Annual Report
2022
Hostmore • Annual Report 2022
Contents
Strategic report
At a glance
Business model
Business strategy
Group highlights
Chairman’s statement
Interim Chief Executive Officer’s statement
Environmental, Social and Governance
Stakeholder engagement
How we create value
Chief Financial Officer’s review
Risk management
Non-financial information statement
Governance report
Board of Directors
Chairman’s Governance Introduction
Corporate Governance Report
Report of the Audit and Risk Committee
Report of the Nominations Committee
Annual Statement from the Chair of the
Remuneration Committee
Hostmore Remuneration Policy
Annual Report on Remuneration
Directors’ Report
Statement of Directors’ responsibilities in respect
of financial statements
Financial statements
Calculation of key performance indicators and
alternative performance measures
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Company Statement of Financial Position
Company Statement of Changes in Equity
Notes to the Company Financial Statements
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Hostmore • Annual Report 2022
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Hostmore • Annual Report 2022
At a glance
Who are we?
Hostmore is a UK hospitality business with its
current operations focused on the American-themed
casual dining brand, “TGI Fridays”, the cocktail-led
bar and restaurant brand, “63rd+1st”, and the fast
casual dining brand, “Fridays and Go”.
While TGI Fridays has been trading for over three
decades in the UK, the Group was established in
2021 with a core strategy of providing a platform for
the development and growth of attractive hospitality
brands, defined by their iconic brand experience
and vibrant heritage. Hostmore is focused on the
organic growth of its existing brands, alongside,
in the longer term, expanding through additional
concepts which have roll-out potential.
The Group operates under the leadership of an
experienced management team that has a track
record of building businesses in the hospitality and
leisure sectors.
Hostmore currently operates 91 sites in the
UK, the majority of which are in high footfall
locations, including retail parks, shopping
centres and city centres.
Our vision and strategic focus
Our vision is to make every customer experience
engaging and relevant, celebrating the unique heritage
and character of our brands. We want our customers
to feel relaxed and enlivened by their experience in an
inclusive and welcoming environment.
Providing a platform for the development of
hospitality brands, our strategic focus is to optimise
their performance. Meeting evolving customer
requirements and delivering personalised customer
engagement are key to achieving this, supported by a
redesigned and innovative digital platform.
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Hostmore • Annual Report 2022
Strategic report
Our restaurants and bars
Our portfolio features a balanced and diversified estate of 91 restaurants across regions and location types.
3%
Stadium
34%
Retail park
31%
Shopping centre
19%
City centre
13%
Standalone
Financial highlights
Operational highlights
In 2022, the opening of new TGI Fridays restaurants
in Chelmsford, Barnsley and Durham and a 63rd+1st
restaurant in Edinburgh underlined our commitment
to expanding our brand and customer experience.
We also launched our quick service restaurant
offering, “Fridays and Go”, and opened our first
restaurant under this brand in Dundee.
Our digital transformation strategy is feeding directly
into our operational activities, with our 4D strategy
having been developed to meet our customers’
requirements. Our vision with this transformation is
to build a single customer view that personalises the
brand experience and maximises our customers’
ability to engage with us as they wish.
In 2022, the Group’s
subsidiary that employs
almost the entire
workforce was accredited
as a “Great Place to
Work” following feedback
provided in an employee
survey on performance
and cultural values as an
employer. This constitutes
a major accolade for the
Group and endorses our
commitment to our teams
and individual employees.
Wales
4%
South West
8%
London
13%
Midlands
19%
North
29%
Scotland
13%
South East
14%
EBITDA
0 5 10 15 20 25 30 35
£31.1m
£34.5m
Return on capital employed (ROCE)
0 5 10 15 20
17%
12%
0 50 100 150 200
YE Dec 2022
£189.1m
YE Dec 2021
£155.0m
Like-for-like sales
YE Dec 2022
YE Dec 2021
YE Dec 2022
YE Dec 2021
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Hostmore • Annual Report 2022
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Business model
Our business model
Our inputs
Our iconic brands which are synonymous with quality, fun
and flair
Our passion for providing a unique customer experience
with a genuine personal touch, embracing inclusivity,
diversity and a spirit of personal self-expression
Our heritage and expertise in creating authentic American
food and legendary drinks
The unique look and feel to our dining environments in
strategically chosen locations
High energy and dynamic environments with a wide
demographic appeal
The value we create
Memorable and unique experiences for our customers
Employment and advancement opportunities for our people
Opportunities through partnerships in the communities we
serve and operate
Investment back into the brands, their reputation and their future
Enhancing revenue returns for our shareholders
We build on/use our knowledge of our markets
and how we position ourselves/consumer research
We invest in our people, locations and
our offering (menu, marketing etc.)
We use these three elements to create
memorable experiences for our customers
We leverage our buying power
to increase our ROI
We reinvest our ROI in building
our business
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Hostmore • Annual Report 2022
Strategic report
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Hostmore • Annual Report 2022
Business strategy
Our 4D approach
Our 4D strategy seeks to provide our customers with different means of engaging with each
of our brands to best suit their requirements.
Our 4D strategy will re-energise the Fridays offering and brings a relevant engagement approach to
our customer relationships.
Our 4D strategy is underpinned by three key pillars, providing a critical
assessment basis for their performance.
Pillar 2
Relevance
Pillar 3
Simplicity
Pillar 1
Quality
American themed, drinks-led
restaurants with dedicated cocktail
bars, providing a fun, inclusive and
quality experience in a casual dining
environment.
New restaurants - In 2022, three
TGI Fridays, one 63rd+1st and one
Fridays and Go were opened.
Prepared high quality food and
drinks delivered through click
and collect and third party
aggregators, such as Deliveroo,
Just Eat and Uber Eats.
As well as TGI Fridays menu,
pre packaged TGI Fridays
branded drinks can be ordered
for home delivery.
Offering the TGI Fridays menu on a
click and collect ordering basis.
This includes Fridays and Go, the
new fast casual dining concept which
enables customers to ‘grab and go’,
using click and collect ordering.
First site opened in Dundee in 2022,
the first TGI Fridays in the world with
this offering. If successful, longer term
strategy to roll out further venues over
the coming years.
Enables Dine in, Delivery and Drive to
Loyalty programmes offered by TGI Fridays and 63rd+1st through the
respective apps. The Fridays loyalty programme, which provides loyalty
rewards, exclusive offers and birthday offers, was relaunched in 2022.
3. Drive to
4. Digital
Rewards
2. Delivery1. Dine in
REWARDS
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Hostmore • Annual Report 2022
Strategic report
Our fashionable cocktail-led bars and restaurants which deliver fabulous drinks and food in a stylish environment.
An all day bar and dining experience serving
brunch, coffee, through to lunch and dinner.
With an emphasis on an ambient atmosphere in
culturally sophisticated decor and furnishings.
Music, both live and recorded, features across
the venues.
Returning to our bar heritage offering a large
selection of iconic cocktails, spirits, beers
and wines.
The 63rd+1st brand provides a contemporary
offering and stylish environment.
Edinburgh restaurant
opened in July 2022
Collaborated with the celebrity
chef, Tony Singh, to provide a
special edition menu
Highlights
Chelmsford, Barnsley and
Durham restaurants opened
in 2022
Creation of Fridays and Go,
with the first venue opened
in Dundee
An improved NPS from
‘Good’ to ‘Great’
The relaunch of our
TGI Fridays app
Highlights
Maintain and improve
on our service rating
Launch the new TGI
Fridays website
Key targets
Maintain and improve on
our ‘Great’ service rating
for a third consecutive year
Broaden the Group’s
demographic appeal
Key targets
TGI Fridays offers the original authentic Americana experience, for young at heart adults
looking for great cocktails and great comfort food.
TGI Fridays’ signature generosity of spirit, positive energy and inclusive celebratory
atmosphere means our customers enjoy That Fridays Feeling any day of the week.
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Hostmore • Annual Report 2022
Group highlights to 1 January 2023
23%
improvement in revenue in FY22
across the Group over FY21, with
both volume and customer spend
per head increasing
5
new restaurants opened in FY22
(including three TGI Fridays, one
63rd+1st and the first Fridays and Go)
(FY21: 4 new restaurants)
-10%
decrease in EBITDA in FY22 over FY21 due
to Government grants and VAT reduction in
FY21, as well as costs inflation
£23.3m
adjusted free cash flow for the period
ended 1 January 2023, before the
settlement of £6.8m of accrued 2021
listing costs
£22.5m
undrawn banking facilities available
under the Revolving Credit Facility
at 1 January 2023
+22%
increase in comparable
like-for-like (“LFL”) revenue in
FY22 compared to FY21
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Hostmore • Annual Report 2022
Strategic report
Group highlights to 1 January 2023
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Hostmore • Annual Report 2022
Group highlights to 1 January 2023
continued
Digital transformation
Our digital strategy remains a key focus for Hostmore’s brands and our offerings.
What does “digital” mean to us and our customers?
Our customers are the at the heart of our brands’
propositions and experiences. Historically, each
of TGI Fridays and 63rd+1st have been a venue-
led proposition. Our people, our buildings and
our dining and cocktails offerings all feed into our
brand experience. In the case of TGI Fridays and
63rd+1st, we remain, first
and foremost, a dining and cocktails ‘at venue’
experience. So our digital strategy across our
websites, apps and social media channels is
shaped to reflect this model, using data and digital
contact points to amplify the brand experience.
Historically, each of TGI Fridays and 63rd+1st have
been a venue-led proposition. Our people, our
buildings and our dining and cocktails offerings all
feed into our brand experience. In 2023, bringing
our digital presence to our customers continues to
be a core driver in increasing footfall and customer
loyalty. Representing our core values whilst
inspiring new customers to visit our venues is how
we strive to represent the brands digitally. We
are, therefore, on a digital transformation journey,
particularly with our largest brand, TGI Fridays.
What will TGI Fridays digital transformation look like?
In essence, we are rebuilding our digital infrastructure
so that our customers have a personalised
and relevant online experience with the brand.
Using web and mobile first platforms, a data-led
approach to understanding customers’ needs and
therefore responding to them, is vitally important
and one that we are continually improving.
The change in our digital infrastructure will
simplify and improve our guest journey so it is
easier and more compelling to visit TGI Fridays.
Specifically, we are rebuilding the TGI Fridays
website platform. This is enabling us to provide
a simpler guest journey which is more attractive
to users and gives them an easier journey to
follow to make a booking. This will involve fewer
steps required to make a booking, better images,
buttons, pop ups which provide information
about the brand, as well as reasons to visit.
Aligning TGI Fridays’ personality with an
online audience creates a digital touch
point with our customers which is part
of the TGI Fridays experience.
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Hostmore • Annual Report 2022
Strategic report
• Rewards app
• Loyalty/members log-in area
• Menus
• Venue locator
• Bookings and cancellations
• Promotions, offers and redemption codes
• Feedback
• Share and endorse
• Using cookies and data analytics, we connect customers and their preferences with our offerings,
feeding into our CRM systems, creating a single customer view
• Improve conversion rates (online visits: bookings)
• Improve brand perception
• Increase loyalty membership
• Strengthen our brand and be market competitive, digitally
• Stronger, relevant relationships with our customers
Using data to better connect with our guests
Features Special functions
Outcomes
Creating a ‘single customer view’
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Hostmore • Annual Report 2022
Introduction
Hostmore’s first full year of being an independent listed company
has been challenging for the economy and consumers – and for the
Company. Whilst the Company has made progress in several areas,
we cannot avoid the fact that in 2022 our financial performance
underperformed the market and our market capitalisation fell
significantly more in percentage terms than our peers.
The Board has every confidence in its brands, its products and its
people.
Chairman’s statement
We have adapted our marketing and capital allocation
policy to these new circumstances. Until market
conditions improve we are focused on:
1. Delivering improved performance from our
core TGI Fridays estate – through further
improvements to our marketing, operating
effectiveness and site management.
2. Not undertaking new site openings for our brands
until the economic backdrop has brightened.
3. Cost reduction and debt repayment.
In light of the current economic environment, we
have assessed the carrying value of our property,
plant and equipment, right of use assets and goodwill
at the period end. The Board has assessed these
by reference to our updated business plan and the
higher interest rates now prevailing. This exercise
has resulted in Hostmore booking impairment
charges totalling £31.2m against property, plant
and equipment and right of use assets, and £70.9m
against goodwill. Both of these items are non-
cash charges in our Statement of Comprehensive
Income. By recording these non-cash charges now,
the resultant net values of our property, plant and
equipment at £36.1m, right of use assets at £94.6m
and goodwill of £75.1m at the period end, reflect
current values of our business by reference to today’s
market conditions. We have recorded the goodwill
impairment as an exceptional item as this is a one-off
item that is not expected to re-occur.
None of these charges have any impact on the
operational cash performance of the Group which
is unaffected by these impairment charges. EBITDA
IFRS16 for the period ended 1 January 2023 totalled
£31.1m (period ended 2 January 2022: £34.5m), with
the Group well placed to continue its recovery in the
year ahead. Our current year and future business
operations are commented on in detail in the Interim
Chief Executive Officer’s Statement on pages 14 to 17
and further detail on the impairments is provided in the
Chief Financial Officer’s Review on pages 36 to 41.
Entering 2022
Whilst inflationary headwinds had reared their heads
in Q3 and Q4 of 2021, having performed well in the
COVID-19 impacted period of Q2 2020 to Q4 2021
through agility and focus, we entered 2022 with
relative confidence having:
1. Improved our core TGI Fridays offering through
delivering our mantra of quality, relevance and
simplification.
2. Launched the new ‘63rd+1st’ brand of
sophisticated cocktail and small plate bars.
3. Being in advanced preparation for the launch of
the new ‘Fridays and Go’ concept.
We were aware that reduced levels of consumer
activity during the COVID-19 impacted period
made it challenging for us to demonstrate
to our consumers the degree to which our
core TGI Fridays offering had improved.
The Operational Environment
The impact on consumer confidence of the rapidly
increasing inflationary pressures arising from the
Russian invasion of Ukraine in February 2022 changed
the nature of the market in which we are operating.
Having started the year well, we again found ourselves
in a market in which it was challenging to gain new
customers and demonstrate our product quality.
Adapting our Approach
Having built an infrastructure in anticipation of a post
COVID-19 environment of growth and opportunities
for consolidation, we found ourselves in a difficult
market with a heavy cost base.
Gavin Manson
Chairman
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Hostmore • Annual Report 2022
Strategic report
Recovery Plan
Hostmore has a recovery plan in place that is already
addressing:
1. The attraction of new customers to TGI Fridays’
core ‘in store’ offering.
2. The prior lower level of penetration
by TGI Fridays in ‘delivery’.
3. The cost base of the business.
The delivery of our expectations for this recovery
plan will require the focus and strong support
of each of our 4,500 team members. It is a
feature of the business that many of our in
store colleagues have been with TGI Fridays
for many years and across multiple locations.
It is this loyalty and inherent understanding of
the brand that represents ‘The Fridays Feeling’
today and that we believe will be invaluable as
we deliver the plan and as the brand evolves.
The Board
I started by saying that this has not been an easy
year for Hostmore. Similarly, your Board has had its
positives and its challenges. In August, we welcomed
Stephen Welker to the Board. With his in-depth
knowledge of the business from its pre-Demerger
days and prior experience of leading multiple
turnarounds, Stephen has added value to Board
discussions from day one. It is a pleasure to have him
on the Board.
In December, two of our valued Non-Executive
Directors resigned from the Board for reasons
unconnected with the business. We wish Louise
Stonier the very best with her blossoming executive
career and, likewise, we wish Jane Bednall well
following her departure for personal reasons. I thank
them both for their valued contributions to Hostmore
through its Demerger and early days as a listed
company. The Board has commenced a search for
two new independent Non-Executive Directors.
In January 2023, Robert B. Cook, who as CEO of TGI
Fridays from late 2019 had seen us through COVID-19
when many other businesses had failed, decided,
with the Board’s approval, to step down. Earlier in
2022, Robert had recruited Julie McEwan as Chief
Operating Officer and the Board is delighted that Julie
has agreed to become our Interim CEO. The Board is
committed to ensuring that the permanent CEO has
the qualities necessary to enable the future success
of the business. Whilst conducting an external search,
we are also working with Julie to give her every
opportunity to build on the extremely encouraging
start she has made as Interim CEO.
At the 2022 AGM, I stepped up from being
a Non- Executive Director of Hostmore to
becoming Chairman. It has been an unexpectedly
challenging period for, in increasing measure,
the UK economy, the casual dining market
and as a result, the Company. Hostmore now
has a recovery plan that has absolute focus to
deliver the significant rewards available to the
Company and shareholders on delivery. I am
absolutely confident that it will be delivered.
In September 2022, I was asked to become an
Executive Director in the turnaround of another
company. With the enhanced strategy referred to
above that Hostmore is handling, it has become clear
to me that both roles cannot be conducted optimally
together. Following the appointment of Stephen
Welker to the Board in August, we have the skills
required to take the Company forward to deliver value.
As such, it is my intention to step down as Chairman
of the Board at our AGM in May with the intention that
Stephen Welker succeeds me as Chairman.
Conclusion
It has been my honour and pleasure to work
with the Board and employees of TGI Fridays
since 2017. I have a high degree of confidence
that I will leave it in May this year well positioned
for future success. I wish Stephen, Julie and
their respective teams every success.
Gavin Manson
28 April 2023
“Hostmore now has a recovery plan that
has absolute focus to deliver the significant
rewards available to the Company and
shareholders on delivery”
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Hostmore • Annual Report 2022
Interim Chief Executive
Officer’s statement
Reflections on 2022
The early part of 2022 showed that the ‘whiplash of COVID-19’ was
still evident across the hospitality sector and in our business, as the
challenges continued. In addition to the COVID-19 disruption, we
faced the adverse effects on our sector of the Russian invasion of
Ukraine, the cost-of-living crisis, heightened inflationary pressures
and various industrial strikes. Whilst we faced these headwinds, our
high-quality brands were robustly placed to navigate through the
economic uncertainty and dynamically shift to reflect changes in
customer behaviour.
The Omicron variant of COVID-19 in the early part of 2022 saw stadium events
cancelled which adversely affected our restaurants in these areas and city centre
trade was affected as customers continued to work from home. Our like-for-like
revenue improved significantly on the prior year and we proactively managed
inflationary pressures with landlord concessions, the hedging of utilities and
the mitigation of food and beverage costs by leveraging supplier relations.
Strategy
Our 4D strategy is focused on the development of our hospitality brands,
underpinned by quality, relevance, and simplicity. At the heart of this is a
customer-centric approach which aims to deliver memorable experiences
through ‘Dine-in’, ‘Delivery’ and ‘Drive To’, enhanced by harnessing ‘Digital’
journeys and the data these provide as a key enabler across all our customer-
facing channels.
Our ‘Dine-In’ experience is our primary focus for 2023, remaining as it does
at the heart of the TGI Fridays, Fridays and Go and 63rd+1st experience. We
deliver it with pride.
The TGI Fridays iconic brand is associated with the original ‘corner bar’, a place
in the local community to ‘drop in and catch up’ with friends, where one feels
welcome and can step into a place of fun and warmth and where delicious food
and drinks can be enjoyed. Given that TGI Fridays is famous for great food,
it is pleasing that the investment in our menu and service improvements has
delivered a positive impact on the overall guest experiences as evidenced by
our guests’ feedback. We have sought to achieve this whilst maintaining pricing
discipline, particularly given the pressures on our customers’ disposal income.
To complement our offering and widen our appeal to new audiences, we have
implemented our ‘Raising the Bar’ strategy in 2023. This seeks to build on
TGI Fridays’ heritage and values by introducing fun and innovative offers and
concepts, such as the TGI Fridays Cocktail Masterclasses and new celebration
packages. These will showcase the very best of our brand.
Delivery remains an important channel to our customers. In Q3 2022, we
signed a contract with Uber Eats to enable our products be ordered via
their platform. This is in addition to the existing relationships we have with
Deliveroo and JustEat. We believe our relationships with our delivery partners
are stronger going into 2023 after a root and branch overhaul of the way in
which we implement delivery. We now have dedicated leadership and assigned
manpower, already improving our metrics and, ultimately, our delivery offer to
our customers.
Julie McEwan
Interim Chief
Executive Officer
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Hostmore • Annual Report 2022
Strategic report
Employees
It is important that I pay tribute to our dedicated and
passionate teams in our restaurants, particularly
our General Managers, for their continued focus
and resilience in the challenges they have faced
throughout the year. Their professionalism, focus and
engagement throughout the period has been obvious
and we are extremely proud of their efforts. During
2022, our subsidiary that employs almost the whole of
the Group’s workforce, partnered with Great Place to
Work on an engagement survey. The survey consisted
of 60 questions focused on the employee/manager
relationship, culture and values and an overall view of
the business performance. Following completion of
this, and reflecting the positive feedback provided in
the survey, the company was accredited with being a
“Great Place to Work”, a major accolade for the Group
as a whole.
We are well positioned with our continuous investment
in attracting, developing and retaining great talent
across our brands, which is critical to our overall
future success. We launched our new Learning
Management System for all employees in 2022. In
addition, Q3 2022 saw the launch of our Aspire High
Potential Development programme, which seeks
to develop leading talent for the next level in our
business. The first pool of Operations Managers
and General Managers who have been participating
in the programme are due to graduate in April
2023. We are delighted to report that three out of
the eight individuals in this pool have already been
promoted within the organisation. The second pool of
candidates embarked on the programme in April 2023.
We have also been delivering intensive bar training
which has resulted in us certifying over 200 individuals
as being Master Bartenders. These individuals stand
ready to assist us in successfully delivering our 2023
“Raising the Bar” strategy.
We remain committed to building a leaner and more
focused organisation. Cost base efficiencies have
been achieved for 2023, with both our operations
teams and support centre having been restructured
over the course of Q4 2022 and Q1 2023.
In terms of the ‘Drive to’ component of our
strategy, we created our quick service restaurant
offering, Fridays and Go, and opened our
first restaurant under this brand. This is an
exciting new proposition in trial stage, with
the potential to offer valuable diversification
of future growth and brand development.
“Our high-quality brands were robustly placed
to navigate through the economic uncertainty
and dynamically shift to reflect changes in
customer behaviour”
Digital transformation
A significant digital transformation is underway across
the business, particularly at our TGI Fridays brand.
This is underpinned by an omnichannel approach
heading towards a single customer view that informs,
enhances and grows our customer proposition.
Accompanied with highly focused marketing activity
around our refreshed TGI Friday’s brand, leveraging
existing heritage and loyalty with our customers, will
consolidate the brand and the TGI Friday’s experience
more effectively.
Considering the ongoing trading pressures, securing
consumer spend is increasingly challenging. By taking
a data-led approach, we are seeking to enhance the
guest experience, optimise marketing, and leverage
the power of digital to establish a competitive
advantage. I look forward to reporting back during
the current financial year on the progress of the digital
transformation programme.
0
2
4
6
8
10
Dine-out sales*
2022 2023 projected
£8.1m
£9.1m
*Dine-out sales comprise delivery and drive to sales less the dine-in
proportion of drive to sales. Drive to sales include both dine-in and
dine-out sales from click and collect and Fridays and Go.
16
Hostmore • Annual Report 2022
Guest feedback
As we entered the final quarter of 2022 and the
economic turbulence continued, trading remained
challenging. Guest sentiment however was extremely
positive in respect of TGI Fridays. Our Net Promoter
Score for TGI Fridays ended the year at 30 which
is on the boundary of “Good” and “Great” (FY21:
18). We also exited the year with a Trip Advisor
score for TGI Fridays of 4.5 out of 5 (having been
at 3.6 out of 5 at the end of 2021), with customers
notably scoring TGI Fridays highly on ‘value for
money’ and indicating that our promotions were
well received. We cater for the fact that our guests
are looking for more experiential occasions, as well
as personalisation, while they keep an eye on costs
and continue to expect value for their money.
Supply chain
In 2022, securing quality and reliable food supplies at
economic prices was more challenging, following the
re-opening of global trade as the effects of COVID-19
lessened. In addition, we have had to contend with the
conflict in Ukraine affecting energy supply and driving
increased costs in manufacturing and logistics, as well
as shortages of key commodity crops driven by the
war. The result of these challenges culminated in food
product inflation across our sector of +24% relative to
FY21 (Prestige Purchasing 2022 Foodservice Inflation
Model, published Jan 2023).
Despite these challenging conditions, the Group’s
procurement team worked closely with our key
partners to develop and implement strategies to limit
the impact of inflation, whilst ensuring quality was not
compromised. Where possible we secured additional
stock ahead of rising costs, reduced our product
range where beneficial and expanded the country
of origin or source to benefit from more competitive
prices. The result of these multiple strategies was
to exit 2022 with food product inflation of just +9%
relative to FY21 prices. The value of these mitigation
strategies against the market norm of +24% delivered
a saving of £5m to the Group.
Interim Chief Executive
Officer’s statement continued
In 2022, we also engaged with a new beef processor
and developed a partnership with Red Tractor, an
assurance scheme ensuring the beef we use in our
burgers is of a high standard, responsibly sourced and
fully traceable. As a consequence, a new burger was
introduced on our menus in February 2023, reflecting
these attributes.
The 2022 drinks market was not as volatile as food,
with drink inflation at +4% in 2022. To reduce the risks
of supply chain challenges, we secured a contract
with a UK-based spirits manufacturer in November
2022. Moving to a UK-based manufacturer for our key
spirits reduced the risks related to long lead times for
the supply of products and high shipping costs, as
well as removing the administration burden of HMRC
compliance on alcohol consignments when they
are shipped into the UK. We continue to experience
increased costs associated with beer, cider, wine and
soft drinks production. Inflation on drinks products
for 2023 has been forecasted to continue and we are
working closely with our partners to seek ways to
minimise this exposure.
0
5
10
15
20
25
Comparative food product inflation in FY22 v FY21
Hostmore Market sector
9%
24%
Strategic report
New restaurant openings
and closures
Our plan for the development of TGI
Fridays continued as we delivered three
new restaurant openings during 2022.
We also opened our first restaurant
under our new quick service offering
brand, Fridays and Go, in Dundee. In
addition, we opened a new 63rd+1st
restaurant in Edinburgh. In 2022, we
closed our TGI Fridays restaurants in
Covent Garden and Guildford and our
63rd+1st restaurant in Harrogate. These
restaurants were not generating the
returns on investment which we expected
and removing them from the estate was
therefore a positive development.
Looking ahead, we are taking a prudent
approach bearing in mind the current
UK economic environment and not
undertaking any new restaurant openings
in the near term.
Conclusion
As our business continues to ride the
economic headwinds that the sector is
experiencing, our dedication to our brand
values remains. This dedication, coupled
with our innovative digital strategy,
will make our guests’ experience as
compelling as ever. This continues to
inspire our teams across all venues and
disciplines, who are such an important
element of our success. “A world of
more” perfectly captures this approach
for 2023 and beyond.
Julie McEwan
28 April 2023
18
Hostmore • Annual Report 2022
Environmental, Social
and Governance
At Hostmore we are committed to embracing our environmental,
social and governance responsibilities. We also have a particular
focus on our brands becoming leaders in sourcing responsibly, and
developing and maintaining supply chains founded on sustainability.
This report sets out the principal areas of focus and activity
relating to our food and drink offering, our people, our
communities and the environment. We continue to invest
significant time and resources in health and safety matters
across the Group to ensure and further enhance a clean and
safe environment for our guests and team members.
Since our inaugural public company report last year,
our focus has remained steadfastly on aligning as
much as possible our customer experience with the
best environmental and social practices.
As a food and beverage operator, our product
sourcing and menu composition remain key to
meeting the high expectations of our guests and
stakeholders. Some highlights in the period ended 1
January 2023 have included:
• Compliance with nutritional labelling requirements
to provide calorie data on all of our menus.
• Diversification of our menus, notably in relation to
kids’ menu choices to provide a balanced offering
with no additives which could otherwise cause
hyperactivity in children.
• Continued expansion of our vegan and plant-
based menu offerings
• The absence of genetically modified foods from
our menu.
• The continued use of 100% RSPO (Roundtable on
Sustainable Palm Oil) certified products.
Animal welfare
Hostmore is committed to operating high animal
welfare standards and practices and will only source
meat from suppliers who share our commitment.
As such, we require suppliers to demonstrate
management of animal welfare from farm to fork
and at any given time be able to provide the
relevant information on request. As a minimum, we
require our suppliers to ensure that their farmers
and producers comply with UK and, if applicable,
EU animal welfare legislation for the relevant
species. We support the “Five Freedoms” principle
proposed by the Farm Animal Welfare Council on the
protection of animals kept for farming purposes.
The five freedoms are: (i) freedom from hunger
and thirst; (ii) freedom from discomfort; (iii)
freedom from pain, injury and disease; (iv)
freedom to express normal behaviours; and
(v) freedom from fear and distress.
We have established a partnership with Red Tractor,
an assurance scheme ensuring the beef we use in
our burgers is of a high standard and responsibly
sourced with assured standards of animal welfare
and full supply chain traceability. It also has the
additional benefit of supporting British farmers.
Aquaculture practices
We fully support responsible fishing and the long-
term sustainability of our global fish stocks. Our
suppliers are required to source from sustainable
fisheries, which are independently approved by
universally recognised certification bodies, such as
the Marine Stewardship Council for wild caught fish
and the Global Aquaculture Alliance, Best Aquaculture
Practice or Aquaculture Stewardship Council for
farmed fish and seafood.
784,450 kg
*
2022
All used cooking oil across the Group is recycled. As a result
we saved a further 784,450kg of CO2 from being released
during the period ended 1 January 2023.
Claire Hussey
Risk & Compliance Director
*
*Claire Hussey is an operational director
(rather than a statutory director)
19
Hostmore • Annual Report 2022
Strategic report
Our ESG focus
£
• Net zero roadmap
• Energy consumption
• Waste reduction and recycling
• Plastics and packaging reduction
• Water consumption
• Sustainability in supply chain
• Animal welfare
• Fridays values and culture
• Employee engagement / wellbeing
• Labour standards / H&S
• Community engagement
• Charity contribution
• Health and nutrition
• Business ethics and conduct
• Risk management
• Remuneration / gender pay gap
• Equality and diversity
• Anti bribery and corruption
• GDPR
• Tax transparency
• Certifications / accreditations
Environmental
Social
Governance
Reduction in the use of plastics
We have removed plastic straws from the business
and continue to work with suppliers to reduce the
amount of single use plastic in our supply chain.
Allergens
We have categorised the 14 allergens detailed
in UK legislation and we follow comprehensive
allergen processes to manage this key food
safety issue. Allergen information is available in
our restaurants and online, allowing guests to
view dishes that are suitable for them, based
on individual allergies and intolerances.
Serving alcohol responsibly
We operate the Challenge 25 ID scheme in
Scotland and Challenge 21 scheme in England
and Wales to play our part in preventing the
purchase of alcohol by underage individuals.
Health and safety
The health and safety of our guests and
employees is of paramount importance to
us. We have extensive procedures to ensure
we mitigate risks as far as possible and clear
procedures and operating standards with
assured advice from our Primary Authority.
We have robust standards in place to ensure we
manage fire safety effectively and protect our teams
and guests. We have a Primary Authority partnership
relating to fire safety that covers the whole of the
Group’s estate.
We also employ external auditors to perform a rolling
programme of independent safety audits covering
food safety, fire safety and health and safety standards
across all our restaurants in line with UK legislation.
A total of 16 incidents were logged as required by
the reporting of injuries, disease and dangerous
occurrence regulations during the period ended 1
January 2023.
Safe dining environment
We wish to lead the way in providing a safe dining
environment for our guests and that includes
providing a safer online experience for our visitors.
In the period ended 1 January 2023, the Group
became ‘Friendly WiFi’
accredited. We display
the below ‘Friendly
WiFi’ symbol in our
restaurants to show our
visitors our WiFi service
has been approved and
is safe to use.
20
Hostmore • Annual Report 2022
Environmental, Social
and Governance continued
IT, cyber and data privacy
At a time of increasing cyber security and data
privacy risk, Hostmore recognises more than ever
the importance of having appropriate and secure IT
infrastructure and managing and securing both its
and our stakeholders’ data. The Group follows the
National Cyber Security Centre recommendation
framework in all areas relevant to its business and
carried out a significant number of projects to
continue to upgrade its infrastructure and safeguard
its systems in the period ended 1 January 2023. The
Group carries out due diligence, onboarding and
monitoring of its IT suppliers, taking corrective actions
where necessary. All employees are given IT and data
privacy training as part of their induction process, with
more advanced cyber security training provided to
more senior employees. In addition to achieving the
Friendly WiFi accreditation detailed above, the Group
maintained its Payment Card Industry Data Security
Standard Attestation of Compliance in 2022. This is a
cybersecurity standard backed by all the major credit
card and payment processing companies that aims to
keep credit and debit card numbers safe.
Training
A new learning management system platform was
rolled out in 2022 for all of our employees, providing
refresher training in aspects of site and venue safety.
As part of this programme, first aid and defibrillator
training was given to our restaurant management
teams across the business. Defibrillators are now
installed in each of the Group’s sites and were used
successfully to support life in four scenarios in 2022.
Our Green Mission
The Group measures its electricity usage in relation to the Group’s restaurants that have electricity usage meters
installed. As at 1 January 2023, 75 of the 91 restaurants in the Group’s estate (approximately 82%) had a meter
installed. The data provided below and on the following page relates to the Group’s restaurants that have
electricity usage meters installed.
Group electricity usage comparison
The below comparison of the Group’s electricity usage is based on actual data for Q3 2021 and 2022 and
projected data for Q3 2023.
Our environment:
Key initiatives during the period ended 1 January 2023
included:
• Developing comprehensive checklists for opening
and closing our restaurants, which are completed
via our online due diligence system.
• Promoting our Green Mission to increase team
awareness and in restaurant activity to support
our green initiatives, as well as using data / meter
readings to review anomalies on a weekly basis
and working with our Operations team to improve
and change energy usage behaviour at every one
of our restaurants.
• The use of our ESG internal audit resources to
support the above initiatives and review and
promote compliance with the required daily
checks and activities in our restaurants.
• Waste – Of the waste managed for us by our third
party manager Circom (approximately 55% of
the Group’s waste (FY21: 65%)), no waste was
sent to landfill. 60% of the total waste managed
for us by Circom was recycled during the year
(FY21: 55%). The remaining 40% of our waste
managed by Circom was used in energy recovery
processes. The disposal of our remaining waste
(approximately 45% of the Group’s waste) is
controlled by our landlords. Nevertheless, we
continue to actively work with our landlords to
encourage them to operate to our high standards.
• The commencement of a trial of technologically
advanced waste units in our newer venues.
• We are working with Nella, a plastics-free
kitchen equipment supplier, to trial their
chopping board products in our kitchens.
As part of this, old and used chopping
boards are being collected and recycled.
0 1000000 2000000 3000000 4000000 5000000 6000000 7000000 8000000
Q3 2021 actual
Q3 2022 actual
Q3 2023 projected
7,089,218 kWh
6,722,734 kWh
5,823,740 kWh
21
Hostmore • Annual Report 2022
Strategic report
Save while you sleep savings in measured period
2022 in comparison to measured period 2021
Electricity consumption saving
17%
CO2 emissions saving
284tCO
2
Overall energy savings in measured period 2022
in comparison to measured period 2021
Electricity consumption saving
12%
CO2 emissions saving
704tCO
2
0
500000
1000000
1500000
2000000
2500000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
20212022
Monthly electricity use (kWh)
Active tracking of the Group’s electricity consumption commenced in July 2021. The chart below details a
month by month comparison of the Group’s electricity usage during 2021 and 2022 and demonstrates a clear
year-on-year reduction in consumption where data is available for the prior year.
kWh
Yielding results
As stated above, active tracking of the Group’s electricity consumption commenced in July 2021.
Our Green Mission is yielding results. This is demonstrated by the below comparisons of electricity consumption,
electricity usage and CO2 emission savings in July 2022 to December 2022 relative to the same period in
2021. The Green Mission comprises a number of campaigns, with one of the key campaigns titled “Save while
you sleep”. This is an ongoing campaign to turn off equipment that does not need to be left on overnight and
challenge behaviours in our restaurants to ensure that they are closed down effectively. The results of this
campaign are shown in the left-hand column below. The overall results of the Green Mission initiative are shown
in the right-hand column (which includes the results of the “Save while you sleep” campaign).
Less electricity used
1.5m kWh
Less electricity used
3.7m kWh
22
Hostmore • Annual Report 2022
Streamlined Energy and Carbon Reporting
Environmental, Social
and Governance continued
As a “large” company, as defined by Companies Act 2006, the Group is required to report on its energy
usage and related carbon information. Consumption in kWh and emissions in tonnes of CO2e (carbon dioxide
equivalent (which includes CO2 and other greenhouse gases)) for the calendar year ended 31 December 2022
are provided.
For the calendar year ended 31 December 2022, the Group has purchased Renewable Energy Guarantees of
Origin (REGO) certified renewable electricity for 100% of its physical estate.
Furthermore, the Company notes the recommendations of the Taskforce on Climate-related Financial
Disclosures (TCFD) and has included disclosure against the TCFD framework on pages 24 to 27.
The data detailed on pages 20 and 21 relates to the Group’s restaurants with electricity usage meters and
show improvements in the Group’s electricity consumption under the Green Mission initiative. The below table
relates to all the Group’s restaurants and shows certain increases in the Group’s carbon emissions and energy
consumption. The increases below relate to: (i) there being lengthier closures of the Group’s restaurants due to
the Covid-19 pandemic in 2021 than in 2022 and therefore lower carbon emissions and energy consumption in
2021; and (ii) the net growth in the number of the Group’s restaurants in 2022.
Carbon Emissions and Energy Consumption
Current reporting year Benchmark year
1 January 2022 - 31 December
2022
1 January 2021 - 31 December
2021
Energy consumption used
to calculate emissions
Gas - 31,100,057 kWh
Electricity - 30,838,703 kWh
Gas - 25,684,068 kWh
Electricity - 23,116,898 kWh
i) Emissions from combustion of
Gas (Scope 1, location based)
5,696 tCO2e 4,704 tCO2e
ii) Emissions from combustion
of vehicle fuels (Scope 1)
25 tCO2e 41 tCO2e
iii) Emissions from purchased
Electricity (Scope 2, location based)
6,548 tCO2e 4,908 tCO2e
iv) Emissions from business travel in
rental cars or employee-owned vehicles
where the Company is responsible
for purchasing for fuel (Scope 3)
Not recorded for
reporting period
Not recorded for
reporting period
Total gross CO2e based on above 12,269 tCO2e 9,653 tCO2e
v) Intensity ratio: tCO2e gross figure
based from mandatory fields
60.167 (tCO2e/£million
gross revenue)
59.524 (tCO2e/£million
gross revenue)
23
Hostmore • Annual Report 2022
Strategic report
Methodology
The Group calculates its intensity ratio with reference to tonnes of CO2e per £1,000,000 of revenue sales.
