Clapham House Group, the operator of Gourmet Burger Kitchen and The Real Greek, has taken a £24.4m write down against the value of its Tootsies chain of restaurants.
Revealing its unaudited preliminary results for the year to 29 March the group said underlying profits were flat at £8.7m, but it added it had achieved a 6% rise in first quarter sales.
Despite not revealing any update about a possible sale of Tootsies - it said the non-cash impairment charge related to the goodwill and intangible assets of the brand.
Gourmet Burger Kitchen (GBK) continued to drive performance and ebitda for the brand was up 11.3% to £7.9m.
Overall net cash flow for the company was £7.4m, down from £9.2m the year before. It had also made inroads into its debts – reducing them by 17.6% from £16m in 2008 to £13.6m
The company opened six new GBK restaurants in the UK and six abroad during the past 12 months. It also opened two new The Real Greek restaurants, which took the group portfolio to a total of 79 restaurants in the UK and 11 abroad.
David Page, executive chairman of the Clapham House, said: “Despite consumer confidence in the UK being fragile and the trading outlook remaining uncertain, our sales in the first quarter of FY10 across the group are 6% higher than in the same period last year.
“We remain positive about the mid term market prospects for the UK eating market and in particular the future expansion of GBK across the UK.”
The company also reported that it had started to see a more realistic response from landlords on the issue of rent and premiums.
In a statement, it added: “We are pleased to observe that rental and premium prices are now becoming more realistic than they were six months ago.
“However, we believe that over the next year there will be significant realignment in property costs and competition. Our expansion strategy in the immediate future is to consider only prime locations which we can occupy on advantageous lease terms.”
The company also admitted that: “We remain convinced of the strong and profitable expansion for GBK in the UK.”
But despite introducing a new overall menu at Tootsies, a new children’s menu in conjunction with a nutritionist and a fixed price menu, Clapham House said the brand had found recent market conditions the most challenging.
The company added that it was unlikely to put up menu costs when the reduced rate of VAT ends in January next year. However, it would continue to offer value promotions to its customers as it looks to build on its 160,000 customers that signed up to its web based loyalty schemes.
It also predicted that the discount culture was here to stay but warned that this would affect margins.
Clapham said: “In response to weaker consumer demand, there has been a significant escalation in promotional activity across the UK restaurant sector over the past year, led primarily by the largest operators. This appears to be intensifying and if it continues, will inevitably impact on margins in the current financial year.”
