Risks

Underlying cause of risk

The Group’s operating environment was severely impacted by COVID, significantly restricting the ability to trade at normal levels due to social distancing and restricted opening hours during periods. There is the risk of ongoing extensive local or national lockdowns and potential fines if operating restrictions are not fully complied with.

Response and mitigation

There are four 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; (iii) regular Board reviews and action planning to deal with local and national lockdowns; and (iv) significant step up in cash liquidity made available to support further lockdowns.

Underlying cause of risk

Brexit may have short-term impacts on consumer prosperity and disposable income. The reopening of the global economy post-COVID has caused supply chain and HGV issues that have impacted the availability of certain products, with the situation constantly evolving. The UK is seeing cost prices rise across several product lines, including utilities.

Response and mitigation

There are four mitigating actions to this risk: (i) The Group’s suppliers have assured us they are monitoring the position closely and have contingency plans in place to maintain supply; (ii) Product offerings can be easily adapted and switched to alternative suppliers and ingredients; (iii) Increase in our retail selling prices may be required to counter the growing costs; and (iv) Utility rates are largely fixed until April 2023.

Underlying cause of risk

The Group’s long-term strategy is based on growth through the acquisition of new bars. Longer-term market expectations rely on the Group sourcing and developing a pipeline of good sites.

Continued like-for-like sales growth is dependent on refurbishment and quality of existing bars, and high-quality offerings at our highest performing bars.

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, as required; (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 out of home markets for eating and drinking depend on the consumers’ disposable income. Macroeconomic factors, such as employment levels, interest rates and consumer confidence are important influences on disposable income. In an increasingly digital world, customers 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) Ensure a safe and welcoming environment in a COVID world; (iii) Group’s proposition is not based solely on selling price; a more affluent demographic is targeted; (iv) Increased focus on guest experience and feedback, with recent partnership with “Feed It Back” to monitor customer experience; and (v) Our brands take a progressive approach to consumer trends, allowing them to be on the right side of most consumer-led campaigns.

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 staff and its customers. Allergens are a heightened risk for our customer base, and thus the Group must ensure strict guidelines are adhered to in order to ensure the safety of guests.

Response and mitigation

There are four 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; (iii) Incidents are thoroughly investigated, and any lessons learned communicated throughout the business; and (iv) The physical safety of our guests is paramount, and our bar and operational teams are trained in managing guest safety.

Underlying cause of risk

All of the Group’s operating sites are held under leases. Typically, rents are determined on a five-year cycle by reference to open market rents prevailing at the time of the review.

Response and mitigation

There are four mitigating actions to this risk: (i) The Group employs specialist rent review advisers who deal only with tenant reviews; (ii) CVA in year resulted in exit of six sites, and improvements in terms on others; (iii) Further two loss-making sites exited; and (iv) Many concessions and rent reviews finalised due to COVID negotiations.

Underlying cause of risk

The drinks distribution market is dominated by one significant business, Matthew Clark, which is the Group’s principal supplier. Matthew Clark operates nationwide whereas other drink wholesalers do not. If Matthew Clark were to face business difficulties or otherwise change its arrangements or pricing, then the Group’s operations could be disrupted.

Response and mitigation

The proposed strategy is to tolerate the risk, based on the Group’s assessment that Matthew Clark is the best supplier, and a three-year deal is in place to September 2024. A tested contingency plan is in place to move to an alternative supplier should Matthew Clark be unable to supply.

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, 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 three mitigating actions to this risk: (i) Technology is utilised to deploy staff 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; and (iii) Increase in sales price of goods may be required to counter the growing costs.