The intensity ratio for the calendar year ended 31 December 2022 was 60.167 tCO2e/£million revenue.
BEIS Conversion Factors 2021 have been used to convert electricity and gas consumption in kWh to
tonnes CO2e.
Methodology 2022 2021
i) Emissions from combustion
of gas tCO2e (Scope 1)
tCO2e calculated from the
invoiced gas consumption in
kWh during the reporting period
converted using the 2022 UK
Government GHG Conversion
Factors for Company
Reporting (version 1.0) for
‘Natural Gas’ at Gross CV.
tCO2e calculated from the
invoiced gas consumption
in kWh during the reporting
period converted using the
2021 UK Government GHG
Conversion Factors for Company
Reporting (version 1.0) for
‘Natural Gas’ at Gross CV.
ii) Emissions from combustion of
vehicle fuels (Scope 1) (tCO2e)
Emissions are based on pro-
rated contract mileage for
the 2022 year. Vehicles are
all owned and operated by
the Group. The fuel type was
identified for each vehicle
and the mileage converted
using UKGov CO2e for 2022
to give tonnes of CO2e.
Emissions are based on pro-
rated contract mileage for the
2021 year. Vehicles are all owned
and operated by the Group.
The fuel type was identified for
each vehicle and the mileage
converted using UKGov CO2e for
2021 to give tonnes of CO2e.
iii) Emissions from purchased
electricity tCO2e (Scope
2, location based)
tCO2e calculated from the
product of the above stated
electricity consumption in kWh
during the reporting period
and the 2022 UK Government
GHG Conversion Factors
for Company Reporting
(version 1.0) for ‘Electricity
Generated/Electricity: UK’
tCO2e calculated from the product
of the above stated electricity
consumption in kWh during the
reporting period and the 2021 UK
Government GHG Conversion
Factors for Company Reporting
(version 1.0) for ‘Electricity
Generated/Electricity: UK’
iv) Emissions from business
travel in rental cars or employee-
owned vehicles where company
is responsible for purchasing
for fuel tCO2e (Scope 3)
Not recorded for 2022
reporting period
Not recorded for 2021
reporting period
v) Intensity ratio: tCO2e gross
figure based from mandatory fields
The intensity ratio stated
above has been calculated as
tonnes of CO2e per £million
of gross sales revenue (£203.9
million), calculated by the
Company’s Finance Team
The intensity ratio stated
above has been calculated as
tonnes of CO2e per £million
of gross sales revenue (£162.2
million), calculated by the
Company’s Finance Team
24
Hostmore • Annual Report 2022
Environmental, Social
and Governance continued
Taskforce on Climate-related Financial Disclosures (TCFD)
Hostmore recognises the significant impact that climate-related risks and opportunities (CRROs) have
on our business and the wider society. We are exploring ways in which we can do our part. The TCFD
Recommendations provide a robust framework against which companies can provide relevant disclosures. This
report sets out details under the four pillars of TCFD reporting, about where we are in this journey, as well as our
current considerations and plans informing our way forward.
The TCFD Guidance for All Sectors and supplemental guidance, where appropriate, was considered in making
the current disclosure, even though the Company did not perform a detailed assessment against such guidance.
The Company is considering a detailed assessment as part of its roadmap for data collection and resultant
disclosure for the period ending 31 December 2023. The table below sets out our compliance by TCFD pillar
together with consistency with the TCFD recommendations and recommended disclosures, with references
where we are not yet fully consistent whilst still on our journey.
TCFD Recommendation by pillar Disclosure provided
Governance
Describe the board’s oversight of
climate-related risks and opportunities.
The Board maintains oversight of CRROs directly, as
well as through the Audit & Risk Committee as further
described in the Governance section on page 25.
Describe management’s role in
assessing and managing climate-related
risks and opportunities.
Our functional area leaders and Risk and Compliance
Forum have responsibility for the day-to-day
consideration of CRROs with the Group’s Executive
Team maintaining oversight. The Governance section on
page 25 provides more details.
Strategy
Describe the climate-related risks and
opportunities the organisation has identified
over the short, medium, and long term.
Whilst they do have impacts or potential impacts on
the business, none of the CRROs identified so far are
material. We continuously identify and assess CRROs as
described in the Strategy section on page 26.
Describe the impact of climate-related risks
and opportunities on the organisation’s
businesses, strategy, and financial planning.
We consider how we impact the climate and how the
climate impacts us. We have initiatives in place, which will
be codified into our Roadmap by the end of 2023. Refer
to the Strategy section on page 26 for further details.
Describe the resilience of the organisation’s
strategy, taking into consideration different climate-
related scenarios, including a 2°C or lower scenario.
Given the stage of our journey, we do not currently
have scenario analysis, nor any specific climate-related
resilience processes. The resilience of our business
remains paramount and currently forms part of our crisis
management and disaster recovery processes. Refer to
the Strategy section on page 26 for further details.
25
Hostmore • Annual Report 2022
Strategic report
TCFD Recommendation by pillar Disclosure provided
Risk Management
Describe the organisation’s processes for
identifying and assessing climate-related risks.
We have set out our process for identifying, assessing
and managing CRRs in the Risk Management section on
page 27.
Describe the organisation’s processes
for managing climate-related risks.
Describe how processes for identifying, assessing,
and managing climate-related risks are integrated
into the organisation’s overall risk management.
Our risk management process for CRRs is completely
integrated with our overall risk management process as
explained in the Risk Management section on page 27.
Metrics and Targets
Disclose the metrics used by the organisation to
assess climate-related risks and opportunities in
line with its strategy and risk management process.
Given the stage of our journey, we do not currently have
formal metrics. Refer to the Metrics and Targets section
on page 27 for our plans.
Disclose Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse gas
(GHG) emissions and the related risks.
Scope 1 and Scope 2 GHGs are disclosed in the
Streamlined Energy and Carbon Reporting on page 22.
Refer to the Metrics and Targets section for details
regarding Scope 3 GHGs.
Describe the targets used by the organisation to
manage climate-related risks and opportunities
and performance against targets.
Given the stage of our journey, we do not currently
implement any formal targets. Refer to the Metrics and
Targets section on page 27 for our plans.
Governance
We include climate-related risks in our risk register,
which is considered by the Board, as well as the Audit
& Risk Committee, on a regular basis. The Board is
aware of its responsibilities as they relate to climate
and its impact on the business.
The day-to-day consideration of climate-related
matters currently sits with our functional area leaders
and the Risk and Compliance Forum, with oversight
and responsibility provided by the Group’s Executive
Team. The ‘Risk Management’ section below expands
on this process, as well as on the interactions
between the functional area leaders, the Executive
Team, the Risk and Compliance Forum, the risk
register and the Board.
The successful implementation of each strategy to
manage and respond to identified CRROs is ultimately
dependent on everyone in the Group. We are therefore
also focusing on training initiatives to raise awareness
of the Group’s responsibilities and how everyone
can contribute. In addition, we provide regular
communication through various channels, such as
electronic notice boards, due diligence checklists,
weekly feedback and regular newsletters.
26
Hostmore • Annual Report 2022
Environmental, Social
and Governance continued
Strategy
The Group’s CRROs are assessed as described in the
Risk Management section of this report on page 27.
None of the identified CRROs are considered at the
present time to be material to the Group whether in
the short, medium or long term and, accordingly,
there are no material impacts on the Group’s financial
results for the 52 week period ended 1 January
2023. Nevertheless, we are acutely aware of the
continuously evolving landscape, its impact on our
business and stakeholders, and the positive impact
of small changes. Together with the Carbon Zero
Forum, we are developing an emissions roadmap
(“Roadmap”). This Roadmap will set out our path to a
net zero position by 2050 at the latest and we aim to
complete the development of the Roadmap in 2023.
As we work on our Roadmap, we are already investing
in initiatives to advance our journey to net zero. These
strategies include switching to LED signage and
lighting; improved processing of waste and oil; water
and oil saving measures; reducing waste; supply
chain considerations; and our Green Mission. These
strategies are being included in the development of
our Roadmap and are being linked to appropriate
metrics and targets.
Our Green Mission is currently focused on electricity
and gas savings through raising awareness, providing
training and changing ways of doing business
to reduce waste whilst maintaining our quality of
products and services. We are using technology
to measure usage and identify potentially wasteful
areas. This measurement is currently focused on
electricity consumption and has shown a significant
reduction in electricity waste. We are in the process of
applying the same strategies to our gas usage. Further
considerations include more efficient refrigeration and
air conditioning through more efficient units and better
maintenance to ensure existing equipment functions
as best as possible. Where possible we are sourcing
electricity from renewable sources and will continue to
expand this programme.
In addition to our steps to reduce waste in relation
to energy usage, the following initiatives are aimed
at reducing physical waste. Our plastic chopping
boards are now resurfaced, rather than replaced. This
results in a significant reduction in plastic waste. We
save water by using technology on taps to reduce
the rate of flow. During our monthly maintenance
inspection process, we have enhanced focus on
identifying and fixing dripping or leakages from
equipment. Other initiatives include the reduction
of single use plastics by switching to paper-based
straws and minimising the use of plastic packaging by
suppliers. We encourage suppliers to use recyclable
cardboard for packaging. Our paper footprint has also
been consistently reduced as we move paper-based
systems to online systems. This has the additional
benefit of a reduction in resources relating to storage
and archiving of information.
The above focuses on reducing waste, but the
production of waste products from our operations
is inevitable. We ensure that all our cooking oil is
recycled into biodiesel. Wherever we control our
waste disposal, which is approximately 65% of our
total waste, it is processed by an external partner
through recycling and energy recovery processes.
In properties where the owner controls our waste
disposal, we look to collaborate with the owner to
ensure that waste is processed in an acceptable way,
providing our own advice and knowledge. Our aim is
to have as much recycling as possible, with no waste
heading to landfills.
Another significant area of strategy is our supply
chain. We continue to use local suppliers where
possible, thereby supporting our communities,
enhancing reliability and reducing transport
emissions. We have upgraded our supplier
handbook to ensure the sustainable and ethical
sourcing of sugar, cocoa, palm oil, soy, coffee
and meat. This includes prescribed standards
and acceptable methods of doing business.
As part of our supplier assessments we require
continued adherence to our supplier handbook.
Although we have not yet formally assessed our
resilience against different climate scenarios, we
have a crisis management and disaster recovery
process to ensure we can continue to operate after
shorter term shocks. In 2022, this was tested when
the avian flu crisis threatened the availability of eggs.
Our current processes were sufficiently robust to
enable us to operate without disruption through
a combination of supply chain management and
consideration of our recipes, to reduce the quantity
of eggs required. A formal assessment of resilience
against different climate scenarios will be undertaken
once our Roadmap is finalised. Operationally, we
are conscious of changes in consumer attitudes
and preferences, and we have introduced a wider
variety of plant-based and vegan friendly dishes.
27
Hostmore • Annual Report 2022
Strategic report
Risk Management
We have incorporated risk management processes
for climate-related risks (CRRs) into our overall risk
management process. These require functional
leaders to identify risks, including CRRs, and populate
their sections of the risk register with how the risk may
impact the Group. All risks are ranked using a matrix
approach, focusing on the likelihood and magnitude
of impact. The risk register includes action plans to
reduce, mitigate, manage, and monitor each risk,
its evolution, its actual and potential impacts on the
business, and our ability to address negative impacts.
This approach ensures the identification of relevant
CRRs for each of our functional areas by those closest
to the relevant CRR. We appreciate that due to the
emerging nature of this area, the initial identification of
relevant CRRs is more challenging and are exploring
further ways to address this.
The risk register is considered on a regular basis at
Executive Team meetings and at the quarterly Risk
and Compliance Forum. The attendees at these Risk
and Compliance Forum meetings include the CEO and
CFO, as well as senior members of our management
team, ensuring senior level oversight.
The Board also reviews the risk register on a
scheduled basis during the year. We ensure that
necessary focus is maintained on the most significant
risks, through the ranking process referred to above.
Metrics and Targets
We have set out our Scope 1 and Scope 2
greenhouse gas (“GHG”) emissions on page 22. We
do not currently disclose Scope 3 GHG emissions.
Although we do not currently provide disclosure
of Scope 3 GHG emissions, we believe this will
be useful information. As part of developing our
Roadmap, we are exploring the ability to collect,
process and disclose Scope 3 information.
Since we are currently focusing on developing a
robust strategy as part of our TCFD journey, we do
not currently have formalised metrics or targets. These
will be developed alongside our Roadmap towards a
net zero position by 2050. As an interim measure, we
have implemented the plans described in the Strategy
section above. Specifically, our Green Mission has
resulted in a reduction of electricity use as explained
on pages 20 and 21. Additionally, since June 2021,
through a collaboration with TrailApp and Ecologi,
1,588 trees have been planted on our behalf, resulting
in a CO2 reduction of 5.9 tonnes.
We are working on how best to link targets for team
members across the wider business with our existing
balanced scorecard appraisal system and bonus
scheme. This entrenches our commitment to identify,
respond, and manage our climate-related risks and
opportunities and maintain accountability throughout
the Group.
28
Hostmore • Annual Report 2022
Stakeholder
engagement
In compliance with our duties under s.172 of the Companies Act 2006, we take the interests of a wide set of our
stakeholders into consideration when making decisions about our strategy and operations.
The table below sets out our key stakeholder groups, how we engage with each, what we believe is important
to them, and how we have responded during the year. Further information on each can be found in the Strategic
and Governance Reports itemised on the pages shown.
Key stakeholder
How do we engage
with them?
What we believe is
important to them
Key metrics and
highlights for 2022
Shareholders
We rely on the
support of our
shareholders, so
we work to ensure
they understand our
strategy and goals
and can monitor
our performance
thorough our
corporate
governance
processes.
Our principal means of
engaging with shareholders
are:
•One-to-one meetings
•General meetings
•Annual report and financial
statements
•Half year and full year trading
and results announcements
•Financial
performance
•Dividends
•Share price
appreciation
•Strategy
•Business model
•ESG
•The Company’s first full year as
a listed company.
•Taking actions to grow the
Group’s business in line with
stated strategy and taking
measures to mitigate costs,
•The appointment of Julie
McEwan, as the new Interim
Chief Executive Officer (having
joined the Group in early 2022
as the new Chief Operating
Officer), and Rhiannon Scarlett,
as the new Chief Marketing
Officer.
•A strong improvement in
revenues (+23% over FY21)
with both volume and customer
spend per head increasing.
•Maintenance of EBITDA
at £31.1m despite very
challenging market conditions
during FY22.
•Continuing to implement the
Group’s ESG strategy, with
particular attention on supply
chain compliance (supplier
SEDEX compliance FY22:
89% (FY21: 84%)), energy
consumption through the “TGI
Fridays Green Mission” (see
tables on pages 20 and 21 for
FY22 and FY21 performance).
In 2022 implementing the
nutritional labelling of all the
Group’s dishes to comply with
new legislative requirements
and reviewing the calorie
content across the Group’s
menus working to Public Health
England’s guidelines.
Compliance with s.172 of the Companies Act 2006
29
Hostmore • Annual Report 2022
Strategic report
Key stakeholder
How do we engage
with them?
What we believe is
important to them
Key metrics and
highlights for 2022
Employees
We recognise our
employees as our
greatest asset: they
work hard to provide
a unique experience
for our customers
and our success is
achieved through
their hard work
and dedication.
We engage with our employees
on a regular basis, through
employee forums, learning and
development opportunities,
career development
programmes, employee
surveys, annual performance
and development reviews
and appraisal processes.
In addition, more informally
we operate social and
team building events.
We measure employee
engagement through our
annual employee engagement
survey, the results of
which are acted upon by
the Executive Team.
•An engaging
and rewarding
culture and work
environment
•Competitive
remuneration and
benefits package
•Opportunities for
learning and career
development
•The launch of the TGI Fridays
values and cultural behaviours
and the People Commitment.
•100% of tips are shared
between employees in our
restaurants.
•A bonus scheme implemented
for restaurant general
managers to reward success in
their own restaurant.
•The Company’s long-term
incentive plan enabling
employees from restaurant
manager upwards to share in
the Group’s success
•The launch of the new learning
management system for
employees.
•Over 168,000 hours of annual
training provided to employee
in our restaurants.
•The launch of the Ignite
Leadership Development
Programme and the Aspire
High Potential Development
Programme.
30
Hostmore • Annual Report 2022
Key stakeholder
How do we engage
with them?
What we believe is
important to them
Key metrics and
highlights for 2022
Customers
Our customers
are paramount to
the success of our
business and our
continuing growth.
We engage with our customers
when they visit our restaurants;
via the Group’s websites, apps
and social media channels;
and advertising, including
social media, print media,
sponsorship deals and
in-restaurant promotions.
We also undertake surveys
and market research to
better understand our
customers’ needs.
•To have an
enjoyable and
memorable dining
experience
•Quality and
relevance
•Value for money
•Health and safety
•ESG
•At 31 December 2022, our
Net Promoter Score for
63rd+1st of 38 (which is
classified as “Great”) and for
TGI Fridays of 30 (which is
classified as on the boundary
of “Good” and “Great”).
•Our monthly Guest Opinion
Score for TGI Fridays improved
for all our regions except one
over the course of the year
ended 31 December 2022. This
is an aggregated score using
Net Promoter Score, Facebook
ratings, Google ratings, Trip
Advisor ratings and data from
in-house guest feedback forms.
•We received 451k pieces of
feedback from TGI Fridays’
guests during 2022. Of these,
direct feedback channels
accounted for 93% of feedback
received and we received
an average rating of 80%.
•The promotion of inclusivity
through the launch of
TGI Fridays’ Show Your
Stripes media campaign.
•By year end, all of the Group’s
restaurants bar one had
achieved either a 5* food
hygiene rating in England
and Wales or a pass food
hygiene rating in Scotland*.
Just one restaurant was rated
4*, which subsequent to
the period ended 1 January
2023 was re-rated at 5*.
Stakeholder
engagement continued
* Scotland operates a pass or fail system,
rather than a system based on stars like
in England and Wales.
31
Hostmore • Annual Report 2022
Strategic report
Key stakeholder
How do we engage
with them?
What we believe is
important to them
Key metrics and
highlights for 2022
Franchisor
Our Franchisor
permits us to use
the TGI Fridays,
63rd+1st and
Fridays and Go
brands, together
with related
trademarks, designs
and intellectual
property relating to
the brands.
The Group’s
continued success
and ability to
compete depends
on the strength of
our brands.
We work with the
Franchisor to ensure
that the brands
and associated
intellectual property
rights are used in a
beneficial manner.
We have franchise
arrangements with the
Franchisor which reflect
the Group’s requirements
in relation to the TGI
Fridays, 63rd+1st and
Fridays and Go brands.
We participate in dialogue
with the Franchisor to discuss
key developments and ways
in which the Franchisor
may be able to assist us.
•Mutually beneficial
partnership
•Growth of our
business
•Collaborative
approach
•Fair payment terms
•All of the Group’s sales
channels operate under the
TGI Fridays, 63rd+1st or
Fridays and Go brand.
•Five new restaurants were
opened by the Group during
the year (three TGI Fridays,
one 63rd+1st and one
Fridays and Go). Taking into
account closures of loss
making restaurants (two TGI
Fridays and one 63rd+1st),
this resulted in a net increase
in the number of restaurants
operated by the Group to two.
32
Hostmore • Annual Report 2022
Key stakeholder
How do we engage
with them?
What we believe is
important to them
Key metrics and
highlights for 2022
Suppliers
We rely on
our suppliers,
distributors and
outsourcing partners
to provide critical
supplies and
services, in areas
such as food and
drink, maintenance,
marketing and IT.
We work with
our suppliers to
ensure beneficial,
sustainable
partnerships so that
our business can
continue to grow
and thrive.
We hold meetings with key
suppliers throughout the year,
to review their performance and
to address issues or concerns.
We are committed to paying
our suppliers in line with
agreed payment terms.
•Beneficial
partnerships
•Collaborative
approach
•Balanced
contractual terms
•Fair payment terms
•Growth of our
business
•£45.1m cost of sales spend
•£71.9m spend with suppliers,
in aggregate
Stakeholder
engagement continued
33
Hostmore • Annual Report 2022
Strategic report
Key stakeholder
How do we engage
with them?
What we believe is
important to them
Key metrics and
highlights for 2022
Local communities
We aim to ensure
that as many people
as possible can
benefit both from
our employment
opportunities and
making a difference
in our sector and
local communities.
We provide support for
our sector and local
communities through a
variety of initiatives, including
fundraising, sponsorship
and voluntarily providing
our time and expertise.
•Employment
opportunities
•Facilitating
contributions to
the charity
Hospitality Action
•Participation as an
active member of
the local community
•Employment opportunities
•Facilitating charitable
donations to Hospitality Action
•Hosting a lunch for Ukrainian
children refugees
•Sponsorship of men’s football
•Continued sponsorship
of Pride in London and
women’s football.
34
Hostmore • Annual Report 2022
How we
create value
Key performance indicators
The Hostmore Board of Directors monitors the Group’s progress against its strategic objectives and the
financial performance of the Group’s operations on a regular basis. Financial performance is assessed against
strategy, budgets and forecasts, while non-financial metrics help us to measure our overall performance.
Like-for-like sales
Like-for-like sales enables the performance of the Group to be measured on a consistent year-on-year basis.
The table below includes sites that were open for the entirety of the years under consideration for comparability.
0 50 100 150 200
YE Dec 2022
£189.1m
YE Dec 2021
£155.0m
EBITDA
EBITDA is calculated as earnings before interest, tax, depreciation, amortisation and impairment.
0 5 10 15 20 25 30 35
£31.1m
£34.5m
Free cash flow
Free cash flow is the cash flow from operating activities for the period, adjusted for working capital movements,
rental income from sub-leases, corporation tax and maintenance capex.
0 5 10 15 20 25 30 35
YE Dec 2022
£16.5m
YE Dec 2021
£31.0m
Net debt calculated in accordance with IFRS16
Net debt calculated in accordance with IFRS16 is the Group’s long-term borrowings (excluding issue costs) and
lease liabilities less cash and cash equivalents at each period end.
0 50 100 150 200
YE Dec 2022
(£176.3m)
YE Dec 2021
(£163.2m)
YE Dec 2022
YE Dec 2021
35
Hostmore • Annual Report 2022
Strategic report
Per cent cash conversion
Per cent cash conversion is calculated as free cash flow divided by EBITDA.
0 20 40 60 80 100
53%
90%
Return on capital employed (ROCE)
Return on capital employed is calculated as EBITDA divided by total assets less current liabilities.
0 5 10 15 20
17%
12%
-100 - 0
Needs improvement
Guest Opinion Score (GOS) by brand
Guest Opinion Score is a monthly aggregated score using Net Promoter Score, Facebook ratings, Google
ratings, Trip Advisor ratings and data from in-house guest feedback forms. The GOS improved in all TGI Fridays’
regions bar one during the period ended 1 January 2023.
0 - 30
Good
30 - 70
Great
70 - 100
Excellent
63rd+1st: 38 (FY21: 45)
TGI Fridays: 30 (FY21: 18)
Net Promoter Score (YTD)
Measuring how our customers value their experiences with us helps us to compare our year-on-year
performance and deliver brand growth.
Performance on 31 December 2022
YE Dec 2022
YE Dec 2021
YE Dec 2022
YE Dec 2021
36
Hostmore • Annual Report 2022
Chief Financial
Officer’s review
Alan Clark
Chief Financial Officer
The results for the period ended 1 January 2023 reflect the
impact of the substantial changes in the market, some of which
still continue. Revenue levels stabilised through the second
half of the year coupled with qualitative aspects of our offering
that have increased significantly. The Company’s business
plan for the 2023 financial period is focused on development
of the Group’s existing hospitality brands, underpinned by
quality, relevance, and simplicity. This is enhanced by an
omnichannel approach heading towards a single customer view
that informs, enhances and grows our customer proposition.
* Refer to note 6 to the financial statements. In the 53 week period ended 2 January 2022 exceptional costs have been increased by £965k
from £8,121k to £9,086k, reducing Group EBITDA and Group EBITDA FRS102 as previously reported, respectively from £35.4m and £14.0m
to £34.5m and £13.0m.
Trading Results
The Group’s trading results for the 52 week period ended 1 January 2023 are summarised below:
52 weeks ended
1 January
2023
* Restated
53 weeks ended 2 January
2022
Total revenue £195.7m £159.0m
Grossprofit £150.6m £127.7m
Group EBITDA (note 1) £31.1m £34.5m
Group EBITDA FRS102 £11.3m £13.0m
Operating(loss)/profit (£91.9m) £11.0m
Basic loss per share (77.8p) (1.3p)
Adjusted basic earnings per share (note 2) 3.6p 7.2p
Total assets £236.3m £349.0m
Total liabilities (£209.8m) (£225.0m)
Net debt IFRS16 (£176.3m) (£163.2m)
Net bank debt FRS102 (note 3) (£27.7m) (£12.2m)
Cashflowsfromoperatingactivities £28.8m £29.7m
Net cash used in investing activities (£10.2m) (£4.1m)
Freecashflow(note4) £16.5m £31.0m
Adjustedfreecashflow(note5) £23.3m £20.1m
Notes
1. Group EBITDA reflects the underlying trade of the overall business. It is calculated as statutory operating
(loss)/profit adjusted for depreciation, net interest and bank arrangement fees, impairment, amortisation,
loss on disposal of fixed assets and share based charges. Refer to page 38 for further details.
2. Adjusted basic earnings per share represents the net profit after tax before impairment and exceptional items,
divided by shares in the Company in issue.
3. Net bank debt FRS102 is borrowings from bank facilities, excluding the unamortised portion of loan
arrangement fees and leases, less cash and cash equivalents.
4. Free cash flow reflects the cash generated from operations less maintenance capital expenditures.
5. Adjusted free cash flow is free cash flow (note 4) adjusted for £6.8m of cash payments relating to listing of
the Company’s shares in 2021 which were settled in 2022.
37
Hostmore • Annual Report 2022
Strategic report
Financial results to 1 January 2023
The results reflect the impact of the substantial
changes in the market that have been evident during
the reporting period, some of which still continue.
These include:
• Inflationary pressures, which have directly
impacted the business at the basic cost of inputs,
including the cost of goods purchased and utilities
pricing, increasing at rates not experienced in
previous years;
• Weaker consumer demand, partly driven by the
inflationary effect that households are facing and
also the impact that increased interest rates are
having on consumer sentiment as households
seek to more closely manage their financial affairs;
• Operational dislocation, particularly during the first
half of the year, when the supply chain and labour
markets provided resourcing deficiencies, which
resulted in a reduced ability to trade normally or
only at a greater cost; and
• During the second half of the year, UK events
including the passing of the Queen and funeral in
September and the World Cup in November and
December impacted financial performance with
fluctuating customer visits throughout the period.
I am pleased that the qualitative aspects of our
product have increased significantly. With the
monthly Guest Opinion Score for TGI Fridays
increasing to 74 at the reporting date (December
2021: 68), and further to 80 at the end of the
March 2023 trading period, I am confident that
the loyal base of customers has been retained
whilst drawing in new customers to what is a
qualitative and competitively priced experience.
The Group took action to mitigate the market factors
affecting revenue through a programme of cost and
efficiency actions. These included the following:
• Cost mitigation measures during 2022:
Successfully hedging the price of our gas and
electricity for the duration of the period at
prices determined in September 2020 when
retail prices were much lower than current
levels. Such hedging, based on financial year
2019 volumes, has been completed without
the necessity of entering into new hedges
to benefit from the reduction in wholesale
prices since August 2022. Since the middle
of April 2023, a programme for entering into
new hedges has been commenced with the
intention of having 75% of both gas and electric
forecast volumes hedged by 30 June 2023.
• Rent reductions: Ongoing from the previous
financial period, the Group continued to
engage with its landlords to determine fair
treatment of obligations. £2.3m of concessions
contracted have been accounted for in the
current period or if enduring over longer
periods, over the term of the benefit.
• Government initiatives: This included benefits
from the introduction of a combination of
schemes made available to the hospitality
sector by the Government. Primarily these
involved a reduction from 20% to 12.5% on
output VAT on food sales until 31 March 2022,
providing an important financial stimulus to
the business; and secondly reduced business
rates and grants also until March 2022.
Cost mitigation measures in 2023
The Board completed a cost reduction exercise in Q1
2023, closing out parts from the previous business
plan that are now no longer being pursued. This has
removed £1.8m of fixed overheads on an annual
basis from the Group which are expected to have a
recurring benefit in future years.
Impairments recorded at 1 January 2023
We have assessed the carrying value of our property,
plant and equipment (“PPE”) and right of use assets
(“RoU assets”), and goodwill at the period end by
reference to the updated business plan and the
higher interest rates now prevailing. This exercise
has resulted in Hostmore recording impairments
of £31.2m against PPE and RoU assets and an
impairment of £70.9m against goodwill. Neither of
these adjustments have any impact on the operational
cash performance of the Group. The goodwill
impairment, by the nature of it being a non-reversible
one-off adjustment, has been accounted for as an
exceptional item while the PPE and RoU assets
impairments may reverse to the credit of the Group’s
earnings if trading conditions improve with resultant
increases in profitability.
38
Hostmore • Annual Report 2022
Chief Financial
Officer’s review continued
EBITDA for period ended 1 January 2023
The Group measured its business performance on
the FRS102 approach to lease accounting which is
consistent with prior years. On this basis, the Group
delivered EBITDA of £11.3m (2021: £13.0m) which
includes the impact of the matters referred to above.
On the basis of IFRS16, the Group delivered EBITDA
of £31.1m (2021: £34.5m) as reflected in these
financial statements. The basic loss per share,
reflecting the impact of the impairments referred to
above is (77.8p) (2021: (1.3p)), while the adjusted
basic earnings per share (being the loss after tax
before impairment and exceptional items) is 3.6p
(2021: 7.2p).
EBITDA
52 weeks
ended 1
January
2023
£’000
* Restated
53 weeks
ended 2
January
2022
£’000
Loss before tax (104,345) (2,549)
Depreciation 20,339 22,339
Net interest and bank
arrangement fees 12,478 13,597
Net impairment of property,
plant and equipment and
right of use assets 31,179 1,019
Impairment of goodwill 70,858 –
Share based payment charge 581 78
EBITDA under IFRS16
for the period 31,090 34,484
* Refer to note 6 to the financial statements. In the 53 week period
ended 2 January 2022 exceptional costs have been increased by
£965k from £8,121k to £9,086k, increasing the loss before tax as
previously reported from £1,584k to £2,549k.
EBITDA FRS102
52 weeks
ended 1
January
2023
£’000
* Restated
53 weeks
ended 2
January
2022
£’000
EBITDA under IFRS16
for the period 31,090 34,484
Less: Rent paid (19,931) (21,669)
Add: Sublease income 101 231
EBITDA under FRS102
for the period 11,260
13,046
* Refer to note 6 to the financial statements. In the 53 week period
ended 2 January 2022 exceptional costs have been increased by
£965k from £8,121k to £9,086k, decreasing EBITDA under IFRS16
from £35,449k to £34,484k.
Cash Flow and Net Debt
The Group’s consolidated statement of cash flows
and movement in net bank debt for the 52 weeks
ended 1 January 2023 is summarised below:
52 weeks
ended 1
January
2023
£’000
* Restated
53 weeks
ended 2
January
2022
£’000
Net cash from
operating activities 19,978 32,904
New restaurant openings and
purchaseofotherfixedassets (10,241) (4,075)
Net cash used in repayment
of bank loans and payment
of lease liabilities (32,726) (33,950)
Net decrease in cash in period (22,989) (5,121)
Net cash at start of period 32,080 37,201
Net cash at end of period 9,091 32,080
Gross bank debt at
start of period 44,300 65,800
Loans drawn 10,500 5,000
Loans repaid (18,000) (26,500)
Gross bank debt at
end of period
36,800 44,300
Net bank debt 27,709 12,220
The reduction in net cash between 2 January 2022
and 1 January 2023 reflects:
• New restaurant openings and other fixed asset
purchases totalling £10.2m;
• Payment of accrued listing costs from 2021 of
£6.8m;
• Settlement of pandemic period rent emanating
from concessions secured during the period of
£2.3m; and
• Final payment of VAT deferred under the
Government pandemic business incentives of
£0.8m.
To protect the business, capital expenditure was
limited to existing contractual commitments, with
the Group prioritising net debt reduction. New store
openings were TGI Fridays stores at Chelmsford,
Barnsley and Durham, a 63rd+1st store in Edinburgh
and the new-concept Fridays and Go store in Dundee.
39
Hostmore • Annual Report 2022
Strategic report
The settlement of the above items also reduced the
cash conversion ratio for the year, reducing it from
90% to 53%. This is expected to increase during
FY23.
In support of this debt reduction strategy, the
Group has obtained the agreement of the franchisor
to no longer be contractually obligated to open
new restaurants during the next two financial
years ending 31 December 2023 and 2024. This
is expected to have a materially positive impact
on overall debt reduction and provide the basis
for returns being commenced to shareholders.
Exceptional Items
Exceptional costs are those items that, by virtue
of their unusual nature or size, warrant separate
disclosure in the financial statements to fairly
assess the performance of the Group.
As referred to above, we have assessed the
carrying value of our goodwill at the period end by
reference to our updated business plan and the
higher interest rates now prevailing. This exercise
has resulted in an impairment charge of £70.9m
which is a non-cash charge in our Statement of
Comprehensive Income. The goodwill impairment is
a non-reversing item and is treated as exceptional.
52 weeks
ended 1
January
2023
£’000
* Restated
53 weeks
ended 2
January
2022
£’000
Impairment of Goodwill 70,858 -
Costs associated with the listing
of Hostmore’s shares on the
London Stock Exchange - 9,086
70,858 9,086
* Further to note 6 in the attached financial statements, in the 53
week period ended 2 January 2022 exceptional costs have been
increased by £965k from previously reported of £8,121k to £9,086k.
Tax
For the period ended 1 January 2023 we recorded
a corporation tax credit of £0.2m and a deferred tax
credit of £6.6m, making an overall tax credit of £6.8m
for the year.
Refinancing
On 28 April 2023, a subsidiary of the Company
signed a bank facility restatement agreement with its
lending banks. Under the terms of this agreement,
certain covenants in the previous facility agreement
have been amended to align with the Group’s two
year forward forecasts. In addition, the previous
requirement for the Group to maintain a minimum
cash balance of £12.5m has been reduced to £1.5m,
thereby enabling the Group to repay debt from
available cashflow. The previous facility comprised
a term loan of £29.3m and a revolving credit facility
of £30.0m. The latter has only been partly used by
the Group and, with the stated intention to defer
development capital expenditure for the next two
years, it has been reduced to £21.0m which will
reduce non-utilisation costs for the benefit of the
Group. The restated facility continues with the same
level of amortisation of £1.5m per quarter, with the
balance repayable at maturity at the end of the
extended facility on 1 January 2025.
I consider this to be a very positive outcome for
the Group. It will also stand the Group in a stronger
position as the Board continues to successfully
advance the recovery programme and digital
transformation referred to in further detail in the
Interim Chief Executive Officer’s Report on pages 14
to 17.
Going Concern
In considering the going concern basis of preparation
of the financial statements, the Directors took account
of significant elements across the business. These
included FY22 underlying free cash flow of £16.5m,
the cost reduction exercise completed in Q1 2023
which reduced fixed overheads on an annual basis by
£1.8m, banking covenants recently reset with lending
banks for the current term to 1 January 2025, the
recent agreement with the franchisor to defer all new
store opening obligations until FY25, and revenue,
adjusted for the variance in the VAT rate on food sales
between FY22 and FY23, is 2% greater than 2022
level in the first 16 weeks of FY23. This has been
underpinned by the successful implementation of
new revenue initiatives and improving Guest Opinion
Scores and Net Promoter Scores at TGI Fridays from
renewed focus on the guest experience.
40
Hostmore • Annual Report 2022
The Directors reviewed the Group’s forecasts and
underlying assumptions in detail and monitored
actual performance against forecast. They also
assessed the forecast deliverability of the Group’s
business plan and the strategies implemented by
the Executive Team to deliver forecast results in
the plan. This enabled the Directors to assess the
expected operating performance and cash availability
for the 15 months from April 2023 to July 2024. This
assessment also considered possible adverse effects,
including severe but plausible downside sensitivities
of trading and a worsening rate of profit conversion
over the forecast period. The Board maintains a tight
focus on the Group capital allocation policy and
expenses, such that both can be reduced further if
trading is reduced to the levels inferred in the severe
but plausible downside scenario. In that scenario,
if there was no corrective action by the Board, the
Group has forecast potential for covenant concerns
in the third quarter of 2023 and a restricted liquidity
position in the first quarter of 2024.
As referred to above, on 28 April 2023, the Group
completed an amendment to certain of the covenants
in the Group’s banking facility. The facility runs until
1 January 2025. As part of these negotiations, the
Group subsidiary that is the borrower under that
facility has undertaken to negotiate a refinancing
of the facility during 2023. This is to be undertaken
during Q3 2023, with the new facility planned to be
finalised in Q4 2023.
Accordingly, the Directors have continued to adopt
the going concern basis in the preparation of the
financial statements.
Viability Statement
In accordance with provision 31 of the UK Corporate
Governance Code (July 2018), the Directors have
assessed the viability of the Group over a three-year
period to December 2025. The Directors consider
that three years is the appropriate period over which
to evaluate the medium-term viability. It is also giving
greater emphasis to the short term trading conditions
which the wider hospitality sector faces.
The Company’s business plan for the 2023 financial
period is focused on development of the Group’s
existing hospitality brands, underpinned by quality,
relevance, and simplicity. At the heart of this is a
customer-centric approach, enhanced by harnessing
digital journeys and the data these provide as a key
enabler across all our customer-facing channels.
This is underpinned by an omnichannel approach
heading towards a single customer view that informs,
enhances and grows our customer proposition.
