- The 2017 figures reflect the group’s decisive commitment to leading growth in the organized restaurant sector both in the casual dining (restaurants with table service) and fast casual (counter service yet casual dining quality) segments as well as with the definitive end of the group’s transformation process following the discontinuation of its retail (VIPS Shops) and fine dining businesses.
- Overall Grupo Vips food service sales (considering the entire system - both internally owned and franchised locations) grew 8.6%, reaching 385.5 million euros in a year in which the Spanish commercial restaurant market grew by about 2.5%.
- The group tripled the number of new openings in comparison to 2016, closing the year with 76 openings (54 internally owned and 22 franchised locations), which accounts for a total of 407 locations in Spain and Portugal, and also added a new brand to its portfolio: wagamama, the leading chain in Pan-Asian cuisine, which replaces The Wok. The year ended having opened 4 of these restaurants.
- At the same time, the group accelerated its reforms plan, renovating and modernizing 72 locations for all of its brands, which was also nearly triple the rate in 2016. With these efforts, especially focused on VIPS (35 renovation projects) and GINOS (22 renovation projects), more than 75% of these two brands’ locations had been updated by the end of 2017.
- Recurring EBITDA (before pre-operations due to openings) increased by 8.4%, to total 30.1 million euros versus the €27.8 million recorded the year before, despite the negative effect of temporary closings due to construction work given the high number of renovation projects.
- The very positive evolution in the restaurant chain business made it easier to decide to discontinue its “Retail” (VIPS Shops) business, which had been secondary for several years; the last shop closed in February 2018. The extraordinary costs deriving from the cease of the “Retail” (VIPS Shops) activity, all incurred or provisioned in the 2017 earnings, in addition to the costs of the definitive closing of the chain The Wok and the last fine dining restaurant (Rugantino) as well as the extraordinary expenditure deriving from the disposal of assets given the high number of renovation projects have led to negative Net Earnings of 10.67 million euros (versus the positive €0.1 million recorded in 2016).
- By the end of 2017, Grupo Vips was employing more than 9,300 people (8,100 of its own staff and approximately 1,200 people through its VIPS, VIPS SMART, GINOS and STARBUCKS franchises).
- As for the priorities for 2018, the group continues to focus on recovering its leadership, mainly through two levers:
- Growth in Spain and Portugal: the group will continue the growth and expansion pace of 2017 with plans to open around 80 new restaurants (internally owned and franchises) and it will renovate another 40 locations to conclude the VIPS and GINOS updates. At the same time, it will intensify its presence in Portugal (where it is already present with Starbucks) by launching its VIPS and GINOS brands in the last quarter of the year. Investment will again be around 40 million euros and the company will create around 1,500 new jobs.
- Investing in continuously improving its customer experience and continuing to do responsible business: the group will continue actively working on strengthening the attraction of its brands with a strong commitment to innovation, digitization to improve its customer experience and the expansion of its healthy eating offer. Moreover, it will maintain its commitment and active efforts to guarantee business management with a positive impact in the areas of sustainability and employability.
As for the 2018 forecasted earnings, great improvement is expected in recurring EBITDA, particularly through Net Earnings, once there are no more extraordinary costs due to all the transformations and the pace of reforms significantly decreases.
The 2017 financial year earnings are a reflection, on the one hand, of the outstanding results of the group’s various food service brands, which have seen an evolution in sales clearly above the market average and, on the other hand, of Grupo Vips’ decisive long-term commitment. This commitment has been clearly seen in the four cornerstones of work present throughout 2017:
a) Continuing to improve the value proposition of its different restaurant brands, a commitment that was rewarded with positive reaction from its customers and has led to a very good evolution in sales
b) Intensifying growth with the opening of 76 locations (73 new locations in Spain and 3 in Portugal) to become the restaurant group that has opened the most new locations in the Iberian market. Likewise, it has reinforced the variety of its portfolio with the launch of the leading brand in the Pan-Asian cuisine segment, wagamama
c) Accelerating the update and renovation of its internally-owned locations by completing 72 renovation projects, especially involving its VIPS and GINOS brands
d) Undertaking the pending part of its business portfolio re-organization with the definitive cease of the business lines considered non-essential or not the “core business”: the discontinuation of the “Retail” (VIPS Shops), which was completed in February 2018, the sale of the last of the unique restaurants in the portfolio (Rugantino) and the close of the Asian chain The Wok, which had stopped being a means of growth several years back and was replaced with wagamama.
