We hereby enclose the transcript of Earnings Conference Call held on Monday, August 7, 2023 at 5:00 PM (IST), post announcement of financial results of the Company for the first quarter ended June 30,...
To
The Manager Listing Department BSE Limited P.J. Towers, Dalal Street, Mumbai – 400001
Date: August 14, 2023
The Manager Listing & Compliance Department National Stock Exchange of India Limited Exchange Plaza, Bandra Kurla Complex, Bandra East, Mumbai – 400051
Scrip Code: 543283
Scrip Symbol: BARBEQUE
Dear Sirs,
Subject: Transcript of Q1 FY24 Earnings Conference Call held on August 7, 2023
Ref: Regulation 30 of the Securities and Exchange Board of India (Listing Obligations and
Disclosure Requirements) Regulations, 2015
We hereby enclose the transcript of Earnings Conference Call held on Monday, August 7, 2023 at 5:00 PM (IST), post announcement of financial results of the Company for the first quarter ended June 30, 2023. The audio recording of the Earnings Conference Call along with the Transcript have been uploaded on the Company’s website at www.barbequenation.com.
This is for your information and records.
Thanking you.
Yours faithfully,
For Barbeque-Nation Hospitality Limited
Nagamani C Y Company Secretary and Compliance Officer M. No.: A27475
Encl.: As above
BARBEQUE-NATION HOSPITALITY LIMITED Registered & Corporate Office: “Saket Callipolis”, Unit No. 601 & 602, 6th Floor, Doddakannalli Village, Varthur Hobli, Sarjapur Road, Bengaluru-560035, Karnataka, India. T: +91 80 69134900, E-mail: corporate@barbequenation.com,CIN: L55101KA2006PLC073031 www.barbequenation.com
Barbeque-Nation Hospitality Limited
Earnings Conference Call Q1 FY2024
Aug 7, 2023
Management:
Kayum Dhanani – Managing Director
Rahul Agrawal – Chief Executive Officer & Whole Time Director
Amit Betala – Chief Financial Officer
Bijay Sharma – Head of Investor Relations
Moderator:
Amar Kedia – Ambit Capital
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Barbeque-Nation Hospitality Limited Earnings Transcript Q1 FY2024
Moderator:
Ladies and gentlemen, good day and welcome to the Barbeque Nation
4, 2021
Q1FY24 Earnings Conference Call hosted by Ambit Capital. As a
reminder, all participant lines will be in the listen-only mode. And there will
be an opportunity for you to ask questions after the presentation
concludes. Should you need assistance during the conference call, please
signal an operator by pressing star then zero on your touchtone phone.
Please note that this conference is now being recorded.
I now hand the conference over to Mr. Amar Kedia. Thank you and over
to you sir.
Amar Kedia:
Thanks, Aman. Good evening everyone. Welcome to the Q1FY24
earnings concall of Barbeque Nation Hospitality Limited. From the
management, we have with us Mr. Kayum Dhanani; Managing Director,
Mr. Rahul Agrawal; CEO and Whole-Time Director; Mr. Amit Betala; CFO;
and Mr. Bijay Sharma; Head of Investor Relations. Before we begin the
presentation, I would like to remind you that some of the statements made
into this conference call by the company may be forward-looking in nature
and may involve risks and uncertainties. Kindly refer to the earnings
presentation for a detailed disclaimer. I now hand the conference over to
Mr. Kayum Dhanani, Thank you, and over to you, sir.
Kayum Dhanani:
Thank you. Very good evening, ladies and gentlemen. I take the pleasure
in welcoming you to Q1FY24 conference call of Barbeque Nation. During
the quarter, we recorded a revenue of Rs. 324 crores, which is an increase
of 15.6% on a quarter-on-quarter basis and 2.9% on a year-on-year basis.
This is an encouraging performance considering the prevailing subdued
demand scenario and higher base impact in the first quarter last year.
Both our dine-in and delivery businesses recorded very strong sequential
growth, primarily driven by volume growth of 20% across both segments.
This growth was offset to some extent due to lower average realization in
the dine-in business because of various offers and promotions across
select markets.
Our key focus during the quarter was to drive volume growth, which we
have been able to achieve successfully. We undertook various initiatives
during the quarter to enhance guest experience through upgraded
restaurant designs, elevating culinary experience and
further
strengthening service culture. We remain committed to drive cover growth
and we will continue to invest with the objective to enhance our guest
satisfaction.
