Monday 21 August 2017 The one stop source for free breaking news, expert analysis, and videos on AIM and LSE listed shares

Comptoir Group – less than a year after IPO on AIM… a profit warning…

By Steve Moore | Monday 5 June 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

A 10:15am “Trading Update” announcement from restaurant group Comptoir (COM), which IPO’d at 50p per share on AIM less than a year ago. An unusual time for a trading update + a restaurant group, with all the pressures facing that sector currently = I think I can guess much of how the announcement is going to go…

It notes recent “unexpected decline in like for like sales and profit at certain mature restaurants, particularly in retail-led locations and at its higher-spend restaurants, Levant and Kenza” and “a number of the restaurants opened in 2016 remain behind expectations in terms of their anticipated maturity trading curve”, before adding;

“Like many of its peers in the sector, the company is experiencing upward pressure on costs, including incremental wage costs and related taxes (apprenticeship levy), higher food and drink costs (driven by depreciation in sterling versus the Euro) and increases in rent and business rates. Together with the softening in consumer spending”.

However, despite noting “a significant impact on restaurant profitability and visibility” of these factors, the company continues to emphasise “considerable potential for expansion” and still expects to open 3 more restaurants before the end of the year, together with a first international franchise operation in the Netherlands, whilst also noting “steps to limit the increase in central overheads” and that it expects to a raise a gross £2.7 million from the sale and leaseback of the freehold of its North London central processing unit to “be used to fund the remaining new openings for 2017 and strengthen the group's working capital position”.

Hmmm. April-announced results though included “the three further anticipated openings for 2017 can be funded from internally generated cash” and that central processing unit freehold action was “depending on the outcome… (of) discussions with our bank regarding additional funding which will enable us to continue the roll-out in 2018”. Now, sale and leaseback is needed to not only fund the remaining new openings for 2017, but to “strengthen the group's working capital position”?

This looks quite a deterioration and how have those discussions with the bank then gone? Despite the shares now declining below 25p, natch, the stance currently is to avoid / sell.

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