Bow Street Group PLC. (LSE:BOW) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the BOW STREET GROUP PLC interim results investor presentation. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish those responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the team from BOW STREET GROUP. David, good morning, sir. Good morning. Hello, everybody. My name is David Page. I'm the chairman, and this is Nick Wong. Morning. My colleague, FD.

0:47 And to kick off with the presentation, which I hope you all have in front of you, we bought into this company a year ago, and it it currently has Wildwood, which is a 25 strong restaurant brand with Italian dishes, and it has Din Tea, which has three restaurants, Asian inspired cuisine. And as I say, a year ago, we raised, £10,000,000 for expenses. I became chairman and chief executive, and we embarked on a a policy of turning the company around. Excuse The the three three pronged policy is we're investing in the estate, which we'll talk about in detail later, going through the whole estate, and we are closing and selling restaurants that we don't think are viable.

1:39 And we're investing in new technology and ecosystems, and we more exciting is we're actually using this as a platform to acquire other restaurant brands and use the buying capacity we have and the knowledge we have in rolling out restaurant brands in The UK. And the trade trading stabilized and grew when we bought the company, and it's grown since, but we'll come onto that. Excuse me. In a minute. So if we turn the slide, we come onto the interim results, which we published on Tuesday morning, and Nick will talk about them in detail. Let me take you through the interim results for the six months to 06/28/2026. We reported like for like revenues, and that is excluding any restaurant closures that we've had last year and this year. And any refurbishment days has been lost due to closure for refurbishment.

2:33 And the like for like revenue was 5.6% positive against last year, same period. That really reflects the the benefit of the management action that's been taking place over the last year, both from the investments in the estates as we're rolling through the refurbishment program and also the investment in the people and the operational structure. Once you add in the closures and the lost days, the reported revenue was down from 15.1 to 14,400,000. The prime primary reason for that are the closures. We had four restaurants that's been closed since our involvement back in September last year.

3:19 And that gap has flowed through to EBITDA and operating loss. So our EBITDA was point five against 1.2 the previous year, and our operating loss before highlights items was point seven against point two the previous year. We did benefit from a highlight item credit from the fact that we dispose of a number of leases and the lease liabilities were extinguished at that point. And that amounted to million pounds. That compares to last year where we had significant amounts of impairments losses, where we wrote down assets following a full review of the estate, and the losses were £7,000,000 last year. Therefore, the loss after tax has narrowed significantly to a point two for the first half against a loss of 7.5 last year.

4:15 As we mentioned, we had a number of refurbishments, during these these months, and in fact, we've completed nine to the end of June. And we spent capital expenditure of 900,000 against a backdrop of very little CapEx, which is point one the previous year. Our net cash balance at the end of June, excluding property lease liabilities or IFRS 16, was 7,900,000, up from 2.4 the previous year. The reason for significant change is the fundraising that David talked about earlier. On the operational side, we saw really strong improvements and like for like performances as mentioned before where we have targeted the capital investments.

5:09 And as I mentioned, that nine has been refurbished so far. And what was very encouraging was that previously underperforming locations were also returning to like for like growth following the refurbishments. We introduced a new wildwood menu in May 2026, so fairly recently, with really positive customer feedback. This was a touch later than we had hoped. We we plan to put that in in April to align with the increase in living wage and various employment rights as as added cost to business. But during the trial phase in similar test locations, we found a few areas that could be improved, and therefore, we launched the revised menu in middle of May.

6:03 Dim Tea with three restaurants has recently put in a new menu, and we will be focusing more attention into the DIMM Tea business over the next nine months. I will also take you through a little bit more detail around the investment in technology and some updates of where we've got to. Excuse me. As you can see from the map, we are widely spread in The UK from York to Plymouth and London, no to Canterbury. The restaurants, in fact, surprisingly, that are performing the best are the ones outside London where they've had a a stormy summer.

6:52 When we sat down after three months of looking at the company when we bought in, we realized there were 280 things we could have improved could improve in the company, and we've we've got down to just over a 150 that are left. We've completed over a 100. We looked at the estate, so we closed four four restaurants. We closed another one since the year end two since the year end. And we're looking to complete our refurbishment program, which Nick referred to, by spring next year. We're just nearly halfway through the estate, and the stores of the refurbished stores are showing sales with way in excess of the group average, as you can see on that slide.

