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Tasty – 2017 results, “significant positive changes throughout 2018”?

By Steve Moore | Tuesday 13 March 2018

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.

Wildwood and dim t UK restaurant company Tasty (TAST) has announced results for the 2017 calendar year – with “highlights including; “Revenue up 9.7% to £50.3m” and “The financial performance of the group was in line with the board's revised expectation”. Hmmm, “revised expectation” hey…

The results show a pre-tax loss of £9.47 million (prior year: £0.09 million loss) and, even on an adjusted basis, a profit of just over £1 million, compared to a prior year more than £4.5 million. Additionally, net debt increased by £3.16 million to £5.16 million.

This was with it noted “margins saw significant decline in the year which is due to a number of underperforming sites as well as underlying inflationary pressures experienced through labour, food and business rates”. It is added “the group will undergo significant positive changes throughout 2018 which should allow for successful menu development, improved customer experience and, in the longer term, lower costs”. However, also…

“the group will also continue to investigate promotional options and pricing structures. Some of these changes will be disruptive to the business in the short term and the group will incur a number of restructuring costs in 2018”. This is particularly not good as “the board does not expect market conditions to improve in 2018 and believes that a further deterioration is likely. Underlying input costs will continue to rise and consumer spending will face increased pressures”.

With it also admitted that the majority of sites saw a decline in footfall and like for like sales in 2017 – and that market conditions became “increasingly challenging” through the year, I suggest it presently correct to remain bearish here.

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