Eclectic to slow roll-out after difficult trading dampens profits

lola lo derby

Leading operator Eclectic Bar Group has issued a profits warning, blaming increased competition and university students going out less.

In a statement today, it said that trading over the summer was in line with expectations but that it had proved more difficult in the three months from the end of September.

The result is that the board has decided it would be “prudent” to reduce its plans to roll out new bars from two or three in the current year to one or two.

Explaining the challenges it faced, Eclectic said: “University undergraduates nationwide have been less active across the marketplace during the freshers’ weeks and have been less predictable.”

The group, which operates venues such as Lola Lo tiki bars and Japanese-inspired Sakura, added there had also been “increased and intense competition in a number of specific locations”.

These factors meant that two of its latest openings, Lola Lo in Derby (pictured) and the New York-inspired Dirty Blonde in Brighton, had “not performed as projected”.

However, it said the management team had carried out “various mitigating actions” and were “actively assessing the new trends”. Also, it is reducing its cost base to match demand. The result is that “trading is stabilising, albeit at a lower level than expected”.

Despite taking these actions and being only five months into its financial year, the board said it now believed the shortfall created over the last few months was unlikely to be recovered.

Based on the trading year to date and provided that trading for the rest of the half year to the end of December is in line with the board’s revised expectations, it expects adjusted earnings (EBITDA) for the six months to be around £1.1million. The equivalent adjusted EBITDA for the six months in the previous financial year, excluding discontinued operations, was £1.4million.

The company added: “Consequently, whilst acknowledging that Eclectic is a strong, well-financed business, profitable and highly cash generative, the board has decided it would be prudent to reduce its aspirational roll-out of two to three new openings in the current year to one to two.”

The company reported some positive news, saying bookings for Christmas and New Year were looking “strong”, in particular at Lowlander in Covent Garden, Lola Lo in Manchester and Dirty Blonde.

The previously announced dividend of 2.5p per share will be paid on November 27. The board will consider the payment of an annual dividend at the time of the final results in September 2015 dependent upon trading performance during the remainder of the financial year.

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