7:40 The first four we refurbished did 18.6% like for like sales increase in July and August. So, obviously, we can get the whole estate up to that figure. We'll be doing what we what we hope to achieve. We've also introduced new incentive schemes to the employees who've put in share options because we're a public company, and we are putting in bonus schemes based on the ones. We we also have hired recently in the last three months a human resources director who came to us from Frankenmecca, so we know her very well. And she's putting in place lots of programs to increase the incentives for the staff and make sure they know what they're meant to be doing and we know what they're meant to be doing. If you look at the pictures down on the next slide thanks. So you can see that the the the previous owners of the business spent quite a lot of money on these restaurants, but they didn't really concentrate on the signage on the outside.

8:44 So you can see in Telford that the signage is oblique, to say the least, and the outside looked a bit drier. So this is what we've done to Telford. And then at the bottom, you can see London now. And the the change is is miraculous, really, and it is is a real eye stopping event. It's eye swiveling, head swiveling, whatever you call it, event in London. No. High Street. Just and sales immediately increased when we when we spend money on the stores. Nick, technology. Let me take you through the technology piece. It has been it's maybe a little bit dry, but it's a necessity for us. The first part, dashboarding system.

9:30 We introduced a new dashboarding system to to the business to allow our operational team better visibility and understanding of the core KPIs and the various, detail that historically would have been analyzed through spreadsheets and manual work. They now have almost instantaneous visibility across your states whether it's sales mix or discounts or loyalty or customer base, they can see everything to do with their restaurants at a touch of a button. And we're now rolling this out to the wider audience within the business. We've reviewed and audited all our restaurants and identified that the estates just haven't had much investment over the last five to ten years, and therefore, the the whole networking infrastructure needed investment.

10:24 So we are just upgrading. We started the process, and we're hoping to complete the upgrades by Christmas this year. And that will give our staff and more importantly, our customers better connectivity in our restaurants. We have been undertaking a program of updating our ecosystem, and that starts going live in October this year and will hopefully complete by Christmas. And that comes with it for integration with our booking platform, giving our staff in the restaurants and our managers much simpler integrated processes to speed up the the work and also improve on customer experience and less mistakes. With that, we're also consolidating our booking processes and how we take big party bookings to maximize efficiency and, more importantly, having the ability to upsell to some of our potential customers even before they step into the restaurants.

11:27 More work will be undertaken after all these systems are live to integrate them to the single customer view that we have in the business, And that will, next year, allow us to design and launch a new loyalty program, which will offer us much better targeting of offers and loyalty incentives to our core customer base who are returning time and time again. Other areas that we're working on include energy monitoring, obviously very topical with the cost of energy going up consistently over the last couple of years. We have we are introducing a time and attendance system that's fully automated to allow managers better manage the time, of our staff who who turn up every day.

12:17 We're also more the most important of this piece of work is working on delivering efficiency. We have started trialing in two restaurants, new smart scheduling systems, and forecasting tools, and we are introducing additional AI tools to help our staff and our managers particularly to forecast better and to deploy our team members in the right places at the right times. That will help us streamline our labor costs. Yes. So the first two strategies were turning around the existing estate by selling stores and handing them back to the landlords if they're not working. We're still that's still an ongoing process.

13:06 Refurbishing the stores we want to keep and boosting sales. That's the first platform for growth. Second platform is to increase the technology, which Nick has just talked about, which is making the bit movement the business more efficient and how we can understand the data. The third and most exciting part of the growth strategy is to actually purchase other companies and expand them and use this public company paper to help with that process. We're very attractive for growth brands because we've got experience in in rolling out businesses like this and letting the management control it whilst we give them advice. We've done it many times before.

13:53 We've both been involved in Gourmet Burger Kitchen. Previously, I was at Pizza Express, and my most recent venture together was Frank and The Real Greek, where we grew brands and then sold them. So this we're using BOW STREET as this platform to buy businesses. In the last year, we've looked at well, we've looked at many businesses. We've probably signed over, like, 10 NDAs to look at these businesses in more detail, and we're looking to buy between four or six of these businesses over the next three years. We've got a top four at the moment, which we are engaging with. But these businesses, we're buying profit effectively, and then we're growing businesses. So these businesses don't have to sell. They're they're making money, but they are reaching a stage for whatever reason internally that they need to move on and get some advice, maybe raise some money, or maybe a combination of a number of things. So we feel we can help them, and then we can invest in their business and help them grow.