The business plan for the 2023 and 2024 financial
periods was approved by the Board in January 2023.
Strategically, the business plan reflects the forecast
financial performance of all 91 restaurants in the
Group on an individual monthly and annual basis as
well as on a consolidated monthly and annual basis.
It also reflects, from 2022, the results of opening five
new restaurants and the closing of three loss making
restaurants. Aligned with this, the Group obtained
agreement from the franchisor to no longer be
contractually obliged to open new restaurants during
the two financial years ending 31 December 2023
and 31 December 2024. Whilst the sector in which
Hostmore operates is facing external challenges,
this focus on the existing business and not being
required to commit capital and incur initial loss
making performance from new restaurant openings is
expected to have a positive impact on overall financial
performance. This is reflected in the business plan.
Specifically, the business plan reflects the 4D strategy
referred to in detail in the Interim Chief Executive
Officer’s Statement on pages 14 to 17. At the heart
of this is the Group’s ‘Dine-in’, ‘Delivery’ and ‘Drive
to’ operations, enhanced by a new and far more
encompassing ‘Digital’ underpin.
The business plan was drawn up in Q4 2022 by
reference to the then changed economic environment
in the UK arising from factors external to the Group.
These included, amongst others, increased interest
and inflation rates, the cost of living crisis and its
effect on the disposable incomes of customers, and
a decrease in the availability of staff and the term
of their retention. In addition, the effects of the risks
facing the Group and the management of these risks
by the Group as referred to on pages 42 to 46 were
reflected in the business plan.
The business plan reflects changes in the supply
chain as referred to on page 16 of the Interim Chief
Executive Officer’s Statement, where the Group has
incurred forward cost inflation across its core food
and drink supplies. The business plan also reflects the
financial effects of negotiations with landlords over the
relevant lease terms.
Chief Financial
Officer’s review continued
41
Hostmore • Annual Report 2022
Strategic report
As referred to above, on 28 April 2023, the Group
completed an amendment to certain of the covenants
in the Group’s banking facility. The facility runs until
1 January 2025. As part of these negotiations, the
Group subsidiary that is the borrower under that
facility has undertaken to negotiate a refinancing
of the facility during 2023. This is to be undertaken
during Q3 2023, with the new facility planned to be
finalised in Q4 2023.
The business plan includes the cost reduction
exercise that has been completed in Q1 2023,
reducing fixed overheads on an annual basis by
£1.8m. The business plan has recently been updated
to reflect the revised banking covenants for the
current term to 1 January 2025.
The business plan already includes measures
undertaken prior to the reporting date to protect
the business and restrict the quantum of negative
cash outflows. These include hedging of the utility
pricing mentioned above and improvements in the
management of payroll to improve efficiency at
restaurant level.
The business plan includes forecasts of expected
operating performance and cash availability for
the two years ending 31 December 2023 and
expectations for the year ending 31 December
2024. It also considers possible adverse effects,
including severe but plausible downside sensitivities
of trading and a worsening rate of profit conversion
over the forecast period and reflecting these in the
cash flow projections and future expectations. This
downside scenario includes assumptions for a lower
level of overall demand in FY23 regardless of the
opening of the 5 new stores in FY22, an increased
store payroll cost of 2%, and a materially slower
growth expectation from the stores opened in
FY22. Various mitigations, which include a further
costs rationalisation that is in the process of being
implemented, have not been included into the model.
The business plan and related forecasts show that
the Group has sufficient liquidity from its restated
facilities to finance its operations for the next fifteen
months to the end of July 2024, including the requisite
compliance by the Group with its banking covenants
and debt amortisation as it comes due under those
facilities. In the severe but plausible downside case
referred to above, the Group has forecast potential
covenant concerns in the third quarter of 2023 and a
restricted liquidity position in the first quarter of 2024.
In such a downside scenario without corrective action
by the Board, there would be material uncertainty
about the Group’s ability to continue as a going
concern. This in turn might affect the ability of the
Group to continue realising its assets and discharging
its liabilities in the normal course of business. The
Board maintains a tight focus on the Group capital
allocation policy, such that capital expenditure can
be reduced further if trading is reduced to the levels
inferred in the severe but plausible downside scenario.
Having already successfully implemented a range
of revenue initiatives and a substantial reduction
in central costs, the Board is confident that these
actions will create the basis for an improvement in
cash generation as the trading environment improves.
The Directors are confident that the business will
continue to trade for a period of at least 15 months
following the signing of these financial statements
and therefore that it is appropriate to prepare these
financial statements on a going concern basis. The
Directors have continued to adopt the going concern
basis in preparing these financial statements, and
the financial statements do not include adjustments
to the carrying amounts or classification of assets
and liabilities that would result if the Group
was unable to continue as a going concern.
After careful consideration of the forecasts and the
risks facing the business, including those presented
within the severe but plausible downside sensitivities
of trading and a worsening rate of profit conversion,
together with mitigating actions that could be
taken by the Group to offset the impact of such
risks, the Board confirms that it has a reasonable
expectation that the Group will be able to continue
in operation and meet its liabilities as they fall
due over the three-year period of assessment.
Conclusion
The year under review has been challenging for
the hospitality sector. Conditions remain which will
continue to test the resilience of all participants as
macro-economic aspects continue to have a material
impact on short-term trading. Nevertheless, having
already successfully implemented a range of revenue
initiatives and a substantial reduction in central
costs, I am confident that these actions will protect
the Group from challenges whilst also creating the
basis for a substantial improvement in profitability
as the trading environment improves. The cash
preservation to be generated by the reduction in our
franchisor development agreement obligations will
also deliver a meaningful reduction in net debt.
Alan Clark
28 April 2023
42
Hostmore • Annual Report 2022
Risk management
Risk
The Board carries out robust assessments of the principal risks facing the Group, including emerging risks,
and those that may adversely affect its business model, future performance and liquidity.
The impact of the COVID-19 pandemic and the economic climate
The COVID-19 pandemic and the ensuing adverse effects of the UK economic climate, particularly the cost of
living crisis, have impacted the Group’s performance and strategy during the year. They have therefore been
addressed through many areas of the business, as well as our strategy and risk management processes.
The following table outlines the principal risks faced by the Group, including the impact of the COVID-19
pandemic and the adverse effects of the UK economic climate, and outlines the impact of each on the
Group and steps the Board has taken to mitigate each risk.
Change during year:
No change in risk
Decrease in risk Increase in risk
Risk summary Impact Our response
Brand usage Change during the year:
•Loss of ability to
use the TGI Fridays,
63rd+1st and/or Fridays
and Go brands
•Brand perception and
reputational risk
>> Impact on our business
and ability to deliver
our growth plans thus
potentially affecting some
of our financial and non-
financial KPIs
The Group’s business is
dependent on its ability to
use the TGI Fridays, 63rd+1st
and Fridays and Go brands,
which it uses under long term
Franchise Agreements (in the
case of the TGI Fridays and
Fridays and Go brands) and a
Licence Agreement (in the case
of the 63rd+1st brands) entered
into with the Franchisor.
The Group relies on the
intellectual property rights owned
by the Franchisor and relies on it
to protect such rights.
The Group’s reputation and
the quality of the TGI Fridays,
63rd+1st and Fridays and
Go brands are critical to its
business and success and
the Group’s business could
be materially and adversely
affected if the perception of
the brands is damaged.
The Board seeks to maintain a strong
business relationship with the Franchisor.
The Franchisor’s business model depends
on the strength of its brands and it,
therefore, operates and adheres to, and
requires its franchisees to operate and
adhere to, systems and standards which
seek to safeguard its brands. The Group
adopts and maintains these systems and
standards, and, in certain areas goes
beyond these contractual standards.
The Board monitors the financial
strength of the Franchisor.
43
Hostmore • Annual Report 2022
Strategic report
Risk summary Impact Our response
COVID-19 Change during the year:
•In the early part of 2022,
the COVID-19 virus had
a significant impact on
the Group, its staff and its
customers. This restricted
customer demand and
increased costs in the
supply chain, as well
as affecting the wider
economy.
>> Impact on sales, costs,
availability of staff and
supplies
Another lockdown or pandemic
could have a material effect on the
business if the UK Government
required restaurants to close
again or if the UK Government
reintroduced safety measures,
such as social distancing.
The Group is focused on ensuring the
safety and wellbeing of the Group’s
customers and its employees.
The Group took measures to reduce costs.
The Group accessed Government support
and negotiated landlord rent reductions.
The Group ensured it was able to reopen
rapidly when the environment enabled this.
The Group’s strategy has been
adapted to ensure the Group is in a
stronger position to confront similar
restrictions, as well as promoting delivery
and click and collect services.
UK economic climate Change during the year:
•Change in economic
conditions, in particular
the cost of living crisis,
COVID-19 and Brexit
related restrictions
•Increases in interest
rates/inflation
•Food inflation, and
rising transport and
energy costs
•A decrease in the
availability of staff
•A decrease in consumer
disposable income
and spending
•A prolonged period of
uncertainty due to the
cost of living crisis,
COVID-19 pandemic and
Brexit related restrictions
>> Impact on sales and
ability to deliver our growth
plans thus affecting some
of our financial and non-
financial KPIs
The Group’s business is based
exclusively in the UK, save for
one restaurant in Jersey, and so
is almost exclusively exposed
to UK economic conditions
and consumer confidence.
Leisure activities may be affected
by the performance of the UK
economy, the level of consumer
disposable income and customer
confidence to meet in social
settings. These factors may
continue to be impacted upon by
the cost of living crisis, COVID-19
and Brexit related restrictions,
as well as other matters.
As long as our restaurants are able to open,
the Board believes that dining out should
withstand a short-term economic downturn.
The Group is adopting a multi-channel
offering, which enables the Group to earn
revenue through additional routes.
The Group regularly reviews its offering
including its value proposition and
the quality of its venues to enhance
the customer experience.
A variety of measures have been taken in
relation to the adverse economic climate
to try and ensure that cost increases are
mitigated, whilst continuing to offer an
attractive proposition to customers.
A wide range of measures were
implemented across our restaurants
to make them COVID-19 secure and
to provide a safe environment for
stakeholders. These measures were
regularly updated as the landscape in
relation to COVID-19 has evolved.
44
Hostmore • Annual Report 2022
Risk summary Impact Our response
Competition risk Change during the year:
•Loss of sales
•A decrease in profitability
>> Impact on sales and
profit
The Group faces competition
from other market participants.
The competition may result in
the Group losing custom to such
other participants or reducing
its prices. A loss of custom or
reduction in prices impacts on
the Group’s revenues and
profitability.
The Group ensures that it has a compelling
offering, which is attractive relative to its
competitor set. The offering is refreshed
periodically and backed up by appropriate
marketing to ensure that it retains its appeal.
The Group operates a loyalty programme to
ensure that repeat custom is rewarded.
Operational risk Change during the year:
•Deterioration of
assets over time
•Loss of key personnel
or an inability to attract
appropriate personnel
>> Impact on sales, costs
and customer experience
The Group’s restaurants have
high footfall and high usage,
in particular at peak times.
There is a risk that without the
right level of ongoing investment
or if the Group ceased to
be able to attract sufficient
skilled staff that the quality
of the customer experience
would decline, impacting the
customer experience and
likelihood of return visits.
The Group ensures that it has an ongoing
maintenance and refurbishment programme
across its restaurants.
The Group is committed to fairness in the
way that it pays all employees in relation to
their skills, experience and performance.
The Group has learning and development
programmes in place to enhance staff
capabilities and to promote staff retention.
Regulatory changes Change during the year:
•The introduction of new
laws and/or regulations
could adversely impact
the Group’s business
•The Group could fail to
obtain required regulatory
approvals or licences.
>> Impact on sales, costs
and reputation
The introduction of new laws or
regulations which run contrary
to the Group’s strategy could
have a significant impact on our
strategic objectives. This might
result in damage to our brands,
reputational loss, revocation
of licences, and inability to
acquire or build new sites.
The Board regularly considers legal,
risk and compliance issues affecting
the Group. Where required, the Group
obtains external specialist advice to
assess, scope and plan our responses
to changes in laws or regulations. In
addition to complying with applicable laws
and regulations, consideration is taken
to ensure that the Group continues to
behave in a socially responsible manner.
Risk management continued
45
Hostmore • Annual Report 2022
Strategic report
Risk summary Impact Our response
Business interruption Change during the year:
•Risk of cyber- attack
•Failure or unavailability
of operational or IT
infrastructure
•GDPR risk
>> Impact on sales, costs
and reputation
A major IT incident could impact
the Group’s ability to keep
trading. Changing preferences
mean that increasingly customers
book online, which increases
this risk. There has also been
an increase in the level of high-
profile cyber-attacks in recent
years, including on providers of IT
services. This increases the risk
that business information could
be accessed by third parties.
The Executive Team manages these
risks by maintaining and testing business
continuity plans and establishing remote
IT disaster recovery capabilities. Cyber-
security is of great importance to the
Group. The Group adopts a multi-faceted
approach to protection through internal
and external sources. The Executive
Team also regularly reviews the level of
monitoring and threat protection systems
that are in place and enhances these
when increases might be warranted
The providers of IT solutions to the
Group are vetted and the Group
carries out penetration testing and
vulnerability scans on a regular basis.
Key supplier issues Change during the year:
•Limitations and/or issues
faced by the Group’s
key suppliers, including
supplier failure.
>>Impact on sales, costs
and customer experience
The Group has a number of
key suppliers that provide its
food and beverage products.
Limitations and/or issues faced
by these suppliers, such as
driver, employee, goods or fuel
shortages, escalating costs,
union activity and/or capacity
constraints, could impact
the Group’s ability to offer its
customers the level of experience
they would wish. A number of
these risks materialised in the
period ended 1 January 2023,
including, the effects of the
Covid-19 pandemic, the war in
Ukraine, the cost of living crisis
and industrial action. This risk
has increased during the year.
Meetings are held between the Group and its
key suppliers to discuss operational issues
and mitigating actions. The Group requires
certain of its food and beverage suppliers
to adhere to specific KPIs and, whilst failure
may lead to short-term disruption, alternative
suppliers could be introduced at short notice.
The Group also seeks to take mitigating
actions, itself, such as ensuring that
it has adequate stock levels and
transferring stock between restaurants.
46
Hostmore • Annual Report 2022
Risk summary Impact Our response
Operational – allergens Change during the year:
•Incidents related
to allergies to food
products offered,
especially when there are
changes to the menu.
>> Impact on sales, costs
and reputation
There have been a number of
high-profile incidents across
the restaurant sector related to
allergens in food products. The
incidents have arisen due to
inadequate awareness, training,
communication and flagging of
allergen items included in menus.
The Group reviews all menus and menu
changes for allergen-related products and
wording is included on its menus to reflect
these items.
We have robust assured advice from our
primary authority partner in place for allergen
management process and procedures which
translates into comprehensive operating
practices in our restaurants to manage this
risk and ensure we serve our guests safely.
Allergen awareness is part of the staff training
programme. In addition, an online allergen
tool is available on the TGI Fridays and
63rd+1st websites so that customers can
ascertain which items on the relevant menu
they are able to safely consume.
Risk management continued
47
Hostmore • Annual Report 2022
Strategic report
Non-financial
information statement
The Group complies with the Non-Financial Reporting requirements contained in sections 414CA and 414CB of
the Companies Act 2006. The below table outlines the Group’s position on non-financial matters and provides
signposts to where the information is included in this report.
Reporting requirement
Policies and standards which
govern the Group’s approach
Additional information and risk management
Description of business
model
•n/a •See:
— Business Model section of the Strategic
Report (page 4)
— Non-Financial KPIs in the Strategic Report
(page 35)
— Stakeholder Engagement section of the
Strategic Report (pages 28 to 33);
— Environmental, Social and Governance
section of the Strategic Report (page 18);
— Board activities in the Corporate Governance
Report (pages 58 and 59); and
— Audit and Risk Committee report
in the Corporate Governance
Report (pages 65 to 68).
Environmental •Supplier Information Pack
provided to all food and drinks
suppliers (which contains
multiple Group policies
which the relevant supplier is
expected to comply with)
•See Environmental, Social and Governance
section of the Strategic Report (pages 18 to 27)
Employees •Equal Opportunities Policy
•Flexible Working Policy
•Whistleblowing Policy
•See:
— Environmental, Social and Governance section
of the Strategic Report (page 19); and
— Section 172 Statement in the
Strategic Report (pages 28 to 33)
— Non-Financial Information Statement (page 48)
Human rights •Modern Slavery and Human
Trafficking Policy
•See Environmental, Social and Governance
section of the Strategic Report (page 19)
Social matters •Modern Slavery and Human
Trafficking Policy
•See Environmental, Social and Governance
section of the Strategic Report (page 18)
Anti-corruption
and bribery
•Anti-Bribery and Corruption
Policy (which includes
hospitality and gifts provisions)
•Conflicts of Interest Policy
•See Chairman’s governance introduction in
the Corporate Governance Report (page 53)
Principal risks
and impact
•Policies and procedures at
Board, management and
operational level controlling and
managing risk
•See Risk Management section of the
Strategic Report (pages 42 to 46)
48
Hostmore • Annual Report 2022
Across the Group, policies are in place to ensure consistent governance on a range of issues. For the purposes
of the Non-Financial Reporting requirements, these include, but are not limited to:
People
The Group understands that its behaviour, operations
and how it treats employees all have an impact on the
environment and society. It recognises the importance
of health and safety and the positive benefits to the
Group. The Group has a commitment to:
• behave ethically;
• comply with relevant laws and regulations; and
• do the right thing.
Disclosure concerning employment
of disabled persons
We give full and fair consideration to applications for
employment by the Group made by disabled persons,
having regard to their particular aptitudes and abilities.
We are also committed to continuing employment of,
and for arranging appropriate training for, employees
of the Group who have become disabled persons
during the period they are employed by the Group.
Training, development and promotion opportunities
are provided for all employees.
Human rights
The Group has a Modern Slavery and Human
Trafficking Policy which applies to both suppliers
and employees. The Group implements and
enforces effective systems and controls to ensure
modern slavery is not taking place anywhere in its
own business or in its supply chains. The Group’s
Procurement team requires all food and drink
suppliers to be registered with SEDEX. SEDEX is a
virtual platform for companies to share their ethical
data including audit results on legislation requirements
on modern slavery, human trafficking, labour
standards, health and safety and business ethics. The
Group publishes its Modern Slavery Act Transparency
Statement annually and this can be viewed at
https://www.hostmoregroup.com/modern-slavery-
statement.
Data protection
The Group is committed to respecting and protecting
privacy and security of personal information. The
Group’s data protection policies govern how it
collects, handles, stores, shares, uses and disposes
of information about people, whether they are
customers, employees or people in the Group’s
supply chain. The data protection policies are a key
element of corporate governance within the Group.
Anti-corruption and anti-bribery
The Group has an Anti-Bribery and Anti-Corruption
Policy and a Conflict of Interest Policy, each of
which incorporate the Group’s key principles and
standards that govern business conduct towards
key stakeholder groups. The Anti-Bribery and
Anti-Corruption Policy includes clear restrictions
and processes on giving and accepting gifts and
hospitality from third parties.
Whistleblowing
The Group’s Whistleblowing Policy is supported
by an external, confidential reporting hotline which
enables employees to raise concerns in confidence.
Any reported issues will be reported to the full Board
and handled in the first instance by the Audit and
Risk Committee and, where appropriate, remedial
actions taken. A communications campaign was
introduced during the period ended 1 January 2023
to all employees to further raise awareness of the
whistleblowing hotline and its purpose.
Environmental policy
The Group has multiple initiatives which it has
implemented across its entire estate, aimed at
reducing the Group’s environmental footprint. See
pages 18 to 21 for examples of these initiatives.
Tax strategy
The Group is committed to acting with integrity and
transparency in all tax matters. The Group undertakes
tax management only where it supports genuine
commercial activity and in doing so is committed to
remaining compliant with all relevant tax laws and
practices. Where it is appropriate to do so, the Group
seeks external advice on tax matters.
Dividend policy
The Company’s current dividend policy is to invest free
cash into the business and so enhance shareholder
value. It is the intention of the Board that Hostmore
will commence dividend payments when it is prudent
to do so. This is expected to be once the Group’s
net debt position has been reduced and after taking
account of macro-economic and geopolitical matters.
The Strategic Report on pages 2 to 48 was approved by
the Board of Directors and signed on its behalf by:
Gavin Manson
28 April 2023
49
Hostmore • Annual Report 2022
Strategic report
Board of Directors
Chairman’s Governance Introduction
Corporate Governance Report
Report of the Audit and Risk Committee
Report of the Nominations Committee
Annual Statement from the Chair of the
Remuneration Committee
Remuneration Policy
Annual Report on Remuneration
Directors’ Report
Statement of Directors’ Responsibilities in
respect of the Financial Statements
50
53
54
65
69
72
76
89
98
105
Governance
report
50
Hostmore • Annual Report 2022
Board of Directors
Gavin Manson
(Non-Executive Chairman)
Date joined Hostmore plc: 14 April 2021
Career and experience
Gavin was initially appointed as a Non-Executive Director of the Company
in 2021 and was subsequently appointed as Chairman in 2022. Gavin is an
Executive Director of Unbound Group PLC (formerly Electra Private Equity
PLC), having previously been a Non-Executive Director. Gavin is a Director
of Meallmore Limited. Prior to Electra Private Equity PLC being renamed as
Unbound Group PLC, Gavin held the role of Chief Financial and Operating
Officer at Electra, which Gavin joined in 2016. TGI Fridays was a portfolio
business of Electra and Gavin was a Director of the then holding company
of TGI Fridays. Prior to Electra, Gavin was the Finance Director of Thomas
Cook Group’s tour operator and hotels and resorts division for three years.
He was the Finance Director at Premier Farnell Plc, the FTSE 250 international
electronic component distribution and software business, for five years. Prior
to that, Gavin worked at Merck GmbH group as the Finance Director for
Seven Seas Ltd before becoming Finance Director of the Merck Consumer
Healthcare division in UK and Ireland, and latterly leading the consolidation
of the back-office activities of Merck’s four operating divisions across the
UK and Ireland. Gavin began his career with KPMG and is a chartered
accountant.
Gavin is Chair of the Disclosure Committee.
External appointments:
Director of each of Unbound Group PLC, Larbeg Limited and Meallmore
Limited.
Alan Clark
(Chief Financial Officer)
Date joined Hostmore plc: 8 September 2021
Career and experience
Alan was appointed Chief Financial Officer of the Company in 2021. Alan
joined Thursdays (UK) Limited (trading as TGI Fridays) as Chief Finance
Officer in March 2020. Alan has spent the majority of his career in the hotel
industry in financial leadership roles, with national and international exposure
across boutique and all-inclusive luxury brands, and has experience in driving
customer engagement from a financial and operational perspective. Alan
joined TGI Fridays from his previous role as Chief Financial Officer at D&D
London. Alan spent several years abroad, serving as Chief Financial Officer
at the publicly listed Hongkong and Shanghai Hotels from 2014 to 2015, and
then at Sandals Resorts in Jamaica from 2015 to 2018. Prior to that, he was
Finance Director at Rocco Forte Hotels and Malmaison and Hotel du Vin for
four years each, respectively, and Deputy VP Finance, Europe, at Le Méridien
Hotels & Resorts.
Alan is a member of the Disclosure Committee.
External appointments:
None.
51
Hostmore • Annual Report 2022
Governance report
David Lis
(Senior Independent Director)
Date joined Hostmore plc: 18 August 2021
Career and experience
David was appointed Senior Independent Director of the Company in 2021.
David was the Senior Independent Director of Electra Private Equity PLC from
2018 to 2021, after joining the company as a Director in May 2016. David is
the Chairman of Wild Life Group Limited, the Senior Non-Executive Director
of Melrose Industries plc and a Non-Executive Director of Dowgate Capital
Limited, and has previously held non-executive director positions at BCA
Marketplace plc and the Multifamily Housing REIT plc. David has held several
senior executive roles at Aviva Investors, including Chief Investment Officer
of Equities and Multi Assets. Prior to Aviva, David spent a few years as Head
of Investor Relations at Ludgate Communications. Earlier in his career, he
co-founded Windsor Investment Management, and spent a number of years
as a fund manager at both Morgan Grenfell and J Rothschild Investment
Management.
David is Chair of the Remuneration Committee, a member of the Audit and
Risk Committee and a member of the Nominations Committee.
External appointments:
Director of each of Melrose Industries PLC, Dowgate Capital Limited, Wild
Life Group Limited and York Minster Fund Limited, and Member of the
Finance Committee York Minster Fund.
Andrew Blurton
(Non-Executive Director)
Date joined Hostmore plc: 17 August 2021
Career and experience
Andrew was appointed an independent Non-Executive Director of the
Company in 2021. Andrew is currently the Finance Director of Advanced
Living Limited. Andrew also holds positions as the Chair of the Governing
Body of Longacre School in Surrey, as well as the Chair of the Liberty Defined
Benefit Pension Scheme. Previously, Andrew was the Finance Director
of MWB Group Plc, the Chief Financial Officer of Landmark Limited and
the Chairman of Manroy Plc. Andrew has been a Fellow of the Institute of
Chartered Accountants in England & Wales for 39years, having previously
qualified as a Chartered Accountant in 1975.
Andrew is Chair of the Audit and Risk Committee, a member of the
Nominations Committee, a member of the Remuneration Committee and a
member of the Disclosure Committee.
External appointments:
Director of each of Advanced Living Limited, Advanced Living (Kingston)
Limited, Andrew Blurton Consultancy Limited and RG Property Asset
Management Limited, Trustee of Liberty Retail Pension Scheme, and Chair of
the Governing Body of Longacre School.
52
Hostmore • Annual Report 2022
Board of Directors
continued
Stephen Welker
(Non-Executive Director)
Date joined Hostmore plc: 15 August 2022
Career and experience
Stephen was appointed a Non-Executive Director in 2022. He is currently
a Partner in Sherborne Investors Management LP and leads the firm’s
research function as the Director of Research. Stephen was previously
a Non-Executive Director of Electra Private Equity PLC from July 2019
to November 2021 and was a Director of Mondays (Topco) Limited, the
then-holding company of the TGI Fridays trading business, from June 2017 to
November 2021. He was an advisor to F&C Asset Management plc from 2011
to 2013. Prior to joining Sherborne Investors, Stephen worked at Morgan
Stanley on both real estate investment banking and principal investment
transactions.
Stephen is Chair of the Nominations Committee and a member of the
Disclosure Committee.
External Appointments:
Partner in Sherborne Investors Management LP
53
Hostmore • Annual Report 2022
Chairman’s Governance
Introduction
Governance report
Dear Shareholder,
On behalf of the Board, I am pleased to present our
Corporate Governance Report for the 52-week period
ended 1 January 2023.
The Hostmore Board sees corporate governance as
an integral part of its business strategy. By having
an appropriate governance framework, the Board
has set out clearly the standards that it expects.
It has also promoted a culture of accountability,
transparency and ‘speaking up’ that applies across
its brands, which, in turn, provides a foundation for
building shareholder and stakeholder confidence in
the Company.
Hostmore’s compliance with good corporate
governance is overseen by the Board and the Board
Committees, who provide effective stewardship of the
Company.
During 2022, the Board maintained its commitment
to the highest standards of corporate governance.
It has complied with the UK Corporate Governance
Code, save in relation to the exceptions noted in the
Corporate Governance Report below.
This year has been one of further embedding
governance structures and policies and operating
as a listed company, which I cover in more detail
on the subsequent pages of my report. Hostmore’s
governance framework principally comprises of
the Board and the Board Committees, policies and
procedures, the promotion and adoption of a culture
of accountability, transparency and ‘speaking up’,
communications, training provided to all employees,
whistleblowing channels and related reporting.
Three areas of key focus are addressed within the
Company’s governance framework as follows:
1. Business Ethics and Conduct – Hostmore’s
moral and ethical beliefs guide the values,
behaviours and decisions of its businesses – and
encompass the individuals working within the
businesses.
2. Risk Management – Hostmore’s businesses
have defined management systems within each
organisation, which are reviewed on a regular
basis to ensure integrity and legal compliance.
3. Anti-Bribery and Corruption – Hostmore
operates a zero-tolerance approach to bribery and
corruption. Hostmore’s governance framework,
including its Anti-Bribery and Corruption Policy,
seeks to minimise the risk of bribery and
corruption occurring within its businesses.
I hope you find this report useful. I would like to
encourage you to attend our Annual General Meeting
(“AGM”) which will be held on 7June 2023. It is
intended that the meeting will be held in person at the
offices of finnCap Limited, One Bartholomew Close,
London, EC1A 7BL. Further details will be set out in
the Notice of Annual General Meeting which will be
distributed to shareholders and made available on the
Company’s website.
In the meantime, the Board would like to thank
our shareholders for their continued support. The
Non-Executive Directors and I remain available to
engage with shareholders as we continue our journey
as a listed company.
Gavin Manson
Chairman
28 April 2023
54
Hostmore • Annual Report 2022
Corporate Governance Report
UK Corporate Governance Code – Compliance Statement
The Board is committed to the highest standards of corporate governance. The UK Corporate Governance
Code applied in the Company for the 52-week period ended 1 January 2023. The Company has complied and
intends to comply with the UK Corporate Governance Code, save in relation to the following provisions which
are explained in this report:
(i) Provisions 9 and 20 relating to the independence and appointment process for the Chairman of the Board,
and the open advertising and/or external search consultants for chair and non-executive appointments,
respectively;
(ii) Provision 11 relating to the composition of the Board having at least half of its members, excluding the
chairman, being independent non-executives;
(iii) Provision 24 relating to the composition of the Audit and Risk Committee; and
(iv) Provision 32 relating to the composition of the Remuneration Committee.
UK
Corporate
Governance
Provision Explanation for non-compliance
9 & 20 Provision 9 recommends that the chair on appointment should be independent within the meaning of the UK
Corporate Governance Code.
Neil Johnson was Chairman of the Board from October 2021 until May 2022, when he retired from the Board
at the end of the 2022 AGM. Gavin Manson stepped up into the role of Chairman of the Board at the end of
the 2022 AGM and will be retiring as Chairman and a Non-Executive Director at the end of the Company’s
Annual General Meeting on 7June 2023 (the “2023 AGM”). Subject to being elected as a Director at the
2023 AGM, Stephen Welker will step up into the role of Chairman in his place.
Neil, Gavin and Stephen are all deemed to be non-independent, within the meaning of the UK Corporate
Governance Code, due to their previous connections to Electra Private Equity PLC (now renamed Unbound
Group PLC) which the Company was demerged from, where they held senior positions of Chairman, Chief
Financial and Operating Officer and Non-Executive Director, respectively. Additionally, Stephen is currently
a significant shareholder in the Company and also a Partner in Sherborne Investors Management LP which
used to hold an interest in the Company.
The Board saw continuity of stewardship as being a particularly important factor with each appointment,
as well as their wide experience and knowledge of the Company. Gavin has brought broad commercial and
governance experience, and Stephen brings unique strategic insight to the business. This, combined with
his financial, commercial and investor relations expertise, will be invaluable as we grow and strengthen the
business.
Consequently, although recommended by Provision 20 of the UK Corporate Governance Code, neither open
advertising nor an external search consultancy were used for the appointment of the role of the Chairman in
each case.
11 Provision 11 recommends that at least half of the board of directors, excluding the chair, should
comprise non-executive directors determined by the board of directors to be independent and free from
circumstances which may impair, or could appear to impair, the director’s independence.
At the date of this report, the Board consists of four Non-Executive Directors (including the non-executive
Chairman) and one Executive Director. The Company regards David Lis and Andrew Blurton as independent
non-executive directors within the meaning of the UK Corporate Governance Code and free from any
circumstances that could materially interfere with the exercise of their independent judgement. Following
Louise Stonier’s and Jane Bednall’s departures from the Board, the Company did not comply with this
recommendation for approximately four weeks until Robert B. Cook departed the Board on 9January 2023.
55
Hostmore • Annual Report 2022
Governance report
UK
Corporate
Governance
Provision Explanation for non-compliance
In assembling the Board, an assessment of David Lis’s independence was performed and it was determined
he was independent with a particular emphasis on providing insight as an experienced institutional investor.
David Lis is the Senior Independent Director of the Company. As a result of the departure from the Board of
Louise, Jane and Robert, the Company is looking to appoint two new independent Non-Executive Directors
and a permanent Chief Executive Officer, who will also be an Executive Director of the Company, to the
Board. This will ensure good governance and that the recommendation of the UK Corporate Governance
Code with regards to the balance of the Board is complied with.
24 Provision 24 recommends that the board of directors should establish an audit committee of independent
non-executive directors with a minimum membership of three, or in the case of smaller companies, two.
The Company qualifies as a “smaller company”. The committee as a whole should also have competence
relevant to the sector in which the Company operates.
Gavin Manson, although not being an independent Non-Executive Director for the reasons referred to above,
sat on the Company’s Audit and Risk Committee until he was appointed Chairman of the Board at the 2022
AGM in May 2022 at which point he stepped down from the Committee. From 27May 2022 onwards, the
Company has therefore complied with the recommendation of the UK Corporate Governance Code that all
members of the Audit and Risk Committee be independent.
32 Provision 32 recommends that the board of directors should establish a remuneration committee of
independent non-executive directors with a minimum membership of three or, in the case, of smaller
companies, two. The Company qualifies as a “smaller company”. The chair of such committee should have
previously served on a remuneration committee for at least 12 months.
Before she resigned from the Board for reasons external to Hostmore, Louise Stonier was the Chair of the
Remuneration Committee. Louise had previously been extensively involved with the remuneration committee
of Pets at Home Group PLC as Chief People and Culture Officer and previously as Group Legal Director and
Company Secretary. The Company was satisfied that Louise had sufficient relevant experience to perform
this role, although she had not previously served on a remuneration committee for a period of at least
12months. David Lis was appointed as Louise’s successor as Chair of the Remuneration Committee and he
has previously served on a remuneration committee for a period of at least 12 months.
Gavin Manson, although not being an independent Non-Executive Director for the reasons referred to above,
sat on the Company’s Remuneration Committee until he was appointed Chairman of the Board at the 2022
AGM in May 2022, at which point he stepped down from the Committee. From 27May 2022, the Company
has therefore complied with the recommendation of the UK Corporate Governance Code that all members
of the Remuneration Committee be independent.
56
Hostmore • Annual Report 2022
Corporate Governance Report
continued
Governance structure
Board
In accordance with the UK Corporate Governance
Code, the role of the Board is to promote the long-
term sustainable success of the Company, generate
value for shareholders and contribute to wider society.
Role of the Board and how it
operates
The Board’s role is to provide overall leadership,
setting the Group’s strategy, purpose, value and
culture, and supporting the Executive Directors in
the delivery of that strategy. The Board’s role is to
promote the long-term sustainable success of the
Company, and it does so by establishing and aligning
itself with the culture and purpose of Hostmore plc.
The Board has at least eight formally scheduled
meetings per year. Its activity at each meeting is
planned at the start of each year and is set out in
a formal Annual Board Activity Calendar which is
approved by the Board. The Board and Committee
meetings are planned around key events in the
corporate calendar, which ensures that the Board then
receives appropriate information at the appropriate
time, and that all key operational, financial reporting
and governance matters are discussed during the
year.
A detailed pack is prepared and circulated in advance
of each meeting which includes updates from the
CEO, CFO and other Executive Team members.
The General Counsel and Company Secretary also
prepares a report for each Board meeting covering
matters such as the latest governance, material
contract and litigation updates.
Roles and responsibilities
The UK Corporate Governance Code requires there
to be a clear division of responsibilities between the
Chairman and the Chief Executive Officer set out in
writing and agreed by the Board. This document,
‘Division of Responsibilities’ was approved at
Admission in 2021 and reviewed and approved by
the Board on 28 November 2022. It is available on the
Company’s website.
The Board agrees with the approach set out in the
UK Corporate Governance Code, but they recognise
that overly prescribing the responsibilities of the
Chairman and the Chief Executive Officer may reduce
their flexibility to act in unforeseen circumstances.
Accordingly, the document sets out a clear division
of responsibilities, but does not intend to provide a
definitive list of the individual responsibilities of the
Chairman or the Chief Executive Officer.
Chairman and Chief Executive Officer
The Chairman is responsible for leadership of the
Board and for ensuring its effectiveness in directing
the Company and promoting the highest standards
of integrity, probity and corporate governance.
Throughout the year, at appropriate intervals, the
Chairman holds meetings with the Non-Executive
Directors without the Executive Directors present.
The Chief Executive Officer leads the team with
executive responsibility for running the businesses
of the Group. The CEO reports to the Board and is
responsible for all executive management matters of
the Group.
Non-Executive Directors
The Non-Executive Directors (Gavin Manson, David
Lis, Andrew Blurton and Stephen Welker) provide
constructive challenge to management, helping
to develop proposals on strategy, and providing
advice and support based on their experience in
both executive and non-executive roles throughout
their careers. David Lis and Andrew Blurton are
independent. Gavin Manson and Stephen Welker
are not considered to be independent. The Board
considers Gavin to have been beneficial to the
Company and its shareholders as he brought financial
experience, in the hospitality and travel sectors,
Stephen brings a knowledge and understanding of the
Group’s business, and a wide understanding of the
City, investment banking and investor relations.
Senior Independent Director
The UK Corporate Governance Code recommends
that the board of directors of a company with a
premium listing on the Official List of the FCA should
appoint one of the independent non-executive
directors to be the senior independent director.
David Lis is the Senior Independent Director of the
Company. In that role David acts as a sounding
board for the Chairman, serves as an intermediary
for the other Directors and shareholders and is
available to shareholders if they have concerns where
contact through the normal channels of the CEO, the
Chairman or the other Executive Director has failed to
resolve.
Company Secretary
Robert Henry has been the General Counsel and
Company Secretary of the Company since 2021. The
57
Hostmore • Annual Report 2022
Governance report
Company Secretary supports the Board and each of
the four Board Committees, and is in attendance at
all their meetings. All Directors have access to the
services of the Company Secretary who is available
to advise on company law, governance and best
practice. He also assists the Board in ensuring that
the correct policies, processes and information are
tabled for discussion, noting or approval at the correct
point in time throughout the year. The Company
Secretary works with the Chairman to ensure that
Board meeting packs are circulated to Directors in a
timely manner and that the information contained in
them is clear and accurate.
Composition, independence and
attendance in 2022
From 3January 2022 to 27May 2022, the Board
comprised eight Directors (including the Chairman).