During the quarter, we opened 4 new restaurants, which included 2
restaurants in Barbeque Nation India, 1 in Toscano and 1 in international
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markets. We closed 8 restaurants during this period, resulting in net worth
of 212 restaurants.
Our medium to long-term growth story remains intact and we are pursuing
a clearly defined strategy. Our focus will be on driving SSSG and
profitability for the India dine-in business, scaling emerging verticals such
as Toscano and International businesses, and drive penetration for UBQ
and Dum Safar. In addition, we will also look at expanding our brand
portfolio, including inorganic growth. With this, now I hand over to Rahul
to take you through the performance during the quarter. Thank you very
much. Over to you, Rahul.
Rahul Agrawal:
Thank you, Kayum. Good evening, everyone.
Our revenues for the quarter were Rs. 324 crores, an increase of 15.6%
sequentially and 2.9% on a year-on-year basis. Our dine-in revenues for
the quarter increased 14.5% sequentially and 1.3% on a year-on-year
basis to Rs. 276 crores. Our delivery revenues recorded a strong
sequential and year-on-year growth of 21% and 12.6%, respectively, to
reach Rs. 47.3 crores. Both dine-in delivery growth were primarily led by
20% volume growth on sequential basis. Delivery sales accounted for
14.6% of the total revenues during the quarter, which is the highest level
over last 7 quarters.
Same-store sales growth for the quarter was negative 7.7% compared to
last year. Compared to quarter Q4 FY23, we recorded a same-store sales
growth of over 13%, which was primarily led by around 20% volume
growth and offset to the tune of around 5% on account of lower dine-in
price realization during the current quarter.
Consolidated gross margin for the quarter declined by around 180 basis
points sequentially and 280 basis points on a year-on-year basis. While
the cost inflation remained under control, this decline was primarily
attributable to lower dine-in price realization of around 5% compared to Q4
on account of various offers and promotions under taken during this
period. The gross margin trend is improving on a month-to-month basis
and has recovered to historical levels in July 2023.
Consolidated reported EBITDA for the period was Rs. 47.6 crores, which
is an increase of 13% compared to Q4FY23 and a decline of 35%
compared to same period last year. Our pre-IndAS adjusted EBITDA for
the period was Rs.18.8 crores with a margin of 5.8%. Pre-IndAS EBITDA
margin marginally improved on a sequential basis as the benefits of
operating leverage from sequential sales growth were offset by lower
gross margins.
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Our restaurant network stood at around 212 restaurants. This included 190
Barbeque Nation India restaurants, 7 International Barbeque Nation
restaurants and 15 restaurants of Toscano. During the period, we added
4 new restaurants, which included 1 Toscano and 1 Barbeque Nation
International. We also closed 8 restaurants in the period, which we believe
had poor future economics.
We also delivered strong quarter-on-quarter performance on revenue per
outlet. Matured restaurant portfolio delivered an annualized revenue per
outlet of Rs. 6.5 crores during the quarter thereby growing 14%
sequentially and declined by around 7% on a year-on-year basis. The
matured portfolio delivered a restaurant operating margin of 14.3%, which
was relatively flat on a sequential basis despite the decline in gross
margin.
New restaurant portfolio is growing well. New restaurant portfolio reported
an annualized revenue per outlet of Rs.5.2 crores, which is an increase of
33% sequentially and 27% on a year-on-year basis. The restaurant
operating margin was 4.3% on this compared to a loss of 1.2% in Q4FY23
and profit of 6.2% in Q1FY23.
Our primary focus during the quarter was to drive volume growth and all
our efforts have yielded very encouraging results. We are positive about
continuing this trend and gradual improvement in our margins going
forward.
We are focused on maintaining our market leadership position in CDR
segment in India. Our focus area for medium term would be four-pronged
strategy across Barbeque Nation India dine-in business, scaling emerging
verticals, growing delivery and portfolio diversification.
In our Barbeque Nation India dine-in business, our focus will be to drive
same-store sales growth and profitability coupled with cost optimization.
We will continue to invest in enhancing guest experience through culinary
innovations as well as upgrading our restaurants.
In our emerging business portfolio, our focus will be expansion led growth
for Toscano coupled with maintaining our current SSSG and profitability.
Similarly, for Barbeque Nation International business, we will focus on
calibrated expansion and maintain SSSG and profitability for the existing
assets.
Growth for delivery vertical will be focused on driving volume growth of
UBQ coupled with increased penetration for our Biryani Brand ‘Dum
Safar'.
