PROFITS have fallen at the restaurant group behind the Di Maggio’s and Café Andaluz chains in spite of record turnover, with staffing costs rising in a tight labour market and sterling weakness increasing imported ingredient costs.
The DRG, which also has the Anchor Line and Atlantic restaurants in Glasgow’s St Vincent Place in its 25-strong portfolio, posted a 31.5 per cent fall in pre-tax profits for the year to April 29 last year to £3.65 million. The group, which described the market as “enormously competitive”, achieved a 5.6% rise in turnover from £34.9m to £36.8m.
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Co-founder, director and shareholder Mario Gizzi said that, in line with the broader restaurant and leisure sector, the group was having to invest significantly more in staff as wage inflation and other costs increased.
The DRG noted it had doubled its annual investment in new restaurants and refurbishment projects to nearly £3.3m in the financial year to last April.
Staff numbers grew to 876, from 771. Staff costs rose to £13.28m in the year to last April, from £11.87m in the prior 12 months.
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The DRG said the record turnover figure reflected the opening of a 220-cover Café Andaluz in Edinburgh’s Old Town, as well as the addition of The Citizen Bar and Dining Rooms in Glasgow’s St Vincent Place. It noted that St Vincent Place had “become an important focus for the group, with Anchor Line, The Atlantic, Café Andaluz and the recently opened Anchorline Aparthotel”.
Explaining the drop in profits, Mr Gizzi cited start-up costs for new restaurants, significant increases in The DRG’s business rates bill and apprenticeship levy costs. He also highlighted the jump in the cost of imported ingredients caused by the weak pound.
The UK electorate’s June 2016 vote to leave the European Union sent sterling tumbling.
Mr Gizzi said: “The latest figures show that we’ve grown our headcount by over 100 to 876, which is a sign of our confidence in the market, but also reflects stiff competition for skilled staff, with national unemployment rates lower than they have been for decades. Reflecting this trend, our latest accounts show that staff costs have risen to £13.3m from £11.9m the previous year.”
Against this backdrop, he flagged a focus on staff training.
He said: “The fact that we’ve also established our own training academy, with experienced chef, front-of-house and admin expertise, underlines a recognition that people coming into the industry rightly expect their employer to invest in their professional growth.”
Mr Gizzi added: “It’s a formula that we believe in and one we are committed to expanding. The market for talent is only going to become more competitive and we want to be recognised as a business where our people can have a long and rewarding career, with salary and promotions which accurately reflect their hard work and commitment.”
Co-director and shareholder Tony Conetta highlighted The DRG’s determination to continue to look for new concepts and “refresh” the company’s existing brands, amid intense competition.
He said: “We’re determined not to rest on our laurels and the accounts show we’ve significantly increased the amount we are spending on new premises and refreshing existing restaurants. It’s vital that we keep ahead of the pack and are always looking at new concepts and to refresh our existing brands.
“The public is becoming increasingly selective about its leisure and restaurant choices, and there has obviously been a major push by institutional and private equity investors in backing the roll-out of restaurant and bar chains in city centres nationwide.”
Mr Conetta added: “We feel our decades of knowledge of the Scottish restaurant scene is a major advantage and it’ll be interesting to see how these corporate-backed ventures fare in the next few years in what is an enormously competitive market.”
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