As a result of this strategy, the total Grupo Vips sales (considering the entire food service system and other business lines) grew around 5%, for a total of 415 million euros. Turnover for the entire food service system (internally-owned and franchised locations), the group’s main activity, was 8.6% above the 2016 figures, reaching 385.5 million euros while the Spanish commercial restaurant market grew only around 2.5%. The evolution in the Spanish restaurant market in 2017 was rather complex with a clear slowdown in consumption in the last quarter, which ended with a worse Christmas season than expected, despite reflecting a very positive trend over the first 8 months of the year.
In comparable units, sales among the group’s brands generally progressed above the market growth average. Particularly outstanding was the growth seen among its flagship brands VIPS (+4.3%), VIPS Smart (+14%) and GINOS (+3.4%). Also very positive was the evolution of Starbucks in Portugal with sales increasing by 8.1% in comparable terms, while Starbucks Spain increased its sales by 3.7%, weighed down during the final part of the year by the drop in sales in Barcelona where it is significantly present and FRIDAYS by 2.3%.
The increase in the rate of new openings, which the group had announced back in 2016, tripled the 2016 volume to end the year with 76 openings - 54 internally-owned locations and 22 franchises- which meant a total of 407 locations in Spain and Portugal by the end of 2017.
As concerns its location renovations, the group considerably accelerated its reforms plan, renovating 72 locations for all of its brands, which was also nearly triple the rate in 2016. The efforts made in 2016 and 2017 with the VIPS (35 renovation projects in 2017) and GINOS (22 renovation projects in 2017) internally-owned locations made it possible for 75% of these two brands’ locations to be updated by the end of 2017. This figure will increase to more than 90% in 2018, to conclude this Extraordinary Plan to update the network. Thus, Grupo Vips was the food service group with the most new openings and reformed locations in Spain last year. This intense pace of openings and renovations led to a significant increase in investments, surpassing 40 million euros versus the €15 million invested in these two areas in 2016.
Recurring EBITDA (before pre-operational expenditure from new openings) totaled 30.1 million euros, which is 8.4% more than in 2016 (at 27.8 million euros). The 2017 recurring EBITDA was particularly weighed down by the temporary closing periods for construction on the reformed locations (by not recording revenue or having it limited in those locations yet recording expenditure). Therefore, this very high number of renovation projects in 2017 will bring excellent results over the next few years.
On the other hand, the decision to cease the “Retail” (VIPS Shops) activity, the costs deriving from the definitive closing of the chain The Wok and the last fine dining restaurants in the portfolio that was still open (Rugantino) along with the extraordinary costs due to the disposal of assets deriving from the reforms created extraordinary costs that affected the Net Earnings, which resulted in a negative 10.67 million euros. With these measures aimed at completing the portfolio re-organization and ceasing the non-core business lines, the group has fully completed its transformation cycle and will now exclusively focus on growth and improving the customer experience at its chains each day.
Net financial debt at the end of 2017 totaled 44 million euros (versus the €27 million recorded in 2016). Despite this increase, which was the logical consequence of the ambitious opening and reform plan, the Net Financial Debt to Recurring EBITDA ratio was 1.98x, which puts the Group in a solid financial position to be able to grow as planned in the next few years.
The CEO of Grupo Vips, Enrique Francia, highlighted the group’s positive evolution over the last year saying that “things are going as planned; we’ve completed the last part of the business portfolio re-organization pending and are continuing with the road map we had established with a focus on accelerating the growth of our food service brands and improving our customer experience each day”. He also revealed that Grupo Vips has plans for another 80 new openings and the intention of continuing the reforms plan with 40 additional new renovation projects throughout the portfolio. “In 2018, investment in new openings and renovation projects will again amount to about 40 million euros and nearly 1,500 new jobs will be created”.
The Group franchises comprise one of the main growth levers for the company and it now boasts 85 restaurants and cafeterias, 18 more units than the year before, representing 20% of all of its locations.
Besides continuing to work on consolidating the growth of its traditional brands in Spain, the group’s efforts will also focus on consolidating and expanding the wagamama brand in Spain, which now has 5 restaurants and plans for a total of 8 by the end of 2018, and the arrival in the last quarter of the year of its VIPS, Vips Smart and GINOS brands in Portugal which will join the nearly 20 Starbucks already open.
