(Sharecast News) - Restaurant group Fulham Shore has hit out a rivals that are kept artificially afloat by "various leaky flotation devices" as it revealed its own dip into the red.
The owner of The Real Greek and Franco Manca chains said the UK restaurant market was heading for a correction "well before" the Covid-19 pandemic.
Chairman David Page, formerly of Pizza Express, said: "There were too many restaurant businesses with owners and managers convinced they could swim like Mark Spitz, but which were actually being kept afloat by some badly made rubber rings and various leaky flotation devices.
"They were driven to expand by historically cheap debt, supposed high exit multiples and run by management teams who had never experienced either a downturn in the UK economy or an oversupply in the restaurant sector."
The hospitality sector was rocked by the pandemic after the government ordered the closure of all pubs, bars and restaurants from 20 March. Numerous brands have shut restaurants due to the crisis, including Pizza Express, Byron Burger and Ask Italian.
But the sector was already battling oversupply prior to lockdown, with mid-price chains struggling in particular. In 2019, Jamie Oliver's restaurant group called in the administrators, and Carluccio's said it had endured "a sustained period of challenging trading conditions" before it collapsed in March.
Page said that in contrast, Fulham Shore offered reasonably-priced food and operated in a "well-positioned, carefully chosen, fairly rented estate".
Revenues in the year to 29 March rose 7% to £68.6m, while earnings before interest, tax, deductibles and amortisation rose 1.4% to £7.2m, or to £14.3m on an IFRS 16 basis.
Losses before tax came in at £800,000 on the same basis, compared to a pre-tax profit of £1.4m a year previously. Pre-adoption of IFRS 16, pre-tax profits tumbled 71% to £400,000.
In the first quarter of the current year, the closure of the entire estate meant the group was loss-making. But it returned to profit on a headline EBITDA basis in the second quarter.
Of its 70 restaurants, 68 have since reopened, with just Franco Manca Aldwych and The Real Greek Strand remaining closed because of a lack of tourists and office workers in central London.
Looking ahead, the firm said it was confident in would emerge a "successful survivor in an albeit reduced UK restaurant sector".
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