Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Much of the recent reports and focus has been on the 40% of the Frankys sites that are on pure retail sites (although of course the CEO claims in the conf call that they dont break down LFL's by brands let alone by site, hmmm, inconsistent). Are they using the retail park footfall as a red herring in order to deflect from the real issues? If only retail park sites were performing badly, wouldn't they be keen to tell us the LFL stats for the remainder of the Franks estate? The TRG business: Franky & Bennies (over 50% of the estate and 99% leasehold). - Accepted that there is a serious issue and its dragging down the figures. After trashing the performance of those retail park sites, how easy will the leases be to assign? Chiquito - Doesnt get much of a mention, but c.70 sites, historically not a strong performer but picked up over recent years. Nothing positive reported. Coast to Coast - CEO dodged a question on the conf call re LFL's here, so we have to assume its not good. (expensive price point for the offering). Garfunkels - Has been ignored for years, and not a strategically relevant part of the business. Joes - Only c.8 sites and in its infancy, nothing too much to report. Concessions - Has somewhat of a monopoly on transport sites, a good part of the business. Brunning and Price - Relevant and strong offer, and a large proportion of the sites are freehold, likely that most of the property value in the accounts relates to Brunning and Price sites. F&B, Chiquito, C2C, Garfunkels, Joes: Nothing positive reported on these, so likely negative LFL's on all, and 99% leasehold sites. Falling sales across c.400+ leasehold sites? Not a pretty picture. Apart from Concessions and B&P, I would struggle to see the positives in the remainder of the business. Cash generations seems good, but you have to think if they did need to raise money quickly, Brunning and Price is where the asset value is.
HH: Analyst asks if Coast 2 Coast like for likes are down... I'd say that's a fair question, and on that share holders would like to know. DB didn't say 'that's confidential' he said we don't break it down by brand. That's a blatant lie.
Thanks for the link. I don't think Critoph would have got away with so many fudged answers, maybe that's why he left? Also some very weak answers, when asked about coast to coast like for likes Danny said we don't split like for like sales by brand. That's just a lie, so we can assume C2C LFL's are down too. Property dept staff overheads was an odd question, can't be a huge cost in the scheme of things.
Where can the conf call be heard? Thanks
Why would people go to Frankie and Bennys when the sun's shining? Footfall (retail and leisure) is not positively affected by good weather. If the sun is shining, people can think of better things to do. The exception is sitting in a beer garden, hence B+P do well when the sun is out.
Generally Frankie & Bennies etc do well in bad weather and suffer when it's sunny. So I wouldn't blame the weather. The pubs are the opposite.
Needs a bit of a rally for the close position of -15%.
So over the past 2-3 years; CEO Andrew Page - left Trish Corzine - MD Concessions - left Alan Jackson - Non exec Chairman - left Tony Hughes - left Stephen Critoph - left Robert Morgan - Company Secretary - left Graham Price - B&P MD - Stepped Down Danny Breithaupt - F&B MD - Promoted to CEO (big hole left operationally) Interesting reading.
Lots of issues for the company to contend with. Biggest issues; Historic reliance on dated Frankie and Bennys offer for the bulk of the LEASEHOLD estate. Reputational damage means no landlord will touch the for now, impacting on the openings pipeline that has fueled previous share price growth.
Fit out is a different issue to location. Anyway, I called it completely wrong this morning saying sell!
RTN/TRG are not keen on the high street or central London, so I don't see either of those suggestions happening. They have one of the strongest pub offers in the market in Brunning and Price, however the pubs have been strong due to lack of interference by TRG, if that changes it will be to the detriment of the pubs offering.
The big issue now is that TRG traditionally drive growth through acquisitions, at a rate of c.40+ new sites per year. In the past the covenant strength of the company got them into schemes rather than the brand strength, but now institutional landlords will be wary of the stock and this could affect the growth pipeline. Lack of growth pipeline means relying on performance of existing units..... and these seem to be the problem. I think this one will linger on like Tragus until an buyout takes place.
Original post continued; Living wage – Others have mentioned that TRG might find it difficult to pass the cost on to the price in a competitive market, so it has the potential to hit the bottom line. Cinemas – Question marks remain on the strength of cinemas, and Chiquito will only open new units close to a cinema, so any turbulence in that market will directly hit Chiquito performance and growth. Concessions – Seems to be a strong and growing element of the business and is the key to other brands gaining entry into the transport hub market, so a strong part of the business. Garfunkels – Often referred to in the headlines, but not an important / relevant part of the business. There are a lot of key issues that could negatively affect the business, but not that many positives that make you think that these can easily be overcome (concerns arose around the fundamentals of Frankie & Bennys in c.Q4 2014 so this is nothing new). Despite the range of brands, the business has always been driven by Frankie & Benny’s and there are a lot of question marks over this part of the business, especially now without Danny B as the operational leader ‘on the ground’. Interesting times ahead.
The issues as I see it are (in no particular order); Competition – A crowded market with lots of existing and new entrants providing more competition that could be seen as more relevant to the consumer. Change in CEO – Andrew Page had overseen consistent growth at TRG, but I think the main issue with Danny B stepping up to become CEO is that it left a gaping hole in the operational management of Frankie & Benny’s. He was the MD of the business and its strongest operational leader, and I don’t think this position has been back filled at the same level. Lack of brand strength – Goes back to competition a little, but I don’t think any of the brands are particularly strong, especially in attracting new customers. The idea seemed to be that a 1950’s styled restaurant wouldn’t date, but I think it’s a concept that people have grown a little tired of, and some of the older outlets need updating. Leasehold portfolio – The vast majority of the estate is leasehold, and this leaves the company exposed to rental increases at rent review and lease renewal, which would hit the bottom line if LFL sales aren’t increasing at a decent rate (especially if there are some RPI linked reviews). Covenant Strength v Deal Negotiation – Much of the previous share price growth has been on the back of the rate of expansion. The TRG brands aren’t the first choice of institutional landlords as there are trendier brands out there that will drive more footfall, but TRG have always had a covenant strength that would get them into schemes. The 40% drop in share price over the past year could make landlords more cautious about putting TRG brands in their schemes and therefore hit the amount of new openings per year. The slack will not be taken up by Coast to Coast and pubs. Joes Kitchen – There was talk that Joes was getting rolled out this year, but it hardly gets a mention in the statements. Has this roll out been a success? Coast to Coast – They say its performing well, but don’t provide stats to back that up. Seems a very high price point for a TRG offer. Chiquito – Traditionally struggled in the past, but does seem to have picked up. But not a brand to drive the overall business. Brunning and Price – The founder and MD Graham Price stepped down two years ago, and it seems that TRG have had more influence of the brand since then, particularly on the supply side and wages. However, the majority of the estate is freehold and that is a real strength. The main concern is whether as the business grows in terms of number of outlets, does the offer suffer? Does it become a Vintage Inn’s? Would be attractive to Greene King if TRG needed a cash injection in future. The rate of openings for the pubs will not be a significant number on an annual basis, and the quality of offer is arguably weakening. Living wage – Others have mentioned that TR