Hostmore has been formed to provide a platform for the development of hospitality brands. Its current operations are Fridays, a UK chain of American-styled casual dining restaurants (85 sites), 63rd+1st, a cocktail-led bar and restaurant brand (four sites) and QSR Fridays and Go (one site).
Ahead of H122 results in September, Hostmore confirmed on 11 July that, despite sector operating challenges, its like-for-like (l-f-l) revenues since 23 May are as expected in its May update, which assumed up to 8% lower l-f-l dine-in volumes on 2019 for the rest of 2022, mitigated by pricing. Organic expansion is also on track with the new 63rd+1st in Edinburgh part of five openings planned this year, while enhanced banking facilities reinforce a strong balance sheet. For FY23 Friday’s rejuvenation prospects in likely improving conditions and clear growth opportunities drive our expectation of a sharp rebound in earnings. Hostmore’s rating of 4x FY23e EV/EBITDA is low against an average of c 7x for peers.
COVID-19’s exacerbation of longstanding structural difficulties in UK hospitality has shown up undeniable growth opportunities for well-funded operators, notably the increasing availability of prime sites at cheaper prices and on more flexible terms and the erosion of competition (industry sources estimate a potential loss at up to 30% of restaurants). Current challenges of rising costs and staff shortages are being mitigated by scale and career initiatives. Restaurant market LFL sales since March are c 4% up on 2019 (Coffer CGA) but well down in real terms, given high inflation.