I like this business because management has a record of past success in the industry.
Below are some key findings:
1. Annual lease per restaurant is £88k, down from £110k seven years ago.
2. The leasing duration for each chain is roughly 16.7 years. It worked out as annual lease/total operating lease = 6%. So, (1/6% = 16.7)
3. Asset turnover minus cash is stable.
4. External funding since IPO’s admission totals £32m or £3.2m per year.
5. Market valuation is at a three-year low.
6. As management revise that new store openings to seven, it helps reduce capex down to around £6m. Previous guidance of 15 new stores would result in £13m to £14m capex.
Industry Outlook
The Guardian posted a piece stating an accountancy firm cite 5,570 restaurants has a 30% probability of going bust in the next three years.
These contributing reasons are: -
-The UK imports 48% of its food, this leads to higher operating costs;
-The cost of labour is rising from £6.70 to £7.20 in April, with a further rise to £7.50 to take place next April;
-More consumers are in debt; - 48% of borrowers have a credit card which is not cleared in full each month, compared with 39% a year ago.
Although they were valid points, we don’t know how many of them are restaurant goers?
Below are some key findings:
1. Annual lease per restaurant is £88k, down from £110k seven years ago.
2. The leasing duration for each chain is roughly 16.7 years. It worked out as annual lease/total operating lease = 6%. So, (1/6% = 16.7)
3. Asset turnover minus cash is stable.
4. External funding since IPO’s admission totals £32m or £3.2m per year.
5. Market valuation is at a three-year low.
6. As management revise that new store openings to seven, it helps reduce capex down to around £6m. Previous guidance of 15 new stores would result in £13m to £14m capex.
Industry Outlook
The Guardian posted a piece stating an accountancy firm cite 5,570 restaurants has a 30% probability of going bust in the next three years.
These contributing reasons are: -
-The UK imports 48% of its food, this leads to higher operating costs;
-The cost of labour is rising from £6.70 to £7.20 in April, with a further rise to £7.50 to take place next April;
-More consumers are in debt; - 48% of borrowers have a credit card which is not cleared in full each month, compared with 39% a year ago.
Although they were valid points, we don’t know how many of them are restaurant goers?
Tasty PLC, a value restaurant chain?
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