The Restaurant Group: Like it or not Like-for-like sales

  • A semi-quantitative leisure like-for-like (LFL) sales growth trend from FY2015 H2 to FY2016 H2 was released in final results presentation FY2016
  • This trend helps, together with other key inputs, to make an educated guess on leisure LFL sales growth in the past 11 years
  • With assumptions on pub & concessions (P&C) LFL growth (Hau’s view), the simulation results indicate that leisure LFL sales growth was ca. -6% by the end of FY2016
  • You can modify Hau’s view assumptions and simulate your own view here

 

Do you like the present like-for-like (LFL) sales performance of The Restaurant Group (RTN:LSE)? If you have been its investors for some years, I believe you do not. Apart from discontent at LFL sales in the past two years, I do not like that the board has tendency to hide important LFL figure at the precise moment when we investors need it most. When I collected LFL sales data from its annual report, I found that the data for FY2009 was missing. Rather, the management emphasized on LFL sales for the first nine weeks in FY2010. Under the new leadership, I see signs of improvement. In final results presentation of FY2016, they disclosed clearly LFL sales down 3.9% and a semi-quantitative leisure LFL sales growth trend in the past one and half years. However, what we investors need is a full disclosure of LFL sales figures of its pub & concessions (P&C) segment and leisure segment separately, rather than only overall LFL sales figure.

Financial highlights in annual reports

I attempt to use the available data from its annual reports and presentations to make an educated guess on its leisure LFL sales. What we know are:

  1. LFL sales growth since FY2006
  2. Number of sites of each brand in every financial year
  3. Number of new sites (net) of each brand in every financial year
  4. New site becomes mature after 12 months operation
  5. LFL sales growth counts only mature sites
  6. A semi-quantitative leisure LFL sales growth trend in the past one and half years

 

The Restaurant Group Like-for-like Sales Simulation

In the final results presentation of FY2016, The Restaurant Group disclosed the historical LFL sales growth figures grouped by announcement dates. From the annual reports, I collect the number of sites for overall, leisure, and P&C. New sites that operate less than 12 months do not contribute to LFL sales growth calculations; so I distinguish between new sites and mature sites. It follows that

LFL (leisure) sales growth

= (LFL sales growth * (Mature Leisure sites + Mature P&C sites) – (LFL (P&C) sales growth * Mature P&C sites)) / (Mature Leisure sites)

To facilitate an interactive simulation experience, the above equation is programmed in Stella® Architect. This simulation requires only the historical LFL (P&C) sales growth trend (from FY2007 to FY2016) as input. The output result is the historical LFL (leisure) sales growth trend.

 

Historical like-for-like sales disclosed in the interim results announcement in FY2016

 

 

Historical site development trends from FY2007 to FY2016

 

Hau’s View

In the final results presentation slides of FY2016, it has one very important chart that shows LFL (leisure) sales growth trend during 2015 H2 to 2016. However, this chart shows no scale on LFL sales growth axis; so, we do not know how much it was by the end of 2016. The only quantitative data we can see is 0% at the beginning of FY2015 H2. As shown in the chart, the trend goes south and becomes stable by the end of FY2016. Nevertheless, I made an informed guess on LFL (leisure) sales growth trend by assuming LFL (P&C) sales growth trend. See the amber line on the simulation result screen snap-shot. The simulation result is LFL (leisure) sales growth trend (the light blue line). Note that the light blue line is passing through 0% at FY2015, roughly in line with the disclosed trend in the final results presentation where 0% is in the middle of FY2015. The simulation results indicate that leisure LFL sales growth was ca. -6% by the end of FY2016

 

Historical leisure like-for-like sales disclosed in the final results announcement in FY2016

 

Simulation results of leisure LFL sales growth according to Hau’s view

 

Simulate Your Own View on Like-for-like Sales Growth

You can modify Hau’s view assumptions and try to simulate your own view here. Like it or not, investors of The Restaurant Group should understand more about its like-for-like sales growth trends.

 

Disclaimer

All articles in this blog are intended for research and educational purposes only. Materials in these articles including, but not limited to, graphs, tables and screen shots featuring investment data are not recommendations to buy or sell. The investment analysis, information, and related comments may be out-of-date when you read them. You should do your own due diligence into any investment before making the decision to buy or sell. While we aim to provide accurate data to assist you in performing your stock valuation, we do not take responsibility of  any inaccurate or omitted data. Please verify them. We are not liable for your investment losses.

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