Azzurri Group – strong trading across all brands, FY Ebitda up 21%, margins back to pre-covid levels: Azzurri Group, the hospitality investment platform, which operates ASK Italian, Zizzi, Coco di Mama and Boojum, has reported a 9% increase in total revenue for the year to 30 June 2023 to £258m. The company said it experienced strong trading performances across all its brands delivering volume, like-for-like revenue, and spend per head increases. Azzurri said its Ebitda (adjusting for the one-off VAT benefit in 2022) for the period was up 21% to £14.3m – not including Boojum, the Mexican, fast-casual operator, it acquired last June. The business said positive momentum had continued in its current financial year, with strong revenue growth forecast in the year to June 2024, at a double-digit Ebitda margin. It said it has experienced “exceptional” trading over the 2023 Christmas period with like-for-like revenue in the mid-teens, ahead of the wider market, while customer feedback and brand metrics “are at an all-time high”. The Steve Holmes-led, Towerbrook Capital Partners-backed business said over the course of the year to 30 June 2023, ASK and Zizzi continued to take market share, while the transformation of Coco di Mama into the leading, Italian omnichannel food-to-go operator continued. It also said it had successfully managed its cost base against high inflationary backdrop through partnership approach with suppliers and menu innovation that has returned margins back to pre-covid levels. It also carried out record investment during the period, with the value of capital investment for future growth increased by £3.8m to £22.2m. This included 23 site transformations, four new Zizzi openings and two new Coco Di Mama openings. The company said the year had seen an “enormous amount of positive change and innovation for our businesses”. As part of this, it integrated all-in-one order and pay handheld technology, which was rolled out at ASK and Zizzi. It also saw the launch of its Zillionaires Loyalty Club in Zizzi with membership exceeding more than half a million members after the first year, “significantly ahead of expectations, and well-placed for further growth”. At the same time, it created and developed SAAS business Openr, a new hospitality data orchestration platform, which harmonises menu, pricing and venue management across delivery, brand websites, and order and pay from one place in real time. Holmes said: “We look forward to building on our successes in the year ahead. Our plans for the brands are underpinned by the increasingly developed and sophisticated resources within the Azzurri investment platform. This will enable its diverse portfolio of brands to grow faster including across both delivery kitchens and retail as well as driving further efficiencies. ASK and Zizzi are market leaders in their sector and are in great shape. Coco di Mama has successfully emerged from covid with significant opportunities and is poised for further growth, and we are very excited about supporting Boojum in bringing its unique offer to Great Britain. All our brands are market-leading and will continue to strengthen from ongoing store rollouts and investment, the omnichannel approach, proprietary digital innovation, and the broader expertise of the Azzurri platform. The group’s strategy is to position Azzurri as a market-leading hospitality platform for the growth and development of exciting brands. This is underpinned by investing in high-growth brands, developing core markets, innovating digitally and embracing the omnichannel approach. We expect more progress this year and we will also maintain a sharp focus on customer proposition, people and culture, and responsible business practices.” Azzurri Group features in the Propel Turnover & Profits Blue Book, the latest version of which was sent to Premium Club members on Friday (9 February) and has grown to 875 companies. Azzurri Group’s turnover of £258m for the year ending 30 June 2023 is the 45th highest in the database. The Blue Book ranks companies by turnover, profit and profit conversion, listing directors’ earnings for the past five years. Companies can now have an unlimited number of people receive access to Premium Club for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email kai.kirkman@propelinfo.com to upgrade your subscription.

On the year ahead, Holmes said: “2023 was a year that generally got tougher until Christmas, whereas I think 2024 might be a year that as you progress through gets better because people must benefit at some point from the national insurance rise they only got in their pay packets a week ago. Energy bills are supposed to come down rapidly in April, interest rates eventually will fall sometime this year. Inflation is falling, consumer confidence is growing every single month. So, you think at some point there must be a bit of a run for eating out because it is discretionary. The rise in the national living wage is a big bump. I'll be honest, I thought that we had normalised now. I got to a point at the back end of last year where I thought we were pretty much back. Our margins were back to pre-covid levels. So, I thought, right, we're normal again, because we've always had minimum wage increases. We've always had a small amount of price increase every year. I thought, right, we're back to normal on price, normal levels of inflation and they brought out this increase that was higher than anyone budgeted. So, you either take it on the chin again, or you need to price a bit more. There is some better news on inflation. We've seen food inflation at the worst flat this year and energy costs are certainly coming down. Wages are still going up of course but the other two biggest costs are coming down so I think there is some light at the end of the inflation tunnel. I was looking at the inflation figure and since covid, CPI has been 26.5% over that time. But if you look at restaurant prices, I'm not sure they've risen by that much over five years – ours certainly haven’t. I think the sector has done a very good job of keeping a lid on it. January is always a quiet month. I'm feeling quite optimistic about trade as we get through 2024. We’ve got Valentine's and half-term this week, and we're expecting that to be a very strong week. Generally trading is very good. I think we're thinking that this run up to the end of our next financial year, which is June, is still going to be good.”

Holmes said that Zizzi is “trading well and taking market share”. He said: “We've been consistently ahead of the Peach Tracker with both ASK and Zizzi for a long time and by a large distance. We're opening new sites and they’re doing very well. We opened a new Zizzi site in Bridgend, six weeks before Christmas and it exceeded our expectations. The first ASK in four years opened in Merry Hill in November, and again it has massively exceeded our expectations. So, when you've got these two businesses that are performing well, beating the market, and can still open new sites, which then exceed expectations, that's comforting because of course those are the two biggest businesses in the group. And they anchor everything else that we want to do.”