At that point it reduced to seven Directors as a result
of Neil Johnson retiring from the Board. On 15August
2022, the Board increased to eight Directors as
a result of Stephen Welker being appointed a
Director, before reducing to six Directors during
December 2022 following Louise Stonier and Jane
Bednall resigning from the Board. Details on the
independence of the Non-Executive Directors are
referred to at the start of this report. Throughout the
year until 19December 2022, the Company complied
with Provision 11 of the UK Corporate Governance
Code relating to at least half of the Board (excluding
the chair) comprising independent Non-Executive
Directors. At that point on the resignation of Jane
Bednall, the Company ceased to comply with
Provision 11 of the UK Corporate Governance Code
for approximately four weeks until Robert B. Cook
departed the Board on 9 January 2023. The Company
is looking to appoint two independent Non-Executive
Directors and a permanent Chief Executive Officer,
who will also be an Executive Director, to the Board
to ensure good governance and compliance with the
recommendation of the UK Corporate Governance
Code with regards to the balance of the Board.
It is the Board’s policy that appointments to the
Board will always be based solely on merit without
any discrimination relating to age, gender or any
other matter that has no bearing on an individual’s
ability to fulfil the role of Director. This principle of
Board diversity is strongly supported by the Board,
recognising that diversity of thought, approach and
experience is an important consideration as part of the
selection criteria used to assess candidates to achieve
a balanced Board.
The table below sets out the gender composition of the Group on a gender basis at 1 January 2023:
Male Female
Main Board 6 (100%)
1
0 (0%)
Group Executive Team
2
4 (44%) 5 (56%)
Direct reports to Executive Directors
3
4 (60%) 6 (40%)
Group employees 2,179 (48%) 2,399 (52%)
Notes:
1
Louise Stonier and Jane Bednall were on the Board throughout the period ended 1 January 2023 until they resigned on 12 December 2022
and 19December 2022, respectively. Consequently: (i) from 3 January 2022 to 27 May 2022 (when Neil Johnson stepped down from the
Board), the gender ratio was 6 males (75%) to 2 females (25%); (ii)from 27 May to 15 August 2022 (when Stephen Welker joined the Board),
the gender ratio was 5 males (71%) to 2 females (29%); (iii) from 15 August 2022 to 12 December 2022 (when Louise Stonier stepped down
from the Board), the gender ratio was 6 males (75%) to 2 females (25%). The lack of female representation on the Board, therefore, only
arose at the very end of the period ended 1January 2023. The Company is in the process of recruiting two independent non-executive
directors and it hopes to address the gender imbalance from the results of this process.
2
The Group Executive Team figures include the two Executive Directors. Following Robert B. Cook’s resignation as Chief Executive Officer
and as a Director with effect from 9 January 2023, there is now one Executive Director plus the interim Chief Executive Officer.
3
The direct reports to Executive Directors figure includes: (i) direct reports into Robert B. Cook, the former Chief Executive Officer, and Alan
Clark, the Chief Financial Officer; and (ii) Alan Clark, the Chief Financial Officer, reporting into Robert B. Cook, the former Chief Executive
Officer. Since Robert’s resignation, these individuals now report into Julie McEwan, the interim Chief Executive Officer, other than Julie
McEwan, herself, and one individual who reports to Alan Clark. Four other individuals also report into Julie McEwan.
58
Hostmore • Annual Report 2022
Corporate Governance Report
continued
The Board considers that each Director is able to
allocate sufficient time to the Company to discharge
their responsibilities effectively.
The Board has at least eight formally scheduled
meetings per year, with additional meetings and calls
convened to deal with matters in between. A strategy
meeting was held in November 2022 which was
attended by all Directors. Where Directors are unable
to attend a meeting, they are encouraged to submit
comments on papers or matters to be discussed to
the Chair of the meeting in advance to ensure that
their views are recorded and taken into account
during the meeting.
Meetings are held in person or, where COVID-19
restrictions were in place, via video conference calls.
The Audit and Risk Committee, the Nominations
Committee, the Remuneration Committee and the
Disclosure Committee were each formally established
on 5 October 2021. The table below shows the
attendance of each Director at the formally scheduled
meetings of the Board and Committees of which
they were a member during 2022. Given the nature
of the matters it considers, the Disclosure Committee
does not have formally scheduled meetings and,
consequently, attendance figures have not been
included for that Committee in the below table.
Director
Board meetings
held/attended
Audit and Risk
Committee
meetings
held/attended
Nominations
Committee
meetings
held/attended
Remuneration
Committee
meetings
held/attended
Independent
David Lis 8/8 4/4 2/2 1/1
Jane Bednall 8/8 4/4 2/2 3/3
Andrew Blurton 8/8 4/4 2/2 3/3
Louise Stonier 8/8 4/4 2/2 3/3
Non-Independent
Neil Johnson 3/3 N/A 1/1 N/A
Gavin Manson 8/8 2/2 1/1 1/1
Robert B. Cook
1
8/7
2
N/A N/A N/A
Alan Clark 8/8 N/A N/A N/A
Stephen Welker 2/2 N/A N/A N/A
Notes:
1
Robert B. Cook stepped down as CEO and as a Director with effect from 9 January 2023.
2
Robert B. Cook missed one formally scheduled Board meeting due to a family funeral but participated in an unscheduled Board meeting
the previous day to ensure that he participated in discussions on the relevant issues.
Key activities of the Board during
the year
The annual Board Activity Calendar setting out
agenda items for each scheduled Board at the start
of meeting is drafted and approved by the Board
each year. The calendar takes into account key
points in the regulatory and financial cycle, including,
amongst other things, updates from the CEO on
Company performance, the CFO on financial results
and forecasts, investor relations updates and updates
from the Company Secretary.
In addition to the full content of the CEO and CFO
operational and financial reports, as part of its annual
governance programme the Board undertook the
following:
• Considered the resignations of Louise Stonier and
Jane Bednall, two independent Non-Executive
Directors from the Board, and, post year end,
Robert B. Cook, the Chief Executive Officer of
the Company and an Executive Director from the
Board.
• Reviewed and approved the FY23 strategy and,
post the period end, the FY23 budget.
• Reviewed its Schedule of Matters Reserved to the
Board and the Terms of Reference of the Board
Committees.
• Reviewed various governance documents,
including the Division of Responsibilities between
the Chair and CEO.
• Received legal and governance updates.
• Received people updates and updates on
workforce engagement.
• Received risk and compliance updates covering
areas such as health and safety and ESG matters.
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Hostmore • Annual Report 2022
Governance report
• Received business solutions updates covering
areas such as cyber security and guest
experience.
• Reviewed potential M&A opportunities.
• Reviewed potential new store opening
opportunities.
Training and development
A full, formal and tailored induction programme is
provided for any new Director joining the Board. The
Company Secretary provides regular updates to the
Board and Committees on regulatory and corporate
governance matters. The Directors keep themselves
appraised of developments relevant to the Company’s
business.
Performance evaluation and
effectiveness
A formal internal performance evaluation was
conducted for the Board and each of its Committees
in Q4 2022.
The performance evaluation consisted of a
questionnaire which covered the following topics:
(i) processes that underpinned the Board’s
effectiveness; (ii) Board and Committee constitution
and commitment; (iii) Board dynamics; (iv) culture,
stakeholder oversight and strategy; (v) questions
for the individual committees; and (vi) an individual
director self-evaluation. Each Board member was
also asked to complete a separate Board skills matrix
survey to self-assess that Director’s skill set with the
objective, amongst other things, of establishing any
skill gaps on the Board.
Following completion of the questionnaire, the
Chairman invited each of the Directors to meet with
him to give the relevant Director the opportunity to
expand on their responses should they wish to. An
anonymised report was then drawn up and presented
to the Board in early 2023.
A number of recommendations were taken from the
evaluation and will be worked on during 2023.
Information and support
An agenda and accompanying papers are distributed
to the Board or Committee members in advance of
each Board or Committee meeting. Where necessary,
separate papers are prepared to support specific
matters requiring Board decision or approval. The
Non-Executive Directors provide ongoing feedback to
the CEO, CFO and Company Secretary on the content
of papers to ensure they continue to support effective
debate and decision-making by the Board.
Minutes of all Board and Committee meetings are
taken by the Company Secretary and circulated
to the Board or the relevant Committee members
for approval as soon as practicable following the
meetings. Specific actions arising from meetings are
recorded in the minutes and, where not completed
by the next Board meeting, are carried forward in
the minutes until completed. This also facilitates
the effective communication of actions to those
responsible and allows the Board or the relevant
Committee to monitor progress.
Any Director may instigate an agreed procedure
whereby independent professional advice may be
sought at the Company’s expense. No such advice
was sought by any Director during the year.
Appointment and election
In accordance with the Company’s articles of
association, all members of the Board will be offering
themselves for re-election or, in Stephen Welker’s
case, election at the Company’s Annual General
Meeting on 7June 2023. All of the Directors have
service agreements or letters of appointment and the
details of their terms are set out below.
Executive Director service agreements
Name Position
Date of service
agreement
Notice period
by Company
(months)
Notice period by
Director (months
Robert B. Cook
1
CEO 15 October 2021 6 6
Alan Clark CFO 15 October 2021 6 6
1
Robert B. Cook stepped down as CEO and as a Director with effect from 9 January 2023. Julie McEwan was appointed as the Interim CEO
on 9 January 2023 but she is not currently a Director of the Company.
60
Hostmore • Annual Report 2022
Corporate Governance Report
continued
The Non-Executive Directors (including the Chairman) do not have service agreements but are instead
appointed by letters of appointment. Each of the Non-Executive Directors and the Chairman were appointed for
a three-year term, subject to their annual reappointment by shareholders.
Non-Executive Director appointment
Name
Date of
appointment
Commencement date
ofcurrent term
Unexpired term at
1 January 2023
Gavin Manson 14 April 2021 17 August 2021 1 years 8 months
David Lis 18 August 2021 18 August 2021 1 years 8 months
Andrew Blurton 17 August 2021 17 August 2021 1 years 8 months
Stephen Welker 15 August 2022 15 August 2022 2 years 8 months
Conflicts of interest
Rules concerning Directors’ conflicts of interests are
set out in the Company’s Articles of Association and
the Company’s Conflicts of Interest Policy. Directors
are reminded at the beginning of each Board meeting
to notify the Board of any further conflicts of interest
in accordance with sections 175, 177 and 182 of the
Companies Act 2006.
Risk management and internal
controls
The Board accepts responsibility for determining the
nature and extent of the significant risks the Group
is willing to take in achieving its strategic objectives.
The Board monitors and reviews the effectiveness of
the Company’s risk management and internal control
systems. Further details can be found in the Audit and
Risk Committee Report and in the Risk Management
section of the Strategic Report. The Group insures
against certain risks, but many business risks are
difficult to effectively insure against. In such cases
the Group identifies and agrees to accept the risk
but seeks to ensure it has management processes
in place to protect the Group. The Group regularly
reviews both the type and amount of external
insurance that it buys.
Whistleblowing
The Company has a Whistleblowing Policy which
enables employees to raise concerns in confidence
relating to suspected wrongdoing and/or dangers at
work, including, without limitation, financial fraud or
mismanagement, failure to comply with any legal or
professional obligation and breach of the Company’s
internal policies and procedures. The Company
Secretary is the Whistleblowing Officer and the
Company also provides a confidential whistleblowing
helpline run by an independent third party so
employees are able to report a concern using an
external forum. The Board reviews the Whistleblowing
Policy on an annual basis and reviews any reports
which have been received throughout the year.
Anew communications programme was launched
in October 2022 to employees across the Group to
raise awareness of the whistleblowing helpline and its
purpose.
Stakeholder engagement
The Board places a strong emphasis on the standards
of good corporate governance and maintaining
effective engagement with its shareholders and key
stakeholders, which it considers to be integral to the
Company’s longer term growth and success. Further
information on how we engage with stakeholders is
set out in the Strategic Report on pages2 to 48 and,
in particular, the Section 172 statement on pages28
to 33. The Directors recognise their duty under
Section 172 of the Companies Act 2006 to consider
the interests of stakeholders. The nature of our
business means that the interests of our shareholders,
employees, customers, franchisor, suppliers and local
communities feature in the Board’s decision-making
process.
Engagement with the workforce
We engage with our employees on a regular basis,
through employee forums, learning and development
opportunities, appraisal processes, annual
performance and development reviews, and a variety
of social and team building events. We also measure
employee engagement through an annual employee
engagement survey. In the period ended 1January
2023, Thursdays (UK) Limited, the company in the
Group that employs almost the whole of the Group’s
workforce, partnered with Great Place to Work on
an engagement survey. The survey consisted of 60
questions that focused on the employee/manager
relationship, culture and values and an overall view of
the business performance. Following completion of
this, and reflecting the positive feedback provided in
61
Hostmore • Annual Report 2022
Governance report
the survey, the company was accredited with being a
“Great Place to Work”, a major accolade for the Group
as a whole.
Further details about our employees can be found in
the Strategic Report on pages2 to48.
Relations with shareholders
Continued support of our shareholders is key, so
we look to ensure they understand our strategy and
goals and can monitor our performance. We engage
with our shareholders through one to one meetings,
investor roadshows, shareholder meetings and our
half and full year financial reports.
The Board also welcomes feedback from shareholders
and establishing a dialogue with its shareholders.
The Company’s AGM will take place at 12.00 pm
on 7June 2023 at the offices of finnCap Limited,
One Bartholomew Close, London, EC1A 7BL. The
Annual Report and Financial Statements and Notice
of the AGM will be made available to shareholders in
accordance with the required notice periods.
The Board has delegated a number of its
responsibilities to the Audit and Risk Committee,
Nominations Committee, Remuneration Committee
and Disclosure Committee. The terms of reference of
each of its Committees are available from
www.hostmoregroup.com. These are reviewed and
updated annually by the Board and Committees
to ensure that they remain appropriate to support
effective governance. Details of the role, composition
and activities of each Committee during the year are
set out in their respective reports on the following
pages within this report.
The members of each Committee are as follows:
Committee Chair Other Members
Audit and Risk
• Andrew Blurton
• David Lis
• Gavin Manson (until 27 May 2022)
• Louise Stonier (until 12 December 2022)
• Jane Bednall (until 19 December 2022)
Nominations
• Neil Johnson (until 27 May 2022)
• Gavin Manson (from 27 May 2022)
to 25January 2023)
• Stephen Welker (from 25 January 2023)
• David Lis
• Andrew Blurton
• Louise Stonier (until 12 December 2022)
• Jane Bednall (until 19 December 2022)
Remuneration
• Louise Stonier (until 12 December 2022)
• David Lis (from 12 December 2022)
• Andrew Blurton
• David Lis (from 27 May 2022 to
12December 2022, when he became
Chair)
• Jane Bednall (until 19 December 2022)
Disclosure • Robert B. Cook (until 9 January 2023)
• Gavin Manson (from 9 January 2023)
• Neil Johnson (until 27 May 2022)
• Gavin Manson (from 27 May 2022
to 9January 2023, when he became
Chair)
• Alan Clark
• Robert Henry (until 25 January 2023)
• Stephen Welker (from 25 January 2023)
• Andrew Blurton (from 25 January 2023)
• Julie McEwan (from 25 January 2023)
Audit and Risk Committee
The Audit and Risk Committee’s role is to assist the
Board with the discharge of its responsibilities in
relation to financial reporting, including reviewing the
Group’s financial statements and accounting policies,
internal and external audits and controls, reviewing and
monitoring the scope of the annual audit and the extent
of the non-audit work undertaken by external auditors,
advising on the appointment of external auditors and
reviewing the effectiveness of the Group’s internal
controls, whistleblowing and fraud systems. The Audit
and Risk Committee gives due consideration to laws
and regulations, the provisions of the UK Corporate
Governance Code and the requirements of the Listing
Rules and the Disclosure Guidance and Transparency
Rules. The Audit and Risk Committee is also
responsible for (i) advising the Board on the Company’s
risk strategy, risk policies and current risk exposures;
(ii) overseeing the implementation and maintenance of
the overall risk management framework and systems;
and (iii) reviewing the Company’s risk assessment
processes and capability to identify and manage new
risks. The Chair of the Audit and Risk Committee will be
available at annual general meetings of the Company
62
Hostmore • Annual Report 2022
Corporate Governance Report
continued
to respond to questions from shareholders on the
activities of the Committee.
The UK Corporate Governance Code recommends
that all members of the Audit and Risk Committee
be non-executive directors, independent in character
and judgment and free from any relationship or
circumstance which may, could or would be likely
to, or appear to, affect their judgment, with a
minimum membership of three or, in the case of
smaller companies, two, and that one such member
has recent and relevant financial experience. The
committee as a whole should have competence
relevant to the sector.
The Audit and Risk Committee is comprised solely of
Non-Executive Directors, chaired by Andrew Blurton
and also includes David Lis. This complies with
the recommendation detailed in the UK Corporate
Governance Code with regards to the minimum
membership of the Committee as the Company
constitutes a “smaller company” for the purposes of
the UK Corporate Governance Code.
Gavin Manson sat on the Audit and Risk Committee
until he was appointed Chairman of the Board at the
2022 AGM, at which point he stepped down from
the Committee. Louise Stonier and Jane Bednall
were members of the Audit and Risk Committee until
their departures from the Company on 12 and 19
December 2022, respectively. The Company is looking
to appoint another two independent Non-Executive
Directors and the intention is to appoint them to the
Committee.
Both current members of the Committee are
considered to be independent, as were Louise Stonier
and Jane Bednall when there were members of the
Committee. Gavin Manson was not considered to be
independent when he sat on the Committee. Whilst
the inclusion of Gavin Manson was not consistent
with the recommendations of the UK Corporate
Governance Code on independence, the Board
considered that the financial experience that Gavin
brought, including in the hospitality and travel sectors,
as well as his general knowledge of the Group and its
history, merited his inclusion on the Committee. The
UK Corporate Governance Code states that the chair
of the board should not be a member of the audit
committee. In line with the UK Corporate Governance
Code, Gavin stepped down as a member of the Audit
and Risk Committee when he became Chairman of
the Board. This brought the Company into line with
the recommendation of the UK Corporate Governance
Code that all members of the Audit and Risk
Committee be independent.
The Audit and Risk Committee meets as often as it
deems necessary but in any case at least three times
per year in line with the relevant dates within the
financial reporting and audit calendar, at least one of
which includes time without management present.
The instances where the Audit and Risk Committee
meets are at times when relevant documents, such as
audit plans prior to half and year end, interim reports
and financial statements, preliminary announcements
and the full Annual Report and Financial Statements
are near to completion and available for review.
Nominations Committee
The Nominations Committee assists the Board in
reviewing the structure, size and composition of the
Board. It is also responsible for reviewing succession
plans for the Company’s Directors, including the
Chairman, the Chief Executive Officer, and other
senior executives. The Chair of the Nominations
Committee is available at annual general meetings
of the Company to respond to questions from
shareholders on the activities of the Nominations
Committee.
The UK Corporate Governance Code recommends
that a majority of the nomination committee be
non-executive directors, independent in character
and judgment and free from any relationship or
circumstance which may, could or would be likely to,
or appear to, affect their judgment and that the chair
of the board should not chair the committee when it is
dealing with the appointment of their successor.
The Nominations Committee is chaired by Stephen
Welker and its other members are David Lis and
Andrew Blurton. Neil Johnson was the Chair of the
Nominations Committee until he retired from the
Board at the 2022 AGM, at which point he stepped
down from the Committee and Gavin Manson became
the Chair of the Committee. Gavin Manson was the
Chair of the Committee until he stepped down from
the Committee on 25 January 2023, at which point
Stephen Welker became the Chair of the Committee.
Louise Stonier and Jane Bednall were also members
of the Nominations Committee until their departures
from the Company on 12 and 19 December 2022,
respectively. Other than Stephen Welker, all current
members of the Committee are considered to be
independent, as were Louise Stonier and Jane Bednall
when they were members of the Committee. Neither
Neil Johnson nor Gavin Manson were considered
to be independent when they were each Chair of
the Committee. Neither Neil nor Gavin chaired the
Committee when it was dealing with the appointment
of either of their successors.
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Hostmore • Annual Report 2022
Governance report
The Nominations Committee meets as often as it
deems necessary but in any case at least twice per
year to provide for the review of elements forming
part of an annual cycle, such as Directors who are
subject to annual re-election or retiring by rotation;
senior management succession; to consider the
annual Board evaluation and to review the statement
of the Committee’s activities in the Annual Report and
Financial Statements.
Remuneration Committee
The Remuneration Committee assists the Board
in determining the Group’s policy on executive
remuneration, the levels of remuneration for the
Chairman, each of the Executive Directors and (on the
recommendation of the Chief Executive Officer) each
other member of the Group’s Executive Team. It also
prepares an annual remuneration report for approval
by the Company’s shareholders at the annual general
meeting. The Chair of the Remuneration Committee is
available at annual general meetings of the Company
to respond to questions from shareholders on the
activities of the Remuneration Committee.
The UK Corporate Governance Code recommends
that all members of the Remuneration Committee be
non-executive directors, independent in character
and judgment and free from any relationship or
circumstance which may, could or would be likely to,
or appear to, affect their judgment, with a minimum
membership of three or, in the case of smaller
companies, two. The UK Corporate Governance Code
also recommends that before appointment as chair
of the remuneration committee, the appointee should
have served on a remuneration committee for at least
12 months.
The Remuneration Committee was chaired by Louise
Stonier until her departure from the Board on 12
December 2022 for reasons external to Hostmore.
Louise Stonier had not previously served on a
remuneration committee for at least 12 months,
but she had been extensively involved with the
Remuneration Committee of Pets at Home Group
PLC as Chief People and Culture Officer and
previously as Group Legal Officer and Company
Secretary. Hence the Company believed she had
sufficient relevant experience to perform this role. The
Remuneration Committee is now chaired by David
Lis and includes Andrew Blurton. This complies with
the recommendation detailed in the UK Corporate
Governance Code with regards to the minimum
membership of the Committee as the Company
constitutes a “smaller company” for the purposes of
the UK Corporate Governance Code.
All current members of the Committee are considered
to be independent. Gavin Manson sat on the
Remuneration Committee until he was appointed
Chairman of the Board at the 2022 AGM, at which
point he stepped down from the Committee. Gavin
Manson was not considered to be independent
when he sat on the Committee. Whilst the inclusion
of Gavin Manson was not consistent with the
recommendations of the UK Corporate Governance
Code that all members of the Remuneration
Committee be independent, the Board considered
that the financial experience that Gavin brought,
including in the hospitality and travel sectors, as
well as his general knowledge of the Group and its
history, merited his inclusion on the Committee. The
UK Corporate Governance Code also provides that
the chair of the board can only be a member of the
remuneration committee if they were independent
on appointment. Gavin was not independent
on appointment as Chairman of the Board and,
accordingly, he stepped down as a member of the
Remuneration Committee upon assuming the role
of Chairman of the Board. This also brought the
Company into line with the recommendation of the UK
Corporate Governance Code that all members of the
Remuneration Committee be independent.
The UK Corporate Governance Code requires that
appropriate arrangements are in place for engagement
with the Company’s workforce. As Chair of the
Remuneration Committee, Louise Stonier performed
the role of designated non-executive director for
engagement with the Company’s workforce until
her departure from the Company. As Chair of the
Remuneration Committee, David Lis performed
this role from his appointment in December 2022
until 25January 2023 when it was decided that the
Company would engage with its workforce using a
formal workforce advisory panel.
The Remuneration Committee meets as often as
it deems necessary but at least twice per year. A
meeting takes place with relevant documents, such
as the Executive Directors’ remuneration policy and
the Directors’ remuneration report, available for
consideration prior to submission for shareholder
approval at the Company’s annual general meeting.
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Hostmore • Annual Report 2022
Corporate Governance Report
continued
Disclosure Committee
The Disclosure Committee assists and informs the
decisions of the Board concerning the identification
of inside information. It also makes recommendations
about how and when the Company should
disclose inside information in accordance with
the Company’s Inside Information and Disclosure
Policy. The Disclosure Committee is responsible for,
among other things, prior to publication, reviewing
for completeness and accuracy the Company’s
public disclosures, and monitoring the outcome of
announcements. The Disclosure Committee meets as
required where necessary or appropriate to fulfil its
responsibilities.
The Disclosure Committee is chaired by Gavin
Manson. Its other members are Julie McEwan, Alan
Clark, Andrew Blurton and Stephen Welker. Robert B.
Cook was the Chair of the Disclosure Committee until
he stepped down as Chief Executive Officer and as a
Director of the Company on 9 January 2023, at which
point he also stepped down from the Committee.
Neil Johnson sat on the Disclosure Committee until
he retired from the Board at the 2022 AGM, at which
point he stepped down from the Committee and Gavin
Manson was appointed as his replacement. Gavin was
appointed as Chair of the Disclosure Committee on
9 January 2023. Robert Henry sat on the Disclosure
Committee until 25January 2023, at which point
he stepped down from the Committee, and Julie
McEwan, Andrew Blurton and Stephen Welker were
appointed as members of the Committee.
65
Hostmore • Annual Report 2022
Report of the Audit and Risk
Committee
Governance report
Chair Introduction
Dear Shareholders
The Audit and Risk Committee had four formally
scheduled meetings in 52-week period ended 1
January 2023 to enable the Committee to undertake
its roles and responsibilities on behalf of the Board. It
also held a number of additional meetings throughout
the year. I am pleased to outline what the Committee
has been focused on during the year.
Committee Members and Meeting
Frequency
The membership of the Committee has recently
changed. Andrew Blurton and David Lis are the
current members of the Audit and Risk Committee (full
biographical details can be found on page51). Gavin
Manson sat on the Committee until he was appointed
Chairman of the Board at the AGM on 27 May 2022
(the “2022 AGM”), at which point he stepped down
from the Committee. Louise Stonier and Jane Bednall
were members of the Committee until December
2022 when they stepped down as independent Non-
Executive Directors of the Board.
Provision 24 of the UK Corporate Governance Code
provides that the Committee must comprise of at least
three members or, in the case of smaller companies,
two members, and, unless the Board approves
otherwise, all members must be independent Non-
Executive Directors of the Company, at least one
of whom must have recent and relevant financial
experience with competence in accounting and/
or auditing. The Company constitutes a “smaller
company” for the purposes of the UK Corporate
Governance Code. The Committee complied with
this requirement, save that Gavin Manson, despite
not being an independent Non-Executive Director,
sat on the Committee until he was appointed as
Chairman of the Board at the 2022 AGM. The
inclusion of Gavin Manson was not consistent
with the recommendations of the UK Corporate
Governance Code that all members of the Audit
and Risk Committee be independent. However, the
Board considered that the financial experience that
Gavin brought, including in the hospitality and travel
sectors, as well as his general knowledge of the
Group and its history, merited his inclusion on the
Committee. The UK Corporate Governance Code
states that the chair of the board should not be a
member of the audit committee. In line with the UK
Corporate Governance Code, Gavin stepped down
as a member of the Audit and Risk Committee when
he became Chairman of the Board. This brought the
Company into line with the recommendation of the UK
Corporate Governance Code that all members of the
Audit and Risk Committee be independent. Andrew
Blurton has recent and relevant financial experience
with competence in accounting and auditing.
Under the Committee’s terms of reference, meetings
are held at least three times a year at appropriate
times in the financial reporting and audit cycle.
Additional meetings are held as required. In
addition to the Committee members, other regular
attendees are representatives of the external auditor,
PricewaterhouseCoopers LLP. In addition, the Chair
of the Committee meets with representatives of the
external auditor before and during their review work
performed on the Group’s Interim Report for the first
six months of the year and before and during their
audit of the Group’s results for the full year.
Role and Responsibilities
The role of the Audit and Risk Committee is set out in
its terms of reference which were originally approved
by the Committee and the Board on 5 October 2021.
The terms of reference were reviewed and approved
by the Committee and by the Board of the Company
on 13 September 2022 and on 22 December 2022.
The Committee’s terms of reference are available on
the Company’s website.
Duties of the Committee
The duties of the Committee include, amongst other
things:
— To report to the Board on significant financial
reporting issues and judgments
— To critically review the integrity of the financial
statements of the Group
— To review the content of the annual report and
financial statements and advise the Board on
whether, taken as a whole, it is fair, balanced
and understandable
— Oversee the relationship with the external
auditor and make recommendations to
the Board regarding the appointment, re-
appointment and removal of the external
auditor
— Review and approve the annual audit plan
— Assess the external auditor’s independence
and objectivity
— Assist the Board with the definition and
execution of its risk management strategy,
risk policies and to assess the current risk
exposure
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Hostmore • Annual Report 2022
Report of the Audit and Risk
Committee continued
— Review the adequacy and effectiveness of the
Group’s risk management and internal control
system
— Review the adequacy and security of the
Company’s whistleblowing arrangements,
and procedures related to fraud, bribery and
money laundering
— Report to the Board after each Committee
meeting on all matters within the Committee’s
duties and responsibilities
Committee Key Activities and
Focus in 2022
Key activities in addition to the duties of the
Committee referred to above:
— Review of financial statements and reports,
including the half and full year financial reports
— Review of risk management and internal controls
— External audit – Receive the output of the
external audit effectiveness review regarding
the 2021 audit process and consider the
external auditor’s re-appointment
— Internal Audit – Keep under review plans and
progress around internal controls framework
and whether there is need for an internal audit
function.
The above key activities are commented on in further
detail below.
Composition, Skills and
Experience
An annual review of the Board and Committee
compositions, the independence of Non-Executive
Directors and their time commitment was conducted
in Q4 2022.
Reporting
Financial Reporting
The Committee reviews on an ongoing basis the
Group’s corporate reporting, including critical
accounting policies, major accounting transactions,
short-term trading risks, business continuity, fraud
environment and management overrides.
Significant Issues considered in relation
to the Financial Statements
Significant issues and accounting judgements are
identified by the Chair, by the Group’s Finance Team
and by the external auditor. These are reviewed by the
Committee prior to the preparation of half year and
year end financial statements. The key audit matters
identified in preparing and subsequently auditing the
Group’s financial statements for the 52-week period
ended 1 January 2023 included:
• the appropriateness of the going concern basis of
preparation of the financial statements;
• the valuation of property, plant and equipment
(“PPE”), and right-of use assets (“RoU assets”); and
• the valuation of goodwill.
With reference to the appropriateness of the
going concern basis of preparation of the financial
statements, the Committee took account of significant
elements across the business. These included:
• FY22 underlying free cash flow of £16.5m;
• FY22 net debt (FRS102) of £27.7m;
• the cost reduction exercise completed in Q1 2023
which reduced fixed overheads on an annual basis
by £1.8m;
• banking covenants recently reset with lending
banks for the extended term of the facility to
1January 2025;
• the recent agreement with the TGI Fridays
franchisor to defer all new restaurant opening
obligations until FY25;
• revenue, adjusted for the variance in the VAT
rate on food sales between FY22 and FY23,
is 2% greater than the 2022 level in the first
16weeks of FY23. This has been underpinned by
the successful implementation of new revenue
initiatives, and improving Guest Opinion Scores
and Net Promoter Scores at TGI Fridays from
renewed focus on the guest experience.
The Group’s capital allocation policy has been re-set
to focus primarily on delivering improved performance
from the core TGI Fridays estate, with substantial
improvements to marketing, operating effectiveness,
and site management. These actions all resulted in an
improvement in net cash generation by the Group.
The Committee reviewed the results of the Executive
Team’s forecasts of expected operating performance
and cash availability for the 15 months ending 31July
2024. These also considered possible adverse effects,
including severe but plausible downside sensitivities
of trading and a worsening rate of profit conversion.
The Committee discussed these projections in detail
with the Executive Team and with the external auditor.
The Group’s base case forecasts showed that the
Group would continue to have headroom above
the minimum covenant levels in the updated Group
banking facilities and continued compliance with
covenant tests.
67
Hostmore • Annual Report 2022
Governance report
The Executive Team also prepared severe but
plausible downside scenarios which assessed the
position in a severely depressed trading environment
and worsening of performance by the Group’s
restaurants, with limited recovery in the second half
of 2023 from the factors that affected performance
in 2022 and the first quarter of 2023. The Board
maintains a tight focus on the Group capital allocation
policy and expenses, such that both can be reduced
further if trading is reduced to the levels inferred in
the severe but plausible downside scenario. In that
scenario, if there was no corrective action by the
Board, the Group has forecast potential for covenant
concerns in the third quarter of 2023 and a restricted
liquidity position in the first quarter of 2024.
The Committee combined this assessment with all
other elements of its work and concluded that it
was appropriate for the financial statements to be
prepared on a going concern basis.
With reference to the valuation of property, PPE and
RoU assets, the Committee reviewed in detail the
impairment assessment of these assets performed
by the Executive Team at 1January 2023. For this
purpose, each restaurant in the Group is considered a
separate cash generating unit (“CGU”). An impairment
charge is recognised where the recoverable amount
is less than the carrying value of the RoU assets of
the CGU. The recoverable amount is based on value-
in-use calculations, using forecast cashflows and
each restaurant’s ability to cover its costs, including
an allocation of central overheads, marketing and
maintenance. The Committee assessed the carrying
value of PPE and RoU assets by reference to the
Group’s updated business plan and the higher interest
rates now prevailing. This exercise resulted in an
impairment charge calculated at £31.2m against those
assets. The Committee discussed these projections in
detail with the Executive Team and with the external
auditor and concluded that an impairment charge of
£31.2m was warranted. Accordingly this has been
reflected in the financial statements for the period
ended 1January 2023.
With reference to the valuation of goodwill, the
Executive Team performed an impairment assessment
of goodwill in accordance with IAS 36 on the Group’s
consolidated statement of financial position. Goodwill
relates to the TGI Fridays brand and is considered to be
at an operating segment level. The Executive Team took
account of the market capitalisation of the Company
by reference to its share price at year end to consider
whether a goodwill impairment trigger was present.
At 1 January 2023, the combined carrying amount of
the CGUs and goodwill calculated on this basis was
assessed to be £70.9m higher than the recoverable
amount of the group of all CGUs. The Committee
discussed this assessment in detail with the Executive
Team and with the external auditor and concluded
that an impairment charge of £70.9m was warranted.
Accordingly, this has been reflected in the financial
statements for the period ended 1January 2023.
Fair, Balanced and Understandable
The Audit and Risk Committee supports the Board
in ensuring that the Annual Report and Financial
Statements is fair, balanced and understandable.
The Committee reviewed the Annual Report and
Financial Statements as it was being written and
updated, and provided detailed feedback throughout
the process to the Finance Team. The Annual Report
and Financial Statements was also shared with the
external auditor at an early stage to obtain feedback.
The Committee concluded that the Annual Report
and Financial Statements is fair, balanced and
understandable.
Risk Management and Internal
Controls
Risk Management
The Committee, along with the Board, reviews the
Group’s monthly management accounts, including
the statement of comprehensive income, statement
of financial position and cash flows. Results are
compared to the latest budget and forecast, with
narrative for variances from the Group’s Executive
Team, and actions agreed.
The Committee assesses the changes in corporate
culture and risk appetite to the extent they have
changed. It also considers the impact of short term
operational and financial risks and the methods by
which resilience is built into the business.
Internal Audit
The Group does not currently have a financial internal
audit function. The Committee reviews this position
on an annual basis and provides an overview of the
separate levels of assurance that are already in place
and how these complement the work of the external
auditor. The Committee concluded that the financial
processes and internal controls in operation in the
Group are sufficient for a Group of Hostmore’s size
to operate effectively without a specific internal audit
function in respect of its financial aspects. Separate
internal audit functions exist in the operational
aspects of the business. The Committee is reviewing
whether some additional resource in the finance
department would assist in delivery of regularly
updated financial information to the Board.
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Hostmore • Annual Report 2022
Report of the Audit and Risk
Committee continued
Internal assurance is achieved through three distinct
lines:
First line:
Operational and management controls
• An appropriate team structure and reporting lines.
• Visible, championed values and expected behaviours.
• Application of Group policies and procedures.
• Employee induction, training and ongoing support.
• Executive and leadership oversight.
Second line:
Risk and compliance monitoring
• Operational internal audit activity.
• Risk management framework, including multiple review
levels.
• External specialists engaged to monitor and report on
compliance operations.
Third line:
Independent and external review
• External advisors engaged to review 1st and 2nd lines
of assurance.
• Open culture of challenge to existing processes and
whistleblowing hotline.
Going Concern
As referred to above, the Committee considered the
going concern basis of preparation for the Company’s
financial statements for the 52-week period ended
1January 2023 and whether it was appropriate for the
Company’s financial statements to be prepared on a
going concern basis. The Committee concluded that
this basis was reasonable for the Group’s financial
statements for the 52-week period ended 1 January
2023.
Viability Assessment
The Committee reviewed the bases of calculation
used in the viability statement set out in the Chief
Financial Officer’s Review on pages40 and 41 and
agreed the viability statement.
External Audit
External Auditor Effectiveness
The current audit partner David Beer has been the
Company’s external auditor’s audit partner since the
admission on 2 November 2021 of the Company’s
shares to the premium listing segment of the Official
List of the Financial Conduct Authority and to trading
on the London Stock Exchange plc’s main market for
listed securities. PricewaterhouseCoopers LLP have
been the Company’s auditors since its incorporation
in April 2021.
Independence and Objectivity
The Committee assesses the independence and
objectivity of the auditor on an annual basis. The Chair
of the Committee meets with the auditor throughout
the year to discuss new accounting standards,
current best practice, matters to be considered
by the Committee and if there are any matters of
concern. The auditor also periodically meets with the
Committee without members of management present
to ensure there is a forum for open discussion.
Non-Audit Services Policy
During the period ended 1January 2023, the Group’s
auditor only provided non-audit services in respect
of its review of the Company’s interim results for the
26 week period ended 3 July 2022 as required under
the Disclosure and Transparency Rules and covenant
reporting as required under the Group’s bank facilities.
No other non-audit services have been provided by
the auditor to the Group during the period ended
1January 2023. The Committee regularly reviews this
position and has no plans to authorise the provision of
any other non-audit services by the auditor.
Appointment of External Auditor
The Committee recommends the re-appointment of
PricewaterhouseCoopers LLP as auditor at the AGM
to be held on 7June 2023.
External Auditor Fee
Details of the fees paid to PricewaterhouseCoopers
LLP during the period ended 1January 2023 are
shown in note 12 to the Financial Statements.
