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Piccolino restaurant in Manchester

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7:24 am, February 9, 2010
Piccolino owner to beat analysts' profit forecasts

Casual dining chain Individual Restaurant Company Plc (AIM: IRC) today said its 2009 pre-tax profits would be ahead of market expectations.

Most analysts are expecting a figure of about £1.1m but IRC said it had cut costs by more than the £2m target it set itself in the year to December 31.

The Manchester-based group, which owns 22 Piccolino and 11 Restaurant Bar & Grill outlets, said its strategy of resisting mass discounting meant there had been no erosion in gross profit margins compared with the previous year.

Net debt was £12.4m at the year end compared with £15.8m at the end of 2008 and IRC has only drawn down £12.4m of its £18.5m bank loan facility and expects to pass year end covenant “comfortably”.

Trading in 2010 is expected to remain challenging due to continued pressure on consumer spending. Bad weather in January hit takings, particularly outside of the South East but trading has since returned to anticipated levels.

Stephen Walker, chief executive, said: "I am pleased to report another sound trading performance in what remains a challenging market. We remain committed to a focus on our core customer values, whilst maintaining tight cost control and improving efficiencies across the group.

"IRC benefits from two strong restaurant brands with demonstrable roll out potential for both Piccolino and Bar & Grill on a national scale. The group is well placed to capitalise on an improvement in the consumer environment as that materialises and the Directors remain confident in the future prospects for the group."

House broker Altium Securities said in a note this morning that it expected IRC to seek more cost cuts to offset the impact of bad weather in January.

The broker said 2010 would see the full year impact of the interest rate increase following last year’s refinancing.

"As previously noted we have some concerns of the impact to restaurant trade generally through the football world cup," Altium added.

It has downgraded its ebitda forecast by £200,000 to £4.9m, giving an ebitda multiple of 4x compared with an average of 5.5x for the restaurant sector as a whole.

Altium said this was "low for a group with two quality restaurant brands with strong medium term recovery potential", and reiterated its Buy recommendation on IRC.

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