Final Results

Various Eateries PLC

01 February 2024

 

1 February 2024

VARIOUS EATERIES PLC

("Various Eateries" or "the Company" 

and with its subsidiaries "the Group") 

Final Results

52-week period ending 1 October 2023

Poised to accelerate following a year of steady progress and a successful post-period fundraise

Various Eateries PLC, the owner, developer and operator of all day clubhouse, restaurant and hotel sites in the United Kingdom, announces its results for the 52 weeks ended 1 October 2023.

Financial Highlights

·      Revenue growth of 12% to £45.5m (2022: £40.7m), largely driven by new site openings

·      Adjusted EBITDA* loss of £2.2m (2022: profit of £0.4m), with the Board choosing to absorb the majority of price rises to strengthen the Group's longer-term prospects

·      Total loss before tax of £6.7m (2022: loss of £7.2m)

·      Cash at bank of £1.9m (2022: £9.4m)

·      Net debt of £11.6m (2022: £3.3m)

* not audited see Financial Review

 Operational Highlights

·      Resilient performance in the year with LFL sales holding relatively firm despite well-publicised industry challenges

·      Measured approach to expansion with the opening of two new Noci restaurants and one Coppa Club

·      Continuous mitigation of the inflationary environment through supply chain management and menu re-engineering

·      Strengthened senior management team with appointment of Sharon Badelek as CFO, Rebecca Tooth as MD of Coppa Club (non-board position) and Scott Williamson as People Director (non-board position)

Post-period Highlights & Outlook

·      Successful fundraise of £10.1m and conversion of debt into equity

·      Encouraging signs that the inflationary environment is normalising

·      Plans to open up to ten Noci sites and up to three Coppa Club sites in the next phase of roll-out

Andy Bassadone, Executive Chairman of Various Eateries, said: 

"Performance in the year under review was solid given the host of challenges faced by the industry. We have continued to focus on customer loyalty, brand reputation and maintaining revenue, and I am proud of our teams for all their hard work. 

We enter the new financial year in a position of strength having raised £10.1m and converted debt into equity in December. The convergence of site availability, reduced competition and changing consumer behaviours has brought forth a generational opportunity akin to the casual dining revolution of the 90s and we are well set to capitalise.

Inflationary pressures have been a major thorn in the side of all hospitality businesses in the period but encouragingly there are signs they are beginning to abate while interest rates appear to be cooling. We are not out of the woods yet by any means but we are confident our approach is the right one to ensure the long-term prosperity of the Group.

We are excited about what we are building and look forward to the challenges and opportunities of the year ahead with confidence."

Annual General Meeting and Posting of Results 

The Company confirms that it intends to distribute its Annual Report and Accounts and notice of Annual General Meeting to shareholders shortly. A further announcement will be made at that time. A copy of the annual report and accounts will also be available from the Company's website at the same time (www.variouseateries.co.uk).

Enquiries 

Various Eateries plc		Via Alma
Andy Bassadone  Sharon Badelek	Executive Chairman  Chief Financial Officer
WH Ireland Limited	Sole Broker and NOMAD	Tel: [phone]
Broking    Harry Ansell
Nominated Adviser   Katy Mitchell
Darshan Patel
Alma Strategic Communications	Financial PR	Tel: [phone]
David Ison  Rebecca Sanders-Hewett Will Merison		[e-mail]

About Various Eateries  

Various Eateries owns, develops and operates restaurant, clubhouse and hotel sites in the United Kingdom. The Group's stated mission is "great people delivering unique experiences through continuous innovation".

The Group is led by a highly experienced senior team including Hugh Osmond (Founder), Andy Bassadone (Executive Chairman) and Sharon Badelek (CFO).

The Group operates two core brands across 18 locations: 

·      Coppa Club, a multi-use, all day concept that combines restaurant, terrace, café, lounge, bar and work spaces

·      Noci, a modern, neighbourhood pasta-only concept which serves very high-quality dishes at reasonable prices

For more information visit www.variouseateries.co.uk

Chairman's Statement

£10.1m placing to fuel expansion following a resilient year

I am pleased to be publishing these results on the back of a successful post-period fundraise and conversion of debt into equity, positioning the Group on a trajectory of accelerated growth. This allows us to move forward with enhanced financial firepower and our sights firmly set on expansion.

Performance in the year under review was solid given the host of challenges faced by the industry, with like-for-like sales standing relatively firm. Experience tells us that in difficult periods, maintaining customer loyalty and brand reputation is paramount, so we made the conscious decision to absorb the majority of price rises. While this strategy put pressure on our margins in the year, taking a longer-term view we are confident it will stand us in good stead.

As we move into FY24, there are encouraging signs that the inflationary landscape is beginning to normalise. Volatility remains and the rate at which certain pressures will abate is difficult to forecast, but conditions appear to be gradually improving. Supported by strong cash reserves and a refined focus, we will continue to pursue our roll-out strategy in a measured and sustainable way, exercising financial discipline while maintaining the ambition necessary to capitalise on the current opportunity.

A multi-brand hospitality business with a generational opportunity

The Group's strategy is built around the expansion of two proven brands, each designed to fill a specific gap in the market.

Noci, a modern neighbourhood pasta restaurant that evolved from the Group's Tavolino concept, is the Group's newest venture. Designed to fill the void left by the reduction of operators in the Italian mid-market sector and deliver profitability in c. 3,000 sq ft spaces, Noci's focus on delivering high quality food at an affordable price point provides it with a layer of protection in the event of tightening consumer spend.

Coppa Club, the Group's all-day clubhouse proposition, has been conceived to meet the evolving consumer behaviour trends accelerated by Covid, such as the shift to flexible/hybrid working. From dramatic full-service riverside locations with vast outdoor spaces, to high street hubs benefitting from city centre footfall throughout the seasons, the concept is designed to suit all occasions, from coffee, breakfast and weekend brunches, to lunches, dinner celebrations and late-night drinks.

