Focus on omni-channel strategy, financial prudence pivots the company’s performance
HIGHLIGHTS OF QUARTER ENDED SEPTEMBER30, 2020
- Total revenue forthe quarter stood at ₹ 2,094.9 million, up 123% from Q1FY21
- Sales through convenience channels (delivery, drive-thru and On-The-Go) exceeded pre-COVID levels
- The new On-The-Go service saw phenomenal growth of over four times in three months
- Dine-in showed healthy recovery trend across markets
- Strong cost controls aided margin and operating EBIDTA recovery
All numbers exclude the impact of IND AS 116
November 2020:Westlife Development Limited (BSE: 505533) (“WDL”), owner of Hardcastle Restaurants Pvt Ltd (“HRPL”), the Master Franchisee of McDonald’s restaurants in West and South India, announced unaudited financial results for the quarter ended September 30, 2020. The results were taken on record by the Board of Directors at a meeting held today.
In the quarter under review, the companyreported strong sales recovery led by its convenience channels that include delivery, take-out, drive-thru and on-the-go. Sales through these convenience channels zoomed back to their pre-COVID levels in September, while in-store started showing healthy recovery trend as the Government started unlocking markets in a phased manner. As a result, the company more than doubled its overall sales over Q1FY21, achieving close to 70% of pre-COVID levels. This was despite Maharashtra – the state that has close to 50% restaurants of the company – remaining shut for dine-in.
The company saw the pace of recovery across its operations accelerate, with recovery rate progressively increasing by 7-10% every month. Stores that were open for dine-in for more than five months came close to pre-COVID levels, with those that opened up recently recovering twice as fast.
The sales recovery was well-supported by the company’s strong cost management. Westlife Development’s focus on rationalizing costs and maximizing efficiencies across operations enabled it to bring down costs, even as the revenues increased. This helped improve margins and Operating EBITDA significantly with the company achieving break-even Operating EBIDTA in September 2020.
Commenting on the financial results for the quarter ended September 30, 2020, Mr.AmitJatia, Vice-Chairman of Westlife Development Limited said “I am happy to share that we have effectively steered this crisisandhave got the business on astrong recovery track this quarter. Our strong financial foundation combined with afocus on accelerating our omni-channel strategy is reaping great results for us. Welook forward to the opportunities that lie ahead and are motivated by the recovery in business that we have seen in this quarter. I am confident thatwe will soon be back on our growth path.”
Westlife Development’sstrategy for business revival has been focused on three key pillars of Assurance, Convenience and Access. With its ‘Golden Guarantee’ platform, it has made the McDonald’s experience as safe as possible for both its customers and employees. The company’s implementation of contactless operations, heightened sanitization across touch points and new hygiene protocols have helped build back customer confidence in a big way.
The company has also moved quickly to launch a bouquet of convenience services including contactless delivery, digitally-enabled contactless take-out and the innovative on-the-go service that has transformed all its restaurants into digital drive-thrus. These services have ensured that safe, hygienic and delicious McDonald’s food is available for customers whenever, wherever and however they want.
Another key lever of strategy has been Access. Identifying the need to offer great value to the customers, Westlife Development has been giving its customers compelling combos and offers through its McDonald’s and McDelivery app. This quarter, the company also tapped into key occasions such as World Chicken Day, Friendship Day and World Photography Day to enhance frequency and give customers more reasons to celebrate with McDonald’s.
With customer confidence slowly building back buoyed by festive cheer and opening up of dine-in services in Maharashtra, the company is confident of accelerating the pace of recovery and marching towards achieving and exceeding pre-COVID level revenues.