14:56 We've looked at most every cuisine you can think of. We've looked at breakfast, lunch, and dinner, sort of sort of three day part businesses. We've looked at couple of four or five businesses from the Far East Asia. We've looked at pizza pizza businesses again, but we're really only interested in things that are making money. So we're gonna buy the profit. And, essentially, we like we have done before, we are going to work with the management over two, three years. They will receive a payout dependent on the profit that they contribute to the company. So we give them, say, half the price of the business upfront.

15:41 They carry on working for two years, and then we give them second payment when they prove that they're contributing a certain amount of money, and we just give them multiple of that. And our ideal business that we would buy would be somewhere between two and fifteen sites. They've got to be a sort of 10 to £30 ahead. We think that's much more defensive than a £100 ahead in The UK at the moment, given the economy. And we've gotta be able to open forty, fifty, 60 around The UK minimum. And we've gotta work with the existing management team, and we've gotta work with them for a couple of years so that we can help them. They can build their knowledge, and we can maybe add some people from our our past to help them as well.

16:29 We may be able to change some of our sites that aren't working to a new business that we buy. And, of course, the buying power of them joining a bigger group is very helpful to their bottom line. So that's something else that they would be attracted to them so they can make more EBITDA, which effectively then relates into what price we pay for their business. So as we reported on Tuesday, the next slide, current trading and outlook, we had a good first half. And as you can see from the top slide, I think we disclosed just over five between five or 6% for the first half, but then we did eight and a half percent like for like sales in the first eight weeks of the the new year in the summer.

17:22 The refurbished restaurants did 18 and a half percent increase. So we're still managing the estate. We as I said, we closed one further restaurant since the year end, which is lost baking, so that'll add to the profits next year. Currently, we trade out of 25 wildwoods and three dim teas. We have net cash of 7,500,000 on the September 13. And although various governments have not been very helpful to this industry, we think this is a business that will thrive. And as you can see from the sales, even in dire times for the general economy, we've been managing to to buck the trend. So I'll say the last point is we are very keen to do at least one acquisition in the next few months, maybe two, and that'll get us going with what the main platform of the business is, which is to provide help to growing brands, of which there are a few out there in despite this economy being in in not very good shape. There are some great businesses with queues out the door, which is which is ones we're going for.

18:37 So that is the end of the presentation. There's some appendices at the end for people to look at when they get the presentation. I think there are some questions. Gonna have trouble reading that. Those Right. For the q and a, let me pick the first one. There's question on how much the like for likes was price taken. Generally, we look at increasing the some menu pricing around two to three percentage points in order to cover the labor cost increases that we see every year. So we are seeing a sort of perhaps half the the benefits in the first half from pricing and half from from footfall and increased customer numbers.

19:28 It it is important to note also that we had much stronger trading over the summer months, and a lot of that is down to the during the refurbishment, we have extended some of our external areas. And whereas previously, they were not so attractive for customers to sit in, following the refurbishments, we have been able to fill those outdoor terraces over the summer months. Pretty packed. In Lincoln, we doubled the number of seats on a site and get in the morning, so it's much more attractive to sit in. That's just one example. Just given us a a fantastic uplift over the summer. The second question, probably to David.

20:15 I can't read it. Sorry. Can we can we do that in front? Yeah. How how have you selected the outlets for Oh, right. Yes. We've actually left the more profitable ones to the end of the refurb because we thought it would be more because they're working, you know, they're flying. And so we we started at the lower end, and we just decided which we were going to sell and close and get back to the landlord in which we were gonna spend some money on. So we we worked our way through the estate into stores that we couldn't understand why they weren't taking so much money, and then we thought there's a lot of money. If we spend, say, $80 on them, that'll uplift the sales to both profit profitability and more, which is what we've been doing. And we're now after we've gone through half that state, we're now gonna concentrate on the restaurants like Rushton Lakes, which is contributing well over £250,000.