Underpinning Various Eateries' growth ambitions are a unique set of circumstances that the Board believes form an opportunity akin to the casual dining revolution of the 1990s.

The directors believe that before Covid, the hospitality industry had become saturated with homogenous operators whose priorities had diverged from quality of food and service. Already struggling to adapt to the impact of Brexit, the lengthy restrictions on trading imposed by the government during the pandemic dealt a killing blow to many of these businesses.

The unprecedented price increases, rising energy bills and reduction in consumer disposable income that followed in the wake of the Russo-Ukrainian War further destabilised the industry.

The closure of many operators throughout the Covid-19 pandemic has given rise to the increased availability of sites in prime locations, often coming with extensive existing fit outs that result in considerable savings on capital investment. Coupled with favourable rates and reduced competition, this presents a clear opportunity for well-funded operator with flexible, forward-thinking brands and a strategy attuned to market dynamics.

Steady trading performance in a year characterised by industry-wide challenges

Trading performance for the period was in line with expectations. Revenues were slightly higher than market expectations at £45.5m (2022: £40.7m), largely driven by new site openings.

Group like-for-like sales ("LFL"), excluding the benefit of the reduced rate of VAT in the prior year, held relatively firm, which is a satisfactory performance considering the challenging macroeconomic environment, continued train strikes and unseasonably wet weather in the spring and summer months. The Board believes focusing on the top line as opposed to pursuing short-term profit maximisation to be fundamentally important to long-term, sustainable success.

Noci continues to perform well. H2 (April to September 2023) LFL sales at the first Noci site in Islington grew 23%. Although still in the first months of their existence, initial trading at our second and third sites in Battersea Power Station and Shoreditch has been promising.

The Group's townhouse Coppa Clubs in Bath and Guildford, benefiting from high footfall town centre locations, delivered positive performances. The Coppa Clubs with large outdoor spaces, which benefitted in the prior year from exceptionally good weather, were impacted this year by extended periods of unusually wet conditions, including the wettest July since 2009.

Trading at the Group's Tavolino site was strong, delivering LFL sales growth of 10%.

Managing cost pressures and growing optimism around inflation outlook

We took a proactive approach to addressing the inflationary pressures that persisted throughout the year, for example employing innovative menu engineering to trim unnecessary costs while upholding the quality of our food. An increased emphasis on seasonal rotation, for example, allowed us to continue to provide fresh, premium ingredients without the added expense linked to year-round sourcing.

There are encouraging signs that the cost surges are beginning to subside. Food and energy costs, which were remarkably elevated through much of FY23, are starting to become more manageable. It will take time for conditions to normalise and we will continue to maintain relentless focus on becoming more operationally efficient as a Group. Aligned to this, we are currently exploring several technological solutions which we expect to boost the overall productivity of our colleagues while positively impacting the customer experience.

While the rise in National Living Wage in April 2024 will have an impact on labour costs, the market is in a much better state than it was 12 months ago, with staffing shortages largely under control and a healthy pool of talented and motivated people available to us. During the year, our workforce grew significantly, and we maintained a low level of vacancies. A lot of hard work goes on behind the scenes to make Various Eateries a great place to work, learn and progress in the industry, and it is heartening to see it paying dividends. 

Continued growth of estate and poised to accelerate

During the financial year, the Group opened three new sites taking the total to 18: Coppa Club Guildford, Noci Battersea Power Station and Noci Shoreditch.  

Coppa Club Guildford, which opened in April 2023, is the second iteration of our townhouse format. A three-storey, all day venue on the busy high street, it boasts café-work space on the ground floor and a bold mural leading the guests' eye up the stairwell to the first-floor dining space and destination bar on the top floor.

The Board believes there is significant potential for the expansion of Coppa Club, with the next opening in Cardiff this spring.

Opening in May 2023, the Group's second Noci site is located in the comprehensive commercial and residential redevelopment of one of London's most iconic landmarks, Battersea Power Station. Noci Shoreditch, located just off Old Street Roundabout in the heart of the capital's Tech City, followed suit in September 2023.

The Group believes Noci to be the most compelling near-term growth opportunity and intends to open up to ten new sites over the next couple of years. While the immediate roll out is expected to be focused on the Greater London area, market research leads the Board to believe there are over 100 suitable sites in the UK.

Significantly strengthened management team

In February 2023, we announced the appointment of Sharon Badelek as Chief Financial Officer and board member with effect from 1 April 2023. Sharon has an established track record of driving growth in businesses in our sector, with an impressive CV that includes senior financial positions at RedCat Pub Company, Vue Entertainment and Novus Leisure Limited. To have attracted someone of Sharon's calibre demonstrates the strength of our proposition and ambition. She has already had a positive impact on our finance function and played an important role in the recent fundraise.

As part of the refocusing of our strategy around the two brands, Rebecca Tooth, formerly of Bills and Cote, was appointed as Managing Director of Coppa Club, while I assumed the role of Managing Director of Noci, having led the concept from inception. The Board believes the new management structure to be conducive to the long-term success of both brands, with dedicated leadership that understand the nuances of each concept and simplified reporting lines that promote quick and effective decision-making.

Oli Williams, former CFO, and Yishay Malkov, former CEO, both left the Group during the year. I would like to again thank them for their significant contributions and wish them all the best for the future.

Investing in our people

During the year under review, we continued to prioritise the wellbeing and development of our colleagues. To facilitate this, a new people director (non-board position), Scott Williamson, joined the group in November 2023. Scott has been in the hospitality industry since the age of 18 and brings a wealth of experience having worked in bars, restaurants and hotels throughout the world including, Firmdale Hotels, Carluccios, Bill's and Côte. Scott has already had a positive impact on training programmes across Various Eateries and will continue to build on this in 2024.

I would like to express my heartfelt appreciation for everyone at Various Eateries for their dedication and resolve during what was another challenging year for the industry. Without their commitment to upholding the high standards we set as a Group, we would not have been able to grow our reputation as we have, and I am grateful for their efforts.