Compliance, Speaking-up and Fraud
The Committee undertakes an annual review of the
Company’s Anti-Bribery and Corruption Policy and the
Whistleblowing Policy and makes recommendations.
A new communications programme was launched
to employees across the Group in October 2022 to
raise awareness of the whistleblowing helpline and its
purpose.
Committee Evaluation
An internal Board and Committee Evaluation was
conducted in Q4 2022 A number of recommendations
were taken from the evaluation and will be worked on
during 2023.
Andrew Blurton
Chair of the Audit and Risk Committee
28 April 2023
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Hostmore • Annual Report 2022
Report of the Nominations
Committee
Governance report
Chair Introduction
Dear Shareholders
The Nominations Committee had two formally
scheduled meetings and a number of additional
meetings during the 52-week period ended 1 January
2023. These were to enable the Committee to
undertake its roles and responsibilities on behalf of
the Board.
I am pleased to outline what the Committee focused
on during the year.
Committee Members and Meeting
Frequency
The membership of the Committee has recently
changed. Stephen Welker, David Lis and Andrew
Blurton are the current members of the Nominations
Committee (full biographical details can be found on
pages51 and 52). Neil Johnson was the Chair of the
Committee until he retired from the Board at the AGM
on 27 May 2022 (the “2022 AGM”), at which point
he stepped down from the Committee and Gavin
Manson replaced him as Chair of the Committee.
Gavin Manson was the Chair of the Committee until
he stepped down from the Committee on 25 January
2023, at which point Stephen Welker was elected
Chair of the Committee. Louise Stonier and Jane
Bednall were members of the Committee until they
departed the Company in December 2022.
The UK Corporate Governance Code requires that
the Committee must comprise of not less than three
members, the majority of whom are to be independent
Non-Executive Directors of the Company. David Lis
and Andrew Blurton are independent Non-Executive
Directors and accordingly the Committee complies
with this requirement. Neil Johnson, Gavin Manson
and Stephen Welker who separately served on the
Committee during the year are not independent Non-
Executive Directors.
Roles and Responsibilities
The role of the Nominations Committee is set out
in its terms of reference, which were approved by
the Committee and the Board on 5 October 2021.
The Committee’s terms of reference were reviewed,
updated and approved by the Committee and the
Board on 13 September 2022. The Committee’s terms
of reference are available on the Company’s website.
Duties of the Committee
The Nominations Committee is responsible for the
following key activities:
— Regularly reviewing the structure, size and
composition of the Board
— Putting in place Board and other senior
management succession plans and keeping
them under review
— Reviewing and monitoring the effectiveness of
the Group’s policies preventing discrimination,
together with the People team’s proposals to
advance an equality, diversity and inclusion
policy during 2023, and linking this with Group
objectives
— Ensuring that appointments and succession
plans are based on merit and objective criteria
— Making recommendations on the structure,
size and composition of the Board
Committees
— Reviewing annually the time required from the
Non-Executive Directors
— Reviewing the results of the Board and
Committee evaluation process and reviewing
its own performance
— Ensuring that new Directors receive a full,
formal and tailored induction
— Making recommendations to the Board on
any area within its remit where action or
improvement is required
— Reporting to the Board after each meeting
of the Committee on all matters within the
Committee’s duties and responsibilities
Focus for 2022
The Committee’s key areas of focus for 2022
included:
— Approving the appointment of Gavin Manson
as Chairman of the Board
— Considering and thereafter approving the
appointment of Stephen Welker as a Director
of the Company
— Board and management team updates
— Reviewing the Committee’s terms of reference
— Reviewing the membership of the Board and
its Committees and the Board succession plan
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Hostmore • Annual Report 2022
Report of the Nominations
Committee continued
— Approving the Committee’s programme for
2023
— Reviewing the time commitment from
Non-Executive Directors
— Completion of the internal Committee
evaluation process
— Considering the Board induction programme
— Monitoring the effectiveness of the Group’s
policies preventing discrimination and its
linkage to Group strategy
— The Committee also considered the
appointment of Julie McEwan as the Interim
CEO in January 2023 as a result of Robert B.
Cook stepping down as CEO on 9 January
2023.
Equality, Diversity and Inclusion
Policy
Building on the Company’s existing policies
preventing discrimination, the Company is working on
the introduction of an equality, diversity and inclusion
programme to be introduced in 2023, together with a
Diversity and Inclusion Committee and an appropriate
Diversity and Inclusion policy. Diversity and inclusion
questions were included in the 2022 Employee
Engagement Survey in support of the launch of the
programme. In addition, the Company provides
online Equality and Diversity training, which each
new employee is required to complete as part of their
induction.
Board Changes and Succession
Planning
As stated above, Neil Johnson stepped down from
the Board at the 2022 AGM, and Gavin Manson
succeeded him as Chairman of the Board.
Whilst Gavin is not considered to be independent,
the Board saw continuity of stewardship as being a
particularly important factor. Gavin led the execution
of the Electra Private Equity PLC (“Electra”) strategy
and, with the new TGI Fridays team, created
Hostmore. Gavin has brought broad commercial and
governance experience, significant knowledge of the
Group, its strategy, management and stakeholders,
and, therefore, provided the continuity of leadership
that the Company needed as a newly listed business.
Consequently, although recommended by the UK
Corporate Governance Code, neither open advertising
nor an external search consultancy were used for the
appointment of Gavin to the role of the Chairman.
Stephen Welker was appointed to the Board on
15 August 2022. Stephen complements the skills
and experience that the Company has on the Board.
In addition, the Board values his knowledge and
understanding of the Group’s business, alongside
his broad insight of the City, investment banking and
investor relations. These will all be of great value as
the Group progresses its business plan.
Gavin Manson will retire from the Board as Chairman
and Non-Executive Director at the 2023 AGM. Subject
to his election as a director at the 2023 AGM, Stephen
Welker will succeed him as Chairman of the Board.
Stephen was previously a Non-Executive Director
of Electra and was a Director of Mondays (Topco)
Limited, the then-holding company of the TGI Fridays
trading business. He is a significant shareholder in the
Company and also a Partner in Sherborne Investors
Management LP which used to hold an interest in
the Company. Stephen, therefore, is not considered
independent within the meaning of the UK Corporate
Governance Code. In selecting Stephen, the Board
again saw continuity of stewardship as being
particularly important, and values his unique strategic
insight to the business. Combined with his financial,
commercial and investor expertise, this will be
invaluable as we grow and strengthen the Company.
Consequently, although recommended by the UK
Corporate Governance Code, neither open advertising
nor an external search consultancy were used for the
appointment of Stephen to the role of the Chairman.
Louise Stonier stepped down from the Board on 12
December 2022 to focus on her expanded executive
commitments external to Hostmore and Jane Bednall
stepped down from the Board on 19 December 2022
for personal reasons.
Robert B. Cook stepped down as CEO of the
Company and from the Board on 9 January 2023.
The Board is committed to ensuring that the new
permanent CEO has the qualities necessary to enable
the future success of the business. Whilst conducting
an external search, the Committee is also working
with Julie McEwan to give her every opportunity to
build on the extremely encouraging start that she has
made as Interim CEO.
The Committee’s focus for 2023 will be to appoint a
new, permanent Chief Executive Officer, who will also
be an Executive Director, and two new independent
Non-Executive Directors to the Board. Details of
the search processes will be included within the
Committee’s report for 2023.
All Directors, except Stephen Welker, will stand for
re-election at the AGM on 7June 2023, in line with
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Hostmore • Annual Report 2022
Governance report
best practice. Stephen Welker will stand for election
at the AGM on 7June 2023, this being his first AGM
since appointment.
The Committee received and considered the
Company’s succession plan in 2022. The Board
members also completed a Board skills matrix to
identify any skills shortages on the Board.
Committee Evaluation
An internal Board and Committee evaluation
was conducted in Q4 2022. A number of
recommendations were taken from the evaluation and
will be worked on during 2023.
Stephen Welker
Chair of the Nominations Committee
28 April 2023
72
Hostmore • Annual Report 2022
Annual Statement from the
Chair of the Remuneration Committee
Dear Shareholder,
As the Chair of the Remuneration Committee, I am
pleased to present, on behalf of the Board, our
Directors’ Remuneration Report for the 52-week
period to 1 January 2023.
This report is set out in three sections:
1. This Annual Statement, which summarises the key
activities and work of the Committee during the
period ended 1January 2023.
2. The Hostmore Directors’ Remuneration Policy
(the “Remuneration Policy”) – this sets out
the proposed remuneration framework for
the Directors which will apply if approved by
shareholder vote at the AGM on 7June 2023 (the
“2023 AGM”)
3. The Annual Report on Remuneration – this
sets out in detail the remuneration received by
Directors for the period ended 1 January 2023 and
how the Remuneration Policy will be applied in
2023. The Annual Report on Remuneration, along
with this statement, will be subject to an advisory
shareholder vote at the 2023 AGM.
Remuneration in context
2022 was a challenging year for our sector, with
the impact of COVID-19 closely followed by a cost
of living crisis and significant inflationary pressures
initially triggered by the Russian invasion of Ukraine.
The Group has delivered well in a challenging set
of circumstances with EBITDA performance for
the period ended 1January 2023 at £31.1m, being
broadly similar to the prior year (FY21 £34.5m). Over
the year, the management team has responded
dynamically to the challenges presented, including but
not limited to the various COVID-19 related impacts.
The management team has worked to ensure the
continued operations of the business, to ensure we
have an attractive offering and to manage costs.
Ensuring our customers’ and our colleagues’ safety
and well-being is critical to the Group and was a key
priority over this difficult time. Despite the challenges
presented, the management team has continued to
drive innovation and make progress in the delivery of
the Company’s strategy.
Remuneration for the period under
review
The single figure of remuneration for period ended
1January 2023 reflects base salary and pension. No
bonus was payable to the Directors in respect of the
period ended 1January 2023.
On 9 June 2022, long-term incentive awards in the
form of Performance Shares Awards were granted
to Robert B. Cook, the then Chief Executive Officer,
and Alan Clark, the Chief Financial Officer. In the case
of the then CEO, his Performance Share Award over
496,080 ordinary shares lapsed upon him resigning
from the Board on 9 January 2023, as well as the
Performance Share Award over 639,136 ordinary
shares which was awarded to him in 2021. In the
case of the CFO, his Performance Share Awards are
subject to the Group achieving the relative TSR, EPS
and ROIC performance measures, and if so, will vest
three years after grant. These awards are subject to
a two-year post-vesting holding period. Malus and
clawback provisions also apply.
The transition of Hostmore to a listed company has
enabled us to broaden our colleague share ownership.
As was the case with the initial awards made under
the scheme in November 2021, the awards made on
9 June 2022 were granted to a significant number of
other employees down to restaurant manager level.
In general terms, awards at executive management
level were in the form of Performance Share Awards,
awards at regional director level were a combination
of Performance Share Awards and Restricted Share
Awards and awards at heads of functional areas and
other managers level, were generally Restricted Share
Awards.
Remuneration Policy and
implementation in FY22
The current Remuneration Policy was approved by
the Company’s shareholders at the 2022 AGM. The
Remuneration Policy is structured to align executive
remuneration with shareholder experience and
to support the strategy of the Company, and its
continued growth and success. The Remuneration
Policy also recognises the importance of attracting
and retaining high-quality talent. In developing the
Remuneration Policy, account was taken of the
prevailing market and best practices.
Implementation in FY22:
• The base salaries for the Executive Directors
were set at Admission at £485,000 for the CEO
and £340,000 for the CFO. These base salaries
remained unchanged during the period ended
1January 2023, except that the CEO and the
CFO, as well as all the Non-Executive Directors
and certain members of the Group’s Executive
Team, agreed, as part of their responsible
approach to remuneration, to a voluntary
reduction of 10% of salary from 1 October 2022 to
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Hostmore • Annual Report 2022
Governance report
31 December 2022 in light of the difficult trading
conditions faced by the Group.
• Executive Directors received a pension
contribution of 3% of their base salary in line
with the contribution percentage available to the
majority of the Group’s workforce.
• The maximum annual bonus payable was 125%
of the relevant Executive Director’s salary. At least
one third of any Executive Director’s annual bonus
earned was to be deferred into the Company’s
shares and was required to be held for three
years if the Executive Director had not met a
shareholding requirement of 300% of salary. For
the period ended 1January 2023, the bonus was
assessed against: EBITDA performance (70%) and
strategic measures (30%) – see Annual Report on
Remuneration on pages89 to 97 for more details.
The purposes of these metrics are detailed under
the heading “Our performance measures” on
page75. They are also aligned to our 4D strategy
which is detailed on page6. No annual bonus has
been or will be paid in respect of the period ended
1January 2023.
• On 9 June 2022, awards were granted under the
long-term incentive plan at 42% of salary, with
three performance metrics equally weighted –
relative TSR, EPS and ROIC. The purposes of
these metrics are detailed under the heading “Our
performance measures” on page75 and they are
aligned to our 4D strategy which is detailed on
page6. A two-year post-vesting holding period
applies.
• Neil Johnson, Louise Stonier and Jane Bednall
retired as Non-Executive Directors of the
Company on 27 May 2022, 12 December 2022
and 19 December 2022, respectively.
New Directors’ Remuneration
Policy (subject to approval at the
2023 AGM)
To address the challenges currently facing the
Company, the Committee is submitting an amended
remuneration policy for shareholder approval at the
2023 AGM.
This new policy does not increase the amounts
available to Executive Directors, but instead provides
for some discretions which will allow our remuneration
structure to better support our strategy in the current
exceptional circumstances.
In more detail, the changes to the Remuneration
Policy are as follows:
• Provide discretion to the Remuneration Committee
to set half yearly or quarterly targets and half
yearly or quarterly payments for the annual bonus
in exceptional circumstances. Noting the extreme
volatility in the sector in which Hostmore operates,
various financial metrics for 2023, including,
without limitation, turnover and profit, are less
straightforward to forecast accurately but there
is also the possibility of a rapid turnaround. As
a result, to ensure that targets remain relevant
throughout 2023 and to allow for the setting
of short term strategic targets that may not be
relevant throughout the full financial year, the
Committee intends to set a six monthly and two
quarterly targets and to allow for six monthly and
quarterly payments to be made for 2023. This
is not possible under the current Remuneration
Policy, but would be possible under the new
Remuneration Policy. The new Remuneration
Policy would not increase the amounts available to
Executive Directors.
• Allow for the temporary suspension of the
in-employment shareholding requirements
in exceptional circumstances when the
satisfaction of the requirement is unreasonable,
for example, due to a significant fall in share
price. Whilst the requirement is suspended, the
requirement to defer part of bonus into shares
if an Executive Director has not met a 300% of
salary shareholding requirement would also be
suspended. However, Executive Directors would
not be permitted to sell any shares they held prior
to the suspension of the requirement. In addition,
the post-cessation shareholding requirement
would continue to apply for a period of two years
following cessation.
• Flexibility in the recruitment policy to allow for
a one-off award of cash and/or shares when
promoting an existing employee to the Board.
These changes would support the setting of
appropriate targets for 2023, guard against excessive
dilution of existing shareholders, and provide flexibility
when seeking the successor for the position of CEO.
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Hostmore • Annual Report 2022
Annual Statement from the
Chair of the Remuneration Committee continued
Implementation of the
Remuneration Policy in FY23
The implementation for FY23 is set out below on
the assumption that the new Remuneration Policy is
approved by the Company’s shareholders at the 2023
AGM:
• Robert B. Cook resigned as a Director of the
Company on 9 January 2023. Details of the
payments Robert received in connection with his
departure are summarised in the Annual Report on
Remuneration (see page92).
• The base salary of the CEO remained unchanged
until he resigned on 9 January 2022. The base
salary of the CFO will remain unchanged for the
year to 31December 2023.
• Executive Directors receive a pension contribution
of 3% of salary in line with the contribution
percentage available to the majority of the Group’s
workforce.
• The maximum annual bonus payable remains
unchanged and is 125% of the relevant Executive
Director’s salary. Targets have been set for the
annual bonus for the first six months of the year,
comprising a mixture of financial and strategic
measures including number of covers, controlling
corporate costs and managing consolidated net
debt which will be subject to a multiplier ranging
from 0% to 125% (but still subject to the overall
maximum opportunity of 125% of salary) of Group
EBITDA. Currently, the Committee envisages
setting quarterly targets on a similar basis for
the last two quarters of the year. Bonuses will be
payable following determination of the outcomes.
The Remuneration Committee has decided not
to introduce a specific ESG metric at this time.
However, the Committee will keep this under
review and consider the introduction of such a
metric for future years in line with the Company’s
ESG strategy.
• Given the focus on achieving short term targets
and the low share price of the Company at this
time, the Committee does not currently intend
to make the normal annual awards under the
Company’s long-term incentive plan during 2023.
• The requirement for Executive Directors to
build their shareholdings to the in-employment
requirement of 200% of base salary has been
suspended, together with the requirement to defer
one third of any annual bonus if a 300% of base
salary shareholding requirement had not been
met. This will be reviewed at the end of FY23.
Pay and benefits of the Group
We operate a fair and equal pay structure that enables
us to attract, retain and incentivise high performing
individuals to deliver our strategy. We also champion
a fair and transparent service charge / TRONC /
gratuities system. The Board believes that the Group
implements a progressive pay structure to reflect
career development.
As Chair of the Remuneration Committee, Louise
Stonier held the position as the designated NED for
the wider workforce until she retired in December
2022. As Louise’s successor as Chair of the
Remuneration Committee, I performed this role
from my appointment on 12 December 2022 until
25January 2023 when it was decided that the Group
would engage with its workforce using a formal
workforce advisory panel. The Group operates an
Employee Forum which acts as the formal workforce
advisory panel. This will be attended by the CEO and
Karen Barnard, the People and Culture Director of
the Group,* throughout 2023, with a range of topics
to be discussed and feedback to be provided to the
Committee and myself.
The Company receives and acts upon employees’
feedback and also conducted a colleague
engagement survey in 2022. Diversity and inclusion
questions were included in the 2022 employee
engagement survey in support of the launch of our
diversity and inclusion agenda in 2023. The results
of this survey and the discussions at the Employee
Forum have continued to be considered by this
Committee. It is intended that a further colleague
engagement survey will be conducted in the second
half of 2023. The Group is looking to introduce a
Diversity and Inclusion Committee and a related
formal policy as part of this programme during 2023.
* Note: Karen Barnard is not a statutory director of Hostmore plc or
its subsidiaries.
The Committee’s key activities
The Committee’s additional activities during the
period ended 1 January 2023 were as follows:
• reviewing the Committee’s terms of reference;
• agreeing remuneration packages and
arrangements for senior employees;
• formulating the Company’s first Remuneration
Policy as a listed company;
• devising and implementing a bonus plan for
relevant employees in the Group; and
• implementing and making awards under the
Company’s share plan.
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Hostmore • Annual Report 2022
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Post the period ended 1 January 2023, the Committee
has been involved in the following key activities:
• agreeing amendments to the Remuneration Policy
to be put to shareholders for approval at the AGM;
• negotiating the settlement agreement with the
previous CEO;
• negotiating the employment terms with the new
Interim CEO; and
• initiating a candidate search for a new CEO.
Our performance measures
Performance measures are used to determine the
extent to which awards vest that are made under
the variable elements of the Group’s annual bonus
and the long-term incentive plan (the “LTIP”) in the
Executive Directors’ remuneration. The performance
measures are selected because they align to our
strategy, they are useful as Key Performance
Indicators (KPIs) to assess the Group performance
and they align the interests of the Directors to those of
the Company’s shareholders.
The measures used for the annual bonus for H1 2023 each fulfil a distinct purpose as set out below.
Measure Used in* Purpose
Group EBITDA Annual bonus Key strategic financial underpin
Covers Annual bonus Strategic imperative to improve performance
Corporate costs Annual bonus Strategic imperative to reduce costs in challenging
business environment
Internal reporting
Annual bonus
Increased speed and quality of internal reporting to
assist the Board in managing the business through this
turnaround phase
Guest feedback Annual bonus Improved guest experience to drive covers growth
Consolidated net debt Annual bonus Key strategic financial measure
Aggregate of store operating expenditure
and corporate office costs
Annual bonus Cost efficiency is a key financial metric
Refinancing process commenced Annual bonus Key strategic imperative
Bank facilities extended Annual bonus Key strategic imperative
* At the date of this report, only the annual bonus measures for H1 2023 have been set and, consequently, only those are detailed in the
above table.
Conclusion
I would welcome any feedback or comments on
the Remuneration Policy and the Annual Report on
Remuneration more generally. I hope that you find the
information in this report helpful and I look forward to
your support at the Company’s AGM.
David Lis
Chair of the Remuneration Committee
28 April 2023
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Hostmore • Annual Report 2022
Hostmore Remuneration Policy
This Directors’ Remuneration Policy (the
“Remuneration Policy”) has been prepared by the
Remuneration Committee (the “Committee”) in
accordance with the provisions of the Companies
Act 2006 and Schedule 8 of the Large and Medium –
sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2008 as amended (the
“Regulations”), the UK Corporate Governance Code
2018 and the Financial Conduct Authority’s Listing
Rules. The Remuneration Policy takes into account
the accompanying Directors’ Reporting Guidance
and the relevant guidelines of the shareholder
representative bodies. The Remuneration Policy will
be submitted to shareholders for approval at the
AGM on 7June 2023. The Committee intends that,
subject to shareholder approval being obtained, the
Remuneration Policy will operate for three years,
effective from the date of the 2023 AGM. The previous
remuneration policy was approved by shareholders at
the AGM on 27 May 2022 (the “2022 AGM”).
The remuneration strategy of the Group is to
provide remuneration packages that attract, retain
and motivate high-calibre talent to help ensure the
Group’s continued growth and success, incorporating
incentives that align with and support the Group’s
business strategy of optimising the Group’s brands,
aligning those brands with evolving consumer
requirements and delivering personalised customer
engagement. The Remuneration Policy is aligned
to the values and philosophies of the Group and
is intended to incentivise and reward long-term
sustainable growth of the Group and is aligned to
market best practice. The Company is committed
to fairness in the way that it pays all employees in
relation to their skills, experience and performance
and takes into account the way the wider workforce is
paid in setting executive pay.
The key changes the previous remuneration policy are
to:
• Provide discretion to set quarterly or six monthly
targets and quarterly or half yearly payments for
the annual bonus in exceptional circumstances.
• Allow for the temporary suspension of the
in-employment shareholding requirements
in exceptional circumstances when the
satisfaction of the requirement is unreasonable.
Whilst the requirement is suspended, the
requirement to defer part of bonus into shares
if an Executive Director had not met a 300% of
salary shareholding requirement would also be
suspended. However, Executive Directors would
not be permitted to sell any shares they held prior
to the suspension of the requirement. In addition,
the post-cessation shareholding requirement
would continue to apply for a period of two years
following cessation.
• Flexibility in the recruitment policy to allow for
a one-off award of cash and/or shares when
promoting an existing employee to the Board.
Key principles of the Remuneration Policy:
Principle How addressed
Clarity The Company operates a simple and transparent remuneration structure which allows clear
understanding by Executive Directors and external stakeholders.
Simplicity Remuneration for Executive Directors is comprised of distinct elements, with clear purposes and links
to the Group strategy.
Risk
The Committee endeavours to structure remuneration arrangements to ensure that risks from
potentially excessive rewards are easily identified and mitigated. The Remuneration Policy is designed
to discourage inappropriate risk taking through the weighting on long-term incentives.
Risk is taken account of by the Committee in the targets that are set, malus and clawback
provisions are included and requirements for the Executive Directors to hold shares both in and after
employment.
Predictability
The Committee seeks to ensure that annual salary increases and changes to the operation of plans
are clearly disclosed and that the potential value of each year’s remuneration is also clearly disclosed.
The Committee has discretion over variable pay and can adjust any pay outcomes that the Committee
deems are inconsistent with the performance of the Group.
Proportionality
The Committee seeks to provide a competitive remuneration package which will attract and retain
high calibre executives, as well as structuring packages so that a significant proportion is performance
related and does not reward poor performance.
Alignment to
culture
The Committee sets the Executive Directors’ pay packages having had due regard to pay and
employment conditions in the wider workforce and so that they do not drive behaviours that are
inconsistent with the Company’s strategy and values. It also ensures that such behaviours are properly
aligned with personal performance, the performance of the Group, and the interests of shareholders.
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Executive remuneration comprises a number of distinct elements, which are structured as follows:
Base Salary
Purpose and
link to strategy
Operation
Maximum
Opportunity
Performance metrics
and assessment
To recruit and retain
Executive Directors of the
right calibre who are capable
of developing and delivering
the Group’s strategy, by
providing a competitive and
appropriate level of fixed pay.
Base salaries are reviewed
annually by the Committee
and any changes are
normally effective from 1st
April each year.
The review takes into account
several factors including (but
not limited to):
• business performance;
• size and scope
of the individual’s
responsibilities;
• skills and experience of
the individual over time;
• pay and conditions
elsewhere in the Group –
including salary increases
awarded to the overall
employee population;
• market data for similar
roles and comparable
companies; and
• the overall economic
environment (including the
rate of inflation)
Whilst there are no maximum
salary increases, the rate
of any salary increase (in
percentage terms) will be
broadly in line with that of the
wider workforce.
Higher increases may
be made under certain
circumstances at the
Committee’s discretion. For
example, this may include
significant changes in
responsibility, a change of
scope in a role, a material
sustained change in the size
and/or complexity of the
Group or very strong
performance, meriting base
salary increases at greater
levels than that of the wider
workforce.
If pay is set at a discount
to the Company’s normal
policy on appointment,
it may be appropriate to
phase an individual towards
an appropriate rate using
increases above those of the
wider workforce based on
performance and experience.
No formal metrics, although
increases will take account of
Group performance.
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Hostmore Remuneration Policy
continued
Benefits
Purpose and
link to strategy Operation
Maximum
Opportunity
Performance metrics
and assessment
To provide market competitive
level of benefits to support
with the recruitment and
retention of Executive
Directors
The Executive Directors
receive benefits which
include, but are not limited
to, family private health
cover, life assurance cover,
critical illness cover and a
car allowance, together with
reimbursement of expenses
reasonably and properly
incurred in the performance
of their duties which are
claimed in accordance with
the Company’s expense
reporting procedure.
These benefits are not
pensionable.
Travel and/or relocation or
the temporary provision of
accommodation may be
offered where the Company
requires an Executive Director
to relocate. Expatriate
allowances may be offered
where required.
The Company may reimburse
any tax payable (on a
grossed up basis) on any
business expense which is
determined to be a taxable
benefit. Executive Directors
may become eligible for any
new benefits introduced to
a wider set of other Group
employees, which may
include any tax approved
all-employee share plans.
The value of each benefit
is not predetermined and is
based upon the cost to the
Group.
The Committee aims to
review both the level of
benefits provided and the
overall cost of the
benefits on a periodic
basis.
Not performance related.
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Hostmore • Annual Report 2022
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Pension
Purpose and
link to strategy Operation
Maximum
Opportunity
Performance metrics
and assessment
To provide retirement benefits
in line with those offered to
the majority of the workforce.
Contribution towards a
Group pension scheme
and/or a cash allowance
in lieu of Company
pension contributions, or a
combination of both.
Pension contribution rate
in line with rate applicable
for the majority of the UK
workforce (currently 3% of
base salary).
Not performance related.
Annual bonus
Purpose and
link to strategy Operation
Maximum
Opportunity
Performance metrics
and assessment
To incentivise the achievement
of stretching objectives that
support the Group’s corporate
goals and delivery of the
strategy.
For any Executive Director
that has not met a
shareholding requirement
of 300% of salary, delivery
of a proportion of any
bonus into the Company’s
shares provides additional
alignment with the Company’s
shareholders.
The Committee sets
Performance measures and
targets for each financial
year and determines the
payment level after year-end
by reference to the measures
and targets.
At least one-third of any
Executive Director’s annual
bonus earned will be deferred
into the Company’s shares
and must be held for three
years if the Executive Director
has not met a shareholding
requirement of 300% of
salary (i.e. 150% of the
in-employment shareholding
requirement which is
summarised below). The
remainder will be paid in cash.
Participants may be entitled to
receive dividend equivalents
which have accrued during
the period from grant to the
date the award vests (or if
there is a holding period
to the earlier of the date of
exercise and the end of the
holding period) on vested
shares, normally delivered in
shares. Malus and clawback
provisions apply (see notes).
The maximum bonus
opportunity is 125% of base
salary for each Executive
Director.
The pay-out will be
determined based on a range
offinancial andstrategic
and/or personal objectives.
At least 70% of the annual
bonus will be based on
financial performance targets.
The Committee retains
the flexibility to vary the
performance measures and/
or weightings for future
years. Up to one-third of
the maximum is payable at
threshold performance against
each measure.
The Committee has the
discretion to adjust the payout
that would otherwise result
by reference to the formulaic
outcome alone, taking into
account corporate and/
or personal performance,
to ensure the pay-out is
consistent with the Group’s
overall performance during
the year and/or shareholder
experience over the period
or the performance of the
Executive Director in delivery
of the business strategy and
results.
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Hostmore • Annual Report 2022
Hostmore Remuneration Policy
continued
Long-Term Incentive Plan (“LTIP”)
Purpose and
link to strategy Operation
Maximum
Opportunity
Performance metrics
and assessment
To incentivise the
achievement of long-term
sustainable growth and to
align Executive Directors and
senior employees with the
Company’s shareholders’
interests.
Normally, awards will be
made under the Company’s
LTIP annually following the
announcement of the annual
results apart from the first
award which was granted
shortly after Admission.
Discretionary annual award
which may be granted in the
form of nil-cost options or
conditional shares, and which
normally vest after three
years subject to performance
conditions and continued
service.
Performance is normally
measured over a period of
at least three financial years
(although the performance
period for two of the three
measures used for the
awards made shortly after
Admission (the EPS and
ROIC measures) will be
measured to the end of
the financial year ending
31December 2023). Awards
for Executive Directors are
subject to a two year post
vesting holding period in
respect of vested shares (net
of sales for tax and national
insurance).
The two year holding
requirement will normally
continue if they leave
employment during the
holding period. Participants
may also be entitled to
receive dividend equivalents
which have accrued during
the period from grant to the
earlier of the date of exercise
and the end of the holding
period on vested shares,
normally delivered in shares.
Malus and clawback
provisions apply (see notes
on page83). Awards are
subject to the discretions
contained in the LTIP rules.
The normal maximum grant
level for an Executive Director
is 150% of base salary
per annum (based on the
closing market value of the
Company’s shares on the day
prior to grant or an average
of the closing prices for a
short period prior to grant).
Awards are normally subject
to a combination of measures
which may include financial
and/or strategic measures
and/or total shareholder
return relative to the
constituents of a relevant
comparator index or peer
group. 25% of the maximum
award vests at the threshold
performance. The Committee
retains the flexibility to vary
the performance measures
and/or weightings for current
and/or future awards.
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Shareholding requirements
Purpose and
link to strategy Operation
Maximum
Opportunity
Performance metrics
and assessment
Share ownership
requirements for Executive
Directors are designed to
strengthen the alignment
between the interests of the
Executive Directors with
those of the Company’s
shareholders.
During employment
Executive Directors are
required to build and retain
a holding of the Company’s
shares equivalent to at least
200% of their base salary.
Executive Directors will be
required to retain 50% of
all vesting Company shares
that they receive under the
LTIP (net of sales for tax and
national insurance) until the
requirement is achieved. For
the purposes of the share
ownership requirements,
deferred bonus shares and
shares under the LTIP which
have vested but are subject
to a holding period will count
towards these requirements,
on a net value basis.
After employment
The shareholding requirement
will continue to apply for
a period of two years after
cessation of employment,
with Executive Directors
expected to retain the lower
of: (i)the shareholding
requirement (i.e. the 200%
requirement); and (ii)the
shares held at cessation of
employment.
200% of base salary Not performance related.
82
Hostmore • Annual Report 2022
Hostmore Remuneration Policy
continued
Directors’ and officers’ liability insurance (“D&O Insurance”)
Purpose and
link to strategy Operation
Maximum
Opportunity
Performance metrics
and assessment
Maintaining D&O Insurance
for Executive Directors is
designed to cover the cost of
defending civil and criminal
proceedings brought against
an individual acting in their
capacity as a Director or
Officer of the Company.
It therefore protects an
individual from claims which
result from that individual
carrying out his or her duties
as a Director.
The Company maintains
D&O Insurance to cover the
cost of defending civil and
criminal proceedings brought
against an individual acting
in their capacity as a Director
or Officer of the Company
(including those who served
as Executive Directors during
2021).
The benefit to a Director is
dependent on the nature of
the claim and the limitations
of the D&O insurance policy.
Not applicable.
Chair and Non-Executive Directors
Purpose and
link to strategy Operation
Maximum
Opportunity
Performance metrics
and assessment
To attract and retain a high-
calibre Non-Executive Chair
and Non-Executive Directors
who have a broad range
of skills and experience to
oversee the implementation
of the Group’s strategy, by
providing a competitive fee
level.
The Non-Executive Chair
receives an all-inclusive fee.
Non-Executive Directors
are paid a base fee, with
additional fees paid to the
Chairs of the permanent
Board Committees and
the Senior Independent
Director to reflect their extra
responsibilities. An additional
fee may also be payable
to reflect other additional
responsibilities. Fees are
reviewed annually by the
Committee for the Chair, and
by the Board for the Non-
Executive Directors. The
Chair and the Non-Executive
Directors do not participate
in any performance-related
incentive schemes, nor
do they receive pension
or other benefits from the
Company. The Company may
reimburse any tax payable
(on a grossed-up basis) on
any business expense which
is determined to be a taxable
benefit.
When reviewing fee levels,
account is taken of market
movements in the fees
of the Non-Executive
Chair and Non-Executive
Directors, Board Committee
Responsibilities and ongoing
time commitments. The total
amount of the fees paid to
all of the Non-Executive
Directors (excluding any
remuneration for special or
additional services) must not
exceed any amount decided
by the Company by ordinary
resolution.
Not performance related.
83
Hostmore • Annual Report 2022
Governance report
D&O Insurance
Purpose and
link to strategy Operation
Maximum
Opportunity
Performance metrics
and assessment
Maintaining D&O Insurance
for Non-Executive Directors
is designed to cover the
cost of defending civil and
criminal proceedings brought
against an individual acting
in their capacity as a Director
or Officer of the Company.
It therefore protects an
individual from claims which
result from that individual
carrying out his or her duties
as a Director.
The Company maintains
D&O Insurance to cover the
cost of defending civil and
criminal proceedings brought
against an individual acting
in their capacity as a Director
or Officer of the Company
(including those who served
as Non-Executive Directors
during 2021).
The benefit to a Director is
dependent on the nature of
the claim and the limitations
of the D&O insurance policy.
Not applicable.
Notes to the Policy table
Performance conditions
The Committee aims to ensure that the performance
measures for the annual bonus and LTIP represent
an appropriate balance between the short-term and
long-term performance of the Group, with measures
aligned to the Company strategy and key performance
indicators. At the beginning of each award cycle, the
Committee reviews and selects the most appropriate
performance measures, considering the key priorities
of the Group at the time over both the short and long-
term.
The Committee sets stretching but achievable targets
for both financial and non-financial measures. Details
are included in the Company’s annual report and
financial statements each year, subject to limitations
with regards to commercial sensitivity for the annual
bonus (where general terms will be provided). The
full details are also disclosed following the end of the
financial year in the Company’s next annual report
and financial statements subject if appropriate to
limitations with regards to commercial sensitivity for
the annual bonus.
Malus and Clawback
Malus and clawback can be applied within three years
of an LTIP award vesting or annual bonus payment as
determined at the discretion of the Committee. These
provisions may be applied by the Company in the
following circumstances by the participant:
(i) material financial misstatement;
(ii) significant reputational damage to the Group;
(iii) negligence or gross misconduct by a participant;
(iv) fraud effected by or with the knowledge of a
participant;
(v) breach of anti-bribery or anti-corruption laws by a
participant;
(vi) material corporate failure in the Group; or
(vii) where awards were granted or vested based on
erroneous or misleading data.
Committee Discretions
The Committee operates under the powers that have
been delegated to it by the Board. The Committee
operates the variable incentive plans in accordance
with the relevant plan rules, the Listing Rules and
applicable legislation. Within the plan rules, the
Committee retains a number of discretions to ensure
effective operation of the plans. The majority of these
discretions are standard market practice and include
(but are not limited to) the following:
• Selecting the participants in the incentive plans;
• Determining the timing of grants of awards and/or
payments;
• Determining the quantum of awards and/
or payments (within the limits set out in the
Remuneration Policy and rules of each plan);
• Determining the choice of (and adjustment
of) performance measures and targets for
each incentive plan in accordance with the
Remuneration Policy and rules of each plan;
• Determining whether to set targets at the start of
the year for the annual bonus, or to set targets
during the financial year, such as six monthly or
quarterly targets in which case bonus payments
84
Hostmore • Annual Report 2022
Hostmore Remuneration Policy
continued
could be made following determination of the
outcome;
• Determining the extent of vesting based on the
assessment of performance;
• Overriding formulaic annual bonus outcomes, and
LTIP vesting outcomes, taking account of overall
or underlying Group performance;
• Determining whether and to what extent dividend
equivalents should apply to awards;
• Determining whether malus and clawback
should be applied to any award in the relevant
circumstances and, if so, the extent to which they
should be applied;
• Making appropriate adjustments required in
certain circumstances, for instance for changes in
capital structure (or any similar corporate event);
• Application of the holding period;
• Determining “good leaver” status for incentive
plan purposes and applying the appropriate
treatment;
• Undertaking the annual review of weighting of
performance measures and setting targets for the
annual bonus plan and LTIP awards from year to
year; and
• Temporarily suspending the in-employment
shareholding requirement in exceptional
circumstances in which case the requirement to
defer one third of the annual bonus into shares if a
300% of salary shareholding requirement was not
met would also be suspended.
If an event occurs which results in the annual bonus
plan or the LTIP performance conditions and/or
the targets being deemed no longer appropriate,
such as a material acquisition or divestment, the
Committee will have the ability to adjust appropriately
the measures and/or targets and alter weightings,
provided that the revised conditions are not materially
less challenging than the original conditions. In
addition, the Committee may exercise its discretion
in order to make such other non-material decisions
affecting the Executive Directors’ awards in order to
facilitate the plans. Any use of the above discretion
would, where relevant, be explained in the Company’s
annual report on remuneration of Directors.
