Eclectic – future growth will come through acquisitions: Eclectic Group, the operator of 19 premium bars that now has sector investor Luke Johnson as chairman, has reported that future growth will come through acquisitions, with a focus on delivering more food revenue. The company reported turnover dropped £400,000 to £22.3m in the 52 weeks to 28 June. It made a loss of £5.8m after impairments. The company stated: “Despite a challenging backdrop, Eclectic delivered £1.8m (2014: £2.6m) of Ebitda on continuing operations. It remains cash generative and has invested in a number of its units which are subsequently delivering improved performance. The loss for the year of £5.8m includes impairment of fixed assets and goodwill of £4.0m. Management have swiftly responded to the challenging trading conditions by reducing head office costs, closing non-profitable nights, focussing on its food offer, rationalising its estate and renegotiating its principal supply contracts. Further benefit of these cost savings will be achieved over the coming months. Minor investment, funded from cash flow, will continue across the estate to maintain standards. £1.65 million of additional capital has come into the Group from subscriptions to new shares after the period end, providing additional working capital to fund the development of the Group’s business. Future growth of the Group is likely to be through acquisition and development of small groups of trading sites with a focus on delivering greater food revenue. Trading over the summer was as anticipated and the Group expects to remain cash generative, with trading expected to be similar to FY 2015.” Luke Johnson, executive chairman said: “Much progress has been made in re-aligning the Group for today’s marketplace. The management team are taking the requisite steps to create a firm foundation for the future. Fundamentally, Eclectic is a good company with a robust business model and an attractive portfolio of sites.” He added: “The 52 weeks to the end of June 2015 financial year has been a challenging period for Eclectic. The Group has faced issues in a number of areas: the change in behaviour of students, intense competition in a number of the Group’s key trading towns and disappointments in Lola Lo Derby and Dirty Blonde in Brighton. Together, these issues have resulted in Ebitda on continuing operations before highlighted items of £1.8 million for the year versus £2.6 million the prior year. The Group has responded to these factors by reducing costs at the head office, closing non-profitable nights, focusing on development of its food offer and rationalising its estate. Given the risks associated with new developments, it has been decided not to refurbish the recently acquired Sheffield and Liverpool sites and to seek to dispose of them both over the next 12 to 24 months. The Group has impaired fixed assets relating to underperforming sites amounting to £1.2 million, made goodwill impairments of £2.9 million, incurred losses of £0.6 million relating to site disposals and provided £0.7 million for onerous leases. I am gaining a deeper understanding of the business and believe we are making tangible progress to assist the Group to plan and execute its strategy. In the short term the focus will be to continue to provide quality service and delivery, continue to focus on reducing costs and to dispose of the Sheffield and Liverpool sites.”
Estate Review:
Embargo Republica on the Kings Road: After a four week closure for an extensive refurbishment and rebranding as Embargo Republica, the venue re-opened in the last week of August 2014. The rebranded and refurbished Embargo Republica delivers more emphasis to its Cuban spirit and created additional space with the move of the back office functions to the area vacated by the Head Office, which in turn, has been relocated above Lowlander on Drury Lane. An extended outside terrace, a new stage for live acts and a cigar shop at the entrance are all part of the bar’s Cuban backdrop giving a distinctive colonial atmosphere. Trading since the re-opening is ahead of expectations.
Bristol Lola Lo: This venue was closed for three weeks and reopened half way through September to coincide with returning university students for the new academic year. This refit to this Lola Lo extends the brand into the south west of England. Trading since opening has been in line with expectations.
Coalition and Manchester Lola Lo: Both venues completed their first anniversary during this period. The combined cash on cash returns (the cash income earned from the cash invested) for the financial year are in excess of 50%. The Company is delighted with trading at both of these units.
Bournemouth Sakura: This venue was refitted as a Sakura during the period and despite every effort to stimulate increased trade, this venue continued to underperform. The announcement of plans by the landlord to develop residential accommodation above this unit left the Company with limited options. At the end of January the decision was taken to close the business and the lease was surrendered to the landlord at the end of March 2015.
Lowlander on Drury Lane: This venue continues to flourish since its acquisition at the end of March 2014. Trading is in line with expectations; furthermore the unutilised upstairs areas have provided useful space for the relocation of the company head office, enabling the expansion of Embargo.
Derby Lola Lo and Brighton Dirty Blonde: Initially Lola Lo in Derby was successful in breaking into the student market, a crucial part of trade in this City, but has since underperformed. However, it is anticipated that Lola Lo Derby will break-even in the coming year. Dirty Blonde continues to have one of the most successful Saturdays in the estate but midweek trading has been more subdued. Some modifications have taken place to make the bar more visible to the street and we are working on steps to simplify the food offering and to reduce the cost base. Additionally, we will be building on the success of last year’s Christmas trading with additional sessions.
Sheffield and Liverpool: In light of the revised strategy highlighted earlier, the decision has been made to halt the development at both of these sites. Since the year end the Liverpool landlord has agreed to conditionally rescind the lease on this property. Eclectic will carry out separation works to split the property into two units, each consisting of approximately half of the property. Once this work is completed two new leases will be granted, one to a new tenant and the second to Eclectic. The Group will seek to dispose of its share of this site over the next 12 to 24 months.
Norwich Lola Lo: In June 2015 this site was disposed for a consideration of £103,000.
Shaftesbury – the West End continues to flourish: Property landlord Shaftesbury has reported buoyant footfall across its West End estate during the summer. It stated: “London’s West End continues to flourish, benefiting from the long-term increase in London’s economy, population, and visitor numbers. Footfall in our villages and trading across our 583 shops, restaurants, cafés, pubs and bars, which together produce 72% of our rental income, have been buoyant over the summer months. With strong occupier demand and low vacancy, we continue to experience good rental growth across all uses. Our management strategy is to identify and secure opportunities to take back space, often to carry out projects which improve accommodation in our portfolio, and through re-letting to deliver growth in rental income and values. We continue to identify and progress a wide range of asset management opportunities across our portfolio and are making good progress with our two largest schemes: Following grant of planning consent in July 2015, we are now securing vacant possession at our mixed-use ownership fronting Charing Cross Road, Newport Place and Newport Court., at the eastern boundary of Chinatown. We expect our scheme to reconfigure and improve 46,000 sq ft of restaurant and retail space to commence in early 2016 and complete in mid-2017. We have submitted a planning application for the reconfiguration and extension of 57 Broadwick Street, at the eastern gateway to Carnaby. Our proposed scheme will provide 12,000 sq ft of retail and restaurant space, 20,000 sq ft of offices and 2,000 sq ft of residential accommodation. Subject to receiving consent, we expect to commence works during spring 2016, with completion in phases from late 2017.”