Current trading and outlook

Sales in the first quarter of FY24 were in line with management expectations.

As we move into the second quarter, we are optimistic that inflationary pressures will continue to ease and interest rates will at least not rise further, but this remains difficult to predict.

Regardless, we will continue to focus on what is within our control - growing the top line and taking action to ensure high levels of customer satisfaction and improving operational efficiency.

We are building a Group for the long-term and believe this approach will position us well for sustainable, profitable growth and value creation for shareholders as conditions improve.

At the same time, we will continue to explore ways to make the business more efficient while progressing our roll-out at a measured pace commensurate with market conditions.

Financial Review

Overview

The first half of the financial results for FY22 benefitted from Covid related reliefs and reduced VAT rates, which did not continue into the FY23 financial year. 

The KPI's of the Group's performance are summarised in the table below:

	52 weeks ended 1 October 2023		52 weeks ended 2 October 2022		Change
	£ 000		£ 000		%
Revenue	45,495		40,667		12%
Adjusted EBITDA (before impact of IFRS 16)*	(2,189)		437		(601%)
Adjusted EBITDA*	1,556		3,531		(56%)
Operating Loss	(4,207)		(5,209)		19%
Total loss for the year after tax	(6,677)		(7,215)		7%
Basic and diluted earnings per share (pence)	(8.1)		(8.8)		7%
Cashflow from operating activities	2,082		1,861		12%
Net debt/ (cash) excluding lease liabilities	11,609		3,317		250%
Number of sites	18		15		20%
* not audited

Summary of financial performance for the 52 weeks ended 1 October 2023

	52 weeks ended 1 October 2023		52 weeks ended 2 October 2022
	£ 000		£ 000
Reconciliation of loss before tax to Adjusted EBITDA
Revenue	45,495		40,667
Loss before tax	(6,677)		(7,215)
Impairment	-		2,543
Financing costs	2,470		2,006
Depreciation and amortisation	5,571		4,702
Gain on surrender of lease	(899)		-
Loss on disposal of assets and leases	37		54
EBITDA	502		2,090
Pre-opening costs*	886		755
Share-based payments	69		830
Non-trading site costs*	(27)		(144)
Exceptional costs*	126		-
Adjusted EBITDA*	1,556		3,531
Adjustment for rent expense	(3,745)		(3,094)
Adjusted EBITDA (before impact of IFRS 16)*	(2,189)		437
* not audited

FINANCIAL PERFORMANCE

Overall Group revenue increased by 12% (FY23: £45.5m, FY22: £40.7m). The Group's adjusted EBITDA decreased by £1.9m, from £3.5m in FY22 to £1.6m in FY23. During the year, the Group was faced with significant cost increases due to external economic factors which were not fully passed onto customers. In the Board's experience, in challenging market conditions, focusing on the Group's revenue, as opposed to maximisation of short-term profits through cost cutting, is fundamental to future success. 

The loss before tax has decreased from £7.2m in FY22 to £6.7m in FY23. In FY23 the Group incurred impairments to goodwill and right‑of‑use assets of £nil (FY22: £2.5m). The Group's depreciation and amortisation charge has increased by £0.9m (from £4.7m in FY22 to £5.6m in FY23) and pre-opening costs have increased by £0.1m (from £0.8m in FY22 to £0.9m in FY23), as we have continued to invest in new sites. The Group's share based payment charge has decreased by £0.7m (from £0.8m in FY22 to £0.1m in FY23).

Consolidated Statement of Comprehensive Income

For the 52 weeks ended 1 October 2023

		52 weeks ended 1 October 2023		52 weeks ended 2 October 2022
	Note	£ 000		£ 000
Revenue	4	45,495		40,667
Cost of sales		(43,597)		(36,992)
Gross profit		1,898		3,675
Central staff costs		(3,426)		(2,617)
Share-based payments	26	(69)		(830)
Impairment of goodwill	13	-		(1,563)
Impairment of property, plant and equipment	14	-		(980)
Gain on early surrender of lease		899		-
Loss of property, plant and equipment		(37)		(54)
Other expenses	11	(3,472)		(2,840)
Operating loss		(4,207)		(5,209)
Financing costs	6	(2,470)		(2,006)
Loss before tax		(6,677)		(7,215)
Tax	10	-		-
Loss for the period		(6,677)		(7,215)
Earnings per share
Basic loss per share (pence)	12	(8.1)		(8.8)
Diluted loss per share (pence)	12	(8.1)		(8.8)

The above results were derived from continuing operations.

There are no items of comprehensive income other than the loss for the period and therefore, no statement of other comprehensive income is presented.

Consolidated Statement of Financial Position

As at 1 October 2023

			1 October 2023			2 October   2022
		Note	£ 000			£ 000
Non-current assets
Intangible assets		13	11,152			11,214
Right-of-use assets		14	24,873			26,109
Other property, plant and equipment		14	25,397			21,592
			61,422			58,915
Current assets
Inventories		16	1,078			808
Trade receivables		17	154			204
Other receivables		17	2,082			2,359
Cash and bank balances		18	1,902			9,390
			5,216			12,761
Total assets			66,638			71,676
Current liabilities
Trade and other payables		19	(13,380)			(11,420)
Borrowings		20	(13,511)			(12,707)
			(26,891)			(29,601)
Net current liabilities			(21,675)			(11,366)
Total assets less current liabilities			39,747			47,549
Non-current liabilities
Borrowings		21	(28,049)			(29,244)
Provisions		22	(358)			(357)
Total non-current liabilities			(28,407)			(29,601)
Total liabilities			(55,298)			(53,728)
Net assets			11,340			17,948
Equity
Share capital		23	890			890
Share premium			52,284			52,284
Merger reserve			64,736			64,736
Employee benefit trust shares reserve			(5,012)			(5,012)
Retained earnings			(101,558)			(94,950)
Total funds attributable to the equity shareholders of the Company			11,340			17,948

The financial statements of Various Eateries PLC (registration number: 12698869) were approved by the Board and authorised for issue on