Legacy Arrangements
Any commitments entered into by the Group on pay
and bonus arrangements prior to the approval and
implementation of the Remuneration Policy outlined
above may be honoured, even if they are not consistent
with the Remuneration Policy prevailing at the time the
commitment is fulfilled. This may include commitments
to future Executive Directors where the terms were
agreed prior to (and not in contemplation of) promotion
to Executive Director, which includes satisfying awards
of variable remuneration based on the terms agreed at
the time the award was originally granted.
Illustration of the Remuneration
Policy
The chart below sets out the potential values (£’000)
of the remuneration package of the Executive Director
for FY23 under various performance scenarios.
0
100
200
300
400
500
600
700
800
900
Annual bonusFixed pay
Max with 50%
share price growth for LTIP
MaximumTargetMinimum
Remuneration (£000s)
100% 62% 45% 45%
351
564
776 776
38%
55% 55%
Chief Financial Officer
85
Hostmore • Annual Report 2022
Governance report
Notes:
• Salary represents annual salary for FY23.
• Benefits have been included based on the
anticipated value of benefits in FY23.
• Pension represents the value of the annual
pension of 3% of salary contributed by the
Company.
• Minimum: Fixed pay only (salary, benefits and
pension).
• Target performance: Fixed pay and annual bonus
at 50% of maximum (62.5% of salary). No LTIP
as currently there is no intention to award LTIP in
2023.
• Maximum performance: Fixed pay and maximum
annual bonus (125% of salary). No LTIP as
currently there is no intention to award LTIP in
2023.
• No maximum with share price growth as no
current intention to make an LTIP award in 2023.
• Scenario chart has only been shown for the
Executive Director currently in role at the date of
this report.
Service contracts and loss of office arrangements
The Executive Directors who served during the period ended 1 January 2023 each had or have a service
contract requiring 6 months’ notice on termination from either party:
Executive Director Date of service contract Notice period
Robert B. Cook
1
15 October 2021 6 months
Alan Clark 15 October 2021 6 months
1 Robert B. Cook stepped down as CEO and as a Director with effect from 9 January 2023. Details of his settlement are on page92. There
will be no further payments in respect of his exit.
New Executive Directors appointed internally will be appointed on service contracts that have a notice period of
not more than six months for both the Company and the individual. In cases of external appointments, the initial
notice period may be up to 12 months, reducing to no more than 6 months after not more than 12 months.
The Group’s policy on remuneration for Executive Directors who leave the Group is set out below and is
consistent with general market practice. The Group does not reward failure. The Committee’s policy for
Executive Directors’ termination payments is to provide only what would normally be due to Executive Directors
had they remained in employment in respect of the relevant notice period, and not to go beyond their normal
contractual entitlements. The rules of the annual bonus plan and the LTIP contain provisions setting out the
treatment of awards where a participant ceases to be employed by the Group. For both annual bonus and LTIP
awards, the Committee has the discretion to determine whether an Executive is a good or bad leaver. This is
summarised in the following table.
86
Hostmore • Annual Report 2022
Hostmore Remuneration Policy
continued
Remuneration element Approach
Fixed pay (salary,
benefits and pension)
Paid for the proportion of notice period worked. The Company may at its discretion terminate the
contract immediately, at any time after notice is served, by making a payment in lieu of notice
equivalent to salary, benefits (insurance benefits and car allowance) and pension. Any such
payments will normally be paid in monthly instalments over the remaining notice period and be
reduced by earnings from other employment. For summary dismissal, no notice will be given and
no payment in lieu of notice is payable.
Annual bonus (in year) Bad leavers (typically due to resignation or summary dismissal) will not be eligible to receive a
pay-out under the annual bonus scheme. Good leavers may receive an annual bonus payment,
which will normally be subject to the satisfaction of the relevant performance criteria tested at
the normal date and, ordinarily, the outcome will be calculated on a time pro-rata basis to date of
departure. The Committee retains discretion on whether the whole bonus payable is paid in cash,
or whether part of it is deferred either in cash or in shares.
Annual bonus (unvested
deferred shares)
For bad leavers, awards will lapse. For good leavers, shares will ordinarily vest on the normal
vesting date.
LTIP For bad leavers, unvested awards will lapse. For good leavers, awards will normally be retained
by the Executive Director and remain subject to the relevant performance conditions (normally
over the full performance period). Ordinarily, the outcome will be calculated on a time pro-rata
basis and vest at the normal vesting date. The Committee may, at its discretion, allow unvested
awards to vest at an earlier date, having regard to the achievement of performance conditions
to that date and the period of time that has passed since the date of grant. The Committee may
choose to apply no, or a reduced, reduction in the amount vesting if it is considered appropriate
given the particular circumstances.
Other payments The Committee may pay reasonable outplacement and legal fees where considered appropriate.
The Committee may also pay any statutory entitlements or settle or compromise claims in
connection with a termination of employment, where considered in the best interests of the
Company.
In the event of a change of control or similar event, awards may vest early subject to performance. In addition,
normally, any bonus or LTIP would be subject to pro-rating on a time apportioned basis. The Committee may at
its discretion determine that awards shall not be subject to time pro-rating or be subject to pro-rating to a lesser
extent if it considers this is appropriate. Following an internal reorganisation which results in a change of control,
awards may be rolled over into awards in the acquiring company.
87
Hostmore • Annual Report 2022
Governance report
Non-Executive Directors terms of
appointment
Each Non-Executive Director has specific terms
of engagement which are terminable on not less
than three months’ notice by either party, including
the Chair, unless waived by the Board. Each
Non-Executive Director’s appointment will continue
for an initial three-year term, subject to annual re-
election at each AGM. The appointment letters
state that Non-Executive Directors are typically
expected to serve two three-year terms but may
be invited by the Board to serve for an additional
period. The remuneration of Non-Executive Directors
is determined by the Board within the limits set by
the Articles of Association and based on a review of
fees paid to Non-Executive Directors of similar sized
companies. The dates of appointment of each of the
Non-Executive Directors serving at 1 January 2023 are
summarised in the table below.
Non-Executive Director Date of appointment
Gavin Manson 17 August 2021
David Lis 18 August 2021
Andrew Blurton 17 August 2021
Stephen Welker 15 August 2022
Recruitment of Directors – approach to remuneration
Consistent with market practice, remuneration packages for any new appointments to the Board (including
those promoted internally) will be set in line with the Remuneration Policy.
Remuneration element Approach
Base salary In setting base salaries for new Executive Directors, the Committee will consider the individual’s
level of skills and experience. Where it is appropriate to offer a below market salary on initial
appointment, the Committee will have the discretion to allow phased salary increases over
a period of time for a newly appointed Executive Director up to an appropriate salary for the
appointment, even though this may involve increases in excess of those awarded to the wider
workforce.
Benefits In line with the Policy table on page78. In addition, the Committee may consider it appropriate
to pay reasonable relocation or incidental expenses, including payment of reasonable legal
expenses. This will ordinarily be for a reasonable but fixed period of time and will be disclosed on
appointment. Tax recognizes may be considered if an Executive Director is adversely affected by
taxation due to their new employment with the Group.
Pension In line with the wider workforce.
Annual Bonus In line with the Policy table on page79, and pro-rated in the year of joining to reflect the period
of service. In setting the annual bonus, the Committee may set different performance metrics to
those of other Executive Directors in the first year of appointment.
LTIP Grants in line with the Policy table on page80. Subject to the absence of inside information and
the Company not being in a closed period, an award may be made shortly after Appointment.
Buyout awards
For external appointments, the Committee recognizes that it may need to provide compensation
for forfeited awards from the individual’s previous employer. To the extent possible, the design
of any buyout will be made on a broadly like-for-like basis and shall be no more generous than
the terms of the incentives they are replacing, taking into account the performance conditions
attached to the vesting of the forfeited incentives, the timing of vesting and the likelihood of
vesting. Share-based awards would be made using the existing share plans, although the
Committee may also use the flexibility provided under the Listing Rules to make awards without
prior shareholder approval.
88
Hostmore • Annual Report 2022
Hostmore Remuneration Policy
continued
For an internal appointment, any variable pay element
or benefit awarded in respect of their prior role may be
allowed to continue on its original terms. In addition,
the Committee recognises that it may sometimes be
appropriate to provide an award of cash and/or shares
on an internal appointment. Such awards would be
limited to a combined value of no more than £50,000.
The terms of appointment for a new Non-Executive
Director will be in accordance with the Policy for
Non-Executive Directors as set out in the Policy table
on pages82 and 83.
Executive Directors’ external
appointments
Executive Directors may accept external appointments
as Non-Executive Directors of other companies, as
long as the companies concerned are not competitors
of the Group, the appointment will not adversely
affect the performance of the Executive Director for
the Company, and with the specific prior approval of
the Board in each case. Any fees receivable may be
retained by the Executive Director concerned.
How shareholders’ views are taken
into account
The Committee will consider the views of shareholders
and proxy agents when reviewing the remuneration
of Executive Directors and other senior executives
and will take into account published remuneration
guidelines. The Committee will consult with the
Company’s key shareholders when considering
significant changes to the implementation of the
Remuneration Policy and when the Policy is being
reviewed (typically ahead of an AGM binding vote
on the Remuneration Policy). The Committee will
consider shareholder feedback received before and
after an AGM. The Committee values feedback from
its shareholders and seeks to maintain a continued,
open dialogue.
Broader employee context –
consideration of employment
conditions elsewhere in the Group
In accordance with the Committee’s terms of
reference, the Committee reviews the pay and
conditions below the Executive Director level. The
Committee considers executive remuneration in
the context of the wider employee population and
aims to provide a market competitive package to all
employees of the Group. As part of the annual salary
review, the Company takes into account current and
future requirements (including the National Minimum
Wage and the National Living Wage).
The Remuneration Policy for Executive Directors is
more weighted towards variable pay than for other
employees, with a greater part of their pay therefore at
risk to them and conditional on the successful delivery
of the Company’s business strategy. A significant
number of the Group’s salaried employees participate
in the annual bonus and the LTIP is operated for a
significant number of employees below the Executive
Directors. A lower aggregate level of incentive
payment applies below Executive Director level, by
reference to the potential impact of the role, internal
relativities, and market comparatives.
Whilst employees are not directly consulted on
matters of remuneration policy, the Committee
ensures there is an appropriate forum to discuss
any remuneration matters which should be taken
into account as part of its annual cycle. The Group
operates an Employee Forum which has been
attended by the Remuneration Committee Chair in
their capacity as the independent Non-Executive
Director for workforce engagement on behalf of
the Company, and the CEO. Going forward, Karen
Barnard, the People & Culture Director of the Group,*
will provide updates from the Employee Forum to
the Committee. This has and shall ensure that the
employee voice is heard directly by the Committee.
Employee engagement scores and other internal
surveys are also considered by the Committee.
* Note: Karen Barnard is not a statutory director of Hostmore plc or
is subsidiaries.
Minor amendments
The Committee may make minor amendments to the
Remuneration Policy set out above (for regulatory,
exchange control, tax or administrative purposes or
to take account of a change in legislation or to reflect
the passing of time) without obtaining shareholder
approval for such minor amendment.
89
Hostmore • Annual Report 2022
Annual Report on Remuneration
Governance report
This is the annual report which explains the
remuneration arrangements for the period ended
1January 2023, and how the Directors’ Remuneration
Policy (the “Remuneration Policy”) will be
implemented for the year ahead. The sections of this
part of the report which are subject to audit have been
highlighted.
Role and responsibility
The Remuneration Committee is formally constituted
and operates on written terms of reference, which
were reviewed and approved by the Board in October
2021. The terms of reference were updated, reviewed
and approved by the Board on 22 December 2022
and are available on the Company’s website. The role
of the Committee is to determine the remuneration
policy and individual packages for the Chairman
of the Board, each Executive Director and (on the
recommendation of the Chief Executive Officer)
each other member of the Group’s Executive Team.
The remuneration of the Non-Executive Directors
is determined by the Chairman and the Executive
Directors. When determining these arrangements, the
Committee will take into account all factors which it
deems necessary, including workforce remuneration,
related policies and the alignment of incentives and
rewards with culture.
The Committee seeks to ensure alignment of the
Remuneration Policy to the Company’s purpose
and values, and its link to the successful delivery of
the Company’s long-term strategy and shareholder
interests. The Committee is also responsible for
reviewing overall workforce remuneration and related
policies including gender pay gap, the CEO pay ratio
and minimum wage.
Remuneration Committee
membership
The Committee consists entirely of independent Non-
Executive Directors. The Committee members are as
follows:
• David Lis (Chair)
• Andrew Blurton
David Lis was appointed as a member of the
Committee on 27May 2022 and as Chair of the
Committee on 12December 2022. Louise Stonier
was Chair of the Committee until she stepped
down from the Board on 12 December 2022 due
to her expanded executive commitments external
to Hostmore. Gavin Manson was a member of the
Committee until he stepped down on becoming
Chairman of the Board at the AGM on 27May 2022.
Jane Bednall was a member of the Committee until
she stepped down from the Board on 19 December
2022 for personal reasons. Louise and Jane were
independent Non-Executive Directors but Gavin was
considered to be a non-independent Non-Executive
Director. The Company has initiated a formal search
for replacements for Louise and Jane and intends to
appoint at least one of the replacements as a member
of the Committee.
Please see the UK Corporate Governance Code
– Compliance Statement on pages54 and 55 for
an explanation of the limited instances where the
requirements of the UK Corporate Governance
Code have not been complied with in relation to the
Remuneration Committee.
The Committee met formally three times during the
period ended 1January 2023, with all members in
attendance. The Committee also met informally on
a number of occasions during the period ended
1January 2023.
Advice to the Committee
Wholly independent and objective advice on executive
remuneration and share schemes is received from
the Executive Compensation practice of Alvarez &
Marsal (A&M) who were appointed by the Company
in 2021 following a competitive tendering process.
The Company selected A&M on the basis of their skill
set, pricing and fit. The decision to appoint A&M was
ratified by the Remuneration Committee in advance
of Admission. A&M is a member of the Remuneration
Consultants’ Group and is a signatory to its Code of
Conduct. During the year, A&M did not provide any
other services to the Company except in relation to
senior management remuneration matters and share
plans. Fees charged by A&M for advice provided to
the Committee during the period ended 1January
2023 amounted to £85k (excluding VAT) charged on a
time and materials basis.
In addition, during the period ended 1 January 2023,
the Committee consulted with the CEO with regard to
the remuneration and benefits provided to the Group’s
Executive Team (other than in relation to the CEO’s
own remuneration). The Committee also received
input from Karen Barnard, the People & Culture
Director of the Group.*
* Note: Karen Barnard is not a statutory director of Hostmore plc or
its subsidiaries.
90
Hostmore • Annual Report 2022
Annual Report on Remuneration
continued
Single figure of remuneration for
the period from 3 January 2022 to
1January 2023 (audited)
The following table sets out the single figure
remuneration received or receivable during the period
from 3 January 2022 to 1 January 2023 and includes
the prior year comparative. The prior year’s figures
only cover the period from 14April 2021 (being the
date of the Company’s incorporation) to 2January
2022 and, therefore, the comparison is unable to be
on a like-for-like basis.
Whilst the table covers the period from 14 April 2021
for the prior year, it only details remuneration from
the Relevant Date to 2January 2022. The “Relevant
Date” for these purposes is (i) in the case of the
Executive Directors, 5October 2021 (being the date
upon which the Company’s subsidiary, Hostmore
Group Limited, acquired the beneficial interest in the
issued, voting share capital of Wednesdays (Bidco)
Limited); and (ii) in the case of the Non-Executive
Directors, the later date in 2021 upon which the
relevant individual was appointed as a Non-Executive
Director of the Company pursuant to his or her letter
of appointment (as detailed in the table).
£000s
Year
Relevant
Date
Salary
and
fees Benefits
1
Pensions
2
Annual
bonus LTIP
Total
fixed
remuneration
Total
variable
remuneration
Total
remuneration
Executive Directors
Robert B. Cook
3
2022 483 2 14 0 0 499 0 499
2021 5 October 2021 107 0 5 0 0 112 0 112
Alan Clark 2022 341 1 10 0 0 352 0 352
2021 5 October 2021 76 0 3 0 0 79 0 79
Non-Executive Directors
Neil Johnson
4,5
2022 49 0 0 0 0 49 0 49
2021 23 August 2021 25 0 0 0 0 25 0 25
Gavin Manson
4,6
2022 102 0 0 0 0 102 0 102
2021 17 August 2021 8 0 0 0 0 8 0 8
David Lis 2022 68 0 0 0 0 68 0 68
2021 18 August 2021 26 0 0 0 0 26 0 26
Jane Bednall
7
2022 49 0 0 0 0 49 0 49
2021
20 September
2021 14 0 0 0 0 14 0 14
Andrew Blurton 2022 59 0 0 0 0 59 0 59
2021 17 August 2021 23 0 0 0 0 23 0 23
Louise Stonier
8
2022 56 0 0 0 0 56 0 56
2021 20 August 2021 22 0 0 0 0 22 0 22
Stephen Welker
9
2022 0 1 0 0 0 1 0 1
2021 N/A N/A N/A N/A N/A N/A N/A N/A N/A
Notes:
1
This is the taxable value of benefits paid or payable in respect of the period from 3 January 2022 to 1 January 2023. These benefits
typically relate to life assurance and disability and medical insurance.
2
Executive Directors are entitled to receive a pension allowance of 3% of salary. The pension figures represent the cash amount of the
pension allowance taken in lieu of contributions to the Group’s pension plan.
3
Robert B. Cook stepped down as an Executive Director with effect from 9 January 2023.
4
Fees payable to Neil Johnson and Gavin Manson were paid to Electra Private Equity PLC until they stepped down from their executive
roles with that company on 31 January 2022.
5
Neil Johnson stepped down as Non-Executive Chair with effect from 27 May 2022.
6
Gavin Manson was appointed as Non-Executive Chairman with effect from 27 May 2022.
7
Jane Bednall stepped down as a Non-Executive Director with effect from 19 December 2022.
8
Louise Stonier stepped down as a Non-Executive Director with effect from 12 December 2022
9
Stephen Welker was appointed as a Non-Executive Director with effect from 15 August 2022.
91
Hostmore • Annual Report 2022
Governance report
Annual bonus (audited)*
The CFO was eligible for a bonus in relation to
performance over the financial period ended
1January 2023, whereas the CEO was not eligible
for a bonus due to his departure before the normal
payment date. The Committee measured performance
at the end of the financial year based on targets set at
the start of the year and determined that the annual
bonus payment would be nil. Further detail is set out
below.
The annual bonus for the financial period ended
1January 2023 was based 70% on EBITDA
performance and 30% on strategic targets. EBITDA
for the financial year of £11.3m was below the
threshold target which resulted in no payment of this
element of the bonus. Targets for EBITDA are set out
below:
Measure
Threshold
target
(33% of
element
payable)
Maximum
target
(100% of
element
payable)
Actual
outcome
Amount
payable
(% of
element)
EBITDA £28.9m £32.0m £11.3m 0%
* All figures in this “Annual bonus (audited)” section are provided
on an FRS102 basis.
Strategic measures account for 30% of the bonus.
For the CEO, these were based on expanding the
business in line with the 4D strategy, underpinned by
development, as set out in the Prospectus through the
organic growth of the then two existing brands, and
through M&A. For the CFO, these strategic measures
were based on banking measures and management
of energy costs. The strategic element of the bonus is
only payable if the threshold EBITDA target is met. As
this underpin was not met in the year, no amount was
payable in relation to this element.
LTIP awards vesting during the
year (audited)
No LTIP awards vested during the period under
review.
LTIP awards granted during the
year (audited)
The second round of awards under the LTIP scheme
was granted on 9 June 2022.
LTIP awards to Executive Directors
Director Type of award
Date of
grant
Number
of options
awarded
Basis of
award %
of salary
Share price
used to
determine
level of
award
pence per
share
Face value
£
% that
vests at
threshold
Vesting
date
1
Robert B. Cook
2
LTIP –
Performance
Share Award
9 June
2022
496,080 42% 40.7p
3
£201,905 25% 9 June
2025
LTIP – Initial
Performance
Share Award
17 Nov
2021
639,136
150%
113.8p
4
£727,500
25%
17 Nov
2024
Alan Clark LTIP –
Performance
Share Award
9 June
2022
347,767
42%
40.7p
3
£141,541
25%
9 June
2025
LTIP – Initial
Performance
Share Award
17 Nov
2021
448,054 150% 113.8p
4
£510,000 25% 17 Nov
2024
1
Following vesting, the awards are subject to a two-year holding period.
2
Robert B. Cook stepped down as an Executive Director with effect from 9 January 2023. As a result, his awards over 1,135,216 ordinary
shares in the Company lapsed with immediate effect.
3
Based on the Company’s average closing share price for the five business days to the dealing date prior to the date of grant. The share
price on the date of grant was 39.8p.
4
Based on the Company’s average closing share price from the date of listing to the dealing date prior to the date of grant. The share price
on the date of grant was 109.5p.
92
Hostmore • Annual Report 2022
Annual Report on Remuneration
continued
The Performance Share Awards granted on 9 June
2022 are subject to the following performance
conditions to be measured over three financial years
to FY 2024. The awards are subject to a two-year
post-vesting holding period. Malus and clawback
provisions apply in line with the Remuneration Policy.
Measure Measurement basis
Proportion of
total award
Threshold
(25% vests)
Maximum
(100% vests)
Relative TSR Company TSR vs FTSE
SmallCap (excluding
Investment Trusts) from date
of grant to 3
rd
anniversary of
date of grant
One-third Median Upper quartile
EPS Underlying fully diluted EPS
for FY 2024
One-third 11.90p 14.54p
ROIC Average ROIC for FY 2022,
FY 2023 and FY 2024
One-third 4.4% 5.4%
Payments made for loss of office
and payments to past Directors
(audited)
There were no payments for loss of office or payments
to past Directors made during period ended 1January
2023. Payments for fees and expenses paid for
services performed up until the date of departure for
each of Neil Johnson, Louise Stonier and Jane Bednall
were paid in accordance with their appointment
letters.
Each of Neil’s, Louise’s and Jane’s appointment letter
with the Company allowed the appointment to be
terminated by either party giving to the other party
three months’ written notice. Neil provided three
months’ written notice and was paid for those three
months (which he worked). Louise and Jane each
wished to leave without working their notice period.
Each signed a resignation letter in which they stated
that, other than in respect of fees and expenses which
were due to them as at their resignation date, they
waived all claims against the Company.
Robert B. Cook resigned as a Director of the
Company on 9 January 2023 (after the period under
review). Robert received the following payments in
connection with his departure: (i) base salary and
contractual benefits up to and including his final date
of employment on 9 January 2023; (ii) a payment
in lieu of accrued but untaken holiday up to and
including 9 January 2023; and (iii) a payment in lieu
of his six month notice period equal to his basic
salary for his six month notice period plus the cost
to the Company of providing his pension and car
allowance benefits for such six month notice period.
The Company will continue to pay premiums to any
group company appointed private medical insurance
policies on the same terms as applied on the date of
Robert’s departure from 9January 2023 for a period
of six months (equal to his notice period), subject to
the rules from time to time of the relevant scheme.
There have not been and will not be any payment to
Robert under the Company’s annual bonus plan for
2022 or 2023 and his long-term incentive plan awards
over 1,135,216 ordinary shares in the Company have
lapsed. There will be no further payments in respect
of his exit and, save as detailed above, no payment
for loss of office made by the Company to Robert in
respect of his exit.
Directors’ shareholdings and share
interests (audited)
Details of the Directors’ interests in shares of the
Company are shown in the following table. Executive
Directors are normally required to build and retain
a holding of the Company’s shares equivalent to at
least 200% of their base salary. However, given the
relatively low share price and the impact that this
would have on the percentage of the Company’s
shares that the Executive Directors would need to
hold to satisfy the requirement, the Committee has
suspended the shareholding requirement for the 2023
financial year. However, the shareholding requirement
will continue to apply for a period of two years after
cessation of employment, with Executive Directors
expected to retain the lower of: (i)the shareholding
requirement (i.e. the 200% requirement) and; (ii)the
shares held at cessation of employment.
93
Hostmore • Annual Report 2022
Governance report
Beneficially
owned at
1 Jan 2023
1
Subject to
continued
employment
Unvested
options
subject to
performance
conditions
Vested but
not exercised
options
Shareholding
requirement
Shareholding
as a
percentage
of salary
Shareholding
requirement
met?
2
Robert B. Cook
3
3,360,662 – 1,135,216 – 200% 90.7% N/A
Alan Clark 2,721,518 – 795,821 – 200% 104.9% N/A
Gavin Manson 2,444,789 N/A N/A N/A N/A N/A N/A
David Lis
4
415,000 N/A N/A N/A N/A N/A N/A
Andrew Blurton 0 N/A N/A N/A N/A N/A N/A
Stephen Welker
5
4,501,556 N/A N/A N/A N/A N/A N/A
Notes:
1
Neil Johnson resigned as a Director on 27 May 2022. As at 27 May 2022, Neil Johnson held 769,671 shares in the Company.
2
The Executive Director’s Shareholding Requirement Policy has been suspended for 2023, hence why whether the shareholding
requirement was met has been marked “N/A” for each of Robert B. Cook and Alan Clark.
3
Robert B. Cook stepped down as an Executive Director with effect from 9 January 2023 as a result of which his awards over 1,135,216
ordinary shares in the Company lapsed with immediate effect.
4
Includes 15,000 shares in the Company held by Mrs P. M. Lis.
5
Stephen Welker holds an aggregate of 4,501,556 shares in the Company, of which 249,374 shares are held in his own name and
4,252,182 shares are held by Beechenbrook Holdings LLC, of which Stephen Welker is the sole member.
There were no changes to the Directors’ interests between 1 January 2023 and the date of approval of this
report or, in the case of Robert B. Cook, between 1 January 2023 and 9 January 2023. The Company has not
been notified of any changes to Robert B. Cook’s interests between 9 January 2023 and the date of approval of
this report.
Performance graph and table
This graph shows the value of £100 invested in Hostmore ordinary shares compared with the value of FTSE
Small Cap (excluding Investment Trusts) since Admission until 1 January 2023. This index has been selected
as it comprises companies of a comparable size and complexity and provides a good indication of Hostmore’s
relative performance.
Hostmore FTSE Small Cap Excluding Investment Trusts
Value (£) (rebased)
Total shareholder return
Source: Datastream
2 November 2021 2 January 2022
1 January 2023
0
10
20
30
40
50
60
70
80
90
100
110
The data is shown as at the last close 30 December 2022.
94
Hostmore • Annual Report 2022
Annual Report on Remuneration
continued
CEO single
figure total
remuneration
(£000)
Annual
bonus (as %
of maximum
opportunity
Long-term
incentive
plan (as %
of maximum
opportunity)
2022 499 0% 0%
2021 112 N/A N/A
Percentage change in Directors’ and employee remuneration (audited)
The table below shows the percentage change in
the salary/fees, benefits and annual bonus of all
employees and Directors of the Company during
2022. For all employees including Directors, the table
covers the 52week period to 1January 2023 relative
to the 53week period to 2January 2022 or, in the
case of the Directors, the Relevant Date to 2January
2022. For Directors in the subsequent rows, the
table covers the 52 week period to 1January 2023
relative to the period from the Relevant Date to the
year end of 2 January 2022. The “Relevant Date”
for these purposes is (i) in the case of the Executive
Directors, 5 October 2021 (being the date upon which
the Company’s subsidiary, Hostmore Group Limited,
acquired the beneficial interest in the issued, voting
share capital of Wednesdays (Bidco) Limited); and
(ii) in the case of the Non-Executive Directors (other
than Stephen Welker*), the later date in 2021 upon
which the relevant individual was appointed as a Non-
Executive Director of the Company pursuant to his or
her letter of appointment. Therefore, the comparison is
not able to be on a like-for-like basis as the 2021 data
is in respect of only part of a year. In addition, Gavin
Manson stepped up to be Chairman at the 2022 AGM
meaning that his fees receivable in 2022 were greater
than those as a Non-Executive Director in 2021.
* Stephen Welker was appointed as a Non-Executive Director of the
Company on 15 August 2022.
Salary
2022
Benefits
2022
Annual Bonus
2022
All employees including Directors 13% 22% -1%
Robert B. Cook 351% n/a 0%
Alan Clark 349% n/a 0%
Neil Johnson 96% n/a n/a
Gavin Manson 1,175% n/a n/a
David Lis 162% n/a n/a
Jane Bednall 250% n/a n/a
Andrew Blurton 157% n/a n/a
Louise Stonier 155% n/a n/a
Stephen Welker n/a n/a n/a
CEO pay ratio (audited)
The following table shows the ratio between the
total remuneration of the CEO and the median total
remuneration of our UK employees. Employee total
remuneration has been calculated using “Option A” of
the regulations.
Method
25
th
percentile
pay ratio
50
th
percentile
pay ratio
75
th
percentile
pay ratio
2022 Option A 23:1 20:1 17:1
2021 Option A 27:1 20:1 19:1
The above ratios have been calculated using the
single figure for the CEO and the following statistics
for our UK employees:
95
Hostmore • Annual Report 2022
Governance report
CEO 25
th
percentile 50
th
percentile 75
th
percentile
Total salary 2022 £482,875 £21,234 £25,519 £28,903
Total remuneration
(Single figure) 2022 £498,897 £21,234 £25,519 £29,284
The above table sets out the ratios of the CEO
single total figure of remuneration of £498,897 to the
equivalent pay for the lower quartile, median and
upper quartile UK employees (calculated on a full time
equivalent basis) from 3 January 2022 to 1January
2023.
The ratio has been calculated using Option A under
which a single total figure of remuneration is derived
for each employee and the quartiles analysed. The
total remuneration figure comprises base salary,
benefits, pension, bonus and long-term incentives
and any one-off payments. All UK employees were
ranked by their total remuneration and from this the
remuneration of the individuals at the 25th, 50th and
75th percentiles were confirmed.
The median (50th percentile) ratio is consistent with
Hostmore’s pay, reward and progression policies for
employees which relate pay levels to performance
and market benchmarks. Under our policy, in-line with
practice in our sector, the extent to which total pay
is dependent on performance is linked to seniority,
with more senior roles having higher levels of variable
remuneration ensuring their pay is more dependent on
Group performance and has the greatest alignment
with shareholders. As such, we expect the ratio to
vary in future years, as the single figure for the CEO
does not include any variable pay for the period ended
1January 2023.
Relative importance of the spend
on pay (unaudited)
The table below shows the Company’s expenditure
on employee pay compared to distributions to
shareholders from 3 January 2022 to 1 January 2023
compared with the prior period (5 October 2021, being
the date upon which the employees became part of
Hostmore’s group) to 2 January 2022.
2022
£m
2021
£m
Distributions to shareholders 0 0
Total employee pay 68.825
1
18.927
1
This number is sourced from Note 13 to the financial statements for the 52 week period ended 1 January 2023, less the remuneration of
the Non-Executive Directors as disclosed in Note 38.
External appointments
The Board considers whether it is appropriate for
Directors to take on any additional directorships
and whether Executive Directors may retain any
remuneration from any external roles. Alan Clark does
not currently hold any external appointments. Robert
B. Cook, who resigned as Chief Executive Officer and
as a Director of the Company on 9January 2023, is
a Director of two family run companies, Cookie Jar
Hospitality (Consultancy) Limited and The Cookie Jar
(Alnwick) Limited, and also a Director of Occupyd
Limited (which trades as Obvlo), a new hospitality
infotech company. He was entitled to retain fees in
respect of these company directorships, so far as
has been advised to the Board, no fees were payable
by any of these companies for the period ended 1
January 2023.
Statement of shareholding voting
The Remuneration Report for the period ended
3January 2022 was approved at our Annual General
Meeting held on 27May 2022, with 99.91% of the
votes cast in favour, and 0.09% of the votes cast
against.
Implementation of Policy in FY23
Executive Directors
Implementation for FY23 is consistent with the Policy
as outlined earlier in this report.
96
Hostmore • Annual Report 2022
Annual Report on Remuneration
continued
Element Operation
Base annual salary Base annual salaries remain unchanged:
CEO: (Robert B. Cook): £485,000 (to 9 January 2023)
Interim CEO (Julie McEwan): £200,000 (from 9 January 2023)
1
CFO: (Alan Clark) £340,000
Benefits and pension Executive Directors receive a cash allowance in lieu of pension contribution of 3% of salary in line
with the contribution percentage available to the majority of the Group’s UK workforce.
Other benefits include private health cover, life assurance cover, critical illness cover, D&O
insurance and a car allowance, together with reimbursement of expenses (including travel and
accommodation expenses for the CEO)
Annual bonus plan Maximum opportunity is 125% of the relevant Executive Director’s base salary
The current intention of the Committee is to exercise its discretion to suspend the shareholding
requirement (given the very low share price) and hence the requirement for the Executive Directors
to defer at least one-third of their annual bonus earned into the Company’s shares and to hold
these for three years if the Executive Director has not met a shareholding requirement of 300% of
salary
Metrics for the first six months include:
• For the Interim CEO:
• Increasing the number of covers
• Controlling corporate costs
• Improving the quality and timeliness of internal reporting
• Improving guest satisfaction scores
• Managing net debt
with the whole bonus then subject to an EBITDA underpin/multiplier.
• For the CFO:
• Improving the quality and timeliness of internal reporting
• Managing net debt
• Controlling corporate costs and operating expenditure against targeted levels in business
plan
• Refinancing process commenced
• Extending bank facilities
with the whole bonus then subject to an EBITDA underpin/multiplier
The specific targets are considered to be commercially sensitive and will be retrospectively
disclosed in next year’s Annual Report to the extent that they are no longer considered to be
commercially sensitive.
Malus and clawback provisions apply in line with the Policy
Long-term incentive plan Given the current low share price and the focus on achieving short-term objectives during the
period of recovery, currently the Committee does not intend to make the normal annual grant of
awards immediately following the annual results of up to 150% of base salary of the Executive
Director
1 In addition to Julie’s salary, Julie will receive a one-off share award of ordinary shares of 20p each to reflect the additional responsibilities
of being interim CEO with the Company meeting any income tax and National Insurance Contributions arising as a result of the making of
such award. It is proposed that these shares will be transferred to Julie by Intertrust Employee Benefit Trustee Limited, the trustee of the
Hostmore plc 2021 Employee Benefit Trust, from shares currently held by the Trust.
97
Hostmore • Annual Report 2022
Governance report
Non-Executive Director fees
The fees paid to the Non-Executive Directors for the period ended 1 January 2023 are summarised below:
Fee
2022 2021
Chairman of the Board £150,000 £150,000
Non-Executive Director base fee
1
£50,000 £50,000
Senior Independent Director £20,000
2
£20,000
2
Chair of Board Committee (other than the Chairman of the Board) £10,000
3
£10,000
3
1
Despite being a Non-Executive Director, Stephen Welker does not receive the Non-Executive Director base fee. Instead, Stephen’s
expenses incurred in relation to travelling from the US to attend Board meetings are reimbursed by the Company.
2
This is in addition to the Non-Executive Director base fee. This will be reduced to £10,000 once a Chairman is appointed who is
considered to be independent under the UK Corporate Governance Code.
3
This is in addition to the Non-Executive Director base fee.
This report was approved on behalf of the Board of Directors on 28 April 2023.
David Lis
Chair of the Remuneration Committee
28 April 2023
98
Hostmore • Annual Report 2022
Directors’ Report
Introduction
The Directors present their report and audited financial
statements for the 52-week period ended 1January
2023. Information required to be part of the Directors’
Report either by statute, by Listing Rule 9.8.4R or by
the Disclosure and Transparency Rules can be found
either in this section or elsewhere in this document,
as indicated in the table below. All information located
elsewhere in this document is incorporated into this
Directors’ Report by reference:
Disclosure Location
Future business developments Strategic Report – pages2 to 48
Financial risk management objectives and policies (including
hedging policy and use of financial instruments) Note30 to the Financial Statements – pages155 and 156
Exposure to price risk, credit risk, liquidity risk and cash flow
risk
Page43 of the Strategic Report and Note30 to the
Financial Statements
Section 172 Statement Strategic Report – pages28 to 33
Stakeholder engagement in key decisions Strategic Report – pages28 to 33
The Company’s statement on corporate governance Corporate Governance Report – pages54 to 64
Directors’ responsibility statement Page105
Directors’ interests Directors’ Remuneration Report – pages92 and 93
Details of long-term incentive schemes
Directors’ Remuneration Report – pages75, 80 and 81,
83to 87, and 91 and 92
Corporate Governance
Arrangements
The Board is committed to the highest standards
of corporate governance. Since Admission on
2November 2021, the UK Corporate Governance
Code has applied to the Company.
The Company fully complies with the UK Corporate
Governance Code, save in relation to: (i)the
independence of the Chairman of the Board and the
appointment process followed (which is explained
further in the Corporate Governance Report on
page54): (ii)temporary exceptions concerning the
compositions of the Audit and Risk Committee and
Remuneration Committee (which were resolved
following the Company’s Annual General Meeting
on 27May 2022, as detailed on page55); and (iii)as
a result of both Louise Stonier and Jane Bednall
retiring as independent Non-Executive Directors of the
Company in December 2022, a temporary exception
regarding the recommendation that at least half the
Board, excluding the Chairman, should be Non-
Executive Directors whom the board considers to be
independent (which was resolved when Robert B.
Cook stepped down as Chief Executive Officer and
as a Director of the Company on 9 January 2023).
Following the departures of Louise, Jane and Robert,
the Company has commenced a search to appoint
two independent Non-Executive Directors and a
permanent Chief Executive Officer, who will also be
an Executive Director, to the Board to ensure good
governance and to accord with the recommendation
of the UK Corporate Governance Code with regards
to the balance of the Board. Further details are set out
on pages54 and 55 of the Governance Report.
Directors
The Directors of the Company who were in office
during the year are stated below with (each Director
being in office for the full year unless otherwise
stated):
• Neil Johnson (Non-Executive Chair until he retired
from the Board on 27 May 2022)
• Gavin Manson (Non-Executive Director until he
became Non-Executive Chairman on 27May 2022)
• Robert B. Cook (Chief Executive Officer)
• Alan Clark (Chief Financial Officer)
• David Lis (Senior Independent Non-Executive
Director)
• Jane Bednall (Independent Non-Executive Director
until she retired from the Board on 19 December
2022)
• Andrew Blurton (Independent Non-Executive
Director)
• Louise Stonier (Independent Non- Executive
Director until she retired from the Board on
12December 2022)
• Stephen Welker (Non-Executive Director
appointed on 15 August 2022)
The biographies of the Directors in office as at the
date of this Annual Report and Financial Statements
are set out on pages50 to 52 of the Corporate
Governance Report. Robert B. Cook resigned as Chief
99
Hostmore • Annual Report 2022
Governance report
Executive Officer and as a Director of the Company on
9 January 2023. There have been no other changes to
the members of the Board since 1 January 2023 to the
date of this report.