21:11 We're actually gonna spend quite a bit of money on it, and we would hope that in 2027, it'll contribute even more because of the money we're spending on. We're putting in a bar, refurbishing the outside, rearranging the seating, new lighting, rearranging the kitchen, things like that. So we started the answer is we started at the lower end in terms of contribution, and then we're working where we're aware of the estate. The next question, it's been a year since the fundraising. It's good that the funds are not burning a hole in your pocket, But what is the reason for the delay in that position? Well well, I can talk about the sort of top four. As I said before, these people don't have to sell.

21:59 They're profitable. They got great businesses, So their their their urgency is not quite the same as ours. And so we are we've got a top four out of the 10 that we're looking at, but they're all different. One of them, unfortunately, suffered a loss of one of the shareholders. You know, others have five or six different shareholders who all have slightly different agendas that we have to address them. One of them, it's so profitable, but the business owner who owns a 100% of the company went went away for three months this summer, which is not very helpful when you're trying to trying to engage. So each situation is different, but, you know, we are as keen as all our shareholders to actually get one or two under our belt quite quickly.

22:54 I think the the rest of the question, then there there are a few really is around the acquisition targets. So we can we can go through some of that. Again, just in terms of the key criteria in we're looking for acquisitions. We sort of covered it, but let's do it again, shall we? So it is it is very much about a brand with, you know, two to 15 sites, must be value for money offer, needs a really scalable footprint. And as David mentioned, queues out the door is a very good indicator that they're successful and is popular with the customers. But we are quite flexible whether it's it's counter service or full service.

23:41 Today, with the sort of labor cost challenges, a quick service or counter service business will naturally thrive with lower labor costs and a smaller footprint. So we are very much open to both both Yes. It's a virtual spiral, basically. If you look at a business like PharmaJade's in London, you know, their property costs are lower because their stores are smaller. It's a QSR operation. It's got great it's got great and it's got queues out of the door. And because the the pricing is lower, because they all their costs are lower than a full service response. So business is not that's not one of the people we're looking at, but that's one of the type of business we'll be looking at. And the question about management. So what were we looking for in the management of an acquisition?

24:34 Well, we'll look the management will have grown the business to a certain scale and size. They should be enthusiastic, hardworking, honest, goes without saying, and really driven to actually take the business from where it is at the moment to a different level. And then they may choose to exit in three or four years time, or they may choose to carry on growing the business with us. We've done this in the past with a typical example is Gourmet Burger Kitchen where we they had four or five sites. We this was two public companies ago. We gave them half the money. We agreed the price. We thought the business was worth. Given that it was meant to be making £2,000,000.

25:19 They told us it was gonna make £2,000,000 in two years. So we said, okay. You can have half of them, half the money now. We work we give you two or three more sites. You work hard. We put in a parallel management team to learn how the business grows, and then we'll give you the rest of the money dependent on the on the performance of the business. And and and the three New Zealanders who founded it walked away with £10,000,000 because the business was making well over £2,000,000 when we're at the end of the two year anniversary. So we'd like to do that sort of arrangement. So we're making sure that we're buying the profits. We only give them, say, half half the money straight away and then half two years down the line. And the final question is one around deal structure, which I think using the Gourmet Kitchen example shows That's just one example where we could we could we can sort of play with it.

26:13 They and that was all cash, wasn't it, Nick? That was all cash. That was all cash. What we quite like to do is if somebody if we're buying a business is they can take some cash now, which once again we've done in the past, and they then take some shares in the business so that they're aligned with us. And then in on the second payment in two years' time, maybe the same thing happens. You know, they take some cash, but they also take some shares in the business. I mean, very, very long time ago at Pizza Express, I had a private business at 14 of the franchises, and my partner took half cash and half shares, and I took all shares. And the the shares went up 20 times, so he he didn't regret taking half cash. But he in retrospect, he probably should have taken some more paper.

27:00 Yes. More paper. Yeah. He took a million pound in paper. David, Nick, if I may just jump back in at this point, and thank you very much for your presentation and for addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. But David, perhaps before really now, just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great. Yeah. We as I say, we got involved in this company two years ago. We put in a lot of our own money, and we raised the money from people we knew. So an existing shareholder is actually putting quite a lot more money to reboot the company, and it's been a pretty good ride so far. It's been just as we expected.

27:50 The slightly frustrating thing is we haven't bought anything yet, but these things take quite a long time. But we're looking to buy some at least one or two things in the next six months. Perfect. David, Nick, thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback? On behalf of the management team of BOW STREET GROUP PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.