Brewhouse & Kitchen FY lfl sales down 0.9%, completes rights issue to raise funds for its next stage of growth: Brewhouse & Kitchen, the UK’s largest brewpub group, has reported a 0.9% decline in like-for-like sales for the year to 30 September 2023, and that 2024 is a year “that continues to be challenging”. The 22-strong company said that it was engaged in a strategic review to establish the best way forward with a “particular focus on identifying the optimum way to create liquidity for our investors”, and that post year end it had completed a rights issue to raise funds for its next stage of growth. For the year to 30 September 2023, the company reported turnover of £16,686,966 (2022: £16,400,034), with a pre-tax loss of £1,172,920 (2022: pre-tax loss of £2,323,437). The company said: “Progress in that year was mixed, but overall the company continued to improve against its pre-covid position. Sales on a like-for-like basis were up 2.3% against 2019. The start of the year (October and November) was a challenging period. Consumer confidence experienced significant disruption after the Liz Truss mini-budget which had occurred in September. However, Christmas 2022 saw a much stronger performance with a year-on-year sales growth of 7.5% followed by a continued good trading momentum into January with further growth of 3%. Unfortunately, the second and third quarters saw sales ease but overall were still ahead of pre-covid performance. June gave us great weather with 5.7% like-for-like growth (+13.3% on 2019). But then the heavens opened. Consequently, trading during July and August was dampened and averaged a decline of 5% year-on-year. During the course of the whole year intermittent rail strikes, particularly in London, plus the overall downturn in spending and consumer confidence saw trading become continuously disrupted. The result was an overall annual decline, year-on-year, of 0.9%. Our Academy Experience and own brewed beer sales remained strong, but food sales were constrained by consumers tightening their belts. This demonstrated that even when the consumer was under significant pressure, due to the cost-of-living crisis, special occasions and the gifting of unique experiences remained a critically important part of our offer. Our new brewpub in Chelmsford continues to perform well and is now settled to be in line with management expectations. It has added significant value to our overall estate.” The business said that with the background of a stagnant economy and a lacklustre trading landscape the management team took a number of “pragmatic and innovative decisions in order to lower head office costs”. It said: “This was largely achieved by reducing a number of roles within the business. These included, the removal of the operations director role, the reduction of operational managers (and their geographic areas) from three to two, the outsourcing of operational administration to an off-shore service provider, the reduction of the people team by one, the complete removal of the sales and reservations team, and the reduction of two business support team members in the brewing and marketing teams. The impact of these changes has been alleviated by intensifying the focus on training and the upskilling of the management team, coupled with a better use of technology and more delegation of decision making to brewpub level. Furthermore, our Highbury head office space has been reduced with the main office area now sublet to a media company paying a rent of £30,000 per annum. Since the summer of 2021, food inflation has remained stubbornly high across the hospitality sector. During the reporting period it was seldom less than double digit growth. We have been working with our procurement company. Prestige Purchasing, to complete a full market review of our food and beverage buying requirement. Since going live with Prestige, and based on a tracked £7.5m spend, and when comparing published inflation prices for food with those that we have paid, we have so far accumulated a savings of 9.1%. This has allowed us to impose only marginal increases in food pricing to our customers. Thankfully the outcome of this is that food inflation has had a minimal impact on our business.” The business said that with the market remaining subdued and the ongoing, and well documented, trading pressures on hospitality, it is “focusing on improving efficiency and productivity whilst continuously fighting to protect margins and profitability”. It said: “The pressure on food margins, energy costs, wages and employment costs, as well as the loss of business rate relief have all conspired to create a perfect storm of operational and financial challenges. The guest can only deal with so many price increases. We are doing all we can to minimise those increases ... without reducing our margins. For the reasons outlined above. 2024 is a year that continues to be challenging. However, we are optimistic because we are a premium, mainly freehold brewpub business that is well established, has an extraordinarily skilled and loyal team, and is ready to take an opportunity to expand. Craft beer is a category that is still growing, and we remain the market leader as the UK’s largest brewpub business as well as being the second largest in Europe. The market for high quality managed houses is beginning to show signs of activity. The company is currently engaged in a strategic review to establish the best way forward with a particular focus on identifying the optimum way to create liquidity for our investors. The company has a strong management team, a high-quality estate that is being continually enhanced, and a strong balance sheet. The bank has been very supportive in agreeing to extend a term loan due in September 2023 initially through to September 2024. At the same time, negotiations are being held to extend this facility by a further period whilst also looking to increase the size of the loan as part of a wider refinancing package. Should this not proceed, the directors have other vehicles for releasing cash and are therefore confident, in this scenario, that the company would be able to continue as a going concern. Post year end, the company completed a rights issue to raise funds for its next stage of growth.”