The Powers of the Company’s
Directors
The powers of the Directors are set out in the
Company’s articles of association (the “Articles”)
and the Companies Act 2006 and are subject to any
directions given by special resolution. The Directors
are responsible for the management of the Company’s
business, for which purpose they may exercise all
the powers of the Company whether relating to the
management of the business or not. Subject to the
Articles, the Directors may also delegate any of their
powers, authorities and discretions as they see fit.
The Board is required by the Articles to consist of no
fewer than two Directors and is not subject to any
maximum number.
Appointment and replacement of
Directors
The rules governing the appointment and replacement
of Directors are set out in the Articles and are
governed by the UK Corporate Governance Code,
the Companies Act 2006 and related legislation.
Directors may be appointed by ordinary resolution
of the shareholders or by the Board. At each AGM,
all Directors who have held office since the previous
AGM will offer themselves for re-election by the
members to the Company’s Board.
Articles of Association
The Articles may be amended by a special resolution
of the Company’s shareholders. They were adopted
by special resolution on 7 October 2021 and took
effect from the date of re-registration as a public
company limited by shares on 13 October 2021.
As well as setting out the rules governing the
appointment and replacement of Directors, the
Articles also set out, amongst other matters, the
Directors’ general authorities, rules on decision-
making by the Directors, as well as the powers of the
Directors in relation to issuing shares and buying back
the Company’s own shares.
Directors’ Insurance and
Indemnities
Directors’ and Officers’ liability insurance cover is
maintained by the Company and is in place in respect
of all the Company’s Directors at the date of this
Annual Report and Financial Statements. The Company
reviews the level of cover on an annual basis.
The Company’s Articles provide, subject to the
provisions of UK legislation, that the Company may
indemnify each Director and Officer of the Company
and the Group in respect of liabilities they may incur in
the discharge of their duties or in the exercise of their
powers. A deed poll was executed by the Company in
2021 indemnifying:
(i) the then Directors of the Company and also those
individuals who agree from time to time after the
date of the deed poll to serve as Directors of the
Company;
(ii) any Director of the Company in their capacity as a
director of a subsidiary of the Company from time
to time; and
(iii) any person who acts in their capacity as the
company secretary of the Company or any
subsidiary of the Company from time to time.
The indemnity, which constitutes a qualifying third-
party indemnity provision as defined by section 234 of
the Companies Act 2006, has been in force since the
2021 financial year and remains in force.
Compensation for loss of Office on
a takeover
The Company does not have any agreements with any
Executive Director or employee that would provide
compensation for loss of office or employment
resulting from a takeover except that: (i)provisions
of the Company’s long-term incentive plan may
cause options and awards outstanding under such
schemes to vest on a takeover; and (ii)provisions of
the Company’s bonus plan rules which apply to the
Executive Directors and the members of the Group’s
Executive Team may cause bonus payments to be
payable on a takeover. Further information is provided
in the Directors’ Remuneration Policy on page86.
Results and Dividends
The results of the Group for the period ended
1January 2023 are set out in the Consolidated
Statement of Comprehensive Income on page120.
The financial position of the Group is disclosed in
the Consolidated Statement of Financial Position
100
Hostmore • Annual Report 2022
Directors’ Report
continued
on pages121 and 122. The financial position of the
Company is disclosed in the Company Statement of
Financial Position on page158. The Directors are not
proposing a dividend for the 52-week period ended
1January 2023.
Review of Business
A review of the business can be found in the Strategic
Report on pages2 to 11.
Going Concern
The going concern statement and viability statement
can be found in the Strategic Report on pages39
to41.
Political Donations
The Company did not make any political donations
during the period ended 1 January 2023.
Research and Development
There was no expenditure on Research and
Development during the period ended 1January 2023.
Share Capital Structure
Details of the Company’s share capital are set out
in Note28 to the Financial Statements. At 1 January
2023, the Company’s issued share capital consisted
of 126,127,279 Ordinary shares of 20 pence each.
There have been no changes to the Company’s issued
share capital since the financial period end.
Ordinary shareholders are entitled to receive notice
of, and to attend and speak at, any general meeting of
the Company. On a show of hands every shareholder
present in person or by proxy (or being a corporation
represented by a duly authorised representative) has
one vote, and on a poll every shareholder who is
present in person or by proxy has one vote for every
share of which he is the holder. The Notice of Annual
General Meeting specifies deadlines for exercising
voting rights and appointing a proxy or proxies.
Other than the general provisions of the Articles and
prevailing legislation there are no specific restrictions
of the size of a holding or on the transfer of Ordinary
shares.
No shareholder holds securities carrying any special
rights or control over the Company’s share capital.
Authority for Company to
Purchase its own Shares
Subject to authorisation by shareholder resolution, the
Company may purchase its own shares in accordance
with the Companies Act 2006. Any shares which have
been bought back may be held as treasury shares
or cancelled immediately upon completion of the
purchase. At the Company’s annual general meeting
held on 27May 2022, the Company’s shareholders
passed a special resolution in accordance with the
Companies Act 2006 to authorise the Company to
purchase in the market up to a maximum number
of 12,612,727 shares in the Company, representing
10% of its issued share capital at 27May 2022,
within normal guidelines. No market purchases were
made under this authority during the period from the
Company’s annual general meeting on 27May 2022
to the date of approval by the Board of this Report.
Significant Interests
At 1 January 2023, the Company had been notified
of the following interests of 3% or more in the issued
share capital of the Company under the UK Disclosure
and Transparency Rules:
Name of shareholder
At 1 January 2023
Number of Ordinary shares
of 20 pence each held
Percentage of total
voting rights held
Witan Investment Trust plc 16,656,417 13.21
Fidelity International 13,866,200 10.99
First Equity Limited 8,850,000 7.02
Oryx International Growth Fund Limited 7,500,000 5.95
Edward J. Bramson 5,120,185 4.06
Crown Sigma UCITS 4,518,000 3.58
Stephen L. Welker 4,501,556 3.57
Notes:
* Edward J. Bramson held 5,120,185 Ordinary shares of 20 pence each in the Company at 1 January 2023, of which 205,993 were held in
his own name and 4,914,192 were held in the name of Wykeham LLC of which Edward J. Bramson was and is the sole member.
** Stephen L. Welker held 4,501,556 Ordinary shares of 20 pence each in the Company at 1 January 2023, of which 249,374 were held in his
own name and 4,252,182 were held in the name of Beechenbrook Holdings LLC, of which Stephen Welker was and is the sole member.
101
Hostmore • Annual Report 2022
Governance report
Since 1 January 2023 and up to 26 April 2023, the
Company had also been notified that Harwood Capital
LLP had an indirect interest of 7.18% (9,050,000
shares), of which 7,500,000 were held in the name of
Oryx International Growth Fund Limited (5.95%) (as
already shown in the table above) and 1,550,000 were
held in the name of Rockwood Strategic plc (1.23%).
Employee Engagement
The Group seeks to provide employees with
information on matters which may affect them as
employees. The principal means by which this is
achieved is via team meetings, operational national
and regional meetings, less formal events (such as the
4th July, Thanksgiving and Christmas celebrations),
site visits, webinars, the Group’s intranet (including
through its news feed) and e-mail systems, monthly
business updates, the Employee Forum and through
the Group’s online learning platform, The Academy.
The Group encourages dialogue with its employees
and consults its employees and their representatives
on a regular basis via multiple channels, such as team
meetings, the Employee Forum and online polls, so
that the views of employees can be taken into account
in making decisions which may affect their interests.
In the period ended 1 January 2023, Thursdays (UK)
Limited, the company in the Group that employs
almost the whole of the Group’s workforce, partnered
with Great Place to Work on an engagement survey
and was accredited with being a “Great Place to
Work”. The survey consisted of 60 questions that
focused on the employee/manager relationship,
culture and values and an overall view of the business
performance.
The Company implemented a long-term incentive
plan which employees in the Group at restaurant
general manager level and above participate in.
This scheme has a number of objectives, including
promoting employee retention, ensuring a common
awareness on the part of employees of the financial
and economic factors affecting the performance of the
Group and encouraging employees to be aligned in
ensuring that the Group achieves its targets.
The Executive Directors are primarily responsible for
engaging with employees. This engagement takes
many forms, including those highlighted above. The
Chief Executive Officer attends and, in her role as the
independent NED for workforce engagement, Louise
Stonier, the Chair of the Remuneration Committee,
attended the Employee Forum meetings. During 2023
Karen Barnard, the People & Culture Director of the
Group,* will provide updates on the Employee Forum
to the Committee. As the Group’s biggest asset, the
Directors seek to ensure the Group offers an engaging
and rewarding culture and work environment to
its employees, with an opportunity to share in the
Group’s success. The Group believes it offers a
competitive remuneration and benefits package to its
employees, with opportunities for learning and career
development. The opportunities for learning and
career development have been strengthened by the
launch of a new learning management system and the
“Aspire” future leaders’ programme.
* Note: Karen Barnard is not a statutory director of Hostmore plc or
its subsidiaries.
Employees/Disabled Persons
We aim to provide an inclusive, accessible and
safe work environment and we acknowledge the
significance of access and equality for people
with a disability. We do this by: (i)giving full and
fair consideration to applications for employment
made by disabled persons, having regard to their
particular aptitudes and abilities; (ii)by continuing the
employment of, and by arranging appropriate training
for, employees of the Group who have become
disabled; and (iii)by providing career development
and promotion opportunities to disabled employees of
the Group.
Equality, Diversity and Inclusion
We foster a fully inclusive culture and environment,
where diversity is welcomed, encouraged and
celebrated. Inclusivity is one of our Values and
Philosophies as we continue to be accessible,
inviting, collaborate with, and respectful to, guests,
employees, shareholders and business partners. In
living these Values and Philosophies, we welcome and
celebrate individuals of ‘all stripes’ which aligns with
our “Show Your Stripes” media campaign.
Building on the Company’s existing policies
preventing discrimination, the Company is working
on the introduction of a diversity and inclusion
programme to be introduced in 2023, including a
Diversity and Inclusion Committee and an aligned
policy. Diversity and Inclusion questions were included
in the 2022 Employee Engagement Survey in support
of the launch of our Diversity and Inclusion agenda
for 2023. In addition, each new starter is required to
complete online Equality and Diversity training as part
of their induction.
The Group is committed to having a diverse and
inclusive team and providing equal opportunities to
all team members. We do not tolerate discrimination
based on race, religion, nationality, culture, gender,
gender identity, disability, sexual orientation or age.
102
Hostmore • Annual Report 2022
Directors’ Report
continued
Branches outside of the UK
The Company has no branches outside the UK.
Change of Control – Significant
Agreements
There are a number of agreements that may take
effect after, or terminate upon, a change of control of
the Company, such as commercial contracts, bank
loan agreements and property lease arrangements.
The only significant agreements to which a member
of the Group is a party that could take effect,
alter or terminate upon a change of control of the
Company following a successful takeover bid,
without agreement from the relevant parties to those
agreements, are as follows:
• The facilities agreement
The facilities agreement dated 30 August 2017
amongst Wednesdays (Bidco) Limited (as Borrower),
Thursdays (UK) Limited and Thursdays (Holdings)
Limited (each as Guarantors), HSBC Bank plc (as
Agent), HSBC Corporate Trustee Company (UK)
Limited (as Security Agent), and HSBC UK Bank plc
and National Westminster Bank plc (each as Lenders),
as amended and restated on 7July 2021 and further
amended on each of 5July 2022 and 20September
2022. On 28April 2023 the Borrower signed a bank
facility restatement agreement with the Lenders.
Under the terms of this agreement, certain covenants
in the previous facility agreement have been amended
to align with the Group’s two year forward forecasts.
Pursuant to the agreement, the Lenders make certain
banking facilities available to the Borrower. The
agreement contains a change of control provision
which provides that, in the event of a (direct or
indirect) change of control of Wednesdays (Bidco)
Limited, the Lenders may cancel their commitments
and require repayment of all outstanding amounts;
• The development agreement for TGI Fridays
casual dining restaurants
The development agreement dated 2 November 2021
amongst TGI Fridays Franchisor, LLC (as Franchisor),
Thursdays (UK) Limited (as Developer) and the
Company (as Principal), as amended on 2 March
2023. Pursuant to the development agreement, the
Developer is granted the exclusive right to develop
and operate TGI Fridays restaurants in the “Territory”
(being England, Scotland, Wales, the Channel Islands,
and the Isle of Man, as geographically constituted on
the date of the development agreement, excluding
United States military bases). The development
agreement places various obligations on the Principal.
The development agreement states that, provided
certain requirements detailed in the development
agreement are met, the Developer and/or the Principal
may complete a “Transfer” (which includes, amongst
other things, a sale or transfer, whether direct or
indirect, of any equity interests in the Developer or
its parent undertakings where such transfer or sale
would result in a person other than the person who
was the Principal immediately before the transfer or
sale having ultimate control of the Developer) without
the Franchisor’s consent, provided that such Transfer
is not made to a “Non-Permitted Transferee”. A
Non- Permitted Transferee includes, amongst other
categories or persons, a person that owns or operates
any directly competing business or is an affiliate of
any such person (unless such affiliate is a portfolio
company of a person that is a private equity fund,
company or similar). Neither the Developer nor the
Principal may complete, or allow to be completed,
any Transfer that is not a “Permitted Transfer”
without the Franchisor’s prior written consent, which
the Franchisor may condition or withhold at its sole
discretion.
Any Transfer that occurs other than as permitted
in accordance with the relevant provisions of the
development agreement shall constitute an “Event of
Default” under the development agreement. Upon the
occurrence of an Event of Default which is continuing
and has not been cured, the Franchisor may exercise
one or more of various remedies. These include the
right to terminate the development agreement.
If, as a result of the Transfer, the Principal no longer
has ultimate control of the Developer, the Principal’s
rights and obligations under the development
agreement (and any covenant given by the outgoing
Principal in the form attached to the development
agreement) are required to be novated to the
person(s) which, following the Transfer, has ultimate
control of the Developer (as the case may be), and
that person shall be the new “Principal”. The new
Principal will enter into a deed of adherence in respect
of the development agreement as the Principal, and
the outgoing Principal will cease to have any further
rights, obligations or liability in connection with the
development agreement after the Transfer and after
entry into the deed of adherence by the new Principal.
• Franchise agreements for TGI Fridays casual
dining restaurants
TGI Fridays Franchisor, LLC (as Franchisor),
Thursdays (UK) Limited (as Franchisee) and
the Company (as Principal) are, pursuant to the
development agreement described above, required
to enter into a separate franchise agreement upon the
103
Hostmore • Annual Report 2022
Governance report
opening of and in respect of carrying on business in
each of the TGI Fridays restaurants in the Territory.
Each franchise agreement is based on the standard
franchise agreement and places various obligations on
the Principal.
Each franchise agreement states that, provided
certain requirements detailed in the development
agreement and the relevant franchise agreement
are met, the Franchisee and/or the Principal may
complete a “Transfer” (which includes, amongst
other things, a sale or transfer, whether direct or
indirect, of any equity interests in the Franchisee or
its parent undertakings where such transfer or sale
would result in a person other than the person who
was the Principal immediately before the transfer
or sale having ultimate control of the Developer),
without the Franchisor’s consent, provided that
such Transfer is not made to a “Non-Permitted
Transferee”. In each franchise agreement the
terms relating to who constitutes a Non-Permitted
Transferee, the prohibition on Transfers that are
not “Permitted Transfers” without the Franchisor’s
consent, the potential consequences of any Transfer
that occurs other than as permitted in accordance
with the relevant provisions of the relevant franchise
agreement and the consequences if, as a result of the
Transfer, the Principal no longer has ultimate control
of the Franchisee, are essentially the same as those
described for the development agreement above.
• Letter agreement for Fridays and Go quick
service / fast casual restaurants
The letter agreement dated 27 May 2022 between
TGI Fridays Franchisor, LLC (Fridays) and Thursdays
(UK) Limited (as Franchisee). Pursuant to the
letter agreement, the Franchisee is granted the
exclusive right to develop and operate Fridays and
Go restaurants in the “Territory” (being England,
Scotland, Wales, the Channel Islands, and the Isle
of Man, as geographically constituted on the date of
the development agreement, excluding United States
military bases).
The letter agreement provides that Fridays will neither
develop or operate, nor authorise any other person
to develop or operate, Fridays and Go restaurants
(or similar restaurants) in the Territory until the
development agreement (referenced above) expires
or is terminated. Consequently, where there is a
change of control of the Company which results
in the development agreement being terminated,
Fridays could develop or operate, or authorise any
other person to develop or operate, Fridays and Go
restaurants (or similar restaurants) in the Territory.
The letter agreement states that the term of the letter
agreement will expire on the last day of the term of
the development agreement, unless (amongst other
things) the development agreement is terminated
in accordance with its terms in which case the term
of the letter agreement shall expire on such date.
Consequently, where there is a change of control
of the Company which results in the development
agreement being terminated, the letter agreement will
expire on such date. The termination or expiry of the
letter agreement could have various consequences
for the Franchisee, including, without limitation, the
Franchisee having no further right to develop Fridays
and Go restaurants in the Territory.
The letter agreement states that Fridays shall be
entitled to terminate the letter agreement for any
material breach by the Franchisee if such breach is
not remedied within the relevant period set out in the
letter agreement. The termination of any Fridays and
Go franchise agreement (as described below) will not
constitute a material breach of the letter agreement,
unless, amongst other things, the termination of the
relevant Fridays and Go franchise agreement occurs
before the date upon which Franchisee is operating
five Fridays and Go restaurants. A change of control
of the Company which constitutes a “Transfer” to
a “Non-Permitted Transferee” or which does not
otherwise comply with the “Transfer” requirements
detailed in a Fridays and Go franchise agreement
could result in such Fridays and Go franchise
agreement being terminated, which could, in turn,
lead to the letter agreement being terminated if, at
the relevant time, the Franchisee is operating fewer
than five Fridays and Go restaurants. At the date
of this Annual Report and Financial Statements,
the Franchisee is operating one Fridays and Go
restaurant.
• Franchise agreements for Fridays and Go quick
service / fast casual restaurants
TGI Fridays Franchisor, LLC (as Franchisor),
Thursdays (UK) Limited (as Franchisee) and the
Company (as Principal) are, pursuant to the letter
agreement described above, required to enter into a
separate Fridays and Go franchise agreement upon
the opening of and in respect of carrying on business
in each of the Fridays and Go restaurants in the
Territory. Each Fridays and Go franchise agreement
is based on the standard Fridays and Go franchise
agreement and places various obligations on the
Principal.
Each Fridays and Go franchise agreement states
that, provided certain requirements detailed in the
development agreement and the relevant Fridays and
104
Hostmore • Annual Report 2022
Directors’ Report
continued
Go franchise agreement are met, the Franchisee and/
or the Principal may complete a “Transfer” (which
includes, amongst other things, a sale or transfer,
whether direct or indirect, of any equity interests
in the Franchisee or its parent undertakings where
such transfer or sale would result in a person other
than the person who was the Principal immediately
before the transfer or sale having ultimate control
of the Developer), without the Franchisor’s consent,
provided that such Transfer is not made to a “Non-
Permitted Transferee”. A Non-Permitted Transferee
includes, amongst other categories or persons, a
person that owns or operates any directly competing
business (although this is defined differently from the
franchise agreement for the TGI Fridays restaurants)
or is an affiliate of any such person (unless such
affiliate is a portfolio company of a person that is a
private equity fund, company or similar).
In each Fridays and Go franchise agreement the
terms relating to the prohibition on Transfers that are
not “Permitted Transfers” without the Franchisor’s
consent, the potential consequences of any Transfer
that occurs other than as permitted in accordance
with the relevant provisions of the relevant Fridays
and Go franchise agreement and the consequences
if, as a result of the Transfer, the Principal no longer
has ultimate control of the Franchisee, are essentially
the same as those described for the development
agreement above.
External Auditor
PricewaterhouseCoopers LLP have indicated their
willingness to continue in office and a resolution
seeking to reappoint them will be proposed at the
forthcoming Annual General Meeting.
Statement of disclosure of
information to Auditor
Each of the Directors at the date of approval of this
report confirms that:
• So far as the Director is aware, there is no relevant
audit information of which the Company’s auditors
are unaware; and
• The Director has taken all the reasonable steps
that he/she ought to have taken as a Director to
make himself/herself aware of any relevant audit
information and to establish that the Company’s
auditors are aware of the information.
The confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
2023 AGM
The Annual General Meeting will be held on 7June
2023. The Notice of Annual General Meeting is
contained in a separate letter from the Chairman
accompanying this report, together with details of the
business to be considered and explanatory notes for
each resolution. A copy of the Notice is also available
on the Company’s website.
Post Balance Sheet Events
Robert B. Cook resigned from the Board on 9
January 2023, details of which are summarised on
pages13 and 92. On 2 March 2023, the development
agreement dated 2 November 2021 referred to on
page102 was amended to, amongst other things,
extend the term of the agreement until 31 December
2026 and defer the requirement for the Developer to
open any new restaurants during each of the years
ending 31 December 2023 and 31 December 2024. In
addition, on 28April 2023, the parties to the facilities
agreement referred to on page102 and in note26
to the financial statements signed a bank facility
restatement agreement. Under the terms of this
agreement, amongst other matters, certain covenants
in the previous facility agreement have been amended
to align with the Company’s updated business plan.
There have been no other material post balance
sheet events involving the Company or any of the
Company’s subsidiaries since the year end to the date
of this report.
The Strategic Report on pages2 to 48 and this
Directors’ Report have been drawn up and presented
in accordance with, and in reliance upon, applicable
English company law and any liability of the Directors
in connection with these reports shall be subject to
the limitations and restrictions provided by such law.
The Directors’ report was approved by the Board of
Directors and signed on its behalf by:
Gavin Manson
Chairman
28 April 2023
105
Hostmore • Annual Report 2022
Statement of Directors’
responsibilities in respect of
financial statements
Governance report
The Directors are responsible for preparing the Annual
Report and Financial Statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, they
are required to prepare the Group financial statements
in accordance with UK-adopted international
accounting standards and the Company financial
statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising FRS 101
“Reduced Disclosure Framework”, and applicable law).
Under company law, the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of
the Group and Company and of the profit or loss of
the Group for that period. In preparing the financial
statements, the Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• state whether applicable UK-adopted international
accounting standards have been followed for
the Group financial statements and United
Kingdom Accounting Standards, comprising
FRS 101 have been followed for the Company
financial statements, subject to any material
departures disclosed and explained in the financial
statements;
• make judgements and accounting estimates that
are reasonable and prudent;
• prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the Group and Company will
continue in business.
The Directors are responsible for safeguarding the
assets of the Group and Company and hence for
taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are also responsible for keeping
adequate accounting records that are sufficient
to show and explain the Group’s and Company’s
transactions and disclose with reasonable accuracy
at any time the financial position of the Group and the
Company and enable them to ensure that the financial
statements and the Directors’ Remuneration Report
comply with the Companies Act 2006.
The Directors are responsible for the maintenance
and integrity of the Company’s website. Legislation
in the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual Report and
Financial Statements, taken as a whole, is fair,
balanced and understandable and provides the
information necessary for shareholders to assess the
Group’s and Company’s position and performance,
business model and strategy.
Each of the Directors, whose names and functions are
listed in the Corporate Governance Report, confirms
that, to the best of their knowledge:
• the Group financial statements, which have
been prepared in accordance with UK-adopted
international accounting standards, give a true and
fair view of the assets, liabilities, financial position
and loss of the Group;
• the Company financial statements, which have
been prepared in accordance with United
Kingdom Accounting Standards, comprising
FRS 101, give a true and fair view of the assets,
liabilities and financial position of the Company;
and
• the Strategic Report includes a fair review of the
development and performance of the business
and the position of the Group and Company,
together with a description of the principal risks
and uncertainties that it faces.
In the case of each Director in office at the date the
Directors’ Report is approved:
• so far as the Director is aware, there is no relevant
audit information of which the Group’s and
Company’s auditors are unaware; and
• they have taken all the steps that they ought
to have taken as a Director in order to make
themselves aware of any relevant audit information
and to establish that the Group’s and Company’s
auditors are aware of that information.
• The statement of Directors’ responsibilities in
respect of the financial statements was approved
by the Board of Directors and signed on its behalf
by:
Gavin Manson
Chairman
Alan Clark
Chief Financial Officer
28 April 2023
106
Hostmore • Annual Report 2022
for the 52 weeks ended 1 January 2023
Financial statements
for the 52 weeks ended 1 January 2023
107
Hostmore • Annual Report 2022
Consolidated
Financial Statements
Calculation of key performance indicators
and alternative performance measures 108
Independent auditor’s report 111
Consolidated statement of comprehensive
income 120
Consolidated statement of financial position 121
Consolidated statement of changes in equity 123
Consolidated statement of cash flows 125
Notes to the consolidated financial
statements 126
Company statement of financial position 158
Company statement of changes in equity 159
Notes to the Company financial statements 160
108
Hostmore • Annual Report 2022
Consolidated Financial Statements
for the 52 weeks ended 1 January 2023
Calculation of key performance indicators and alternative performance
measures
The Group uses several key performance indicators (“KPIs”) to track the financial and operating performance of
its business. These measures are derived from the Group’s internal systems. Some of the KPIs are alternative
performance measures (“APMs”) that are not defined or recognised under IFRS. They may not be comparable to
similarly titled measures used by other companies and should not be considered in isolation or as a substitute
for analysis of the Group’s operating results as reported under IFRS. The following information on the KPIs
includes reconciliations to the nearest IFRS measures where relevant.
Sales
Like-for-like (“LFL”) sales measure the performance of the Group on a consistent year-on-year basis. The table
below includes sites that were open for all of 2021 for comparability and separately includes sites opened since
2021 or subsequently disposed of.
52 weeks
ended
1January
2023
£’000
53 weeks
ended
2 January
2022
£’000
LFL sales 189,087 154,987
Additions since January 2021 6,422 2,516
Disposals since January 2021 359 1,129
Deferred revenue provisions (148) 362
Total 195,720 158,994
EBITDA
EBITDA is the Group’s earnings before interest and bank arrangement fees, tax, depreciation, amortisation,
impairment and share based payment charges.
52 weeks
ended
1 January
2023
£’000
* Restated
53 weeks
ended
2 January
2022
£’000
Loss before tax (104,345) (2,549)
Depreciation 20,339 22,339
Net interest and bank arrangement fees 12,478 13,597
Net impairment of property, plant and equipment and right of use assets 31,179 1,019
Impairment of goodwill 70,858 –
Share based payment charge 581 78
EBITDA 31,090 34,484
* Refer to note 6 to the financial statements. In the 53 week period ended 2 January 2022 exceptional costs have been increased by £965k
from £8,121k to £9,086k, increasing the loss before tax as previously reported from £1,584k to £2,549k.
Financial statements
109
Hostmore • Annual Report 2022
Calculation of key performance indicators and alternative performance
measures continued
EBITDA FRS102
EBITDA FRS102 is the Group’s EBITDA under IFRS, adjusted for rent paid to lessors and rent received from
subleases.
52 weeks
ended
1 January
2023
£’000
* Restated
53 weeks
ended
2 January
2022
£’000
Loss before tax (104,345) (2,549)
Depreciation 20,339 22,339
Net interest and bank arrangement fees 12,478 13,597
Net impairment of property, plant and equipment and right of use assets 31,179 1,019
Impairment of goodwill 70,858 –
Share based payment charge 581 78
EBITDA 31,090 34,484
Less: Rent paid (19,931) (21,669)
Add: Sublease income 101 231
EBITDA FRS102 11,260 13,046
* Refer to note 6 to the financial statements. In the 53 week period ended 2 January 2022 exceptional costs have been increased by £965k
from £8,121k to £9,086k, decreasing EBITDA from £35,449k to £34,484k and decreasing EBITDA (FRS102) from £14,011k to £13,046.
Free cash flow
Free cash flow is the cashflow from operating activities for the period, adjusted for working capital movements,
rental income from sub-leases, corporation tax and maintenance capex.
52 weeks
ended
1 January
2023
£’000
* Restated
53 weeks
ended
2 January
2022
£’000
Cashflow from operating activities 28,800 29,658
Change in working capital (8,070) 1,931
Rental income from subleases 105 337
Corporation taxes (paid)/recovered (857) 978
Cash generated from operations 19,978 32,904
Maintenance capex (3,496) (1,929)
Free cash flow 16,482 30,975
* Refer to note 6 to the financial statements. In the 53 week period ended 2 January 2022 exceptional costs have been increased by £965k
from £8,121k to £9,086k, reducing cashflow from operating activities as previously reported of £30,623k to £29,658k.
Consolidated Financial Statements
for the 52 weeks ended 1 January 2023 continued
110
Hostmore • Annual Report 2022
Calculation of key performance indicators and alternative performance
measures continued
Net debt
Net debt, calculated in accordance with IFRS16, is the Group’s long-term borrowings (excluding issue costs)
and lease liabilities less cash and cash equivalents at each period end.
1 January
2023
£’000
2 January
2022
£’000
Gross bank loans and borrowings (36,800) (44,299)
Lease liabilities (148,555) (150,994)
Cash & cash equivalents 9,091 32,080
Net debt (176,264) (163,213)
% Cash conversion
% Cash conversion is calculated as free cash flow divided by EBITDA.
1 January
2023
£’000
* Restated
2 January
2022
£’000
Free cash flow 16,482 30,975
EBITDA 31,090 34,484
% Cash conversion 53% 90%
* Refer to note 6 to the financial statements. In the 53 week period ended 2 January 2022 exceptional costs have been increased by £965k
from £8,121k to £9,086k, decreasing EBITDA as previously reported from £35,449k to £34,484k.
Return on capital employed (ROCE)
ROCE is calculated as EBITDA divided by total assets less current liabilities.
1 January
2023
£’000
* Restated
2 January
2022
£’000
EBITDA 31,090 34,484
Total assets less current liabilities 188,113 292,367
ROCE 17% 12%
* Refer to note 6 to the financial statements. In the 53 week period ended 2 January 2022 exceptional costs have been increased by
£965k from £8,121k to £9,086k, decreasing both EBITDA as previously reported from £35,449k to £34,484k and total assets less current
liabilities from £293,332k to £292,367k.
Financial statements
Independent Auditor’s Report
111
Hostmore • Annual Report 2022
Independent auditors’ report to the members of Hostmore plc
Report on the audit of the financial statements
Opinion
In our opinion:
• Hostmore plc’s group financial statements and company financial statements (the “financial statements”)
give a true and fair view of the state of the group’s and of the company’s affairs as at 1 January 2023 and of
the group’s loss and the group’s cash flows for the 52 week period then ended;
• the group financial statements have been properly prepared in accordance with UK-adopted international
accounting standards as applied in accordance with the provisions of the Companies Act 2006;
• the company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
We have audited the financial statements, included within the Annual Report, which comprise: the consolidated
statement of financial position and company statement of financial position as at 1 January 2023; the
consolidated statement of comprehensive income, consolidated statement of changes in equity, consolidated
statement of cash flows and company statement of changes in equity for the period then ended; and the notes
to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk Committee of the company.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and
applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the
audit of the financial statements section of our report. We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical
Standard were not provided.
Other than those disclosed in note 12, we have provided no non-audit services to the company or its controlled
undertakings in the period under audit.
Material uncertainty related to going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of
the disclosure made in note 4.2 to the financial statements concerning the group’s and the company’s ability
to continue as a going concern. Based on the Directors’ forecasts, under a severe but plausible downside
scenario, the Group is forecast to breach the monthly cumulative EBITDA covenant and the Net debt to EBITDA
ratio covenant within 12 months from the date of approval of the financial statements, due to the possible
impact of reduced demand following significant energy and cost of food inflation, which would make the loans
repayable on demand. In addition, in the severe but plausible model, there is uncertainty over the adequacy of
liquidity within 12 months from the date of approval of the financial statements. These conditions, along with the
other matters explained in note 4.2 to the financial statements, indicate the existence of a material uncertainty
which may cast significant doubt about the group’s and the company’s ability to continue as a going concern.
Independent Auditor’s Report continued
112
Hostmore • Annual Report 2022
The financial statements do not include the adjustments that would result if the group and the company were
unable to continue as a going concern.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the
going concern basis of accounting included:
• obtaining and agreeing management’s going concern assessment to the business’ board approved plan and
ensuring that the base case scenario indicates that the business generates sufficient cash flows to meets its
long and short term obligations while complying with covenant arrangements.
• engaging with internal specialists to assess the reasonableness of assumptions used in the base case
scenario;
• obtaining and inspecting the loan agreement and subsequent revised terms agreed to ensure the latest
terms and covenants were fully reflected in management’s assessment.
• obtaining and inspecting the amendment to the franchisor agreement to allow the group to not open any
new restaurants in the period;
• considering the extent to which the group’s and company’s future cash flows might be adversely affected by
economic environment and geo-political impacts; reviewing management’s cash flow forecasts, assessing
the existing sources of finance, and considering the overall impact of liquidity;
• ensuring mathematical accuracy of management’s models;
• evaluating management’s severe but plausible downside scenario of reduced demand continuing into the
future and ensuring this is appropriately modelled through the cash flows;
• observing that climate change is expected to have a limited impact during the period of the going concern
assessment;
• considering the adequacy of the disclosures in the financial statements.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, other than
the material uncertainty identified in note 4.2 to the financial statements, we have nothing material to add or
draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting, or in respect of the directors’
identification in the financial statements of any other material uncertainties to the group’s and the company’s
ability to continue to do so over a period of at least twelve months from the date of approval of the financial
statements.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Our audit approach
Overview
Audit scope
• We performed full scope audit procedures over the group. This provided coverage of 100% of external
consolidated revenue and 100% of the consolidated loss before tax.
Key audit matters
• Material uncertainty related to going concern
• Valuation of Property, plant and equipment and Right of use assets (group)
• Valuation of Goodwill (group)
• Recoverability of the company’s investments in subsidiary undertakings (parent)
Financial statements
113
Hostmore • Annual Report 2022
Materiality
• Overall group materiality: £1,210,000 based on 0.75% of three year average of total consolidated revenues.
• Overall company materiality: £1,800,000 based on 1% of total company assets (capped at 90% of group
materiality for the purposes of our group audit).
• Performance materiality: £907,500 (group) and £1,359,000 (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance
in the audit of the financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by the auditors, including those which had the
greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of
the engagement team. These matters, and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
In addition to going concern, described in the Material uncertainty related to going concern section above, we
determined the matters described below to be the key audit matters to be communicated in our report. This is
not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Key audit matter How our audit addressed the key audit matter
Valuation of Property, plant and equipment and Right
of use assets (group)
The group has non-current assets that include: •
PP&E – £36.1m • ROU assets – £94.6m. As set out in
Note 4.13, Note 5, Note 18 and Note 19 management
have outlined their considerations of impairment
indicators as well as their definitions of a CGU. As
the geo-political events in the current period have
had a significant impact on the performance of
the restaurants in the period this is an impairment
indicator. Management have performed a value in use
calculation to assess the recoverability of the assets
at a CGU level. This involves several key estimates
in relation to management’s assumptions used in the
valuation, including the discount rate and future cash
flows.
We obtained management’s impairment assessment
and ensured the calculations were mathematically
accurate.
We challenged the key assumptions used within the
model to which the value was most sensitive, including
the discount rate, the cash flows for 2023, future
revenue growth and inflation on both revenue and
costs.
We obtained supporting evidence for those
assumptions that could be supported and where
no evidence could be provided, we obtained a
revised model from management with supportable
assumptions which increased the impairment charge.
We compared the forecast used for the impairment
test to the latest Board-approved plans. We have
performed sensitivity analysis to identify what the
key assumptions are and to ensure sufficient audit
evidence was obtained for those assumptions.
We considered the adequacy of management’s
disclosure in respect of the impairment recorded and
the key sensitivities in their estimates.
Based on the work performed, as summarised above,
we concluded that the carrying value of the individual
site assets is materially correct after the impairment
charges recorded.
Independent Auditor’s Report continued
114
Hostmore • Annual Report 2022
Valuation of Goodwill (group)
The group has impaired the Goodwill balance of
£146m by £70.9m in the period. As set out in Note
4.14, Note 5, and Note 21 management has outlined
their considerations of impairment indicators as well as
their definition of group CGUs to be assessed. There
is an indicator of impairment in relation to goodwill, in
respect of the market capitalisation of the company as
well as the performance of the business in the current
period. Management has performed a value in use
calculation to assess the recoverability of the goodwill
based on the entire group. This involves several key
estimates in relation to management’s assumptions
used, including the cash flows for FY23, the discount
rate and the future cash flows.
We obtained management’s impairment assessment
and ensured the calculations were mathematically
accurate.
We challenged the key assumptions used within the
model to which the value was most sensitive, including
the discount rate, the cash flows for 2023, future
revenue growth and inflation of revenue and costs.
We obtained supporting evidence for those
assumptions.
We compared the forecast used for the impairment test
to the latest Board-approved plans.
We have obtained and inspected third party industry
reports, addressed forecast accuracy and recent
results to determine the validity of the forecasts.
We have considered the gap between the enterprise
value and compared this against the value in use
model provided.
We considered the adequacy of management’s
disclosure in respect of the impairment recorded and
the key sensitivities in their estimates.
Based on the work performed, as summarised above,
we concluded that the carrying value of the Goodwill
is materially correct after the impairment charges
recorded.
Recoverability of the company’s investments in
subsidiary undertakings (parent)
As set out in note 35 to the company financial
statements, investments in subsidiaries are £176.7m.
These are accounted for at cost less provision for
impairment in the company balance sheet as at
1January 2023. Investments are tested for impairment
if impairment indicators exist. If such indicators
exist, the recoverable amounts of the investments
in subsidiary undertakings are estimated in order
to determine the extent of any impairment loss.