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We also continue to evaluate opportunities of brand portfolio expansion,
both under organic and inorganic space, such that we further capitalize on
our existing organizational strengths and understanding of our guests.
With this, we can open the session for Q&A. Thank you.
Moderator:
Thank you very much. We will now begin the question-and-answer
session. The first question is from the line of Kapil Jagasia from Nuvama
Wealth Research.
Kapil Jagasia:
My first question is all food operators including you are very optimistic on
demand revival around Q3. Now since the festival season is just 2 months
away, have you seen demand reviving in smaller towns or inflation
moderating to a larger extent for your business? Just wanted to get a
sense on how confident you are about business performance in the
second half of the year.
Rahul Agrawal:
It looks very encouraging. If you look at our past 5 months data also, I think
we reached our lowest point in the month of February, this calendar year.
And post that February till around June, we have seen a sequential month-
on-month improvement, both in terms of top line and also in margins. In
our business, quarter 2 generally is a lower quarter given a lot of
vegetarian days. Sawan months have already started. And this time this
period is longer, around 1.5 months. To that extent, we saw some dip in
July. But otherwise, on a like-to-like basis, even for sawan days last year
vs this year, the growth continues. With this momentum, I think I'm also on
the same bucket, which we believe that second half of the year should be
really strong. Also given the fact that the base impact will also kick in
because last year second half has not performed that well.
Kapil Jagasia:
Okay. That helps. My second question is Dine-in volumes grew 20%
sequentially. What has been a trend of volume growth earlier between Q1
and Q4 in your limited history, are pre-COVID times were really healthier?
Rahul Agrawal:
Sorry, you mean growth between Q4 and Q1 in the historical period?
Kapil Jagasia:
Yes.
Rahul Agrawal:
So pre-COVID, the business growth is around 8%. Out of that 5% is
typically volume growth and 3% is price hike. Historically, we took price
hikes in 2 periods. One is the beginning of the year, and one is around the
beginning of the second half. The total revenue growth was around 8%,
which this time around is around 16% on a sequential basis.
Kapil Jagasia:
Okay. And one final question would be on Dum Safar. There was no
mention about this in your presentation. Just looking at the sharp recovery
in delivery volumes, how much revenue has Dum Safar reached? And
what would have been the ADS?
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Rahul Agrawal:
Dum Safar is now, present at over 80% of our restaurants. We have–done
Rs. 6.5 crores in the previous quarter on a month-on-month there is
increase in ADS in Dum Safar. On the average, it could be around Rs.
5,000 ADS per day.
Kapil Jagasia:
So, I guess, earlier, we were at 7,000, right? So, has that gone down?
Rahul Agrawal:
No. Rs. 7,000 was only for stores that we started in the first phase. The
first phase outlets for which the ADS was Rs. 7,000 has now reached
approximately 11,000. The network for Dum Safar has expanded and
reached to 80% of our outlets over a period of 4 quarters. The first phase
includes restaurants that were opened up in August and September last
year.
Moderator:
Next question is from the line of Harit Kapoor from Investec.
Harit Kapoor:
My first question is on the margins in the matured stores. So, you've gone
from 19% to about 14-odd percent. If you look at Q2 to Q1, Q2FY23 to
Q1FY24, while revenue per outlet is broadly the similar trajectory, Rs. 6.7
crores and Rs. 6.5 crores. So, would you attribute this 500 bps only to
increased promotions which you've done quarter-on-quarter?
Rahul Agrawal:
Largely around 2.5% of that would also come from gross margin, which is
largely the impact of the lower price realization and the balance, 2% would
be the revenues are lower by around 3%, maybe 1.5% will come from
that. Overall, this portfolio is also recovering well. If you look at versus
quarter 4 versus now, ideally with the increase in revenues, some bit of
this should flow to their margins, but we lost because of only lower price
utilization.
Harit Kapoor:
And by when do you think you'll be comfortable with the footfall number,
and you can kind of phase out the promotions?
Rahul Agrawal:
This is already phased out. We did this aggressively in April, we also spoke
about this in our last call. And then from July onwards, this has been
phased out. And in fact, if you look at our gross margin numbers in July, it
has reverted back to around 66.5%, that we used to do historically.
Harit Kapoor:
Got it. Second question was on the closures. So, you've done 8 closures.
Can you give us sense of what that number could look like in the near term
given what visibility you have? And also, the benefit of closures on the
margin, do you start to see it from Q2, especially on the late closures, as
I'm assuming it's been done through the quarter, sir?
