Various Eateries’ CEO Yishay Malkov likened the current situation with regards to trading and the economic outlook to driving through fog.
“You need to put your lights on and drive slowly […] and you have to gently correct you direction all the time.” But bar any major black swan events, he is confident the path will clear soon enough, and the business will be able to put its foot back on the accelerator.
Speaking to MCA following the announcement of its full year results yesterday (28 February), Malkov said despite the hit to profitability in the last financial year, the Coppa Club operator is happy with its overall progress.
A glance at the financials gives a mix picture of positive and negative developments. Revenue increased by 82% to £40.7m, compared to 2021, and adjusted EBITDA rose 193% to £3.5m. But loss before tax doubled to £7.2m and the company swung from a position of net cash (£7.3m in 2021) to net debt of £3.3m as at 2 October 2022.
While Malkov attributes the majority of its debt position to the fact the group invested in four big openings last year (Coppa Club Putney, Coppa Club Haslemere, Coppa Club Bath and Noci Islington), compared to two the prior year, the business conceded that it had been resistant to pass on price rises to its customers until there was more certainty around the trajectory of inflation, with only 1% like-for-like growth seen at Coppa Club in H2.
“I’m not going to lie to you, obviously the bottom line is affected – bottom line pressures are affecting everyone. We are not immune by any means, it’s a struggle, but I think with some things we are in a better position than some,” he says.
At the end of the period, and moving into the new financial year, it carried out a comprehensive menu re-engineering exercise across the group, in order to enhance its margins. Some dishes have been tweaked, some removed and with only “modest price increases” applied.
“We have definitely taken some pricing, but we are not taking everything we can. We feel that we have enough flexibility to help us out. We have a lot in our back pocket and I’m not intending to change our strategy for the time being.”
Trading in the financial year to date has been in line with expectations – although Malkov admits there are so many variables that are affecting trading, such as the rail strikes, that it is hard to forecast where sales might end up. October trading was ok, November wasn’t great, but Christmas trading was really strong, he says.
Another fact that is impacting profitability is build costs, which Malkov says have risen by at least 20% since the start of the pandemic. And it’s not just the cost of supplies, but the much longer build process.
“Everything about opening a restaurant is a lot more complicated and time consuming that it used to be. If you opened in 2019 you would order a kitchen about five to six weeks out… now you need to order it 12 weeks, or sometimes 16 weeks out,” he explains.
Despite the unpredictable picture, Various Eateries is intent on continuing its current slow and steady growth plan, with four sites due to open this year: Coppa Club Cardiff, Coppa Club Guildford, Coppa Club Farnham and a second Noci at Battersea Power Station.
It has benefited from the pandemic in some respects due to the availability of sites at lower rents – something we Malkov says has only really started to come through in the market over the past six months.
“As we have maintained since IPO in September 2020, while it is sad to see our industry peers fall by the wayside, the increasing number of high-quality sites becoming available at extremely attractive rates presents us with a growing opportunity,” Malkov and executive chairman Andy Bassadone’s statement read in its trading update.
“Our three new publicly confirmed Coppa Club venues are a good illustration of this. It is very unlikely they would have become available had it not been for the pandemic, and certainly not with the lease terms and at the rates we have been able to secure them on.”
Various Eateries is also seeing an influx of fully fitted restaurants coming to market, at no premium, which could well further the expansion of its neighbourhood Italian restaurant concept Noci, which has performed very strongly since opening in March 2022.
“Because you are talking about a much lower capex to convert something like that, it is definitely higher on our hit list, because for a relatively small amount of money you can open something that returns really well and really strongly,” he says.
While the business is also on the look out for additional sites for its mid-market Italian concept Tavolino – which opened in July 2020 – the focus seems to be much more on the other two concepts in terms of growth opportunities, with Various Eateries keen to explore the potential for more townhouse venues for Coppa Club, following the success of its Bath location.
The Guildford site will also be housed within a former high street Gap store, with the business paying around 45% less than the previous rental at those two townhouse sites, so it makes economic sense to, as well as the obvious footfall benefits.
While there are quite a number of opportunities for further Coppa sites like this, there are not as many as smaller sites that fit the criteria for Noci, which Malkov says are popping up every day.
It will be interesting to see what the 2024 pipeline looks like for the neighbourhood concept.
