Food & Group Group shares dive on profits warning

Shares in the Food and Drink Group (F&DG) slumped nearly 50 per cent today after the bar and restaurant operator admitted profits for 2008 would be "significantly" lower than market expectations of £1.2m, despite hopes of a good summer's trading.

In a statement the group, which operates 31 sites including brands such as Jamies Wine bars and Henry J Bean's restaurants, said it had "experienced worsening trading conditions over the last two months and whilst performance is anticipated to improve during the historically strong summer trading period, it is expected that performance will be significantly below market expectation for the financial year ending 27 September 2008".

Some of the group's units are said to be up 25 per cent year-on-year, while others, particularly those sites that were uninvested, are believed to be faring considerably less well.

In January of this year F&DG had said that trading in the last third of its 2007 financial year had become "more challenging" as it announced turnoverfor the period up 2.4 per cent to £20.8m, with operating profits down 23.4 per cent at £966,000 and pre-tax profits down a third at £600,000.

The group also said at the time that its capital structure was "inappropriate for a more uncertain economic climate" and that it was looking for either a buyer or a merger partner.

Last year F&DG bought seven sites from the Puzzle Pub Company and the refurbished units were said to have delivered "improved performance".

However the trading environment appears not to have improved for the group enough, as today's statement confirms.

F&DG also revealed it had sold its leasehold bar in Maddox Street, London, for a net cash consideration of £600,000.

The group said disposal proceeds would be used to reduce its net debt and result in a profit on disposal of the site in the region of £200,000.

"The site made no contribution to profitability last year and it is not expected that the disposal will result in a material change in the profitability of the company in the current year," it added.

F&DG's shares were trading down 30p at 31.5p.