Rahul Agrawal:
Yes. It's been done through the quarters, but typically, there's some notice
period also additional expenditures if you close. I think Q3 onwards it will
definitely start flowing. Did you ask in terms of other closures going
forward?
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Harit Kapoor:
Yes, also that. That's the other question.
4, 2021
Rahul Agrawal:
As of now, I think maybe 5-odd restaurants would be under very close
watch. I think out of this 2 or 3 will finish close in this quarter. And on the
other 2, we'll take a call in quarter 3, if required. Other than this portfolio, I
think largely, I don’t see that this needs to be revaluated. And I think we
will be done with our portfolio reconfiguration.
Moderator:
The next question is from the line of Manish Poddar from Motilal Oswal.
Manish Poddar:
So just a continuation to the other one. Can you call up, let's say, these
eight restaurants, which you have closed. Now what was generally the
vintage of that? And how much is the actual EBITDA loss there? And why
did you close it actually? Why take the decision now? Because I thought
during COVID you've done a lot of downscaling already. So, what has
really changed? 3 parts. One is the absolute EBITDA loss, why close now
and vintage. That's the third part.
Rahul Agrawal:
Let me first share few data point. Absolute EBITDA loss for the quarter on
this would be approximately Rs. 1.2 crores. These are at store level. And
vintage-wise, these are all part of mature buckets, this is not new bucket
barring one, which is a new bucket. And in terms of tiers, 4 of them are in
Tier 2&3 markets and 4 of them are in metro & tier1 markets. Some have
lived through the entire life of 12 years and rents have gone up to a
particular level, which was not being supported, and our discussions on
rental renegotiation did not work well.
And in this, two of them will revisit and go back to the same trade area
because we are talking to a site which is close by, but didn’t want to take
losses in the current scenario. Why now, just to clarify, during COVID
times on the entire portfolio of close to 160 odd restaurants, we have only
closed 3 restaurants. And out of those 3, 2 were in Bombay and one in
Delhi and those were profit-making restaurant, but we closed them
because our rental discussions on them did not sort of go well.
In the current one, I think with the expansion that we have done, some of
the demands would have also shifted to the other places. And when we
re-evaluated all of these portfolios, we thought at least in the metro & tier
1 markets, these 4 were not making any sense.
Manish Poddar:
So, if I had to just look at this mature restaurants’ basket, excluding this,
let's say 8, what is the margin there?
Rahul Agrawal:
Maybe 0.5% improvement in the overall basis.
Manish Poddar:
Okay. And if I look at the scheme of the promotions page in the deck, do
you think effectively, I'm not sure if this is pan-India, there are schemes on
for every day from Monday to Thursday in terms of lunch. There is a
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scheme or there is discounted price. Is this in the regular course of
business, this was the case earlier also or the scheme intensities, because
once you roll it out to roll it back with corporate customers, let's say, if
they're on for this lunch means, it is a difficult task right? So, I'm just trying
to think to it, is this a regular course of business? Or when was the similar
thing witnessed by you all per year?
Rahul Agrawal:
I wanted to clarify, this is not just lunch, and this is both lunch and dinner.
Typically, this is not corporate customer because corporate customers
largely come on second half of the week, which is Wednesday and Friday.
This is more of Monday, Tuesday, which are the leaner days in our
business, and we tried to drive some value-seeking customer who cannot
afford a product on a weekend pricing.
We always had a differential pricing. But on these days, and its selective,
it's 599 in some days, it's 699 also in key markets, metro markets. So, it's
by outlet based on what is the turns the outlet does. And this was a limited
time offer, which has given us very positive results. If you look at our
current pricing basket, this price has gone up by approximately Rs. 150
across all markets now.
Manish Poddar:
And this is Monday to Thursday right? More on Monday Tuesday and I
see two offers. Monday to Tuesday, and Tuesday to Thursday.
Rahul Agrawal:
Look, this is not pan-India. There are different offers in different markets.
In some markets, it's only happy Monday Tuesdays, some markets only
terrific Thursdays, and some markets, it may be mid-week offer, which
could be Tuesday to Thursday. It is not one offer for pan-India. It's based
on what is the table turn, what is the capacity utilization which day part is
not working for us, and that's the way we've done it. And the promotions
are largely digital targeted promotions.
Manish Poddar:
When was this last done by you all? And this sort of promotion intensity,
when was it last done? And does your customers retrace back to the full
pricing? Is there a difficult task - just to touch on that?
