Willow67
09 Mar 2018
Update Wow its just non-stop bad news from these guys. Revenue per store seems to still be falling and margins are clearly under pressure. Sadly for shareholders, the place to be in fast casual restaurants right now is in well run high quality independents with a strong niche in a local neighbourhood, not roll-outs which have become too generic. I also still think their price point is too low and it leaves them so vulnerable to squeezed margins from wage/rates/produce cost increases. But to put prices up you need a place people really want to go for a night out in, not just pop in for quick pizza, and that isn't FM.
Willow67
04 Jan 2018
New lows New lows of 10.25p. It's a pretty much non-stop disaster for the shares since the trading update on 6th Sept when they announced a slowdown in July and August sales and highlighted that margins were getting squeezed by increased cost pressures without them feeling they could raise prices. The Chairman's statements on 24th Sept added to this woe by confirming continued weak trading in Sept, some of their older FM's trading below prior year levels hinting strongly that they have not targeted a high enough return on capital from openings. my reckoning the sales per site in the last 6 months report have slipped from £800k area to £675k area over the prior full year which is a significant decline and on an absolute basis is low. The weak sites in the London suburbs should be performing better since this is where young people and families live. My view is that as they have expanded their quality has dropped and competition has increased. London is now littered with independent Neapolitan pizzerias and many of those simply provide a more varied and more interesting experience, and in some cases simply much better food. FM has now become very generic and by opening in shopping centres like Westfield it is no longer seen as at all cool as a brand. I also believe Londoners will pay for quality - a slightly weaker economy and lower discretionary spending does not impact whether someone is willing to pay £7 or £5 for pizza if the product is good enough.For now and until their can show a turnaround in the weak summer trading and improved margins the shares are going stay under pressure - the market is punishing any business demonstrating Brexit-related pain. The directors are 30-40% down on the extra shares they bought in Sept in an attempt to demonstrate confidence and the market cap of the business just £60m values the business at £1m per restaurant which is historically low for a roll-out concept until you consider that on an ebitda margin of 16% and sales of £675k per site (£100k of ebitda) thats a multiple of another too shabby x10. Could it be even lower? I don't see why not.
Willow67
11 Sep 2017
Re: Profits warning My gut feeling is another dip lower, then a sharpish bounce, to settle at 15-16 but hey it's all speculation.
Still learningafterallthistime
07 Sep 2017
Re: Profits warning I almost bought some more yesterday when they were even lower, but i agree with you, I think they could go lower. Although they are still very popular in London. Watching, might buy a few.
Willow67
07 Sep 2017
Profits warning Not great news and certainly a multi-thousand pound hit to me. Despite the director buying following the news it dents confidence in their low price point model and whether a pizzeria roll-out in the current difficult environment works. I would be surprised if we have seen the low point in the shares but here (or lower if we are lucky) could yet prove to be an amazing entry point for buyers.
Willow67
26 Aug 2017
Re: Gone for it The way I am trying to view this is assuming there isn't a sale in the near or even medium term, but take that as a bonus if there is. If you lookout the March 2020 forecasts finical have for site openings and the comment the company have made about stepping up RG openings in 2018/19, its not unreasonable to expect there to be 100 restaurants in the group in 3.5 years time, which on the current run rate would be producing £20m of ebitda and value the group somewhere in the £200-300m area. I am happy to hold for that kind of period, 3-5 years. With the company worth £100m right now, that's a nice return profile.
twotonetyrone
08 Aug 2017
Re: Gone for it Welcome (back) onboard and nicely timed. I've been a holder for a while and managed to buy some tranches in 16-17p range. SP hasn't done much but i'm holding for sale of FM to private equity. I live in London so see first hand how good their operation is - fast service, great pizza and low price point. I work in commercial property so have been monitoring their role out first hand - FM and TRG popping up in many large cities/towns. As you've pointed out previously, a concern is rising costs...rents, wages, input costs, low £, etc
Willow67
03 Aug 2017
Gone for it I bought a pretty big slug of shares today a touch below 18p on an order. The shares have traded in the 17-22p range for over a year now and at some point I think they will test the top of that range again and probably go through it. Also like the upside of a possible sale of FM.
