Frankie & Benny's profits surge comes with warning

Published on Friday 29 August 2008 20:53

FRANKIE & Benny's owner Restaurant Group served up a 20 per cent hike in profits yesterday but recent sales have slowed as the squeeze on consumers tightens.

The group, which also trades as Chiquito and Garfunkel's, said same-outlet sales improved 3 per cent in the first half of 2008 – a slowdown from the 5 per cent like-for-like growth it reported in May.

But it stuck by plans to open up to 35 new pubs and restaurants this year, and said sales growth had held steady at 3 per cent since the end of June, a "very creditable" performance.

Shares rose 5.3 per cent to 139p as it unveiled pre-tax profits of 21.1 million in the six months to 30 June, on revenues 18 per cent higher at 203m.

Companies across the sector have been stung by soaring food, fuel and energy bills, but Restaurant Group mitigated inflationary pressures for around a third of its input costs by entering into fixed-price contracts with suppliers in 2006 and 2007.

Of the group's 284 restaurants at leisure locations around the UK, the firm said Frankie & Benny's, Chiquito and Garfunkel's had all traded well.

But the pub restaurants business, which has 43 outlets, has been more affected by the downturn and rising prices, due to the bigger meat offerings of its menus.

The company added that slowing economic growth and lower numbers of flights at UK airports over the next 18 months could weigh on its concessions business, which has 53 airport restaurants, although the division's performance remains ahead of management expectations.

Panmure Gordon analyst Andrew Saunders warned of the cost pressures mounting on the business, but he added: "From a trading perspective the group has done well against a challenging consumer backdrop."