Rahul Agrawal:
Last quarter, obviously, we were looking at low demand scenario, and if
you look at other businesses also, people are down trading lower average
realizations. Unfortunately, in our business, we only have one segment
which is all you can eat, right? If the price point is x, I don't have an option
for customers to go and say that now you only take these 4 items and pay
less than that, the purpose of these campaigns was to ensure that how do
you capture some of the value-conscious market customers and
somebody who's been hit by the demand scenario.
We only did it with that perspective. This was not on a weekend, weekends
are pretty good. And if I look at the growth numbers versus Q4, the 20%
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volume sequential growth that I am talking about, our weekday sales,
which is Monday to Thursday, the growth number is around 28% and our
weekend volume growth is around 12% to 15%. What also happens is that
this gets a talking point and also, it's something that helps in recall. And
we'll also get a rub off effect on other day-parts as well.
Moderator:
The next question is from the line of Shubh from Emerge Capital.
Shubh:
Can you please give the split of number of matured stores versus new
stores and the operating margins with Ind AS?
Rahul Agrawal:
Quarter 1 would have around 152 or so matured stores and the balance
would be new stores. And operating margin with IndAS I don't have I'll get
it sent to you. But typically, I think there is additional 8% which sort of
comes through from that.
Moderator:
The next question is from the line of Sakshee Chhabra from Svan
Investment.
Sakshee Chhabra:
I had two questions. My first question was what is the driving pattern
behind this increase in the delivery volumes and sales?
Rahul Agrawal:
No doubt we have been talking about it a lot of things about our product,
our menu engineering, our packaging engineering. And those things have
started to play out sequentially since February. We have also kept our mix
of sales, which is A-la-carte and boxes. And whatever deterioration that
we have seen in the previous quarters in our delivery revenue numbers
was on account of decline in average order value. And our average order
value has been pretty stable for now for 5 - 6 quarters. And whatever of
the increase that we're seeing is on the volume front.
Sakshee Chhabra:
Okay. So, what was the average order value on the delivery front?
Rahul Agrawal:
Approximately Rs. 500. This is Net to us. This is after GST after discount.
Sakshee Chhabra:
Okay. And how do you see this panning out going forward as you see this
sort of growth sustainable on a delivery-side?
Rahul Agrawal:
Yes. We hope so, at least over the last 7 quarters, this is one of the best.
I think this growth number is also continuing in the existing in the current
quarter also. It should do well.
Sakshee Chhabra:
Okay. And sir, I wanted to understand on your matured stores. If we even
see the ADS, which is in Q1 versus Q2 of last year, which was like to Q2
is usually the weakest quarter for you. When compared to that, the ADS
has been lower in this quarter. What is our strategy going forward to
improve this?
Rahul Agrawal:
Look, over the last 5 quarters, what has happened is we have added more
capacity. And generally, there's some demand pressures on discretionary
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spends. With the mix of that, if you look at the trend quarter-on-quarter
was in terms of last year, we have come down from almost Rs. 7 crores to
Rs. 5.7 crores in Q4, right?
The task was, how do you get more people inside. I think we called this
out last quarter also that our focus is volume growth and we have achieved
that as compared to what we probably did in quarter 4. We have done
better than what normally it can between quarter 4 and quarter 1.
Our focus first was to see what changes you can make on your existing
operations, be it in terms of culinary innovation, be it in terms of asset
upgradations while that is continuous work. But by and large, a lot of work
has gone into back in quarter 3 and quarter 4 last year. The second step
was how do you get your volumes and revenues back.
I think we have got our volumes on an upward trend and revenues also
are reflecting accordingly. And the third step is our margins, which is what
we are working on both as a factor of improvement in terms of our gross
margin and also some cost optimization.
This will obviously take maybe 1 or 2 more quarters we've taken a hard
look at our portfolio. But what I can say now is that have we reached the
bottom in the previous quarter; I believe so. Based on what other industries
are talking about some improvement and sequential growth, I think that
should also start reflecting in our numbers.
Sakshee Chhabra:
Okay. And what is the kind of SSSG growth that you would be targeting in
the coming few years?
Rahul Agrawal:
Long term, we target 5% to 7%. And if I look at last 10-year history, we
have delivered that. Quarter 1 obviously started with a negative number,
a lot of catching up has to be done. Today it's really difficult to give you a
number, but I think it should be better than what we have done in quarter
1 based on what we are seeing in our business. Maybe one more quarter
and then it is easier for me to give you an estimation.