Willow67
14 Jul 2017
Results A real mixed bag in their results but some issues here, also evidenced by the shares falling slightly on a day they announced a large jump in sales & profits. On the positive side they have expand their footprint with 16 new sites in the year and 8 since, and have gained proof of concept for both FM and tRG outside London, which is very important. Despite the cautious tone from David Page, the rate of openings has accelerated and cash generation appears now to be at a level that with the borrowing facilities they have, they will have no problems at all keeping up the pace. They have around 52 open now, so this could reach 100+in 3 years.There are negatives though. The GP margin is very low for a fast casual restaurant group at only 43% and it has fallen this year from 45% after the fall in GBP. That is probably a function of their very cheap price point. Brexit certainly creates uncertainty in terms of rising costs, the minimum wage will be a drag and good chefs will be harder to find especially outside London.The bottom line however is at a market cap (that has gone nowhere for some time) of £110m and ebitda up to £7m, the shares are on a multiple of just 16. It you move one year forward, I'd guess that ebitda figure will be up close to £10m, with the multiple falling to 11. The outlook for the UK economy and restaurant groups is a little shaky, but they should be relatively insulated at least from a drop in consumer spending by their cheap price point. Ultimately you reach a conclusion that the shares start to look cheap, arguably very cheap. The potential icing on the cake here is sale of FM, which might go somewhere around 25 times, if a large restaurant group wants to take the chain fully nationwide, say from 50-60 to 200 sites. With FM ebitda currently at £5m, say £7m next year, that's a take-out worth £175m and it leaves the company owning tRG away from that, conservative worth £30-40m. So to me there is a scenario where the shares are worth almost double the current market cap. I have been out of them for some time but will be looking to start to buy any dips nearer to £100m market cap.
Still learningafterallthistime
25 Apr 2017
Trend? I'm not a chartist, but I sometimes think they add value. The 50 day SMA keeps bouncing off the 200 day. Is that a good thing? To my simple mind it looks positive. SL
Willow67
17 Mar 2017
Re: Franco Manca builds pipeline I started buying back in yesterday now the valuation is £100m and the share options granted today only confirm my feeling that the valuation is now an attractive one. I'll buy more at 15-16p if the shares get there. The shares might mark time in the short term but my feeling is over 12-24 months this will be a +50% investment as their growth continues or is actually monetised through some kind of corporate activity
twotonetyrone
16 Mar 2017
Franco Manca builds pipeline Franco Manca, the Fulham Shore-owned chain, which last night won the Best Concept Award at the Retailers’ Retailer Awards 2017, has lined up a further seven locations, as it looks to push through the 40-site mark and beyond.
Willow67
02 Nov 2016
Re: Further FM expansion There are some significant cost pressures now on the business that make me very wary, which is why I have sold out. (1) The weakness of GBP will put most of their imported food prices up by around 10% (you can’t get caputo flour etc in the UK). Because they sell at an affordable price, their GP was only 50% in their last year end accounts (very low for a restaurant, normally more like 70%) and that is going to come under pressure further...even a 7% increase in all materials prices would bring their GP down to almost 40%, very low (2) with the increases in the national living wage, their employee pay rates are going to go up about £2/hr over the next 3 years, adding around 25% or £2m to their wages bill. Given their operating profit was only £3m last year, this additional cost almost wipes out their profitability.This business model worked very well when materials and labour were affordable but both of those costs are heading up. The problem they have got is their quality has inevitably suffered as they have expanded and now if they put their prices now to defend their profitability they will run into more direct competition with the good independent pizzerias who with 1-5 sites can maintain the quality of their food better than FM can/does.
twotonetyrone
01 Nov 2016
Further FM expansion Franco Manca has opened at the Westfield shopping centre in London, marking the brand’s 28th restaurant in all. Franco Manca has also announced it will open in Southampton in December and Reading early next year, as it continues an expansion outside London. Two more sites in the capital are meanwhile lined up for spring, in Richmond and Putney.
gravy
14 Jul 2016
Re: Franco Manca expansion Excellent results today.
