BUSINESS LIVE: TRG to sell loss-making Frankie & Benny’s unit

Aarin Chiekrie, equity analyst at Hargreaves Lansdown:

‘Vistry’s overall performance was impressive given the challenging environment for UK housebuilders, and the group today announced a major shift in strategy. Vistry is set to shift its operations to focus solely on the more defensive, high-yield association business, which focuses on affordable housing.

‘This means Housebuilding will fully merge with Partnerships at the end of the second half, freeing up capital to strengthen the balance sheet and help fund shareholder returns as well as the continued growth of the Partnerships division.

It’s fair to say that the Homebuilding division has been stuttering lately. Recent interest rate increases have reduced affordability for buyers, causing private sales rates to decline and lower completions as a result. However, this is not surprising, given that home construction is a notoriously cyclical sector.

‘In contrast, association revenues tend to be stronger: the need for more affordable housing doesn’t disappear because economic conditions seem tough. This provides large, fixed-volume projects that should hold up better in a downturn.

‘Partnerships, which for the first time includes a contribution from recently acquired Countryside, saw completions almost triple to 3,203 in the first half. Cost savings as a result of the acquisition are progressing well and helping to keep the underlying full-year pre-tax profit guidance intact, which is expected to be in excess of £450m.’

John Lewis will report another loss this week when new chief executive Nish Kankiwala reports his first set of results since taking the helm of the struggling retailer.

Britain’s largest employee-owned business, which includes department store John Lewis and grocer Waitrose, has been hit hard by a triple whammy of the pandemic, rampant inflation and falling cost of living. Kankiwala is expected to announce smaller losses in the six months to July compared with the £99m deficit recorded during the same period a year ago.

Vistry Group will merge its affordable housing Partnerships business with its homebuilding operations.

The housebuilder communicated its plans to investors and maintained its annual profit forecast, boosted by resilient demand in the cheap housing segment.

Vistry, one of Britain’s biggest builders in terms of annual homes built, posted an adjusted pre-tax profit of £174m for the half-year ended June 30, compared with £189.9m for the year former.

BMW will announce plans to build its next-generation electric Mini in Oxford after securing a government funding package.

The German-based manufacturer’s multi-million-pound investment to transform its existing plant will secure 4,000 high-quality jobs, according to ministers.

Government sources declined to establish the level of taxpayer support being offered to BMW, but did not dispute the previously reported figure of £75m.

The Restaurant Group has agreed to sell its loss-making leisure business, which houses the Frankie & Benny’s and Chiquito brands, to Cafe Rouge owner Big Table Group.

TRG will pay £7.5 million to Big Table as part of the deal.

Andy Hornby, CEO of TRG, said:

‘The sale of our Leisure business significantly accelerates our medium-term strategic plans to increase adjusted EBITDA margins and reduce leverage.

‘On behalf of TRG, I would like to express our huge thanks to the extraordinarily hard-working and dedicated teams across the Leisure business who have achieved huge improvements to the customer proposition over recent years. We wish them all the best as part of the Big Table Group.”