Judgement is required in this area, particularly in
assessing whether the carrying value of an asset can
be supported by the recoverable value, being the
higher of fair value less cost of disposal or the net
present value of future cash flows which are estimated
based on the continued use of the asset in the
business. The investments relate to the Friday’s brand,
owned by the subsidiary Thursdays (UK) Limited. The
carrying value of the investment is supported by the
recoverable amount which is calculated using the value
in use basis.
We evaluated management’s determination of whether
any indicators of impairment existed by comparing
the carrying value of investments in subsidiary
undertakings to the market capitalisation of the group
at 1 January 2023.
We have concluded that there is no impairment
required.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial statements as a whole, taking into account the structure of the group and the company, the
accounting processes and controls, and the industry in which they operate.
Financial statements
115
Hostmore • Annual Report 2022
The group consists of four holding companies and one trading company. Following our assessment of the risk
of material misstatement we selected all entities within the group structure for full scope audits. Taken together,
these reporting entities where we performed audit work accounted for 100% of group revenue and 100% of
group loss before tax.
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of
climate risk on the group’s financial statements, and we remained alert when performing our audit procedures
for any indicators of the impact of climate risk. Our procedures did not identify any material impact as a result of
climate risk on the group’s and company’s financial statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
Financial statements – group Financial statements –
company
Overall materiality £1,210,000. £1,800,000.
How we
determined it
0.75% of three year average of total consolidated
revenues
1% of total company assets
(capped at 90% of group
materiality for the purposes of
our group audit)
Rationale for
benchmark
applied
A revenue benchmark has been considered an
appropriate measure due to a relatively high fixed cost
base of the business and the focus of the group to
increase footfall into the sites. A three year average
of total consolidated revenues is considered to be
the appropriate benchmark due to the circumstances
of the past two years causing large fluctuations in
revenue over an individual year.
The entity is a holding company
of the rest of the group and is
not a trading entity. Therefore,
an asset based measure is
considered appropriate.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall
group materiality. The range of materiality allocated across components was below the group materiality
detailed above. Certain components were audited to a local statutory audit materiality that was also less than
our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of
uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance
materiality in determining the scope of our audit and the nature and extent of our testing of account balances,
classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality
was 75% of overall materiality, amounting to £907,500 for the group financial statements and £1,359,000 for the
company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements,
risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the
upper end of our normal range was appropriate.
Independent Auditor’s Report continued
116
Hostmore • Annual Report 2022
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our
audit above £61,000 (group audit) and £61,000 (company audit) as well as misstatements below those amounts
that, in our view, warranted reporting for qualitative reasons.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements
and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent
material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ report, we also considered whether the disclosures required
by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report
certain opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic
report and Directors’ report for the period ended 1 January 2023 is consistent with the financial statements and
has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the
course of the audit, we did not identify any material misstatements in the Strategic report and Directors’ report.
Directors’ Remuneration
In our opinion, the part of the Annual Report on Remuneration to be audited has been properly prepared in
accordance with the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability
and that part of the corporate governance statement relating to the company’s compliance with the provisions
of the UK Corporate Governance Code specified for our review. Our additional responsibilities with respect to
the corporate governance statement as other information are described in the Reporting on other information
section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of
the corporate governance statement is materially consistent with the financial statements and our knowledge
obtained during the audit, and, except for the matters reported in the section headed ‘Material uncertainty
related to going concern’, we have nothing material to add or draw attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal
risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to
identify emerging risks and an explanation of how these are being managed or mitigated;
Financial statements
117
Hostmore • Annual Report 2022
• The directors’ statement in the financial statements about whether they considered it appropriate to
adopt the going concern basis of accounting in preparing them, and their identification of any material
uncertainties to the group’s and company’s ability to continue to do so over a period of at least twelve
months from the date of approval of the financial statements;
• The directors’ explanation as to their assessment of the group’s and company’s prospects, the period this
assessment covers and why the period is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the company will be able to
continue in operation and meet its liabilities as they fall due over the period of its assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group and company was
substantially less in scope than an audit and only consisted of making inquiries and considering the directors’
processes supporting their statement; checking that the statement is in alignment with the relevant provisions
of the UK Corporate Governance Code; and considering whether the statement is consistent with the financial
statements and our knowledge and understanding of the group and company and their environment obtained in
the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following
elements of the corporate governance statement is materially consistent with the financial statements and our
knowledge obtained during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for the members to assess the group’s and
company’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal
control systems; and
• The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the
company’s compliance with the Code does not properly disclose a departure from a relevant provision of the
Code specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors responsibilities in respect of financial statements, the
directors are responsible for the preparation of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair view. The directors are also responsible for such
internal control as they determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the group or the company or to
cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Independent Auditor’s Report continued
118
Hostmore • Annual Report 2022
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is
detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance
with laws and regulations related to Health & Safety and food hygiene laws, Minimum Wage regulations and
other employment laws, and Money Laundering regulations, and we considered the extent to which non-
compliance might have a material effect on the financial statements. We also considered those laws and
regulations that have a direct impact on the financial statements such as the Companies Act 2006 and UK tax
legislation. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and determined that the principal risks were related to
posting inappropriate journal entries to increase revenue and management bias within accounting estimates.
Audit procedures performed by the engagement team included:
• Enquiries with the Directors, the Audit and Risk Committee and Company General Counsel, including review
of board meeting minutes and consideration of known or suspected instances of non-compliance with laws,
regulations and fraud;
• Identifying and testing journal entries, in particular certain journal entries posted with unusual account
combinations which result in an increase in revenue; and
• Challenging estimates and judgements made by management in determining significant accounting
estimates, in particular in relation to impairment of certain non-current assets and going concern.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that are not closely related to events and transactions
reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly
using data auditing techniques. However, it typically involves selecting a limited number of items for testing,
rather than testing complete populations. We will often seek to target particular items for testing based on their
size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about
the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to any other person to whom this
report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Financial statements
119
Hostmore • Annual Report 2022
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have
not been received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements and the part of the Annual Report on Remuneration to be audited are not
in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
We were appointed by the directors on 6 October 2021 to audit the financial statements for the year ended
2 January 2022 and subsequent financial periods. The period of total uninterrupted engagement is 2 years,
covering the years ended 2 January 2022 to 1 January 2023.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these
financial statements form part of the ESEF-prepared annual financial report filed on the National Storage
Mechanism of the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard
(‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual financial report has been
prepared using the single electronic format specified in the ESEF RTS.
David Beer (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Watford
28 April 2023
Consolidated Financial Statements
for the 52 weeks ended 1 January 2023 continued
120
Hostmore • Annual Report 2022
Consolidated statement of comprehensive income for the 52 week period
ended 1 January 2023
Note
52 weeks
ended
1 January
2023
£’000
* Restated
53 weeks
ended
2 January
2022
£’000
Revenue 7 195,720 158,994
Cost of sales (45,103 ) (31,256 )
Gross profit 150,617 127,738
Underlying administrative expenses (141,152 ) (121,773 )
Exceptional items* 11 (70,858 ) (9,086 )
Administrative expenses 6 (212,010 ) (130,859 )
Impairment reversal of property, plant and equipment
and right of use assets 18, 19 5,712 –
Impairment of property, plant and equipment
and right of use assets** 18, 19 (36,891 ) (1,019 )
Other operating income 9 705 15,188
(Loss) /profit from operations 10 (91,867 ) 11,048
Finance income 15 78 6
Finance expense 15 (12,556 ) (13,603 )
Loss before tax (104,345 ) (2,549 )
Tax credit 16 6,801 1,017
Loss for the period (97,544 ) (1,532 )
Total comprehensive expense (97,544 ) (1,532 )
* Refer to note 6 for further details.
** In prior periods, impairment of property, plant and equipment and right of use assets were disclosed as part of administrative expenses
but are now disclosed separately to provide greater analysis of trading operations.
All operations are continuing operations.
There are no amounts recognised within other comprehensive income in the current or prior period.
(Loss)/earnings per share in pence Note
52 weeks
ended
1 January
2023
* Restated
53 weeks
ended
2 January
2022
Basic loss per share* 17 (77.8 ) (1.3 )
Diluted loss per share* 17 (77.8 ) (1.3 )
Adjusted basic earnings per share* 17 3.6 7.2
Adjusted diluted earnings per share* 17 3.6 7.2
* Refer to note 6 for further details.
Adjusted basic and diluted earnings per share excludes impairments and exceptional items.
Financial statements
121
Hostmore • Annual Report 2022
Consolidated statement of financial position at 1 January 2023
Note
1 January
2023
£’000
* Restated
2 January
2022
£’000
Assets
Non-current assets
Property, plant and equipment 18 36,140 42,781
Right of use assets 19 94,568 116,388
Goodwill 21 75,121 145,979
Net investment in subleases 20 95 106
Deferred tax assets 16 12,801 6,192
Total non-current assets 218,725 311,446
Current assets
Inventories 22 1,464 1,489
Trade and other receivables* 23 6,285 3,870
Current tax assets 740 –
Net investment in subleases 20 12 98
Cash and cash equivalents 9,091 32,080
Total current assets 17,592 37,537
Total assets 236,317 348,983
Liabilities
Non-current liabilities
Loans and borrowings 26 23,146 33,931
Lease liabilities 20 133,261 131,980
Provisions 27 5,143 2,430
Total non-current liabilities 161,550 168,341
Current liabilities
Trade and other payables* 24 18,136 26,033
Contract liabilities 25 1,004 1,024
Current tax liabilities – 309
Loans and borrowings 26 13,295 9,491
Lease liabilities 20 15,294 19,014
Provisions 27 475 745
Total current liabilities 48,204 56,616
Total liabilities 209,754 224,957
Net current liabilities (30,612 ) (19,079 )
Net assets 26,563 124,026
* Refer to note 6 for further details.
Consolidated Financial Statements
for the 52 weeks ended 1 January 2023 continued
122
Hostmore • Annual Report 2022
Consolidated statement of financial position at 1 January 2023 continued
Note
1 January
2023
£’000
* Restated
2 January
2022
£’000
Issued capital and reserves attributable
to owners of the Company
Share capital 28 25,225 25,225
Share premium reserve 14,583 14,583
Merger reserve (181,180 ) (181,180 )
Share based payment reserve 634 53
Retained earnings* 167,301 265,345
Total equity 26,563 124,026
* Refer to note 6 for further details.
The notes on pages 126 to 157 form part of these financial statements.
Financial statements
123
Hostmore • Annual Report 2022
Consolidated statement of changes in equity for the 52 week period
ended 1 January 2023
Share
capital
£’000
Share
premium
reserve
£’000
Merger
reserve
£’000
Share based
payment
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
At 28 December 2020 – – – 4,054 (30,646 ) (26,592 )
Comprehensive expense
for the period
Loss for the period – – – – (567 ) (567 )
Total comprehensive
expense for the period – – – – (567 ) (567 )
Correction of error* – – – – (965 ) (965 )
Total comprehensive
expense for the period (restated) – – – – (1,532 ) (1,532 )
Contributions by and distributions to
owners
Issue of share capital 1,518 11,624 – – – 13,142
Acquisition of subsidiaries by Hostmore 20,477 144,278 (164,755 ) – – –
Transfer of share capital of a subsidiary
to Hostmore 138,930 – – – – 138,930
Capital reduction in a subsidiary (137,541 ) – – – 137,541 –
Share issue proceeds extinguishing
shareholder loan 1,841 14,584 (16,425 ) – – –
Cancellation of share premium – (155,903 ) – – 155,903 –
Reclassification of share based reserve
to retained earnings on lapse of share
incentives – – – (4,079 ) 4,079 –
Share based payment charge – – – 78 – 78
Total contributions by and
distributions to owners 25,225 14,583 (181,180 ) (4,001 ) 297,523 152,150
At 2 January 2022 (restated)* 25,225 14,583 (181,180 ) 53 265,345 124,026
* Refer to note 6 for further details.
Consolidated Financial Statements
for the 52 weeks ended 1 January 2023 continued
124
Hostmore • Annual Report 2022
Consolidated statement of changes in equity for the 52 week period
ended 1 January 2023 continued
Share
capital
£’000
Share
premium
reserve
£’000
Merger
reserve
£’000
Share based
payment
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
At 3 January 2022 (restated) 25,225 14,583 (181,180 ) 53 265,345 124,026
Comprehensive expense
for the period
Loss for the period – – – – (97,544 ) (97,544 )
Total comprehensive
expense for the period – – – – (97,544 ) (97,544 )
Contributions by and distributions to
owners
Share purchases by EBT – – – – (500 ) (500 )
Share based payment charge – – – 581 – 581
Total contributions by and
distributions to owners – – – 581 (500 ) 81
At 1 January 2023 25,225 14,583 (181,180 ) 634 167,301 26,563
Financial statements
125
Hostmore • Annual Report 2022
Consolidated statement of cash flows for the 52 week period ended
1January 2023
Note
52 weeks
ended
1 January
2023
£’000
* Restated
53 weeks
ended
2 January
2022
£’000
Cash flows from operating activities* 31 28,800 29,658
Movements in working capital:
(Increase)/decrease in trade and other receivables 23 (2,415 ) 2,711
Decrease/(increase) in inventories 22 25 (787 )
(Decrease)/increase in trade and other payables* 24 (8,071 ) 163
Increase/(decrease) in provisions and employee benefits 2,391 (156 )
Cash generated from operations 20,730 31,589
Corporation taxes (paid)/recovered (857 ) 978
Rental income from finance subleases 20 105 337
Net cash from operating activities 19,978 32,904
Cash flows from investing activities
Purchases of property, plant and equipment (10,311 ) (4,075 )
Interest received 70 –
Net cash used in investing activities (10,241 ) (4,075 )
Cash flows from financing activities
Repayment of bank borrowings (18,000 ) (26,500 )
Payment of loan arrangement fees – (816 )
Receipt of bank borrowings 10,500 5,000
Interest paid on bank borrowings (2,291 ) (1,751 )
Proceeds from share issue – 13,094
Share purchases by EBT (500 ) –
Payment of lease liabilities (22,435 ) (22,977 )
Net cash used in financing activities (32,726 ) (33,950 )
Net cash decrease in cash and cash equivalents (22,989 ) (5,121 )
Cash and cash equivalents at the beginning of period 32,080 37,201
Cash and cash equivalents at the end of the period 9,091 32,080
* Refer to note 6 for further details.
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023
126
Hostmore • Annual Report 2022
Financial statements
127
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
128
Hostmore • Annual Report 2022
Financial statements
129
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
130
Hostmore • Annual Report 2022
Financial statements
131
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
132
Hostmore • Annual Report 2022
Financial statements
133
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
134
Hostmore • Annual Report 2022
Financial statements
135
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
136
Hostmore • Annual Report 2022
Financial statements
137
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
138
Hostmore • Annual Report 2022
Financial statements
139
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
140
Hostmore • Annual Report 2022
Financial statements
141
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
142
Hostmore • Annual Report 2022
Financial statements
143
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
144
Hostmore • Annual Report 2022
Financial statements
145
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
146
Hostmore • Annual Report 2022
20. Leases
20.1 Group as a lessee
The Group has entered into a number of leases on properties from which it operates its restaurants. It has also
entered into lease arrangements for motor vehicles for use by employees. These have all been recognised as
right of use assets in the consolidated statement of financial position. The total cash outflow for leases was
£23,775k for the 52 week period ended 1 January 2023 (2021: £23,978k).
Lease liabilities are due as follows:
1 January
2023
£’000
2 January
2022
£’000
Contractual undiscounted cash flows due
Not later than one year 20,925 21,108
Between one year and five years 80,764 77,591
Later than five years 104,673 111,285
Total contractual undiscounted cash flows 206,362 209,984
1 January
2023
£’000
2 January
2022
£’000
Contractual discounted cash flows of lease liabilities
Non-current 133,261 131,980
Current 15,294 19,014
Total lease liabilities 148,555 150,994
The contractual cash flows due have been discounted by applying an appropriate incremental borrowing rate for
each lease depending on the remaining lease term ranging from 2.55% for leases with shorter terms to 7.5% for
leases with longer terms.
The following amounts have been recognised in the consolidated statement of comprehensive income:
1 January
2023
£’000
2 January
2022
£’000
Charges:
Rent on leases of low value assets (711) (661)
Variable lease payments not included in the measurement of lease liabilities (629) (320)
Credits:
Covid-19-related rent concessions 2,290 4,210
Financial statements
147
Hostmore • Annual Report 2022
20.2 Group as a lessor
The Group sub-leases some of its properties to third parties for essentially the whole of the remaining term of
the head lease. These are classified as finance leases.
The undiscounted lease payments receivable after the period end are as follows:
1 January
2023
£’000
2 January
2022
£’000
Not later than one year 19 106
Between one and five years 89 89
Later than five years 29 47
Total undiscounted lease payments receivable 137 242
Less: unearned finance income for receipts due within 1 year (7) (8)
Less: unearned finance income for receipts due after more than 1 year (23) (30)
Present value of current minimum lease payments receivable 12 98
Present value of non-current minimum lease payments receivable 95 106
Annual lease income from finance lease contracts in which the Group acts as a lessor:
52 weeks
ended
1 January
2023
£’000
53 weeks
ended
2 January
2022
£’000
Finance income on the net investment in finance leases 8 28
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
148
Hostmore • Annual Report 2022
Financial statements
149
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
150
Hostmore • Annual Report 2022
Financial statements
151
Hostmore • Annual Report 2022
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
152
Hostmore • Annual Report 2022
Financial statements
153
Hostmore • Annual Report 2022
29. Share based payments
Total share based payment charge for the 52 week period ended 1 January 2023 was £581k (2021: £78k).
Employee share option plan
The Group operates a share based payment scheme for its employees. A long-term incentive scheme was
introduced in November 2021, whereby the Executive Directors and certain employees were awarded share
options in Hostmore plc. These share options are equity settled and comprise of Performance Share Awards
(“PSA”) and Restricted Share Awards (“RSA”), noted below, with a total of 3,184,094 options awarded on
17 November 2021 and a further 3,002,794 options awarded on 9 June 2022. PSA awards were subject to
performance conditions. No share options were exercisable at the period end.
The following share based payment arrangements were in existence during the period ended 1 January 2023:
2021 awards
Opening
share
options
Granted
share
options
Lapsed
share
options
Closing
share
options Grant date Expiry date
Fair value
at grant
date
(pence)
1. PSA (with holding
period)
EPS & ROIC part
TSR part
1,087,190
— —
1,087,190 17 November
2021
16 November
2031
101
64
2. PSA (without holding
period)
EPS & ROIC part
TSR part
1,060,505
—
(382,599)
677,906 17 November
2021
16 November
2031
110
69
3. RSA
Nil cost and one-
off awards
1,031,260
—
(276,680)
754,580
17 November
2021
16 November
2031
110
Nominal cost
option
5,139
—
—
5,139 17 November
2021
16 November
2031
91
Total 2021 awards 3,184,094
—
(659,279) 2,524,815
2022 awards
4. PSA (with holding
period)
EPS & ROIC part
TSR part
—
843,847
—
843,847 9 June 2022 8 June 2032 37
9
5. PSA (without holding
period)
EPS & ROIC part
TSR part
1,123,112 (85,484) 1,037,628 9 June 2022 8 June 2032 40
10
6. RSA Nil cost
awards
—
1,028,505 (186,482) 842,023
9 June 2022 8 June 2032 40
Nominal cost
option
—
7,330
—
7,330 9 June 2022 8 June 2032 25
Total 2022 awards
—
3,002,794 (271,966) 2,730,828
Total awards
3,184,094 3,002,794 (931,245) 5,255,643
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
154
Hostmore • Annual Report 2022
Fair value of share options granted in the period
The different share option schemes have been valued as follows:
PSA – ROIC and EPS: These nil cost option awards are valued using the share price on the date of issue on
17 November 2021 or 9 June 2022 (as applicable).
PSA – TSR: A Monte Carlo Simulation (“MCS”) stochastic model has been used to calculate the fair value of
these nil cost option awards.
PSA – withholding period: For these awards subject to a post-vesting holding period, a discount is applied to reflect
the lack of marketability during the post-vesting holding period. This discount is based on the Finnerty model.
RSA – nil cost options: The RSA nil cost options (including one-off awards) are valued using the share price on
the date of issue on 17 November 2021 or 9 June 2022 (as applicable).
RSA – nominal cost options: The Black Scholes Merton option pricing formula has been used to calculate the
fair value.
Volatility: Due to the short time between the listing of the Company’s ordinary shares and the respective dates
of grant in November 2021 and June 2022, the volatility is based on the volatility of Electra, over a period
commensurate with the projection period, adjusted to remove any periods of exceptional volatility during
lockdowns of 2020.
Dividends: Dividend equivalents are paid on vesting awards. As a result, no assumption for dividend yield is
required.
The weighted average fair value of those options granted during the period at the reporting date was 32.5p.
The following inputs were used in valuing the share based payment arrangements during the period ended
1 January 2023:
Grant data
share price
(pence) Volatility Option life
Risk-free
interest rate
1. PSA EPS & ROIC part
TSR part
40
40
0%
51%
3 years
3 years
0%
2%
2. RSA Nil cost and one-off
awards
40 0% 3 years 0%
Nominal cost option 40 35% 6.5 years 2%
Movements in share options during the period:
52 weeks
ended
1 January
2023
Number
53 weeks
ended
2 January
2022
Number
Opening share options 3,184,094 –
Granted share options during the period 3,002,794 3,184,094
Lapsed share options during the period (931,245) –
Closing share options 5,255,643 3,184,094
Financial statements
155
Hostmore • Annual Report 2022
30. Financial instruments – fair values and risk management
The Group’s financial instruments are analysed as follows:
Financial assets
1 January
2023
£’000
* Restated
2 January
2022
£’000
Cash and cash equivalents 9,091 32,080
Trade receivables 2,040 1,375
Other receivables 508 261
Net investment in a sub-leases 107 204
Total financial assets 11,746 33,920
Financial liabilities
1 January
2023
£’000
* Restated
2 January
2022
£’000
Borrowings 36,441 43,422
Lease liabilities 148,555 150,994
Trade payables 5,512 8,774
Other payables 1,860 1,746
Accruals 9,440 12,891
Total financial liabilities 201,808 217,827
Net financial liabilities 190,062 183,907
* Further to note 6, in the 53 week period ended 2 January 2022 other receivables of £937k have been reclassified to trade payables,
increasing trade payables balance as previously reported from £8,746k to £8,774k. Further £772k of other receivables have been reclassified
to tax and social security payments balance, decreasing other receivables by £1,709k as previously reported from £1,970k to £261k.
Notes to the Consolidated Financial Statements
for the 52 weeks ended 1January2023 continued
156
Hostmore • Annual Report 2022
Financial statements
157
Hostmore • Annual Report 2022
31. Cash flows from operating activities
52 weeks
ended
1 January
2023
£’000
* Restated
53 weeks
ended
2 January
2022
£’000
Loss for the period (97,544) (1,532)
Adjustments for non-cash items and amounts disclosed separately:
Depreciation of property, plant and equipment and right of use assets 20,339 22,339
Impairment reversal of property, plant and equipment and right of use assets (5,712) –
Impairment of property, plant and equipment and right of use assets 36,891 1,019
Impairment of goodwill 70,858 –
Lease exit income – (616)
Finance income (78) (6)
Finance expense 12,556 13,603
Covid-19 rent concessions (2,290) (4,210)
Income tax credit (6,801) (1,017)
Share based payment charge 581 78
Cash flows from operating activities 28,800 29,658
* Further to note 6, in the 53 week period ended 2 January 2022 exceptional costs have increased by £965k from the previously reported
£8,121k to £9,086k, increasing the loss after tax from £567k, to £1,532k.
32. Related parties
Identity of related parties with which the Group has transacted
The Group was previously wholly owned by Electra. During the 53 week period ended 2 January 2022, a
distribution in specie of all of the issued share capital of the Company was declared. This resulted in each
Electra shareholder receiving three shares in the Company pro-rata for each Electra share then held. Further
details relating to the Demerger were set out in the Prospectus.
Transactions with key management personnel
Remuneration in respect of key management personnel is set out in note 13.
During the 52 week period ended 1 January 2023, a relative of Julie McEwan, the Group’s Interim Chief
Executive Officer, received £9k of Board approved sponsorship in return of advertising TGI Fridays brand at
sports events.
Company Financial Statements
for the 52 weeks ended 1January2023
158
Hostmore • Annual Report 2022
Company statement of financial position at 1 January 2023
Hostmore plc
Note
1 January
2023
£’000
2 January
2022
£’000
Assets
Non-current assets
Investment in subsidiary undertakings 37 176,737 176,737
Total non-current asset 176,737 176,737
Current assets
Trade and other receivables 39 15,227 16,231
Cash and cash equivalents 4,404 2,550
Total current assets 19,631 18,781
Total assets 196,368 195,518
Liabilities
Current liabilities
Trade and other payables 40 119 130
Total current liabilities 119 130
Total liabilities 119 130
Net current assets 19,512 18,651
Net assets 196,249 195,388
Issued capital and reserves attributable to owners of the parent
Share capital 41 25,225 25,225
Share premium reserve 14,583 14,583
Retained earnings 156,441 155,580
Total equity 196,249 195,388
In accordance with the exemption permitted under section 408 of the Companies Act, the Company has not
presented its own statement of comprehensive income in these financial statements.
The Company’s profit after tax for the period ended 1 January 2023 was £1,361k (2021: loss £323k). Included
within the profit after tax is a £2.5m dividend received from the Company’s subsidiary, Hostmore Group Limited.
The notes on pages 160 to 163 form part of these financial statements.
The financial statements on pages 158 to 163 were approved and authorised for issue by the Board of Directors
on 28April 2023 and were signed on its behalf by:
Gavin Manson
Chairman
Alan Clark
Chief Financial Officer
Financial statements
159
Hostmore • Annual Report 2022
Company statement of changes in equity
Share
capital
£’000
Share
premium
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Comprehensive expense for the period
Loss for the period – – (323) (323)
Total comprehensive expense for the period – – (323) (323)
Issue of share capital 25,225 170,486 – 195,711
Cancellation of share premium – (155,903) 155,903 –
Total contributions by and distributions to owners 25,225 14,583 155,903 195,711
At 2 January 2022 25,225 14,583 155,580 195,388
Share
capital
£’000
Share
premium
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
At 3 January 2022 25,225 14,583 155,580 195,388
Comprehensive income for the period
Profit for the period – – 1,361 1,361
Total comprehensive income for the period – – 1,361 1,361
Contributions by and distributions to owners
Share purchases by EBT – – (500) (500)
Total contributions by and distributions to owners – – (500) (500)
At 1 January 2023 25,225 14,583 156,441 196,249
Notes to the Company Financial Statements
for the 52 weeks ended 1January2023
160
Hostmore • Annual Report 2022
35. Company accounting policies and basis of preparation
35.1 Basis of preparation
The Company financial statements have been prepared in accordance with the Financial Reporting Standards
101 ‘Reduced Disclosure Framework’ as issued by FRC. As permitted under FRS 101, the Company has
adopted the disclosure exemptions available under that standard in relation to share based payments, financial
instruments, presentation of a cash flow statement, impairment of assets and related party disclosures. Where
required, equivalent disclosures are given in the consolidated financial statements.
The Company was incorporated on 14 April 2021 and accordingly the prior period comparatives relate to the 38
week period from incorporation to 2 January 2022. The Company has adopted the exemption available under
section 408 of the Companies Act 2006 of not presenting its own statement of comprehensive income in these
financial statements.
The Company financial statements have been prepared under the historical cost convention. The Company’s
accounting policies have been applied on a consistent basis throughout the 52 week period ended 1 January
2023 and the previous period.
The Company’s functional and reporting currency is pounds sterling. All amounts have been rounded to the
nearest thousand pounds (“£’000”), unless otherwise indicated.
The following principal accounting policies have been applied in the preparation of the financial statements.
35.2 Going concern
The financial statements have been prepared on a going concern basis, with more detail to this assessment
within note 4.2 in the consolidated financial statements.
35.3 Company statement of comprehensive income
In accordance with the exemption permitted under section 408 of the Companies Act, the Company has not
presented its own statement of comprehensive income in these financial statements.
35.4 Investments
The interest of the Company in shares of subsidiary undertakings is stated at cost less provision for
impairment. The carrying values of fixed asset investments are reviewed for impairment if events or changes in
circumstances indicate the carrying value may not be recoverable. An impairment is calculated by comparing
the carrying amount to the higher of the recoverable amount and the value-in-use.
35.5 Share based transactions
Equity-settled share based payments to employees and others providing similar services are measured at the
fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of
equity-settled share based transactions are set out in note 29 to the financial statements.
Based on the Group’s estimate of equity instruments that will eventually vest, the fair value determined at
the grant date is expensed on a straight-line basis over the vesting period with a corresponding increase in
equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments
expected to vest. The impact of the revision of the original estimates, if any, is recognised in the statement of
comprehensive income such that the cumulative expense reflects the revised estimate, with a corresponding
adjustment to the equity-settled employee benefits reserve.
For cash-settled share based payments, a liability is recognised for the goods or services acquired, measured
initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the
date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised the
statement of comprehensive income for the period.
Financial statements
161
Hostmore • Annual Report 2022
35.6 Dividends
Equity dividends are recognised when they become legally payable. Interim equity dividends are recognised
when they are paid. Final equity dividends are recognised when approved by the shareholders at an annual
general meeting.
35.7 Cash and cash equivalents
Cash is represented by cash on hand and demand bank balances. Cash equivalents are highly liquid
investments that are readily convertible to known amounts of cash without significant risk of change in value.
36. Critical accounting estimates and judgements
Estimates and judgements are evaluated at each reporting date and are based on historical experience, updated
for current market conditions and other factors. Judgements, estimates and assumptions have been made in
respect of the following:
36.1 Judgements
There are no critical judgements that the Directors have made in the process of applying the Company’s
accounting policies.
36.2 Estimates and assumptions
Investment impairment
The Group performs an impairment assessment at the end of each reporting period. For this purpose, each
restaurant in the Group is considered a separate CGU. An impairment charge is recognised where the
recoverable amount is less than the carrying value of Group’s investments. The recoverable amount is based
on value-in-use calculations, using discounted forecasted cashflows and each restaurant’s ability to cover its
costs, including an allocation of central overheads, marketing and maintenance standards of assets.
The recoverable amount is based on value-in-use calculations with cash flow projections over the lease term
of each restaurant, using the Group’s budget of performance for 2023, significantly risked from the target 2023
budget, and the business plan growth rate for the next two years, applying a long-term growth rate of 2%.
The discount rate applied in the value-in-use calculations has been calculated with reference to the Group’s
weighted average cost of capital and similar benchmarks in the industry. A pre-tax discount rate of 14.2%
(2021: 11.7%) has been applied in the value-in-use calculations.
37. Investment in subsidiary undertakings
Movements in carrying value of investments
52 weeks
ended
1 January
2023
£’000
38 weeks
ended
2 January
2022
£’000
Opening balance 176,737 –
Purchase of shares in Hostmore Group Limited – 176,737
Closing balance 176,737 176,737
The Group performs an impairment assessment at the end of each reporting period. No impairment charge has
been necessary for the 52 weeks ended 1 January 2023 as the value-in-use supports the carrying value of the
Company’s investments.
At 1 January 2023 the Company had one directly wholly owned subsidiary undertaking, Hostmore Group
Limited, and three indirectly wholly owned subsidiary undertakings, Wednesdays (Bidco) Limited, Thursdays
(Holdings) Limited and Thursdays (UK) Limited. All subsidiary undertakings are wholly owned, operate in the
restaurant sector, were incorporated in the United Kingdom and are registered at Grant House, 101 Bourges
Boulevard, Peterborough, PE1 1NG. Thursdays (UK) Limited is a trading company, the remaining subsidiaries
are holding companies.
Notes to the Company Financial Statements
for the 52 weeks ended 1January2023 continued
162
Hostmore • Annual Report 2022
38. Employees and directors
Employee benefit expense, including Directors, comprises:
52 weeks
ended
1 January
2023
£’000
38 weeks
ended
2 January
2022
£’000
Wages and salaries 382 87
Social security costs 48 5
Total employee benefit expense 430 92
The Company had 10 (2021:8) employees, including Directors, during the period. The cost for 3 (2021:4)
employees is borne by a subsidiary company and included in the consolidated financial statements. This note
discloses the remuneration for 7 (2021:4) Non-Executive Directors.
39. Trade and other receivables
1 January
2023
£’000
2 January
2022
£’000
Prepayments 206 86
Amounts owed by Group undertakings 15,010 16,126
Other receivables 11 19
Total trade and other receivables 15,227 16,231
All amounts are receivable within one year and are non-interest bearing. Amounts owed by Group undertakings
are receivable on demand.
40. Trade and other payables
1 January
2023
£’000
2 January
2022
£’000
Trade payables 119 117
Accruals – 13
Total trade and other payables 119 130
Trade payables and other payables are non-interest bearing and are normally settled monthly.
41. Share capital
Issued and fully paid
Number £’000
Ordinary shares of 20p each at each of 1 January 2023 and 2 January 2022 126,127,279 25,225
The Company has one class of ordinary shares, comprising the entire issued share capital of the Company.
Share issuances during the period
There were no shares issued during the 52 week period ended 1 January 2023.
Rights attaching to ordinary shares
The Company’s shares form a single class for all purposes, including with respect to voting, dividends and other
distributions declared, made or paid on the Company’s share capital. Shareholders are entitled to one vote per
share at shareholder meetings of the Company.
Financial statements
163
Hostmore • Annual Report 2022
Dividends on ordinary shares
No dividends were declared by the Company during the 52 week period ended 1 January 2023.
Market purchases of ordinary shares
At the Company’s annual general meeting held on 27 May 2022, the Company’s shareholders passed a special
resolution in accordance with the Companies Act 2006 to authorise the Company to purchase in the market up
to a maximum number of 12,612,727 shares in the Company, representing 10% of its issued share capital at
27 May 2022, within normal guidelines. No market purchases were made under this authority during the period
from the Company’s annual general meeting on 27 May 2022 to the date of approval by the Board of these
financial statements. The authority will expire (unless previously revoked, varied or renewed) at the close of
business on 30 June 2023 or, if earlier, at the conclusion of the Company’s annual general meeting to be held in
2023. The Company intends to seek a renewal of this authority at its annual general meeting to be held in 2023.
Under the existing authority, purchases can be made at a minimum price of the nominal value of the share and
a maximum price of the higher of (a) 5% above the average of the closing price for a share for the five business
days immediately preceding the date the share is contracted to be purchased, and (b) an amount equal to the
higher of the price of the last independent trade of a share and the highest current independent bid for a share
as derived from the London Stock Exchange Trading System.
Market purchases of ordinary shares by Intertrust Employee Benefit Trustee Limited, the trustee of the
Hostmore plc 2021 Employee Benefit Trust
Intertrust Employee Benefit Trustee Limited, the trustee of the Hostmore plc 2021 Employee Benefit Trust
(the “Trust”), completed the market purchase of 1,470,036 ordinary shares in the Company, representing
approximately 1.17% of the Company’s total issued share capital, in the period ended 1January 2023. These
shares are held subject to the terms of the Trust and are expected to be used to help meet future obligations
arising under the Company’s long-term incentive plan and for other employee incentivisation purposes. The
market purchases of these shares were funded by amounts advanced by the Company.
Shares in the Company held in the Trust are consolidated in determining the number of shares in the Company
held by the Group. Consequently, the Group held 1,470,036 ordinary shares in the Company on 1January 2023
(2021: nil ordinary shares in the Company). All of these ordinary shares in the Company were held by Intertrust
Employee Benefit Trustee Limited, the trustee of the Trust. The right to dividend income on these ordinary
shares in the Company held by Intertrust Employee Benefit Trustee Limited, the trustee of the Trust, has been
waived. The closing middle market quotation for the shares on 30December 2022, being the last dealing day
of the period ended 1January 2023, was 13.1p per share. The market value of the shares based on the closing
middle market quotation for the shares on 30December 2022 was £0.193m (2021: £nil).
Authorities to issue share capital
At the Company’s annual general meeting held on 27 May 2022, the Directors were authorised to allot and issue
ordinary shares in the Company within ordinary guidelines. No issuances were made under this authority during
the period from the Company’s annual general meeting on 27 May 2022 to 1 January 2023. This authority will
expire (unless previously revoked, varied or renewed) at the close of business on 30 June 2023 or, if earlier, at
the conclusion of the Company’s annual general meeting to be held in 2023. The Company intends to seek a
renewal of this authority at its annual general meeting to be held in 2023.
164
Hostmore • Annual Report 2022
Definitions
The following definitions shall apply throughout this document unless the context requires otherwise:
“Admission” the admission of the Company’s ordinary shares to premium listing segment of the
Official List of the Financial Conduct Authority and to trading on the London Stock
Exchange’s main market for listed securities
“Company” Hostmore plc, a company registered in England and Wales with company number
13334853 whose registered office is at Highdown House, Yeoman Way, Worthing, West
Sussex BN99 3HH
“Demerger” the demerger of the Company from Electra
“EBITDA” earnings before interest and bank arrangement fees, tax, depreciation, amortisation,
impairment and share based payments
“Electra” Electra Private Equity PLC (now renamed Unbound Group PLC), a company registered
in England and Wales with company number 00303062 whose registered office is at
17Old Park Lane, London W1K 1QT
“Exceptional items” items that, by virtue of their unusual nature or size, warrant separate, additional
disclosure in the financial statements in order to assess the performance of the Group
“Free cash flow” the profit/(loss) for a period adjusted for depreciation, non-cash items, changes in
working capital, tax paid and maintenance capex, and excludes cash used in financing
activities
“Group” the Company together with its direct and indirect subsidiaries and subsidiary
undertakings
“GAAP” Generally Accepted Accounting Principles in the UK
“IFRS” International Financial Reporting Standards as adopted by the UK
“Like-for-like (LFL) Sales” the revenue performance of the Group measured by reference to its business in
operation during any comparable period
“Net debt” the Group’s long-term borrowings (excluding issue costs) and lease obligations less
cash and cash equivalents at each period end
“Prospectus” the document issued by the Company dated 15 October 2021 relating to Admission
“PSA” performance share awards
“RoU asset” right of use asset
“RSA” restricted share awards
“TSR” total shareholder returns over a period
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Hostmore • Annual Report 2022
Hostmore plc
Highdown House
Yeoman Way
Worthing
West Sussex
United Kingdom
BN99 3HH
Tel: +44 330 460 5588
www.hostmoregroup.com