The restaurant chain Leon, recently acquired by Asda, has reported a considerable financial loss. New accounts show a pre-tax deficit amounting to £19.5m for 2023.
Despite the increase in turnover, the financial performance highlights ongoing challenges for the business.
Leon, a notable restaurant chain, was sold by the billionaire Issa brothers to Asda in late 2023. The business had initially been acquired by the Issa brothers’ EG Group in 2021.
The sale, which included a majority of the group’s UK operations, was valued at £2bn. Asda, headquartered in Leeds, was jointly owned by the Issa brothers and TDR Capital, with Walmart retaining a minor stake.
Recently filed accounts at Companies House have disclosed Leon’s financial performance for 2023.
Turnover increased from £52.1m to £64.9m. However, pre-tax losses escalated from £13.2m to £19.5m during the same period. Leon has not recorded a pre-tax profit since 2015, its last reported profit being £358,793.
The board stated that the business saw a continued recovery from Covid-19, with weekly sales and footfall improving steadily. Despite improvements, the year remained challenging.
Rail strikes and a rise in remote working significantly affected Leon’s business.
Inflationary pressures exacerbated by the war in Ukraine further compounded these issues, particularly with increased electricity costs and the cost of sales.
Industrial action, especially rail and tube strikes, led to reduced footfall and sales, as many Leon restaurants are located near transport hubs. The trend of working from home also impacted the recovery of restaurants situated in office-centric locations.
In response to these challenges, Leon’s board expressed confidence in a gradual recovery. Management remains optimistic about future sales, citing ongoing improvements observed in 2024.
Despite current financial difficulties, they believe the business is on a path to recovery. The continuous improvement in weekly sales and restaurant footfall supports this outlook.
Ownership transitions have had a notable impact on Leon’s strategic direction. The deal in October 2023 marked a significant shift with Asda acquiring a substantial portion of the Issa brothers’ assets.
The shareholder structure is set to change further, with TDR Capital taking over Zuber Issa’s shares in Asda, indicating a shift in management dynamics.
The broader economic landscape has also played a role in Leon’s financial performance. The UK economy’s recovery post-Covid-19 has been slow, contributing to the chain’s financial woes.
The ongoing war in Ukraine has exacerbated economic challenges, leading to inflationary pressures that have directly impacted operational costs for Leon.
Industrial actions have not only affected Leon but have also been a broader issue affecting many businesses across the UK.
The future remains uncertain, but management’s positive outlook shows resilience.
Continuous adaptation and strategic planning will be critical for Leon to navigate the ongoing economic challenges successfully.
Leon’s journey through financial turmoil under Asda’s ownership highlights significant challenges.
While the path to profitability appears arduous, management’s faith in a gradual recovery offers a glimmer of hope.