Companies: REG   

Bars and comedy clubs group Regent Inns has had a rough time in its smoky late-night sub-sector, but executive chairman Bob Ivell believes a stronger focus on restaurants will lead the group to salvation.

Regent bought the Old Orleans restaurant chain last September for £26m and the acquisition is ‘bedding down ahead of schedule’, Ivell recently told Growth Company Investor. ‘The estate’s in reasonably good nick so we’ll only need £2m to £3m to tidy it up. The key is to improve the quality of food and service, which Punch had cut back on,’ he added. He is eyeing potential sites for a roll-out of the brand, some within the greater Regent estate.

Slightly ahead of expectations, the acquisition contributed £10.2m of revenue towards the interim total of £73m, lifted from £65.8m in 2005, though continuing operations fell almost 5%. Pre-tax profits for the six months to 30 December fell from £6.4m to £3.6m, though £0.5m was shifted to the second half due to New Year’s Eve moving into that period. £4.5m of debt was paid down in the first half and there is still £30m of banking headroom. No interim dividend will be paid.

‘The first half was all about the Licensing Act,’ admitted Ivell. ‘We did have quite a slow start but Christmas trading was strong.’ Like-for-like sales were up 3.4% for the six weeks after the anniversary of the licensing changes in November and improvements to the food offer saw an 18.1% increase in like-for-like food sales over the half.

Analysts are concerned about the unforgiving late-night bar environment and even more anxious about the looming smoking ban. Charles Stanley is looking for 6.4p of earnings for the full year, while Numis expects around 6p. With growth rather stagnant at the moment, a prospective price/earnings ratio of around 16 is a tad weighty. Avoid for now.