They were signed on its behalf by:

S Badelek

Director

Consolidated Statement of Changes in Equity

for the 52 weeks ended 1 October 2023

	Called-up share capital		Share premium account		Merger reserve		Employee benefit trust shares reserve		Retained Earnings		Total
Attributable to equity shareholders of the Company	£ 000		£ 000		£ 000		£ 000		£ 000		£ 000
At 3 October 2021	890		52,284		64,736		(5,012)		(88,565)		24,333
Share based payments	-		-		-		-		830		830
Total transactions with owners	-		-		-		-		830		830
Loss for the period	-		-		-		-		(7,215)		(7,215)
Total comprehensive loss	-		-		-		-		(7,215)		(7,215)
At 2 October 2022	890		52,284		64,736		(5,012)		(94,950)		17,948
Share based payments	-		-		-		-		69		69
Total transactions with owners	-		-		-		-		69		69
Loss for the period	-		-		-		-		(6,677)		(6,677)
Total comprehensive loss	-		-		-		-		(6,677)		(6,677)
At 1 October 2023	890		52,284		64,736		(5,012)		(101,558)		11,340

Consolidated Statement of Cash Flows

for the 52 weeks ended 2 October 2022

		52 weeks ended 1 October 2023		52 weeksended 2 October2022
		£ 000		£ 000
Cash flows from operating activities
Loss for the year		(6,677)		(7,215)
Adjustments to cash flows from non-cash items:
Depreciation and amortisation		5,571		4,702
Impairment loss		-		2,543
Gain on early surrender of lease		(899)		-
Loss on disposal of assets and leases		37		54
Share based payments		69		830
Financing costs		2,470		2,006
		571		2,920
Working capital adjustments:
Increase in inventories		(270)		(262)
(Increase) / decrease in trade and other receivables		327		(1,059)
Increase in accruals, trade and other payables		1,454		262
Net cash flow from operating activities		2,082		1,861
Cash flows used in investing activities
Purchases of property plant and equipment		(6,845)		(8,852)
Net cash flows from investing activities		(6,845)		(8,852)
Cash flows from financing activities
Interest paid		(1,627)		(1,345)
Repayment of borrowings		-		(431)
Principal elements of lease payments		(1,098)		(1,559)
Net cash flows used in financing activities		(2,725)		(3,335)
Decrease in cash		(7,488)		(10,326)
Opening cash at bank and in hand		9,390		19,716
Closing cash at bank and in hand		1,902		9,390

Notes to the accounts

4 Revenue

An analysis of the Group's total revenue (including sublease rental income shown within cost of sales) which all originates in the UK is as follows:

	52 weeks ended 1 October 2023		52 weeks ended 2 October 2022
	£ 000		£ 000
Sale of goods	41,437		36,523
Accommodation and room hire	4,025		4,086
Sub-let rental income	33		58
	45,495		40,667

6 Finance costs

	52 weeks ended 1 October 2023		52 weeks ended 2 October 2022
	£ 000		£ 000
Interest on bank overdrafts and borrowings	897		661
Lease liability interest	1,573		1,344
Foreign exchange loss	-		1
Total financing costs	2,470		2,006
Net finance costs	2,470		2,006

10 Tax

Tax charged in the statement of comprehensive income

	52 weeks ended 1 October 2023		52 weeks ended 2 October 2022
Tax expense	£ 000		£ 000
Corporation tax	-		-
Total current income tax	-		-
Tax expense in the statement of comprehensive income	-		-
Corporation tax is calculated at 25% (2022: 19%) of the estimated taxable loss for the period.

The charge for the period can be reconciled to the loss in the statement of profit or loss as follows:
	52 weeks ended 1 October 2023		52 weeks ended 2 October 2022
	£ 000		£ 000
Loss before tax	(6,677)		(7,215)
Corporation tax at standard rate 22.0% (2022: 19.0%)	(1,469)		(1,371)
Fixed asset differences	-		527
Expenses not deductible	247		1,792
Income not taxable	-		(1,409)
Tax losses carried forward	1,160		-
Movement in deferred tax not recognised	62		529
Other movements	-		(69)
Total tax charge	-		-

10 Tax (continued)

No account has been taken of the potential deferred tax asset of £14,628,000 (2022: £13,375,000) calculated at 25% (2022: 25%) and representing losses carried forward and short term timing differences, owing to the uncertainty over the utilisation of the losses available.

11 Other expenses

	52 weeks ended  1 October 2023		52 weeks ended  2 October 2022
	£ 000		£ 000
Depreciation and amortisation	324		244
AGA release of provision (note 22)	1		-
Other central costs	3,147		2,596
	3,472		2,840

12 Earnings per share

Basic loss per share is calculated by dividing the profit attributable to equity shareholders by the weighted average number of shares outstanding during the year. There were no potentially dilutive ordinary shares outstanding as at the periods ended 1 October 2023 and 2 October 2022.

					1 October 2023		2 October 2022
					£ 000		£ 000
Loss for the year after tax					(6,677)		(7,215)
Basic and diluted weighted average number of shares					82,143,398		82,143,398
Basic loss per share (pence)					(8.1)		(8.8)
Diluted loss per share (pence)					(8.1)		(8.8)

13 Intangible assets

Group	Brand		Goodwill		Trademarks, patents & licenses		Total
	£ 000		£ 000		£ 000		£ 000
Cost or valuation
At 2 October 2022	2,912		26,019		25		28,956
Additions	-		-		-		-
At 1 October 2023	2,912		26,019		25		28,956
Amortisation
At 2 October 2022	2,788		14,954		-		17,742
Charge for the period	62		-		-		62
Impairment	-		-		-		-
At 1 October 2023	2,850		14,954		-		17,804
Carrying amount 1 October 2023	62		11,065		25		11,152
	Brand		Goodwill		Trademarks, patents & licenses		Total
	£ 000		£ 000		£ 000		£ 000
Cost or valuation
At 3 October 2021	2,912		26,019		25		28,956
Additions	-		-		-		-
At 2 October 2022	2,912		26,019		25		28,956
Amortisation
At 3 October 2021	2,724		13,391		-		16,115
Charge for the period	64		-		-		64
Impairment	-		1,563		-		1,563
At 2 October 2022	2,788		14,954		-		17,742
Carrying amount 2 October 2022	124		11,065		25		11,214

Brand relates to registered brand names and is amortised over an estimated useful economic life of four years.

