Top restaurants tumble to £82m loss

Pre-tax earnings at the largest UK groups have nosedived after site closures took their toll. Picture: Nick Ansell
Pre-tax earnings at the largest UK groups have nosedived after site closures took their toll. Picture: Nick Ansell
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The UK’s largest restaurant groups took a collective £82 million hit in 2018, as turbulence in the sector led a number of high profile chains to embark on radical store closure programmes.

New data from accountancy group UHY Hacker Young shows that the UK’s top 100 restaurant groups slid from a combined pre-tax profit of £102m in 2017 to record the bumper loss last year.

UHY pointed to a string of increased financial pressures which have been taking a toll on the hospitality industry, including one-off costs relating to restructuring.

The figures also revealed that annual pre-tax earnings at the elite collection of eateries have plummeted from £345m two years earlier.

Of the 100 biggest restaurant groups, 48 are now loss making, representing a 30 per cent increase from 37 in 2017.

The report comes amid high-profile struggles in the UK restaurant sector, most recently marked by news that Jamie’s Italian, the mid-market chain founded by celebrity chef Jamie Oliver, had entered into administration.

This followed store closure programmes announced in 2018 by pizza chain Prezzo, which will close 93 of its restaurants and cut around 1,000 jobs, and fellow Italian Carluccio’s, which has shut 35 outlets as part of a company voluntary agreement affecting 500 jobs.

UHY highlighted that the £82m loss is a collective total, with a number of groups included in the top 100, such as Portuguese-inspired chicken chain Nando’s, turning a profit in the past 12 months.

However, these were overshadowed by earnings hits incurred by restaurant chains going through radical restructuring to shut loss-making branches.

This has led to a dramatic rise in short-term outgoings such as funding staff redundancies, exiting tenancy agreements and terminating contracts with suppliers. Increased staffing fees, higher business rates, rising rents and a fall in sterling have also contributed to drive up costs.

Peter Kubik, partner at UHY, said: “Restaurant groups are having to undergo radical restructuring surgery just to stay afloat.”

“Cutting down the number of branches is financially stressful for restaurant companies but in the long term it is essential they get to the right size,” he added. “Despite the gloom, there are a number of restaurant success stories which can give the sector some hope.

“For example, Nando’s, the South African restaurant chain recorded bumper sales last year as it continues its global expansion and Wagamama has completed a successful sale.”

Eileen Blackburn, head of restructuring and debt advisory at accountant and business adviser French Duncan, noted: “The combined pressures of high business rates coupled with inflexible leases and sky-high rents are making it extremely difficult for the casual dining sector to survive.”