Sakshee Chhabra:
Okay. But with the current sentiment and Q2 you will have to keep giving
further promotions and offers your volume growth is gaining, but on the
pricing side for another sometime you'll keep doing these sort of
promotional offers so that you can drive the footfalls?
Rahul Agrawal:
No. Look, it's very tactical. Like I said, the pricing is back, the gross
margins are back in the month of July itself. You keep running some of
these tactical offers, promotional offers to get the customer back and when
they convert into repeat customer, and then they see the amount of work
that has happened be it in terms of assets, be it in terms of food. I mean
the repeat numbers will come in.
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And the better reflection also is our internal guest satisfaction scores, we
track it very closely While last year also was very good, in the current year,
we have been higher than last year. And if you look at the sub part of our
feedback score, our food feedback score is even higher. Our service
feedback score is flattish, and our asset ambience scores are also higher.
Those things give me comfort that and we've also seen the improvement
in quarter 1 versus the last quarter. Hopefully, it should continue based on
the daily feedback that we are getting from our guests.
Moderator:
The next question is from the line of Faisal Zuber Hawa from H.G. Hawa
Company. It seems there is no response from the current participant. And
we'll move to our next question. That is from the line of Sanjeev Goswami
from Fractal Capital Investment.
Sanjeev Goswami:
I have a couple of questions around the store expansion. From what I
added gross new stores and net of minus of the closed 4 stores. If I look
at the last 3 years, most of the additions that you had done, they have
been happening in metro and tier I cities, 59 restaurants in metro tier 1
cities with only 4 in Tier 2 Tier 3 cities. Now I have two questions. One,
can you talk about your addition of 20 new stores this year in this financial
year. Is it on a gross level or net level? And second, what kind of cities it
will happen?
Rahul Agrawal:
This number is on gross level, not a net level right now. And in terms of
city expansion, I think let's look at 3 parts. One is Barbeque Nation brand,
both India, international separately and Toscano. Our international
business and Toscano business are on a different trajectory, both in terms
of profitability and SSSG, there we will continue to expand. Toscano, we
have already opened one more in this quarter. And we have under
discussion pipeline of around 4 - 5 restaurants. Maybe 2 or 3 more will
come from that. Overall 5 will come from that. International, again, we have
one more which will come up in this quarter and then maybe one more in
quarter 4. We'll have 3 coming on that. And 12 will come from Barbeque
Nation in India on a gross basis.
Sanjeev Goswami:
Okay. Now, if you look at the prospective of 90 stores, which opened
before the COVID basically and what the new format that you have. What
is the capex per store and what is the change in terms of capex per store
and also staffing per restaurant.
Rahul Agrawal:
In terms of capex, it has slightly gone up. We are currently around Rs 3.0
to Rs 3.1 crores per outlet and staffing depends on size of the restaurant.
Typically, around 4,000 square feet area would have around 40-odd staff
in the restaurants. And this includes both front of the house, back of the
house and house keeping.
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Sanjeev Goswami:
Okay. And how did this compare with pre-Covid scenario?
Rahul Agrawal:
So, it's pretty similar. I think between pre-COVID and now we have kept
the same, but the only efficiency has come from the fact that we have also
not added incremental staff despite the fact that we have added delivery
business, which is around 15% of our revenues.
Sanjeev Goswami:
If I can have just one more question, actually, on the commissaries part, I
understand that we have 2 commissaries, right? One is in Delhi, and one
is in Mumbai? How many minimum outlets do you need to start the
commissaries in the region? And what are the capex for one commissary?
Rahul Agrawal:
The commissary is not the model that we are pursuing anymore. These
were historical commissaries as some of the older restaurants were
designed with smaller kitchen areas, which required commissary to
support the kitchen, we're continuing with those commissaries only.
But as you know, we currently operate in over 80 cities and most of our
operations have moved towards various standardized products wherein
we rely on ready to cook products and a lot of vendor-driven standardized
items that we procure from them. Commissaries is no longer an integral
part of our strategy. For example, Bangalore, we have around 18 outlets
of Barbeque Nation and we do not operate a commissary for these outlets.
Sanjeev Goswami:
Okay. Probably in the future you can look at closing on the commissary’s
outlet?
Rahul Agrawal:
We can look at optimizing. I think closures would be difficult. As I said,
some of the outlets this support do not have that large kitchen right now.
It is the design that matters.
Moderator:
The next question is from the line of Vaibhav from BMB Investments.