Goodwill is not amortised, but an impairment test is performed annually by comparing the carrying amount of the goodwill to its recoverable amount. The recoverable amount is represented by the greater of the individual Cash Generating Units ("CGU's") fair value less costs of disposal and its value-in-use.

The goodwill balance relates to Tavolino Riverside (£1,046,000), Strada Southbank (£992,000), Rare Bird Hotels at Sonning Limited (£2,418,000), and Rare Bird Hotels at Streatley Limited (£6,609,000). Tavolino Riverside and Strada Southbank are included within the restaurant operating segment. Rare Bird Hotels at Sonning Limited and Rare Bird Hotels at Streatley Limited are included within the hotels operating segment.

Restaurant segment

The key assumptions for the value-in-use calculations are those regarding the discount rate, trading forecasts and growth rates. The key underlying assumption is the group's 3 year business plan which is based on past experience, taking into account operational developments/ changes at the group's operating sites. A pre-tax discount rate of 12.1% was used (2022: 14.9%), based on the Group's WACC and comparable businesses in the sector. Cash flows in line with forecasts for the next 3 years were used. Cash flows beyond the forecast period are extended out to the end of the lease terms at a 3% growth rate.

Impairment testing at 1 October 2023 resulted in no impairments.

Given the ongoing global economic uncertainty and its impact on the UK hospitality sector there is particular sensitivity to the forecasts prepared in connection with the impairment review as at 1 October 2023. The estimate of recoverable amount for the restaurant segment is particularly sensitive to the discount rate and trading forecast assumptions. If the discount rate used is increased by 1%, the forecast future EBITDA is reduced by 10% and the terminal growth rate reduced by 1%, a further impairment loss of £nil for the period ended 1 October 2023 would have to be recognised against goodwill (2022: £991,000). Management is not currently aware of any other reasonably possible changes to key assumptions that would cause a unit's carrying amount to exceed its recoverable amount.

Hotel segment

The key assumptions for the value-in-use calculations are those regarding the discount rate, trading forecasts and growth rates. A pre-tax discount rate of 12.1% was used (2022: 14.9%), based on the Group's WACC and comparable businesses in the sector. Cash flows in line with forecasts for the next 3 years were used. Cash flows beyond the forecast period are extended at a terminal growth rate of 3% (2022: 2%).

Impairment testing at 1 October 2023 resulted in no requirement to reduce the carrying value of goodwill at 1 October 2023, as the recoverable amounts of the CGUs, based on value-in-use estimates, were greater than the carrying values.

The estimate of recoverable amount for the hotel segment is sensitive to the discount rate, trading forecast assumptions and terminal growth rate. If the discount rate used is increased by 1%, the forecast future EBITDA is reduced by 10% and the terminal growth rate reduced by 1%, no impairment would be required (2022: nil). Management is not currently aware of any other reasonably possible changes to key assumptions that would cause a unit's carrying amount to exceed its recoverable amount.

14 Property, plant and equipment
   Group

	Right of use assets		Freehold property		Leasehold Improvements		Furniture, fittings and equipment		Assets Under Construction		IT equipment		Total
	£ 000		£ 000		£ 000		£ 000		£ 000		£ 000		£ 000
Cost or valuation
At 2 October 2022	37,588		2,294		16,293		8,535		573		2,108		67,391
Additions	1,206		-		654		935		5,191		65		8,051
Lease modifications	56		-		-		-		-		-		56
Disposals	(1,228)		-		-		-		(30)		-		(1,258)
Transfers	-		-		4,304		664		(5,137)		169		-
At 1 October 2023	37,622		2,294		21,251		10,134		597		2,342		74,240
Depreciation
At 2 October 2022	11,479		-		2,489		4,440		-		1,282		19,690
Charge for the period	2,499		138		1,054		1,502		-		316		5,509
Eliminated on disposal	(1,229)		-		-		-		-		-		(1,229)
At 1 October 2023	12,749		138		3,543		5,942		-		1,598		23,970
Carrying amount At 1 October 2023	24,873		2,156		17,708		4,192		597		744		50,270

14 Property, plant and equipment (continued)

	Right of use assets		Freehold property		Leasehold Improvements		Furniture, fittings and equipment		Assets Under Construction		IT equipment		Total
	£ 000		£ 000		£ 000		£ 000		£ 000		£ 000		£ 000
Cost or valuation
At 3 October 2021	29,215		2,294		9,814		6,003		1,336		1,583		50,245
Additions	6,531		-		5,481		2,291		585		495		15,383
Lease modifications	2,127		-		-		-		-		-		2,127
Disposals	(285)		-		-		(3)		(74)		(2)		(364)
Transfers	-		-		998		244		(1,274)		32		-
At 2 October 2022	37,588		2,294		16,293		8,535		573		2,108		67,391
Depreciation
At 3 October 2021	8,491		-		1,756		3,091		-		1,015		14,353
Charge for the period	2,286		-		733		1,351		-		268		4,638
Eliminated on disposal	(278)		-		-		(2)		-		(1)		(281)
Impairment loss	980		-		-		-		-		-		980
At 2 October 2022	11,479		-		2,489		4,440		-		1,282		19,690
Carrying amount 2 October 2022	26,109		2,294		13,804		4,095		573		826		47,701

The Group's leasehold premises and improvements are stated at cost, being the fair value at the date of acquisition, plus any additions at cost less any subsequent accumulated depreciation. Work in progress relates to capital expenditure on sites that have not started trading.

