Luke Johnson, the casual dining sector veteran and executive chairman of Patisserie Holdings, has told City A.M. that his business is currently hungry for acquisitions.
Patisserie Holdings, which owns cafe chains Patisserie Valerie, Druckers, Philpotts, Baker & Spice and Flour Power City, revealed in results today that it had £21m of cash on its balance sheet after a strong financial year.
“We are actively looking at the possibility of acquisitions – we would love to invest the money if we can find the right deal,” said Johnson, who is also the company’s largest shareholder. “We would certainly consider taking on a new brand if the opportunity came up at a sensible price, if there were synergies and there was a cultural and strategic fit that made sense.”
In a year that has caused many in the casual dining sector to struggle, Patisserie Holdings has seen revenue and profits rocket. Some of Johnson’s peers, who have blamed falling consumer confidence and devalued sterling as a result of Brexit for their shaky results, might also have hoped to see the pro-Brexit chairman take a hit.
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But Johnson appears to be both having his cake and eating it, as he has remained strong in his opinion that the UK’s departure from the European Union will not cause his business to suffer.
“I don’t believe that everyday shoppers are thinking about Brexit when they decide whether to have a coffee and a cake,” he said.
“The habit of going out to have a snack or a drink is well-established in poeple’s behaviour patterns, and I don't think that’s going to change.
I think it’s more costs than confidence and consumer spending that has impacted the eating and drinking out sector – the national living wage, some imported inflation in ingredients, rent reviews, and we’ve had to manage some of that.
Fattening up
Yet Patisserie Holdings has pushed ahead with its expansion. The group opened 20 stores over the last 12 months – it operated 199 as of September – and plans to open another 20 over the course of 2018.
The business also started selling its products in select Sainsbury’s outlets.
In fact, some of the very same pressures which are causing pain for some businesses may actually be paving the way for Johnson’s acquisitive plan.
“In a way, the more challenging conditions help that cause because I think some sellers are a bit keener than they were – or more realistic about the price they’re expecting. That’s helpful to us,” he explained.
But he maintains that strict cost discipline has kept Patisserie Holdings’ financials looking tasty for investors. “The management run the business with real discipline,” he added.
Johnson, who made his name at Pizza Express and started the Strada restaurant chain from scratch, has previously told City A.M. that sterling “was going to have a correction at some point anyhow” and Brexit would not be a primary concern for business prospects.
For Patisserie Holdings at least, that theory seems to be holding true.
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