Vaibhav:
Yes. As you mentioned in the last quarter that this quarter how are you
improving SSSG. So, in that still this quarter SSSG is negative. And so,
the reason for this is the Indian consumption market or anything else? Is
the demand the problem or anything else?
Rahul Agrawal:
Demand was the problem. And like I said last quarter, we focused on
SSSG. If you compare it versus quarter 1, on a high base, it is low. But if
you compare it against a trend versus last quarter, it has started to trend
up. And we believe that as demand recovery also happens, which at least
we're optimistic that it should happen in second half of the year, it should
move towards positive trajectory also.
Vaibhav:
And you feel that you said that the capex will be Rs. 3.1 crores. So,
considering that what will be the depreciation per year from now onwards
per outlet?
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Rahul Agrawal:
Typically, on an overall number, we have around Rs 37 crores, which also
includes entries related to IndAS 116. Without that, the number is around
Rs. 18-odd crores, which would be around Rs. 3 lakh to Rs. 4 lakh per
outlet per month. Yes. So, around Rs 40 lakhs per outlet per year.
Moderator:
The next question is from the line of Khush Gosrani from InCred Asset
Management.
Khush Gosrani:
Sir, could you help us to understand the store mix between North, South,
East and West?
Rahul Agrawal:
It is pretty similar across all. If you look at 190 Barbeque Nation
restaurants, it is only divided across all territories. When you look at East,
we also look at integrated band in that, but without that, if you look at core,
which is which is Bihar, Jharkhand and Northeast and West Bengal, this
would have around 25 outlets.
Khush Gosrani:
Sure. And sir, if I just look at the per store revenue outlets that are matured
and new stores, I think, the revenue part is improving very constantly. It is
where the EBITDA margins were the profitability that we are into focus.
So, what are the steps that you are taking as of now to recover to the
profitability that we have done?
Rahul Agrawal:
A couple of percentage points will straight away come from gross margin
expansion, which we are seeing already. And the balance will come from
of some increase in revenues in these and operating leverage. While some
cost optimization work has also been undertaken that should give us
another 50-basis points expansion there.
Khush Gosrani:
Sure. And lastly, since you're curtailing on these promotion expenses, you
are still seeing the volume remaining at the levels or it is declining as well
as the August month is rolling?
Rahul Agrawal:
No. Volumes are better, but if you look at quarter 2 last year versus quarter
of this year, there are differences in dates with respect to sawan impact.
This year sawan started earlier than last year. Barring those impacts, the
volumes are holding up. And sawan does impact us strongly in markets
like North UP and also West.
Khush Gosrani:
Sure. And for the overall, when are you internally planning to reach the
EBITDA margins that we were doing pre-COVID or at least at the peak
that we have done?
Rahul Agrawal:
It's improving on a quarter-on-quarter basis. It's difficult for me to call out,
it also depends on a lot of factors. But I think my estimate is from quarter
3 onwards, you should start seeing a very good positive impact on the
numbers. Yes it is also subject to a general improvement in demand
scenario that we're all expecting in quarter 2 and second half of the year.
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Khush Gosrani:
And my last question, sir, you have written in the deck that target is to add
20 new restaurants. This is on the net basis, right?
Rahul Agrawal:
No, gross basis. I should have clarified that.
Khush Gosrani:
On gross basis. And okay. Then what on a net basis, you would be only
adding 12 - 13 stores.
Rahul Agrawal:
No, around 10-odd on net basis, because in this quarter also, we might
have a couple of closures. On the store front, let me clarify, we are long-
term believers in obviously our model, both Barbeque Nation Toscano and
international opportunities. I think today, the time is not to expand, and
opening stores are relatively easier. We have history of opening up 10
restaurants every quarter or 3 to 4 restaurants every month.
All we are saying is that today, given the capacity that we have created,
it's time to utilize that capacity and increase the revenues from the existing
capacity we created either opening up in capacity. Rest assured, the
moment we see that happening and the signs are very encouraging based
on our month-on-month performance over the last 6 months, we will speed
up on expansion also very quickly.
Moderator:
The next question is from the line of Mythili Balakrishnan from Alchemy
Capital Management.
Mythili Balakrishnan: A good set of numbers given the demand environment. Just a couple of
questions. First on the, if you could help us with the cash from operations,
capex and FCF in the pre-IndAS world for the quarter?