| Consolidated Financial Performance per IGAAP for the quarter ended September 30, 2020 | |||
| (₹ in millions) | |||
| Particulars | For the quarter ended September 30, 2020 | For the quarter ended September 30, 2019 | Growth |
| Amount | Amount | % | |
| REVENUES | |||
| Sales by company owned restaurants | 2068.5 | 3,947.1 | (47.6%) |
| Other Operating Income – Restaurants | 25.5 | 16.6 | 53.6% |
| Restaurant Operating Revenues (A) | 2094.0 | 3,963.7 | (47.2%) |
| Net Gain on fair value changes in value of Investments | 0.9 | 1.6 | (40.1%) |
| TOTAL REVENUES (A) + (B) | 2094.9 | 3965.3 | (47.2%) |
| OPERATING COSTS AND EXPENSES | |||
| Restaurant Operating Cost and Expenses | |||
| Food & Paper | 764.3 | 1,376.4 | (44.5%) |
| Payroll and Employee Benefits | 282.1 | 433.2 | (34.9%) |
| Royalty | 94.9 | 180.6 | (47.5%) |
| Occupancy and Other Operating Expenses | 876.6 | 1,345.9 | (34.9%) |
| TOTAL RESTAURANT OPERATING COSTS AND EXPENSES | 2017.9 | 3336.1 | (39.5) |
| Restaurant Operating Margin | 77.0 | 629.2 | (87.8%) |
| Other trading operating cost and expenses | – | – | – |
| General & Administrative expenses | 179.2 | 219.2 | (18.2%) |
| Total Operating costs and expenses | 2197.1 | 3555.3 | (38.2%) |
| Operating EBIDTA | (102.2) | 410.0 | (124.9%) |
| Other (income)/expenses, (net) | (57.7) | (37.4) | 54.4% |
| Assets written off for closure / rebuild of restaurants | 54.6 | 14.2 | 284.6% |
| EBIDTA | (99.1) | 433.2 | (122.9%) |
| Net Financial Expense (Interest & Bank Charges) | 47.4 | 37.7 | 25.7% |
| Depreciation | 220.0 | 214.9 | 2.4% |
| Profit before Tax and Exceptional Items | (366.5) | 180.6 | (302.8%) |
| Exceptional Items | |||
| Profit before Tax | (366.5) | 180.6 | (302.8%) |
| Deferred Tax | (92.1) | 25.1 | (479.3%) |
| Income tax | – | 26.5 | (100.0%) |
| Profit after Tax | (274.3) | 129.1 | (312.5%) |
| Other Comprehensive Income | |||
| (a) Items that will not be reclassified to Profit or Loss | 1.2 | 0.7 | 76.7% |
| (b) Income tax on items that will not be reclassified to Profit or Loss | (0.3) | (0.1) | 182.3% |
| Other Comprehensive Income (A+B) | 0.9 | 0.6 | 57.0% |
| Total Comprehensive income for the period | (275.3) | 128.5 | (314.2%) |
| Cash Profit / (Loss) | (93.1) | 409.7 | (122.7%) |
| Cash Profit / (Loss) After Tax | (93.1) | 358.2 | (126.0%) |
| Reconciliation of reported and comparable operating performance excluding impact of IND AS 116 | |||||||
| Rs. (In Millions) | |||||||
| Particulars | (A) Quarter ended Sept 30, 2020 (Adjusted) | (B) Changes due to Ind AS 116 increase / (decrease) ** | (C) Quarter ended Sept 30, 2020 (Reported) | (D) Quarter ended Sept 30, 2019 (Adjusted) | (E) Changes due to Ind AS 116 increase / (decrease) ** | (F) Quarter ended Sept 30, 2019 (Reported) | (A over D) YoY Growth |
| Occupancy and other operating expenses | 876.6 | (144.0) | 732.6 | 1,345.9 | (184.9) | 1,161.0 | (34.9%) |
| Restaurant Operating Margin | 77.0 | 144.0 | 221.0 | 629.2 | 184.9 | 814.1 | (87.8%) |
| General and Administration Expenses | 179.2 | – | 179.2 | 219.2 | – | 219.2 | (18.2%) |
| Operating Earnings before interest, tax and depreciation and amortisation | (102.2) | 144.0 | 41.8 | 410.1 | 184.9 | 594.9 | (124.9%) |
| Other Income | (57.7) | (88.5) | (146.2) | (37.4) | – | (37.4) | 54.4% |
| Finance costs | 47.4 | 169.3 | 216.7 | 37.7 | 162.8 | 200.5 | 25.7% |
| Depreciation and amortisation expense | 220.0 | 131.4 | 351.4 | 214.9 | 128.7 | 343.5 | 2.4% |
| Profit before tax and exceptional items | (366.5) | (68.2) | (434.7) | 180.7 | (106.6) | 74.1 | (302.8%) |
| Exceptional Items | – | – | – | – | – | 100.0% | |
| Profit before tax | (366.5) | (68.2) | (434.7) | 180.7 | (106.6) | 74.1 | (302.8%) |
| Deferred tax | (92.1) | (17.2) | (109.3) | 25.1 | (24.2) | 0.9 | (467.4%) |
| Income tax | – | – | – | 26.5 | – | 26.5 | (100.0%) |
| Profit after tax | (274.3) | (51.1) | (325.4) | 129.1 | (82.4) | 46.7 | (312.5%) |
| Other Comprehensive income (net of tax) | 0.9 | – | 0.9 | 0.6 | – | 0.6 | 57.0% |
| Total Comprehensive Income | (275.3) | (51.1) | (326.3) | 128.5 | (82.4) | 46.2 | (314.2%) |
Adjustments arising out of Ind AS 116
NOTE TO THE EDITORS: Westlife Development Limited and Hardcastle Restaurants follow an April-March fiscal year. The results reported are for the second quarter of the fiscal year 2021.
THE FOLLOWING DEFINITIONS APPLY TO THESE TERMS AS USED THROUGHOUT THIS RELEASE:
[1] Comparable sales (SSSG) represent sales at all restaurants operated by the Company, in operation at least thirteen months excluding those temporarily closed. Some of the reasons restaurants may be temporarily closed include reimaging or remodeling, rebuilding, road construction and natural disasters. The number of weekdays and weekend days, referred to as the calendar shift/trading day adjustment, can impact comparable sales. In addition, the timing of holidays also can impact comparable sales.
[2] Restaurant Operating Margin represents the total revenue of company operated restaurants less the operating costs of these restaurants (including royalty etc.) before depreciation and corporate overheads; expressed as a percent of total revenue.