In the digital arena, where the group has dedicated special efforts in recent years for both internal operations and customer relations, the excellent response to the Club VIPS App, which has already been downloaded more than 1,000,000 times in just three years, as well as its community of social media followers, which now totals more than 4 million for all of its brands, are worth emphasizing.
By the end of 2017, Grupo Vips was employing more than 9,300 people (8,100 of its own staff and approximately 1,200 people at its VIPS, VIPS Smart, GINOS and Starbucks franchises), 52% of whom are women. Its employees represent 72 nationalities and the ages of its professionals cover a broad generational range, which makes it a faithful reflection of today’s society.
In the last year, the group continued to undertake commitments aimed at integrating Social Responsibility in all business areas. “As a food service business, our priority is to ensure the customer experience is exceptional by offering excellent and varied products that adapt to each person’s needs and preferences, but we’re aware that society demands we go a step further by helping to meet the needs of our surroundings as concerns sustainable development, environmental challenges, healthcare and changes in the job market,” said Enrique Francia.
In 2017, the group continued progressing with its commitment to healthy food by adding more options to all of its brands’ menus: bean salads, vegetable smoothies, whole-wheat pasta, vegetarian burgers, vegetarian and vegan meals and plant-based beverages (oat, almonds and soy as dairy alternatives), among others. Moreover, it is worth noting that nearly 300,000 dishes were served to gluten-intolerant customers throughout 2017.
The group’s annual Corporate Responsibility report also emphasizes the achievements made in the area of employability: 823 young people in vulnerable situations participated in training, mentoring and guidance programs along with the group’s professionals with 406 of them doing internships in the group’s different business divisions and 317 hired. Moreover, it recorded 273,560 training hours with an investment of more than €1,600,000 to improve skills and the development possibilities among our teams.
Finally, it is also worth highlighting the progress in sustainability: 100% of the energy consumed at its own restaurants and stores comes from renewable sources, reducing energy consumption by 2.48% in comparable units over 2016. 100% of the oil used in its kitchens is recycled. At the same time, the group is actively working on several projects aimed at reducing its environmental footprint and will focus efforts on optimizing recycling, waste management and food waste. Finally, the use of paper to advertise promotions has been reduced by 75% thanks to the Club Vips app.
The group’s forecasts for 2018 indicate double-digit turnover growth and a major increase in Recurring EBITDA as well as relevant positive Net Earnings. And all of this is expected in an atmosphere where the Spanish restaurant market continues growing, but at a slower pace, at around 2%. ”The figures for the first three months of the year lead us to believe these forecasts will prove true and encourage us to be optimistic as far as the group’s evolution this year, as long as the market behaves as expected,” indicated Enrique Francia.
During the first quarter of 2018, the group recorded significant turnover growth in its food service options (total system) with an increase of 12.3% over the same period the year before. It opened 8 new locations in Spain (2 Starbucks, 4 GINOS and 6 VIPS and VIPS Smart), reaching new regions and cities where it was not yet present while continuing its active reforms plan with a total of 12 renovation projects completed during the first three months of the year.
About Grupo Vips: Grupo Vips is one of the leading multi-brand and multi-format groups in the organized restaurant sector in Spain. The company manages a total of six well-known brands it either owns or operates under franchising agreements: VIPS, VIPS Smart, GINOS, Fridays, Starbucks and wagamama. Moreover, Grupo Vips has a premium sandwich, salad and take-away product factory, BSF. The company manages a total of 400 locations serving more than 120,000 customers a day. It runs a pioneer and restaurant sector-leading loyalty program, Club VIPS, with more than 1,000,000 members throughout Spain. The App, which is unique in the market and was released at the end of April 2015, has already been downloaded more than 1 million times. Grupo Vips is a private equity company which was founded in 1969. Seventy percent of Grupo Vips shares are held by majority shareholders and founders, led by the Arango family, and 30% are held by the ProA Capital fund. Grupo Vips employs more than 9,300 people and ended fiscal year 2017 with 415 million euros in turnover. For the second consecutive year, Grupo Vips was listed in the ranking of the companies with the best reputation in Spain, as per the RepTrak® Spain 2018, as the only restaurant business to be included on the list. www.grupovips.com