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Business strategy

Our priorities

We have set out previously three priorities by which we are delivering our strategy: building a more balanced business, instilling a culture of pace and execution, and growing through technology and innovation. We have made good progress across these three priorities, and continue to focus on them this year.

Building a more balanced business

Our estate comprises more than 1,800 sites, of which over 80% are owned under freehold or long-leasehold. This provides the opportunity for long-term value generation; our priority is therefore to ensure the estate is set up to extract this value.

Over the coming years we are setting out to improve the quality of the estate: by exposing it to more premium market spaces and by improving the overall level of amenity. More premium market spaces are those in which we would expect to see the strongest growth, and they offer a form of long-term mitigation towards wage inflation. This approach is leading us to convert several of our businesses towards more premium concepts (both existing and new) as well as selective site acquisitions and disposals where appropriate.

To this end, we have carried out a full estate review which gives us a plan for each of our sites. We have recently identified around 75 sites for sale, which we believe will generate greater value for shareholders than retaining as managed businesses. Going forward we will continue to look at acquisitions and disposals as part of our normal course of business; acquiring where we feel we can add value and disposing where do not believe we can add further value.

It remains our intention to grow Miller & Carter to 100 sites by end of calendar 2017. This is a proven and successful format that generates strong like-for-like sales, but also delivers good returns when we open in new locations. We have grown the brand in the last year from 36 to 52 sites. A small number of these have been acquisitions, with the majority having been converted from our existing estate and delivering EBITDA returns of more than 25%. Our portfolio gives us a strong pipeline of future conversion opportunities to continue successfully growing the brand.

We have also evolved our Pizza & Carvery businesses, by establishing the new Stonehouse brand in the summer of 2016. At the end of FY 2016 we had 36 sites under the new brand. This remains a strong value format, but with a more premium offer than existed in the businesses prior to conversion. As with Miller & Carter, these have been converted from the existing estate, and are generating returns of around 25%. We will aim to grow Stonehouse to around 80 sites by 2018.

The amenity level of our estate is improved through our remodel programme, which encompasses all our brands and allows us to develop the guest proposition whilst maintaining and enhancing the estate through capital investment. An example of this is within Harvester, which has faced much new competition in recent years. We have developed evolved our 'Feel Good Dining' remodel solution, which sees us spend around £400,000 of capex per site, but is delivering a strong turnaround in sales and profit in the 32 sites in which it has so far been implemented. We have a pipeline of Harvester sites to continue rollout of this format.

In all, we completed 252 remodels and conversions in FY 2016 (FY 2015 167), moving us towards a six-year investment cycle for all our sites. We will continue to increase this to around 300 remodels and conversions in FY 2017, which will broadly be the consistent rate in future years.

Instil a more commercial culture

Across our retail teams and our support centre we employ more than 43,000 people, and engagement of this team is critical to achieving growth in profitable sales. Given the challenges we face as a business and an industry, it is critical we execute well and at pace.

To facilitate this, we underwent an organisational restructure this year, which saw four operating divisions created, each containing similar brands and customer types. Organisationally, we have also identified a number of clear workstreams aligned to our three priorities. These changes enable us to make much quicker decisions, with our workstream teams empowered to be decisive, work their way through barriers, and deliver effectively.

We have focused our work in this area across a wide range of activities. There has been a significant drive towards resolving our guests' complaints more quickly. A year ago it was taking an unacceptable average of 11 days to resolve a guest complaint. Through our focus we fairly quickly reduced this to our target of less than 2 days, and more importantly have subsequently maintained this quicker level. This will continue to be an area of importance for our teams.

Much of our work in this area has been around creating a more sales-focused culture, and as such we will continue to have an ongoing number of initiatives aiming to achieve this. Examples from the last year include dedicated sales training provided to all the operational teams, an incentive scheme in the second half of the year which awarded cash bonuses for improving sales trends, and the establishment of a London-based sales team to fill secondary space and increase levels of corporate bookings.

Drive an innovation agenda

Innovation and technology are critical areas for us as a business, in terms of efficiency, attracting and interacting with guests and remaining competitive in our markets. As a result, and as with our other priorities, there has been much activity in this space.

A key area of focus is to build on our existing technology, given the systems investment we have made in recent years. We have developed our online bookings system to increase the availability of short-term bookings, but also to integrate with third party booking providers to extend our reach. Our bookings have grown such that now more than half of restaurant bookings are made online, and we have increased third party bookings by more than 200% in the last year. We are looking at various other ways to improve efficiency and the guest experience, including enhanced wifi provision in our sites and the trialling of alternative payment technology.

We have also developed our digital strategy across all the key areas in which we can interact with our guests: acquisition, experience, CRM, loyalty, and social media. The nature of digital is such that it is both relentless and moving at pace, and as such requires work across each of these areas. In the last year we have worked to increase our social media presence, we have developed four new brand apps, we have consolidated 9m guests' details on our central database, our gift card sales have increased by more than 40% and we have carried out various campaigns with affiliates.

We have increased our use of TripAdvisor as a guest interaction tool, providing all our house managers with accounts and encouraging its usage. We will look to develop this further in the year ahead, but have already seen the number of reviews significantly increase, as well as our average rating rise by more than 8%.

Delivery is becoming increasingly important to the industry, and we have carried out an initial successful trial with Deliveroo across 25 All Bar One and Browns sites. Given the early success, we are working to quickly roll this out further across our brands, in different locations and with different third party providers. We believe that this can apply to around a quarter of the estate, and provides a good opportunity to generate incremental sales.

Finally, we have stated that we will look to carry out new concept and product development, to maintain the appeal of our existing brands but to also innovate in new markets. As noted previously, we have launched the new Stonehouse brand, having evolved from our Pizza & Carvery offering. We are also close to opening our first Chicken Society restaurant later this year. This provides us an opportunity to test a new concept which may be later rolled out to further sites. We expect to take the learning from this and to develop a pipeline of further new concepts this financial year.

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Contact Us

A photograph of Tim Jones
Tim Jones Finance DirectorSarah MilfordPA to Finance Director +44 (0) 121 498 6552
A photograph of Denise Burton
Denise Burton Deputy Company Secretary +44 (0) 121 498 6514
Amy De Marsac Head of Investor Relations +44 (0) 121 498 6514