Depreciation is charged to cost of sales in the Statement of Comprehensive Income for property, plant and equipment in use at the trading leasehold premises. Depreciation on property, plant and equipment used by central functions is charged to other expenses in the Statement of Comprehensive Income.

Rental income from subletting right-of-use assets is recognised on a straight-line basis over the term of the relevant lease. It is netted off against rental costs and is recognised within cost of sales (2023: £41,000, 2022: £42,000).

The Group has determined that each site in the restaurant operating segment, and each of the companies in the hotel operating segment are separate CGUs for impairment testing purposes. Each CGU is tested for impairment at the balance sheet date if there exists at that date any indicators of impairment. Losses incurred by the Group pre Covid-19 as well as the ongoing Covid-19 pandemic are considered indicators of potential impairment, accordingly all CGUs have been tested for impairment by comparing the carrying amount of the assets to recoverable amount. The recoverable amount is represented by the greater of the individual CGU's fair value less costs of disposal and its value-in-use.

Restaurant segment

The key assumptions for the value-in-use calculations are those regarding the discount rate, trading forecasts and growth rates. A discount rate of 12.1% was used (2022: 14.9%), based on the Group's WACC and comparable businesses in the sector. Cash flows in line with forecasts over the next 3 years were used. Cash flows beyond the forecast period are extended out to the end of the lease terms at a 3% growth rate.

Impairment testing resulted in no impairments in the year. The CGU's with the least headroom are Restaurant 1 with £23,000, Restaurant 2 with £432,000 and Restaurant 3 with £461,000.

The estimate of recoverable amount for the restaurant segment is particularly sensitive to the trading forecast assumptions. If the discount rate used is increased by 1%, the forecast EBITDA is reduced by 10%, and the terminal growth rate reduced by 1%, an impairment loss of £650,000 for the period ended 1 October 2023 would have to be recognized against hyphenate right of use assets. Management is not currently aware of any other reasonably possible changes to key assumptions that would cause a unit's carrying amount to exceed its recoverable amount.

Hotel segment

As a result of the headroom identified during the goodwill impairment testing of the hotel operating segment (see note 13), no impairment charge is required in respect of the hotel segment.

17 Trade and other receivables

	Group
	1 October 2023		2 October 2022		1 October 2023	2 October 2022 as restated
	£ 000		£ 000		£ 000	£ 000
Trade receivables	154		204		-	-
Prepayments	946		907		-	-
Other receivables	1,136		1,452		-	-
	2,236		2,563		-	-

All of the trade receivables were non-interest bearing, receivable under normal commercial terms, and the directors do not consider there to be any material expected credit loss. The directors consider that the carrying value of trade and other receivables approximates to their fair value. The receivable from subsidiaries (£42,632,000) at 2 October 2022 has been restated as a fixed asset, which better reflects management's expectation of the timing of the recovery of the amount.

18 Cash and bank balances

	Group				Company
	1 October 2023		2 October 2022		1 October 2023		2 October 2022
	£ 000		£ 000		£ 000		£ 000
Cash and bank balances	1,902		9,390		-		-

19 Trade and other payables

	Group				Company
	1 October 2023		2 October 2022		1 October 2023		2 October 2022
	£ 000		£ 000		£ 000		£ 000
Trade payables	3,107		2,232		-		-
Payables to subsidiaries	-		-		2,795		1,863
Accrued expenses	4,205		3,805		-		-
Social security and other taxes	1,400		1,363		-		-
Other payables	1,377		1,194		-		-
Lease liabilities due in less than one year	3,291		2,826		-		-
	13,380		11,420		2,795		1,863

20 Current borrowings

	Group				Company
	1 October 2023		2 October 2022		1 October 2023		2 October 2022
	£ 000		£ 000		£ 000		£ 000
Borrowings from related parties	13,511		12,707		-		-

Borrowings from related parties classed as payable within 12 months includes two deep discounted bond instruments issued by VEL Property Holdings Limited and by Various Eateries Trading Limited.

The deep discounted bond instrument issued by VEL Property Holdings Limited was rolled in January 2023 with a new redemption date of 14 July 2023. In July 2023 the deep discounted bond was rolled with a new redemption date of 14 January 2024. The nominal value at year end is £2,902,000 (2022: £2,791,000). The discount is recognised between subscription and redemption date, resulting in £51,000 of accrued financing costs as at the reporting date.

20 Current borrowings (continued)

The deep discounted bond instrument issued by Various Eateries Trading Limited was rolled for 12 months in February 2023 with a redemption date of April 2024. The nominal value at year end is £10,001,000 (2022: £10,001,000). The discount is recognised between subscription and redemption date resulting in £368,000 of accrued financing costs at the reporting date. The balance of £608,000 (2022: £608,000) under the August 2019 loan agreement matures in April 2024, and bears cash settled interest at 3.75% above SONIA (2022: cash settled interest at 3.75% above SONIA).

21 Non-current borrowings

	Group				Company
	1 October 2023		2 October 2022		1 October 2023		2 October 2022
	£ 000		£ 000		£ 000		£ 000
Lease liabilities due after more than one year	28,049		29,244		-		-

The loans and borrowings classified as financial instruments are disclosed in note 25.

The Group's exposure to market and liquidity risk in respect of loans and borrowings is disclosed in the financial instruments note.

22 Provisions for liabilities

Group			52 weeks ended 1 October 2023
Authorised Guarantee Agreements ('AGAs')			£ 000
At start and end of previous financial period			357

At start of financial period	357
Charge in the year	1
At end of financial period	358

The provision relates to the annual rental cost of three (2022: three) previously operated sites that have been disposed of via assignment of lease and include Authorised Guarantee Agreements ('AGAs') as part of the assignment arrangement (see also note 30).

23 Share capital and share premium

Authorised, allotted, called-up and fully paid shares
	1 October 2023				2 October 2022
	No. 000		£ 000		No. 000		£ 000
Ordinary shares of £0.01 each	89,008		890		89,008		890

There were no movements in ordinary share capital in the period ended 1 October 2023

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have a par value of £0.01 and the company does not have a limited amount of authorised capital.