Rahul Agrawal:
Yes. Cash was around Rs. 16-odd crores. This is cash profit I'm talking
about. Out of Rs. 18.5 crores of pre-IndAS EBITDA, we have 16 crores of
cash coming. capex was around Rs. 30-odd crores. This includes 4 new
restaurants. One of the international is slightly higher capex and also two
renovations that we have done during the quarter and money that we
spent on maintenance and general upgrade of few of our assets.
Mythili Balakrishnan: In terms of the demand trends, I also wanted to get a sense, is there any
difference which you are seeing in terms of Tier 1, Tier 2 in terms of metros
in terms of malls, high streets, etcetera, if you could sort of just help with
that.
Rahul Agrawal:
If I look at last quarter versus this quarter, given that we are around 20%
growth, we have seen growth pretty much across all verticals. But that
weekdays have done better than weekends. Weekends have also grown
in double digits. In terms of geographical spread barring one or two cities
in South, we have seen very broad-based growth. In fact, Tier 1 and Tier
2 also has reacted extremely well to some of the promotions that we have
done. And the numbers I'm talking about is more on volume base rather
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than just overall revenue base, but the net is also a bit very similar. Tier 1
tier 2 also has responded very well to the price-based offers.
Mythili Balakrishnan: Got it. Rahul given and just to get a sense like how much of your revenues
would be from repeat customers given that you do track them with some
form of the cell phone numbers, etcetera?
Rahul Agrawal:
It's around 50-50. If I look at on a daily basis, whatever customers who
dine with us, 50% customers or existing customers, which means that we
have their mobile numbers on the system before and 50% are our new
customers. But as we always said, you should look at this data with the
fact that our average group size is around 4.5. So, every time, say, 4 or 5
people come to us, you only get one by number. At least 50% repeat is
also very good. And if I apply a factor of, say, 2 or 1.5%, 75% business
typically comes from them.
Mythili Balakrishnan: Got it. And in terms of a loyalty program or something like that, what would
be your sense of, have you tried experimenting on that front as well to
drive volumes?
Rahul Agrawal:
Our loyalty program is app based. And we get almost 30% of our revenue
is coming from our own app, and that's doing very well growing month-on-
month. You will see that number lower this quarter is because we had a
property called Happiness Card, which became unattractive in few days
because the pricing in the outlet itself was lower in this case. That's why
the number is low now.
Otherwise, structurally our total happiness card conversion was still very
good. Coming back to loyalty, 30% business comes from app and almost
12% to 14% of our customers who dined with us have the loyalty points
added to that in the transactions.
Mythili Balakrishnan: Sorry, just wanted to get a sense of the seasonality as you head into Q2
from Q1, while Q2 tends to be weak. Just wanted to get a sense of how
much has it normally been down by as compared to the previous quarter?
And any indications of how it has been so far?
Rahul Agrawal:
Around low single digits, 4% to 5% between Q2 and Q1. And currently, as
I said, it's stable.
Mythili Balakrishnan: You are not including the fact that on a normal Q2, we would have had
more stores than what you have had in the Q1, right?
Rahul Agrawal:
No, it is including that. Last time also when I said 8% growth normally
versus now 15% growth in this quarter. This includes overall business.
Mythili Balakrishnan: Okay. So, it is normally a 4% to 5% decline between Q2 and Q1?
Rahul Agrawal:
Yes.
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Mythili Balakrishnan: Got it. And this time, are we trending similar or worse because of a longer
sawan?
Rahul Agrawal:
Till now pretty similar, but also realize that the longer sawan days have
covered the business about 37, 38 days. I think going forward, if I look at
like-to-like sawan days, we are actually better than last year.
Moderator:
Thank you. Ladies and gentlemen, that would be our last question for
today. On behalf of Ambit Capital, that concludes today's conference.
Thank you for joining us, and you may now disconnect your lines. Thank
you.
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Barbeque-Nation Hospitality Limited Earnings Transcript Q1 FY2024
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For further information, please contact
Bijay Sharma Head of Investor Relations Barbeque-Nation Hospitality Ltd.
+91 080 6902 8721 Investor@barbequenation.com
Note: This transcript has been edited to improve readability and is not a verbatim record of the proceedings.
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Website: www.barbequenation.com
Cautionary Statement: This release contains statements that contain “forward looking statements” including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to barbeque Nation’s future business developments and economic performance. While these forward-looking statements indicate our assessment and future expectations concerning the development of our business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to, general market, macro-economic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with us, legislative developments, and other key factors that could affect our business and financial performance. Barbeque Nation undertakes no obligation to publicly revise any forward-looking statements to reflect future / likely events or circumstances.
17 | Barbeque Nation