Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Record revenue growth of 24.7%, reaching GBP353 million.
- Adjusted EBITDA increased by 29%, with a margin improvement from 12.1% to 12.5%.
- Opened a record 36 new sites during the year, with strong performance from these new locations.
- Like-for-like sales growth of 7.5% in FY24 and 5% in the first 11 weeks of FY25.
- Strong cash generation, with GBP47.1 million from operations and GBP35.4 million of free cash flow.
Negative Points
- Increased labor costs, impacting overall gross profit margin.
- Negative impact on like-for-like sales growth due to external factors such as football events and additional bank holidays.
- Energy costs increased by 30 basis points due to coming out of a post-COVID hedge.
- Central costs increased by 30 basis points, mainly due to higher bonus payments.
- Challenges in maintaining volume growth amidst price increases.
Q & A Highlights
Q: With 36 new sites opened in FY24, how do we assess the performance and profitability of these new locations compared to existing sites?
A: Nicholas Collins, CEO: The new sites from FY24 are showing higher levels of average sales and EBITDA, with a consistent maturity profile. We see a honeymoon period followed by like-for-like growth, leading to improved EBITDA and profitability.
Q: How are you planning to tackle ongoing inflationary pressures, especially concerning labor costs and national living wage increases?
A: Stephen Marshall, CFO: We take a balanced view between maintaining profitability and the right customer offer. We've been successful in managing inflationary pressures historically and will continue to monitor our cost profile and site profitability to maintain balance.
Q: Your focus on staff retention sounds great. Can you give us some color on exactly what you're doing from a learning and development point of view?
A: Nicholas Collins, CEO: We have formalized our training programs, including the bitesize program, step-up program, and future-ops program. These initiatives aim to provide clear career progression paths and ensure consistent training across the business.
Q: Are there any specific market trends or consumer behavior you are closely monitoring that could influence your strategy?
A: Nicholas Collins, CEO: We monitor food and drink trends closely. For example, we've seen an increase in Middle Eastern and Asian dishes on our menu. We also trial new products like Guinness to respond to consumer preferences.
Q: Volume versus price: Given you've taken lots of price increases, would this be at the expense of volume? What gives you confidence that volume will return?
A: Nicholas Collins, CEO: While price increases may impact volume slightly, our strategic priority is to return to meaningful volume growth. We focus on operational efficiency, speed, and customer familiarity to drive sales growth.
Q: Can you explain why the restaurant industry focuses on IAS 17 EBITDA?
A: Nicholas Collins, CEO: EBITDA is a good surrogate for cash generation in our business. It captures the full-year effect of our sites and the opportunity for growth through our rollout strategy. Stephen Marshall, CFO: IFRS 16 has complicated analysis, but EBITDA remains a key metric for understanding our cash generation and growth potential.
Q: What's your average lease length?
A: Nicholas Collins, CEO: Our average lease length is 15 years.
Q: Are loyalty schemes on the radar?
A: Nicholas Collins, CEO: Instead of formal loyalty schemes, we encourage random acts of kindness where our teams can give away items to customers to enhance their experience.
Q: Do you expect to see further optimization in the supply chain? Can we expect sustainable sales growth to continue at this level?
A: Nicholas Collins, CEO: Yes, we are on a journey to optimize our supply chain and reduce logistics costs. We believe we can continue our track record of consistent sales growth.
Q: What are your top two or three learnings from the closure of the site in Harrogate?
A: Nicholas Collins, CEO: The site was in the wrong pitch, too far from the evening trade area. We rushed into the site without enough on-the-ground research. This experience has made us more cautious and thorough in site selection.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