Employee benefit trust shares reserve

The Group presents these shares as an adjustment to own equity at the period end date through the employee benefit trust shares reserve, until the point that the shares are awarded, and cease to be conditional awards of shares. The award of shares is conditional upon certain vesting criteria, as outlined in note 26.

25 Financial instruments

Group
Financial assets at amortised cost
			1 October 2023		2 October 2022
			£ 000		£ 000
Cash at bank and in hand			1,902		9,390
Trade and other receivables			1,290		1,656
			3,192		11,046

Reconciliation of liabilities arising from financing activities

	Lease Liabilities		Other Borrowings		Total
	£ 000		£ 000		£ 000
At start of financial period	32,070		12,707		44,777
New Borrowings/(disposals)	(425)		-		(425)
DDB renewal	-		-		-
Interest charge	1,573		804		2,377
Repayments during the period	(1,878)		-		(1,878)
At end of financial period	31,340		13,511		44,851

Valuation methods and assumptions

Trade receivables are all due for settlement in less than one year. The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value due to their short term nature.

Financial liabilities at amortised cost
			1 October 2023		2 October 2022
			£ 000		£ 000
Trade and other payables			40,029		39,190
Borrowings from related parties			13,511		12,707
			53,540		51,897

Valuation methods and assumptions

The Directors consider that the carrying amount of trade and other payables is approximately equal to their fair value due to their short-term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial liabilities.

Fair value hierarchy

The tables above detail the Group's assets and liabilities disclosed at fair value. Using a three-level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, all assets and liabilities shown above are considered to be level 3: 'Unobservable inputs for the asset or liability'. There were no transfers between levels during the financial period.

Financial risk management and impairment of financial assets

The Group's activities expose it to a variety of financial instrument risks. The risk management policies employed by the Group to manage these risks are discussed below. The primary objectives of the financial instrument risk management function are to establish risk limits, and then ensure that exposure to risks stay within these limits.

Capital risk management

The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital.

Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Company is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial period.

Credit risk management

The Group's credit risk is attributable to trade and other receivables and cash with the carrying amount best representing the maximum exposure to credit risk. The Group places its cash with banks with high quality credit standings. Trade and other receivables relate to day-to-day activities which are entered into with creditworthy counterparties.

Market risk management

The Group's activities expose it economic factors, the Directors closely monitor market conditions and consider any impact on the Group's existing strategy.

Interest rate risk management

The Group is exposed to interest rate risk as the Group's borrowings have an interest rate of 3.75% above SONIA.

Liquidity risk management

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments.  It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

Management review cashflow forecasts on a regular basis to determine whether the Group has sufficient cash reserves to meet future working capital requirements and to take advantage of business opportunities.

Remaining contractual maturities

The following tables detail the company's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.

25 Financial instruments (continued)

			Weighted average interest rate			1 year or less			Between 1 and 2 years			Between 2 and 5 years			Over 5 years			Remaining contractual maturities
2023			%			£ 000			£ 000			£ 000			£ 000			£ 000
Non-derivatives
Trade payables			-			3,107			-			-			-			3,107
Other payables			-			5,582			-			-			-			5,582
Borrowings - Deep Discount Bond			-			12,903			-			-			-			12,903
Borrowings - loan			3.75% + SONIA			608			-			-			-			608
Lease liability			4.5%			3,291			3,718			3,733			20,598			31,340
						25,491			3,718			3,733			20,598				53,540
	Weighted average Interest rate						1 year or less		Between 1 and 2 years				Between 2 and 5 years			Over 5 years			Remaining contractual maturities
2022	%						£ 000		£ 000				£ 000			£ 000			£ 000
Non-derivatives
Trade payables	-						2,232		-				-			-			2,232
Other payables	-						4,999		-				-			-			4,999
Borrowings - Deep Discount Bond	-						12,792		-				-			-			12,792
Borrowings - loan		3.75% + SONIA					608		-				-			-			608
Lease liability	4.5%						3,157		3,669				11,178			26,451			44,455
							23,788		3,669				11,178			26,451			65,086

The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.

26 Share based payments

As at 1 October 2023, the Group maintained three separate share based payment scheme for employee remuneration (2022: three):

·      Various Eateries Joint Share Ownership Scheme ("JSOP Scheme 1")

·      Various Eateries Joint Share Ownership Scheme ("JSOP Scheme 2")

·      Various Eateries Company Share Option Plan ("CSOP")

JSOP Scheme 1

In accordance with IFRS 2 "Share-based Payment", the value of the awards is measured at fair value at the date of the grant. The fair value is expensed on a straight-line basis over the vesting period, based on management's estimate of the number of shares that will eventually vest. A charge of £nil (2022: £713,000) has been recognised in the consolidated income statement by the Group in the period ended 1 October 2023.

The JSOP is part of the remuneration package of the Group's senior management. Participants in this scheme have to be employed until the end of the agreed vesting period. Upon vesting, the holder is entitled to purchase ordinary shares at the market price determined at grant date.

	JSOP (Scheme 1)
	Number of shares
	Granted		Exercisable		Total
At 2 October 2022	-		5,809,523		5,809,523
Lapsed 11 November 2022	-		(1,095,238)		(1,095,238)
Lapsed 8 September 2023	-		(2,190,476)		(2,190,476)
At 2 October 2022	-		2,523,809		2,523,809
At 3 October 2021	5,809,523		-		5,809,523
Granted	-		-		-
Vesting	(5,809,523)		5,809,523		-
At 2 October 2022	-		5,809,523		5,809,523

26 Share based payments (continued)

The fair value of these options granted was determined using a Black-Scholes model. The following principal assumptions were used in the valuation:
			JSOP
Grant date			18 September 2020
Vesting period ends			31 August 2022
Share price at date of grant			£0.73
Volatility			66.98%
Option life			1.95 years
Dividend yield			0.00%
Risk-free investment rate			(0.13) %
Fair value per option at grant date			£0.26
Exercise price at date of grant			£0.73
Exercisable from / to			31 August 2022/31 August 2030
Remaining contractual life			nil

The historical volatility has been calculated based on the share returns of four comparators for a period preceding the valuation date equal to the initial expected term of the options, i.e. a period of 1.95 years. The total estimated fair value of the options granted on 18 September 2020 that was recognised as an expense expenses over the vesting period is £1,531,000.

