This time last year Clapham House, the restaurant operator that owns the GBK, Tootsies and Real Greek chains, saw its shares dive after downgrading its forecasts. But today it’s riding high: despite this being one of the most difficult years for the hospitality industry in living memory, it’s managed to record a 114% jump in profits for the six months to September. And it even claims to be ‘very positive’ about the future prospects for its various formats. Perhaps the UK restaurant business is not quite so moribund after all?
Today’s figures from Clapham House show that it’s done an excellent job of overhauling its business in the last 12 months, after a shock profit warning sent its shares plummeting 40% in a single day. Revenues were up 21% to £30m, while pre-tax profits more than doubled to £1.5m; this was partly thanks to the opening of nine new restaurants, which the company said had been ‘particularly strong and immediately profitable’ – quite a feat in the current climate. It’s also been able to cut its debt by 10% and agree a financing deal that takes it right through to 2012 – by which time the market should (hopefully) be recovering.
As a mid-market restaurant group, all the prevailing wisdom would suggest that Clapham House would be clobbered by the recent slowdown - hence why last year’s profit warning was seen as the first warning sign of the sector’s decline, and sparked a mass sell-off of similar stocks (chairman David Page has since suggested that it brought a ‘dose of reality to the sector’, albeit rather harshly). We suppose GBK may have benefited from people trading down from more expensive restaurants (without wanting to go as far as the fast-food chains), but it's still a remarkable result.
Or it may just be - with the benefit of hindsight - that Clapham House did a better job than most of seeing which way the wind was blowing and adjusting its strategy accordingly. In the last year it has slowed down its expansion programme, and sold off its Bombay Bicycle Club business for £4.4m in July to boost its cash balance. ‘We have worked hard for a year on repositioning our pipeline, managing costs and promoting sales, and feel our business is well positioned,’ Page said today.
After running Pizza Express for 10 years, Page knows the restaurant business as well as anyone – and these results suggest that he’s getting the strategy right. However, he’ll also know that the next year is going to be even tougher – and as analysts have been pointing out today, even the well-managed restaurant chains will see trade slow as consumers really start to feel the squeeze on their spending. Still, for the time being, it looks as though his rivals are playing ketchup.
In today's bulletin:
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MT's Little Ray of Sunshine: Gourmet Burger sizzling
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