Tags: Finance

From pariah to a City darling

Monday 18th October 2004 15:06
When Andrew Page joined City Centre Restaurants (CCR) as financial director in June 2001 he was faced with a business that had lost its way strategically and was in poor financial shape.
 
Front Page news: it's been a success
story for The Restaurant Group, whose
biggest brand is Frankie & Benny's

With the support of the new chairman, Alan Jackson, who had joined CCR two months earlier, Page set about changing the culture and mind-set of the business, which owns the Chiquito, Frankie & Benny's, Garfunkel's, Est Est Est, and Caffé Uno brands.

By placing the emphasis firmly on cash-flow and generating returns, along with career development and reward programmes for staff, he initiated 18 months of pain, but an approach that ultimately led to last month's confirmation of recovery with a great set of interim results.

Now called The Restaurant Group, the company showed record pre-tax profits for the six months to 30 June, up 40% to £9.8m on sales of £118m.

With the turnaround complete, The Restaurant Group is ramping up its expansion programme. Page aims to grow the group from 260 to 300 sites by the end of 2005, building on its lucrative presence in leisure-park sites by moving into out-of-town retail sites, which are growing at the expense of the high street.

And he's actively looking for one or two acquisitions to accelerate the group's expansion, having failed to acquire pizza and pasta group Ask Central last year.

An early focus for Page was to cut costs through labour savings and purchasing discounts and lowering interest payments by reducing the group's net debt - down to £18m from just under £60m three years ago - primarily through the disposal of non-core sites and January's sale of more than 19 million shares.

Page also put the brakes on an overseas expansion strategy, which had seen the previous management open three Frankie & Benny's sites in Spain. "It's extremely difficult to generate acceptable levels of return with overseas restaurants," he explained.

Turning around the fortunes of its high-street operations has been a major focus, and the group's profits in this area were up 10% for the six months to June. A key factor was the transformation of its Chiquito brand, which saw like-for-like sales up 2.8% for the same six months following refurbishment of a third of the "garish" Mexican-themed sites. A new audience was also attracted by moving the focus away from a "let's-go-out-and-get-pissed-on-slammers" clientele towards the family market.

Its two Italian restaurant chains, Est Est Est and Caff‚ Uno, are still performing poorly, achieving like-for-like sales down 3.9% and 0.7% respectively in the latest figures.

But having cut costs and invested in the brands, including £2m spent refurbishing the Caff‚ Uno estate, Page is reluctant to walk away from them. "They're eminently capable of being turned around," he added. He believes many of the problems are confined to a few underperforming sites that will be disposed of.

To address the changing dynamics on the high street market, with the move towards a faster, more casual approach, Page aims to use lessons learnt in the group's Concession Connection business, which has outlets in five UK airports and a bar in London Bridge and London Victoria train stations.

The core aim is to move away from full service to "grab-and-go" operations, an approach that will be augmented by rolling out three offerings the group has developed for airport operator BAA - sandwich bar Bite, juice bar Pip, and Est Presso, a coffee-bar derivative of Est Est Est - on the high street.

Meanwhile, Page plans to take the company's concession business into shopping centres, visitor attractions and more train stations. Another focus is to grow the group's franchise business, which currently includes an Eat sandwich bar and a couple of O'Neill's branded pubs.

"We've gone from a company that was a pariah and had no friends in the City to a situation where all the analysts have us down as a buy, and the shareholders are very happy," said Page. "The business has turned the corner and we're into the comfort zone now. We're absolutely set fair to deliver great returns going forward." n


The Restaurant Group
20 Irving Steet
London WC2H 7AU
www.trgplc.com

Sites: 260
Core brands: Chiquito, Frankie & Benny's, Garfunkel's, Est Est Est, Caffé Uno
Locations: high streets, leisure parks, airports and train stations through its concession and franchise businesses

Key staff:
Alan Jackson, executive chairman
Andrew Page, group managing director
Kevin Bacon, managing director, Leisure Parks
Trish Corzine, managing director, Concession Connection

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