JSOP Scheme 2

A charge of £nil (2022: £35,000) has been recognised in the consolidated income statement by the Group in the period ended 1 October 2023.

The JSOP is part of the remuneration package of the Group's senior management. Participants in this scheme have to be employed until the end of the agreed vesting period. Upon vesting, the holder is entitled to purchase ordinary shares at the market price determined at grant date.

	JSOP (Scheme 2)
	Number of shares				Exercise price per share (£)
At 1 October 2023	-				-
At 3 October 2021	360,000				1.09
Lapsed 29 June 2022	(360,000)				1.09
At 2 October 2022	-				-
Grant date				11 May 2021
Vesting period ends				Various
Share price at date of grant				£1.03
Volatility				64.17%
Option life				3.89
Dividend yield				0.00%
Risk-free investment rate				0.24%
Exercise price at date of grant				£1.09
Exercisable from / to				31 March 2025 / 31 March 2026
Remaining contractual life				1.50 years
26 Share based payments (continued)

The historical volatility has been calculated based on the share returns of four comparators for a period preceding the valuation date equal to the initial expected term of the options, i.e. a period of 3.89 years. The total estimated fair value of the options granted on 11 May 2021 to be recognised in expenses over the vesting period was £193,000. All options under the scheme as at 1 October 2023 have lapsed.

CSOP

A charge of £69,000 (2022: £82,000) has been recognised in the consolidated income statement by the Group in the period ended 1 October 2023.

		CSOP
	Number of shares			Exercise price per share (£)
At 2 October 2022	1,240,441			various
Granted  15 November 2022	250,000			0.35
Granted 4 April 2023	642,857			0.28
Granted  17 July 2023	393,442			0.31
Lapsed 11th November 2022	(104,167)			1.09
Lapsed 3 October 2022	(136,887)			1.09
Lapsed 30th April 2023	(250,000)			1.09
Lapsed 31 July 2023	(91,258)			1.09
At 1 October 2023	1,944,428			various
At 3 October 2021	92,402			1.09
Granted 17 January 2022	990,441			0.69
Lapsed 11 May 2022	(92,402)			1.09
Granted  25 August 2022	250,000			0.42
At 2 October 2022	1,240,441			various

The fair value of the options is estimated at the date of grant using a Black-Scholes valuation method. The total estimated fair value of the options granted during the year to be recognised over the vesting period is £167,000.

		CSOP	CSOP	CSOP	CSOP	CSOP	CSOP
Grant date		11 May 2021	17 January 2022	25 August 2022	15 November 2022	4 April 2023	17 July 2023
Vesting period ends		11 May 2024	17 January 2025	25 August 2025	15 November 2025	4 April 2026	17 July 2026
Share price at date of grant		£1.08	£0.69	£0.42	£0.35	£0.28	£0.31
Volatility		65.66%	65.66%	65.66%	65.66%	65.66%	65.66%
Option life at grant		3 years	3 years	3 years	3 years	3 years	3 years
Dividend yield		0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Risk-free investment rate		0.87 %	0.87 %	0.87 %	0.87 %	0.87 %	0.87 %
Fair value per option at grant date		£0.49	£0.30	£0.19	£0.15	£0.12	£0.13
Exercise price at date of grant		£1.08	£0.69	£0.42	£0.35	£0.28	£0.31
Exercisable from / to		11 May 2024/11 May 2031	17 January 2025/17 January 2032	25 August 2025/25 August 2032	15 November 2025/15 November 2032	4 April 2026/4 April 2033		17 July 2026/17 July 2033
Remaining contractual life		0.6 years	1.3 years	1.9 years	2.1 years	2.5 years		2.8 years

29 Post balance sheet events                    

Various Eateries Trading Limited funding

In December 2023, the business issued 86,036,788 shares at £0.25 each raising a total of £21,509,197. Of the total amount raised, £11,409,197 is used to convert the deep discounted bond debt in Various Eateries Trading Limited to Equity (see note 20). The remaining £10,100,000 is paid in cash. The net cash inflow after transaction fees is £9,707,000.

Deep discount bond

In January 2024 the deep discounted bond was rolled with a new redemption date of 14 July 2024 and a nominal value of £3,139,189.

Share options

Following the equity raise, the existing share options were revised. All JSOP options of 2,523,809 and 654,167 of the CSOP scheme were surrendered.

New options totalling 13,483,180 under the CSOP scheme were issued and will vest over a three-year period to January 2027. One third were issued at 27.5 pence, a 10% premium to the equity raise price of 25 pence. The second third were at a 10% premium to the first issue at 30.25 pence and the last third at 33.275 pence.

30 Contingent liabilities

Authorised Guarantee Agreements

There are 10 (2022: 9) previously operated sites that have been disposed of via assignment of lease and include Authorised Guarantee Agreements ('AGAs') as part of the assignment arrangement. There is a risk that the sites would be returned if the assigned leaseholders were to default on their contractual obligations with their respective landlords, the risk of which was heightened as a result of the coronavirus (Covid-19) outbreak. The total annual rental cost for these sites is £758,000, of which £358,000 (2022: £357,000) has been provided for (see note 23). The average remaining lease length is 6 years.

CJRS claim

The Group made material claims under the CJRS schemes in order to support the business through the pandemic.  Given multiple changes to the rules governing the schemes, as well as the degree of complexity in the various rules, the Group undertook an external review of past claims to confirm their validity. The directors are of the opinion that claims made to date are valid and materially correct and so do not consider the likelihood of material outflow as a result of this review to be probable.

 

END