUL

Fulham Shore (FUL) – H1 Results

In their AGM trading update for the first 21 weeks of FY 2020 they reported steady growth but like-for-like revenues behind due to weather comparables at the Real Greek.

Today’s H1 results only cover a further four weeks and so there are no surprises.

It is disappointing that like-for-like performance is not given today – the company is now reaching a size and maturity where this would be appropriate, while admitting that this is an imperfect measure whichever criteria is chosen. A supposed advantage of their business model is relatively low depreciation on fit-outs and like-for-like figures can be the first sign that maintenance capex is at the correct level. They do report “increased customer numbers in our existing Franco Manca pizzeria” and imply Real Greek is behind due to weather comparables.

A reduction of net debt (excluding lease liabilities) despite the opening of 7 new restaurants is a good sign of strong cashflow from existing business and an indication that the current roll-out rate is more than sustainable.

IFRS 16 distorts the profitability figures and previous years have not been fully restated, but headline comparables are given showing EBITDA, operating profit and profit after tax fairly flat.

There is a belief within the industry that general elections create a sense of uncertainty that adversely affects the restaurant trade. I can see how negative campaigning could have an effect, but personally I am sceptical whether it would be measurable. Today they report current trading as merely “satisfactory” with “poor consumer confidence” but do not go as far as blaming either the election or Brexit.

Full-year revenue looks to be ahead of Allenby’s July note given that last year’s H1 seasonality was driven by unusually good weather on a higher historical proportion of Real Greek restaurants, and since they have already exceeded Allenby’s year-end restaurant target.

Reduced profitability (even pre-IFRS) is partly due to increased pre-opening costs but may disappoint some this morning. However it seems more likely that the implied revenue beat and sense of optimism after the election will lead to buying.

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