KPMG advises on Boparan Restaurant Group CVA

06 March 2019 Consultancy.uk

A company voluntary arrangement at two casual dining brands has put more than 300 jobs at risk across the UK. The closure of 27 branches of the Giraffe and Ed’s Easy Diner chain was advised upon by restructuring specialists from KPMG.

Boparan Restaurant Group (BRG) acquired Giraffe from Tesco in the summer of 2016, in a deal valued at about £13 million. The same year, it paid nearly £10 million to acquire 30 Ed’s Easy Diner stores after the business fell into administration. The deal saw the companies combined into the single BRG-owned Giraffe Concepts, employing more than 1,300 people. The firm saw like-for-like sales improve significantly, generating revenues of £67.1 million in 2017, but it still made a loss of £9.9 million according to its latest company accounts.

While the hope was to turn the troubled brand into a major cash-cow, the continued economic malaise pummelling the casual dining sector put paid to that optimism. As a result, KPMG was specifically brought in to consider options for the Giraffe and Ed’s Easy Diner brands at the start of February, with all options, including the potential sale of those operations, reportedly on the table. The restaurant group also operates several high street names including fish and chip chain Harry Ramsdens and Slim Chickens.

In order to reduce its financial burden, the owner of Giraffe and Ed’s has decided to close 27 of their 87 restaurants.

KPMG advises on Boparan Restaurant Group CVA

Speaking at the time of KPMG’s appointment, a spokesperson for Boparan Restaurant Group said, “BRG operates a portfolio of restaurant brands, most of which are trading well despite some of the most difficult trading conditions seen in the UK for some time. While we have some star brands, we have one or two that are performing less well. We are therefore looking at a number of options and have hired KPMG to advise.”

A company voluntary arrangement (CVA) is an insolvency procedure that can include cutting property costs by seeking store closures or a reduced rental bill. According to Tom Crowley, the Chief Executive of BRG, the company has negotiated a refinancing package with lenders if its creditors agreed to the CVA. As well as the 27 store closures, the deal would reduce rent at 13 of the restaurants.

Crowley added, “We have been examining options for the two brands for some time and the CVA is the only option to protect the company. The combination of increasing costs and over-supply of restaurants in the sector and a softening of consumer demand have all contributed to the challenges both these brands face.”

On top of this, it is understood that if creditors agree to the CVA, BRG will inject another £10 million into Giraffe Concepts. While all this will likely put Giraffe and Ed’s on a more even keel, however, the move also puts 340 jobs at risk. According to reports from The Guardian, staff at 20 Giraffe and seven Ed’s restaurants have been informed of the start of a consultation process on their jobs. The closures will come across the UK, at sites including Aberdeen, Manchester’s Trafford Centre and Holland Park in West London. None of the potential closures will affect the 17 outlets run by franchisees, including those at airports.

The casual dining scene of the UK has come under sustained pressure from spiralling import costs and declining consumer spending power in the last year. In 2018, the beginnings of the ‘casual dining crunch’ saw Italian chains Prezzo and Carluccio’s both enlist the help of consulting firms to aid turnaround efforts. Meanwhile, Prezzo also entered a CVA, handled by AlixPartners, with TPG Capital, Prezzo’s US private equity backer, tipped to axe 1,500 jobs across the UK at the time.

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