At the start of the financial year, the group’s ASK site restaurant in Horsham, West Sussex, reopened its doors as a new model site. Holmes said: “New kitchen equipment enables chefs to produce great food in peak trading periods and a delivery superstation delineates dine-in and delivery customers, improving the experience for both. Waiting teams were provided with bespoke handheld tablets, facilitating ordering, payment, and allergy management to smooth the customer journey. The model store has delivered a truly exciting footprint to fuel further growth for the brand. As core elements have started to land across the restaurants we are benefiting from the impact of that investment. We've refurbished quite a few ASKs this year as well based off the back of that Horsham refurbishment. Every refurbishment we have done since then has reflected the work there.” 

In terms of further growth for its brands, with Zizzi on 138 (including the brand's five sites in Ireland), Holmes said there is “more runway there but we’ve always been quality over quantity”. He said: “I'm not sure we would necessarily say we're going to do ten new Zizzis a year, but I think there is definitely an opportunity to do more. We've got a new one coming in Chatham in May. We should sign one more for the end of 2024. We've got two lined up for 2025. We've got a couple of ASKs lined up. We hope to do another three to five Boojums. We'll open a good number of sites across the group but none of them need to go gangbusters to get solid growth. One of the benefits of a diversified platform where you've got all brands that can grow is that you don't need to push the boat out massively on any one brand. You can get sort of modest, quality growth without sort of chasing quantity across all of them. You can still get strong growth across the whole group in absolute terms, and then you don't risk ending up with marginal sites that don't quite work. But it is comforting that we think there's still growth in all the businesses.” 

Last February, the company’s Coco di Mama brand opened its first regional standalone site in Reading. However, Holmes said he doesn’t think the concept is going to work in the regions. He said: “We've still got one in Reading but we pulled out of doing one in Oxford. We're working very well in Liverpool Street station – that's been a real success. We've done very well in Canary Wharf, and on the roadside, where we are up to eight sites with Roadchef. Coco does very well in high footfall, high traffic type locations with people who are on the move. It's working in railways, is working on the roadside and I’m sure it will work in airports. So, it works where people are on the move either from their desk or travelling. We had a go at regional and it’s probably not worked as well as we thought and I think the logic there is that there are not enough people in places like Reading and Oxford that are on the move enough. There are definitely more stations that we're going to go after for Coco and airports if we can do them. There are also more franchise partnerships we can go after, and we still have 200 dark kitchens with the brand. The regional thing was worth testing but probably not a rollout opportunity.” Despite pulling back on a regional expansion play, Holmes said that overseas is one area he believes Coco di Mama might be able to explore. He says: “So if you think about people on the go and we are now franchising to Roadchef, I think if there's anything that could do international, it could be Coco with an international franchise partner. I can't see why it couldn't do stations or airports in Europe. So, I think that might be worth looking at.”

The business acquired the then 14-strong, Belfast-based Boojum business last June. Its first site in Great Britain will open in April, in Leeds, with a pipeline of further opportunities lined up for 2024. Holmes said the integration and performance of Boojum has given Azzurri the confidence it can do further similar deals. He said: “We call Azzurri a hospitality investment platform. We run our businesses independently. They've all got their own managing directors, they've all got their own boards of directors and they manage not just the operations, but all the marketing, food development, brand identity and culture. And then we have what we think is a world class central function that provides procurement, back-office accounting, digital and property facilities. It's the best of both worlds because the brands can focus on everything to do with the customer proposition and know that they can draw on Azzurri’s essential services to help them go faster or to be more profitable than they would be if they were operating as a stand-alone. I think Boojum has given us the confidence that this works. I think the relationship is working really well because David [Maxwell, Boojum founder and managing director] can now focus on rolling the business out in Britain and focus on menu development, proposition improvements in service, those kinds of things. And in the background, we can help him with some of the transactional stuff that really most people don't want to worry about. We've added huge amounts of value across the Boojum business through procurement alone, by leveraging the Azzurri scale so that it makes Boojum more profitable than it would be as a stand-alone business. We think it can go faster by taking the shackles off operators like David, so he just focuses on the growth of his business. And I think we've got capacity to do more of those types of investments. Clearly, it's more advantageous to have a more balanced, diversified portfolio of brands that offer either different cuisines or different occasions or a different demographic and customer. So, anything that's a quality business with growth opportunities, I think the platform's got capacity to do more of those.”

In December, Sky News reported that Azzurri was to begin testing buyers’ appetite for a deal this year and had begun talks with investment bankers about an auction. Holmes said: “We're not running a process. My view is there's always speculation. Towerbrook is never going to be around forever and everybody knows that the whole nature of the game is that they need to exit at some point. And I think when you're coming up to four years in and the business is performing well and the results look good and everything's growing then it's inevitable that there is speculation about Towerbrook moving on. I’m sure it is constantly assessing its options and at some point it is going to want to exit but there's no process running at the moment. But if you look at the wider market, there is a sense that there will be more activity over the coming 12-24 months. If interest rates start falling, and then the affordability of money starts improving, and the debt markets start to reopen, then I think you'll start to see private equity coming back.”