The risk factors set out below are those which the Board believes are
the most significant to the Group’s business model that could adversely
affect its operations, revenue, profit, cash flow or asset values and
which may prevent the Group from achieving its strategic objectives.
Underlying cause of risk
The Group’s operating environment has continued to be affected by COVID-19 due to the Omicron variant in the winter. There is the risk of ongoing extensive local or national lockdowns, guest or corporate caution, and potential operating restrictions.
Response and mitigation
There are three mitigating actions to this risk: (i) Operational procedures implemented to ensure safeguarding of our staff and customers; (ii) Investment to ensure COVID-safe venues through use of screens, signage, PPE and enhanced cleaning procedures; and (iii) Regular Board reviews and action
planning to monitor restrictions.
Underlying cause of risk
Climate change and a growing requirement to operate a sustainable business pose a risk to the business’ ability to source appropriate food and drink. It also has the potential to cause reputational damage with our guests.
Response and mitigation
There are three mitigating actions to this risk: (i) Dedicated management and team members focused on driving sustainability agenda; (ii) Collaborating with Net Zero partners to monitor progress and provide accurate reporting; and (iii) Removal of passion fruit garnishes allowing us to net our cocktail menu and make it carbon neutral.
Underlying cause of risk
The Group’s long-term strategy is based on growth through the acquisition of new bars and sales generation from refurbished bars, with longer-term market expectations reliant on this. There is a risk that should these not happen, like-for-like sales will not grow, the business will not remain relevant, and overall sales growth will not occur
Response and mitigation
There are four mitigating actions to this risk: (i) The development team and property agents have sufficient resources to ensure the investigation of new site opportunities; (ii) 5/6-year investment cycle for all bars; (iii) Bars refurbished have proven track record of improvement in sales; and (iv) Operational management focus on economically significant bars.
Underlying cause of risk
The reopening of the global economy post-COVID-19 has caused supply chain issues that continue to affect the availability of certain products.
The UK is seeing cost prices rise across several areas, including utilities, food and drink.
The drinks distribution market is also dominated by one significant business, Matthew Clark, which is the Group’s principal supplier as it operates nationwide. If Matthew Clark were to face business difficulties or alter pricing it could disrupt the Group’s operations.
Response and mitigation
There are four mitigating actions to this risk: (i) Product offerings can be easily adapted and switched to alternative suppliers and ingredients; (ii) Increases in our retail selling prices are strategically required to counter the growing costs; (iii) Utility rates are largely fixed until April 2023; and (iv) The proposed strategy regarding Matthew Clark is to tolerate the risk based on the Group’s assessment that they are
the best supplier and a three-year deal is in place to September 2024, as well as maintaining a good relationship.
Underlying cause of risk
The out of home markets for eating and drinking depend on the consumers’ disposable income. Macroeconomic factors, including recent challenges with energy costs, other inflationary pressures, and low-growth, have an impact on consumer confidence and disposable income.
In an increasingly digital world, guests are more likely to express dissatisfaction on social media rather than alerting a member of staff, which can have reputational impacts.
There is a growing trend for consumer-led digital campaigns against sectors or brands that they believe require change.
Response and mitigation
There are five mitigating actions to this risk: (i) Ability to tailor offerings in response to macroeconomic influences, including quick adjustments to promotional activity; (ii) Group’s proposition is not based solely on selling price; a more affluent demographic is targeted; (iii) Increased focus on guest experience and feedback, with recent partnership with “Feed It Back” to monitor guest experience; (iv) Community management team to monitor and respond across our social channels; and (v) Crisis PR agency to support in any high-risk issues that may occur.
Underlying cause of risk
The Group’s bars are open to the public and the Group has a duty of care to look after its colleagues and its guests. Allergens are a heightened risk for our guest base, and thus the Group must ensure strict guidelines are adhered to in order to ensure the safety of guests. The physical safety of our guests is paramount, and our bar and operational teams are trained in managing guest safety.
Response and mitigation
There are three mitigating actions to this risk: (i) The Group’s policies and procedures manual covers all aspects of operations, as well as detailed ongoing training for all staff ; (ii)Adherence to these is strictly enforced both through internal operational line management and through external third-party audits; and (iii) Incidents are thoroughly investigated, and any lessons learned communicated throughout the business.
Underlying cause of risk
A significant proportion of bar-based teams are affected, directly or indirectly, by wage legislation and the national minimum living wage. Recent years have seen rises above inflation imposed on the business. Post-COVID-19, we face challenges in availability of the right people, and we must ensure we offer competitive packages to attract and be the best place to work. This extends to the costs of other people-focused suppliers like security staff.
Response and mitigation
There are four mitigating actions to this risk: (i) Technology is utilised to deploy our people more effectively and to streamline back office processes that will help mitigate wage increases; (ii) Contracts are reviewed regularly for external suppliers to ensure securing the best rates; (iii) Increase in sales price of goods may be required to counter the growing costs; and (iv) In FY22 we became an above-minimum wage employer to ensure retention of our best people.
Underlying cause of risk
NatWest provides funding to the Group by way of a Revolving Credit Facility which bears covenants which set levels for ratios on leverage, interest and fixed charge covers. As interest rates increase this has the potential to put increased pressure on the Group’s banking facilities.
Response and mitigation
There are two mitigating actions to this risk: (i) The difficult economic landscape may result in further increases to this risk; and (ii) The Group manages costs and has several options to manage cash to ensure compliance.