Trading Update

RNS Number : 8496M

Hostmore PLC

26 May 2022

 

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This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

Hostmore plc

Trading update for the 20 weeks ended 22 May 2022 and revised guidance for FY22

A challenging consumer environment but well positioned with a strong and resilient balance sheet

26 May 2022

Hostmore plc (the "Company" and, together with its subsidiaries, being the "Group"), the hospitality business focused on American-themed casual dining brand, 'Fridays', the cocktail-led bar and restaurant brand, '63rd+1st', and the fast casual dining brand 'Fridays and Go' announces an update on trading for the 20 weeks ended 22 May 2022.

Highlights

· LFL revenue for the 20 weeks ending 22 May 2022 is c.6% lower than 2019, with dine-in sales remaining in line with the market benchmark data.

· Management actions, including pricing adjustments and hedging of utilities, limiting impact of lower volumes on margins.

· Successful new store openings in Dundee (Fridays and Go) in March and Chelmsford (Fridays) in May.

· Three further new sites now anticipated to open in financial year 2022 ("FY22").

· Continued cash flow generation, balance sheet strength and liquidity headroom provides a base to almost double the estate in the medium term.

Current Trading

Dine-in trading, the most significant revenue stream and primary focus for the Group, is in line with the market benchmark data, with LFL revenue for the 20 weeks ending 22 May 2022 c.6% lower than FY19 as a result of a more challenging consumer environment. We believe this is primarily a result of consumer confidence weakening significantly since Russia's invasion of Ukraine on 24 February 2022 which is contributing to the current cost of living crisis.

Our focus on quality, relevance and simplification continues to deliver a significant improvement in guest satisfaction scores. Furthermore, early hedging of gas and electricity costs, both volume and pricing, and success in limiting food and beverage costs increases, has limited the impact on margins.

Continued organic expansion being delivered

Strong cashflow from operations continues, enabling estate expansion in line with our strategic growth plans. The new store openings in Dundee (Fridays & Go) in March and Chelmsford (Fridays) in May have both since traded ahead of expectations. We expect to open a further three new sites during FY22 with the development of the Edinburgh 63rd+1st site having commenced with a planned opening date in early July. 

Subject to an improved trading environment our ambition is to almost double the number of site locations from the current 89 over the medium term. This growth will be self-funded and achieved through a combination of our core Fridays portfolio, further roll-out of 63rd+1st and, in particular, the development of the recently launched town centre concept Fridays and Go which allows low capital brand penetration into previously inaccessible but attractive geographies.

Outlook

The challenging consumer environment means that we are taking a more prudent view on trading for the remainder of year, including the assumption that LFL dine-in volumes, as compared to FY19, may reduce by 8% for the rest of FY22. However, improved customer satisfaction scores demonstrate the success of our investment in improving the quality of our customer offer and now provides a strong basis for appropriate pricing adjustments, in line with broader sector announcements, to mitigate approximately half of the impact of the lower volumes now anticipated.  Food and beverage input cost inflation impacting the sector is currently approximately 10%. We have partially mitigated the impact of this cost inflation by fixed utility and supply contracts; however, the combination of cost increases and lower volume will result in an EBITDA margin (pre-IFRS) in low double digits (%) for the current year compared with our medium-term targeted level of mid-teens, which is retained.

The Group is highly cash generative and maintains a strong and resilient balance sheet with significant liquidity headroom, providing the flexibility for disciplined expansion.  This will be focused around our organic growth and new store openings from our existing stable of brands. We now expect to be at the mid-point of our previously communicated target net debt to EBITDA range of between 0.75x and 1.5x EBITDA (pre-IFRS) at the end of FY22, taking into account the investment in new store openings.

Robert B. Cook, Hostmore plc's Chief Executive Officer, commented:

"We are not where we expected to be, however, I am able to report a financial performance which, regardless of the arduous challenge and extreme economic headwinds being encountered presently, allows us to confidently continue with our development strategy. Our ambition remains that of almost doubling the size of our existing portfolio brands over the medium term as economic conditions improve. Our relationship with landlords, coupled with a prudently managed balance sheet, provides the basis for confidence in the success of our strategy over the longer term.

The ongoing loyalty of our many guests that continue to support us by visiting our restaurants is welcome, and I am extremely grateful to all our colleagues for their continued hard work and commitment which has resulted in a further improvement in our guest satisfaction scores. This is a great cornerstone to build upon, and our focus continues to be on extending the lifetime value of our guests by adding further to the guest experience through our three pillars of quality, simplification and relevance, which should increase the number of repeat visits per annum.

The recent Fridays core brand store opening in Chelmsford, and our world-first "fast casual" Fridays and Go restaurant in Dundee, supports our belief that the Fridays brand has a strong long-term future, and our 63rd+1st brand continues to attract higher than average levels of guest spend and satisfaction which will enable it to consolidate itself in existing and new target locations.

Whilst we remain ever mindful of the ongoing economic challenges, the management team remains focused on delivering the appropriate returns to the benefit of all stakeholders."

1.  Market benchmark data refers to Coffer Peach tracker for restaurants (Fridays benchmark group).

ENDS

ENQUIRIES

Hostmore plc

Robert B. Cook, Chief Executive Officer

Alan Clark, Chief Financial Officer

[e-mail]

[phone]

Vico Partners

Sofia Newitt 

020 3957 5045

NOTES TO EDITORS

Hostmore plc is a growing hospitality business with its current operations focused on the American-themed casual dining brand, 'Fridays', and the cocktail-led bar and restaurant brand, '63rd+1st', and the fast casual dining brand 'Fridays and Go'. While Fridays has been trading for over three decades in the UK, Hostmore was established in 2021 to provide a platform for the development of hospitality brands under the leadership of an experienced management team that has a record of building businesses in the hospitality and leisure sectors. Hostmore's businesses are defined by their iconic brand experience and vibrant heritage. As of 26 May 2022, Hostmore operates 89 restaurants in the United Kingdom and Jersey, a majority of which are in high footfall locations, including retail parks, shopping centres and city centres.  Hostmore is exploring opportunities with TGI Friday's, Inc., the franchisor of Fridays, to expand its existing brands into new franchise territories and is seeking to add rapidly growing, early-stage businesses to its portfolio of complementary hospitality brands, as well as to extend its offering in other experience-led, leisure concepts.

 

 

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