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Tasty – “trading across the estate below management's revised expectations”. Uh oh…

By Steve Moore | Wednesday 9 August 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.

March-announced 2016 results from restaurant group Tasty (TAST) included that “the directors believe the group's core 'Wildwood' brand remains attractive to customers”, but that “trading since year has proved challenging and the directors are now expecting headline operating profit for 2017 to be below that achieved in 2016”. Hopefully the warning was heeded as the shares are currently further lower on the back of a “Trading Statement” announcement…

This notes, for the 26 weeks ended 2nd July 2017, an adjusted profit after tax of approximately £200,000 (27 week 2016: £1,283,000). That is someway below then! This on revenue of £24.4 million, with “trading across the estate below management's revised expectations”.

It though continues to consider “the group's core 'Wildwood' brand remains attractive to customers and that the group has a property estate with desirable locations which will deliver significant financial performance”. However, it also notes “the directors continue to refine and improve the 'Wildwood' brand offering” and that it “has undertaken a full review of its estate, operational structure and cost base however the expected improvements from these initiatives are now unlikely to be significant in the current year”.

Hmmm. It then argues it “has a strong balance sheet”, but follows this up with that it “expects to dispose of certain fixed assets during the second half of the financial year to strengthen the cash resources available to the group”!

The end of last year balance sheet showed net assets of £30.2 million, current assets of £12 million and cash of £5 million, though also current liabilities of £9.6 million and non-current liabilities (including borrowings of £7 million) of £9.1 million.

I’d thus suggest the 12th September-scheduled half year results announcement won’t show a very ‘strong’ position in terms of liquidity and, with a still “difficult trading environment”, I avoid. Sell.

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