Profits at Gordon Ramsay’s UK restaurants have plunged by nearly 90% and the celebrity chef has been forced to pump his own money into the business.
Ramsay’s latest company accounts show the restaurant chain came close to the brink as revenues collapsed while debt and tax bills mounted up.
The precarious situation caused the TV chef and Chris Hutcheson, his father-in-law and business partner, to inject the business with £5m. Ramsay had to sell his Ferrari to help fund the move.
Ramsay’s business problems were blamed on ambitious expansion as well as the closure of key London restaurants such as the Savoy Grill, as pretax profits tumbled from £3.05m in 2007 to £383,325.
The Savoy Grill was shut because of refurbishment at its host hotel, while the Connaught lease expired. The two restaurants alone accounted for a £9.5m reduction in revenues.
The firm said a restructuring of operations meant the group had “successfully undergone change for the better” and was now “well placed to grow its operation with a more stable capital base and a more manageable overall structure”.
Ramsay’s restaurant business expanded significantly in 2007 and 2008 but, in the year to August 2008, turnover dropped to £35m from £41.6m the previous year. Net debt soared from £4.06m to £9.48m.
A full review of operations was instigated in December as part of a refinancing deal with the Royal Bank of Scotland and to help the business get through the troubled economic times.
The cash injection from Ramsay and Hutcheson came after the firm had to pay £8m in VAT, corporation tax and PAYE. This has now mostly been repaid and will be completely settled by the end of this month.
Hutcheson said: “2008 brought its own challenges, not just for our group, but for the industry as a whole and the broader economy.
“Whilst the restructuring has benefited the group, the significant contribution and commitment of all 750 staff to the business has been integral to moving us to a position of strength.”
The firm said 25 staff were sacked as part of the restructuring efforts.
Of Ramsay’s 11 London venues, the Boxwood Café and his restaurants in Royal Hospital Road and at Claridges emerged as the star performers.
The restaurant at the Connaught hotel was closed after its lease expired, but two further ventures were opened in the capital: Murano in Mayfair and York and Albany in Camden.
The Narrow has had extra seating installed, Petrus is due to move to Knightsbridge later this year after closing last September, Maze has been fully refurbished and the Savoy Grill is set to reopen with the hotel in early 2010.
But La Noisette in Knightsbridge ceased trading in January this year and was described as a consistently underperforming site.