Our strategic priorities
We have maintained our strategic approach with three priority areas focused on repositioning the company to a stronger competitive position:
- Build a more balanced business
- Instil a more commercial culture
- Drive an innovation agenda
Our continued progress across each of these priorities has been instrumental in the strong performance during the year.
Build a more balanced business
Our estate comprises 1,748 pubs, bars and restaurants, of which more than 80% are freehold or long-leasehold. Our focus in this area is to optimise the balance of brands across the estate in order to create long-term value. During the year, we continued to execute our plan focusing on improving the quality of the estate through premiumisation and amenity upgrades.
We completed 240 remodels and conversions in FY 2019 (FY 2018 232) and remain on course to deliver a 6-7 year cycle of investment, from the 11-12 year cycle of previous years. Ordinarily we expect a drag on profit in the year of investment due to lost trade during closure and the cost associated with opening the invested business. This year we have been focusing on enhancing the "in year" return of our investment projects and have eliminated profit drag by reducing closure time, more efficient use of resources and setting businesses up for success from the first day of trading. As a result, return on investment for conversion and acquisition projects increased to 21%, the strongest we have seen for many years.
Our remodel returns have also improved, increasing to 34% for projects completed in the financial year. Our remodel programme is designed to enhance the amenity and appeal of sites which remain within the same brand, giving the opportunity both to delight existing, and attract new guests. The remodel programme provides a vehicle through which brands can continue to evolve and innovate in the highly competitive market in which we operate.
We continue to search for new areas to create value. Miller & Carter Frankfurt opened in August and gives us an opportunity to test this successful offer in a new market.
We have been considering the environmental impact of our investment programme and, where possible, have refurbished existing kitchen equipment and furnishings to be used in new projects. In so doing we have saved 500 pieces of equipment from landfill which equates to 274m3. In addition, our new Edinburgh lodge has been built to high environmental standards and we are continually looking for opportunities to improve the sustainability credentials of our buildings to reduce our use of natural resources.
Instil a more commercial culture
Instilling a commercial mindset across the organisation has been instrumental in driving the turnaround in trading performance over the past two years. In our sites, managers have been equipped with the knowledge to confidently grow sales in their local markets and have been provided with systems which assist them in running their businesses more efficiently. Centrally, our procurement team continue to leverage our buying power and during the year have mitigated £6m of inflation costs across food, drink and logistics.
Centralisation of procurement and stock management has also allowed us to reduce the level of food waste in our supply chain during the year. Through product and pack size review we have reduced food waste by 65% compared to last year. During the year we also begun working with FareShare who will take the unavoidable waste from our supply chain and distribute it to charitable organisations which aim to bring people together through food and social interaction. We are also working hard to reduce food waste in our sites, aided by investment in a more sophisticated stock management system. In addition, we are exploring opportunities to redistribute food from sites when we do have instances of surplus, for example we have trialled Too Good to Go in Toby Carvery.
Our enhanced labour deployment systems, in combination with a specialist team of system experts, continues to deliver improved efficiencies. The system generates accurate deployment schedules, individual to the trading patterns of a specific business, enabling the manager to deploy staff in the most efficient way. Our team of experts help managers to get the most out of the system and to optimise the labour deployment in their business.
Drive an innovation agenda
An innovation mindset continues to be a priority for our business. Innovation takes place at all levels of the business from single product and process development to our organisation-wide digital strategy. Our digital strategy represents an opportunity to unlock value by facilitating agile integration with new technology. As consumer behaviour evolves, we are more able to provide flexible solutions to accommodate changing needs. Technology and the resulting data also provide us with the insight to improve our understanding of the requirements of our guests and how we can fulfil those requirements and offer even better experiences.
During the year we have developed our technology to facilitate an improved online booking experience, have developed an employee app allowing our staff greater flexibility and have continued to work with Just Eat and Deliveroo, with 273 sites now offering delivery. In addition to this, we have three delivery only brands in trial, utilising existing kitchens which have additional capacity.
The George, a new all-day concept in Harpenden which we opened last year, has been performing well. The offer is a premium suburban concept which aims to appeal across all day parts with flexible space which is appropriate for a range of occasions.
We are increasingly supporting innovative companies finding sustainable solutions for our industry, as well as working collaboratively with other organisations in our sector to share learnings and best practice in addressing the environmental challenges we are faced with.
Ignite is the internal name used for our focused programme of work underpinning the longer-term strategy. Ignite initiatives have been instrumental in driving the turnaround in trading performance and profitability and have continued at pace in the year. Ignite 2 initiatives are in place to continue to deliver benefits in the current financial year and our next stage, Ignite 3, will be developed during the coming year.
Examples of Ignite 2 initiatives which have been rolled out in the year include enhancement to our booking platforms by reducing the number of steps a guest needs to take to book a table. Booking conversions have increased by 1.3ppts as a result of this more seamless experience.
Our centralised pricing process allows us to identify pricing opportunities and move quickly to realise them. Our till software enables centralised changes to be activated in line with changes to local market dynamics.
During the year, we have systematically targeted leased businesses which were underperforming expectations. A focused team has identified and implemented solutions to enhance the performance and profitability of these sites, and as a result, we have improved the uninvested trading performance of these sites by over £1m in the financial year.
Contributing to our improved return on invested capital, we have invested in software which enables us to match specific guest criteria against a site location. This technology enables us to make data driven investment decisions to ensure that each site operates under each brand which most appropriately matches the needs of the population around it.