UK franchise of an American themed restaurant chain providing a high energy, fun environment with a wide demographic appeal

Year ended 31 December   2017
£m
2016
£m
Sales   216.0 211.0
Operating Profit   22.3 21.0
EBITDA   33.3 31.0
Return on Capital Employed (ROCE)   11.0% 9.6%

 

Demand in the casual dining market continues to grow and offers attractive opportunities for those brands that keep up with changing consumer expectations. TGI Fridays continually seeks to improve its proposition, updating its menus, refreshing stores and developing staff, as it aims to provide an experience that is valued by its customers. Over the last year, new healthier menu items and an updated ordering platform have been introduced.

The business continues to pursue a strategy of sustainable growth through highly selective store expansion and has a strong pipeline of future stores, but with the flexibility to take advantage of opportunities in the market. Recent acquisitions have provided a high return on investment of around 35%; providing confidence in the Company’s expansion plans.

A difficult market has provided a challenging year for TGI Fridays and led to the value of the business falling to £125m. In particular, severe weather and the World Cup dampened underlying sales by around 4% and EBITDA by around £2.5m, with extended snow to start the year followed by extreme heat in the summer. The result of these conditions, in addition to long-term rent and rates and other costs increases, have impacted the entire market, with a number of competitors forced into taking actions including CVAs and site closures. TGI Fridays, however, remains highly profitable, cash generative and able to support a controlled growth plan, helped by our investment to reduce bank debt in August 2017 which substantially reduced interest payments. 

The short-term outlook is improving with average spend per head increasing year on year and number of covers returning to positive growth. We expect that the market will continue to recover; however, the strategy for the business does not rely upon market recovery, but on a differentiated proposition to customers.
 

CHIEF EXECUTIVE OFFICER:

Karen Forrester

99%

ELECTRA OWNERSHIP: 99%

£142m

COST: £142m

£125m

VALUATION: £125m

0.9x

MULTIPLE OF COST: 0.9x

VALUATION:

Based on multiple of earnings

 
 
 

DATE OF INITIAL INVESTMENT:

December 2014

 
 
 

TYPE OF DEAL:

Buyout

 
 
 

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