Carluccio’s has confirmed its intention to launch a Company Voluntary Arrangement (CVA), which will see it exit a number of lossmaking sites out of its 103-strong UK estate.
The proposal is a ‘landlord-only’ CVA, which will impact 34 of the group’s restaurants. It will be voted on by the end of May and, if approved by at least 75% of creditors, will be followed by an investment programme seeing Landmark Group, which acquired Carluccio’s in 2010 for c£90m, putting in £10m of fresh funding to fuel an investment and growth plan. The investment is conditional on approval of the CVA.
The company statement said that while a successful conclusion to the CVA process would release Carluccio’s from the lossmaking sites, the group is open to entering discussions with affected landlords to reach new and mutually agreeable terms.
MCA understands the affected sites will have their rent cut to 67% for six months with tenant break options.
The decision to enter a CVA was taken after a strategic review of the business, led by new chief executive, Mark Jones, who joined with chief financial officer, Andrew Campbell, in 2018.
Jones said: “Carluccio’s remains a very strong brand known for high-quality food. Independent research shows it is extremely well regarded by the British public in the premium Italian dining space.
“However, the business is not immune from well-documented pressures sweeping through the casual dining sector and indeed much of the wider UK high street, including retail.
“Regrettably, this is the only course of action available and if approved, will safeguard the future of the group, protecting this strong core business. It is therefore in the best interests of the company, its people, its creditors and its customers.”
MCA understands that the group’s current EBITDA level is c£5m, against the last £13.2m EBITDA figure it reported for the year to 26 September 2016.
The sites under the spotlight are believed to be spread across the UK and to include sites outside the capital in Chelmsford and Bromley, plus London-based restaurants in Islington, Muswell Hill and Chiswick, as well as the restaurant at Westfield London. The majority of the Carluccio’s UK estate is believed to be trading in-line with the CGA Peach Tracker, and therefore in-line with a good proportion of the sector in general. It is thought that it is not in market towns where the brand is particularly struggling but in over populated “strips”, for example Upper Street in Islington.
Will Wright, of KPMG, said: “Carluccio’s is a well-established and much-loved part of the UK high street. But like many other businesses in the casual dining sector, in recent times the company has been adversely impacted by a combination of well-documented pressures including a gradual decline in consumer spending and increasing competition, coupled with the rising costs of labour, raw materials, rent and business rates.
“Today’s announcement follows a strategic review of the business undertaken by the company’s directors. Specifically, this CVA is designed to tackle the cost of the company’s leasehold obligations across its restaurant portfolio, which if successful, will allow the business to move forward across a core, more profitable estate.”