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Tue 31st Dec 2019 - Update: UKHospitality on wage increases, Chilango, Pieminister and Arkell's results
Wage increases must be mitigated by business tax cuts, says UKHospitality: UKHospitality has urged the government to cut business taxes to support higher wages. The government has announced it will adopt the Low Pay Commission's (LPC) recommendations for rates from April 2020. As a result, the National Living Wage for over-25s will increase 6.2% from £8.21 an hour to £8.72. The National Minimum Wage for 21 to 24-year-olds will go up 6.5% to £8.20. For 18 to 20-year-olds, it will rise 4.9%, to £6.45 and for under 18s, there will be an increase of 4.6%, to £4.55. Meanwhile, apprentices will see a rise of 6.4%, to £4.15. In response, UKHospitality chief executive Kate Nicholls said: “Hospitality operators absolutely want to reward the great work of their staff. In order to make that growth sustainable, other measures are needed to mitigate cost growth. UKHospitality has long argued business rates place an unfair burden on hospitality. It is now critical rates are cut for the sector in April, to provide relief while the government's commitment to a more fundamental review of business taxation is delivered. The new government must also address employer National Insurance contributions so business can pay higher wages while continuing to invest in their businesses and future jobs. We welcome the continued oversight of the LPC in ensuring future wage rates are set independently and safeguard the economy. This is particularly important outside of London where it is harder to mitigate wage increases with price increases. We look forward to working with the LPC to deliver on industry and government’s shared ambitions for the workforce.”

Chilango shareholders agree to transfer burrito bond debt into new form of equity: Investors who poured £3.7m into Mexican restaurant brand Chilango's mini-bond fund-raise have successfully avoided losing 90% of their money, but how much will be returned to them remains unclear. Emails sent out to some creditors on Monday (30 December) revealed enough of the firm's shareholders have voted in favour of Chilango's proposal to transfer the company's mini-bond debt into a new form of equity, reports the Daily Mail. It means investors in its 8% burrito bonds no longer face the prospect of automatically losing 90p in every £1 they invested without any say, but the new debt-like shares they could be left with still does not guarantee them the returns they signed up for. A letter previously sent to bondholders told them the preferred equity “will attract an 8% annual dividend going forward”, which will be paid “when the directors consider it appropriate”, and “if there is available cash”. Essentially investors have been promised returns sometime in the future provided the company sorts out its finances, rather than the 8% interest they are currently due twice a year under the terms of the mini-bonds. With £3.7m invested, the firm was previously on the hook for £296,000 every time it had to make interest payments to the nearly 800 investors who poured money in between October 2018 and April 2019. It has since become apparent from Chilango’s official restructuring documents the payments were maintained in part through using its second burrito bond fund-raise to service interest payments on its first burrito bond issuance, which raised £2.1m in 2014. The proposal approved by shareholders is one of several steps the chain is taking to try and get a grip on its finances and its £6.9m debt pile. Shareholders, creditors and employees are currently voting on a company voluntary arrangement (CVA), which proposes reducing rents by 40% on three restaurants and exiting leases on four unopened sites, as well as clearing its debt from the balance sheet. Shareholders still have until Friday (3 January) to vote on the preferred equity proposal, but the email suggested the business has convinced enough to vote in favour already. Its CVA also closes on Friday. Its CVA proposal suggests it is due to make an Ebitda profit of £111,000 in the 12 months to March 2019, a sixth of what it forecast to investors last October.

Pieminister returns to profit, restaurant like-for-like sales up 8%: Bristol-based pie and mash restaurant operator Pieminister has reported a return to profit after seeing a boost in sales in its restaurant and retail divisions. Group turnover was up 15% to £16.6m for the year ending 31 March 2019, compared with £14.3m the previous year. Like-for-like sales within its restaurant business rose 8% with sales increasing 28%. During the period, Pieminister opened sites in Sheffield and Liverpool, while earlier this month it opened its 16th outlet, in Exeter. It is targeting four more sites in 2020 with cities including Bath, Brighton, Cambridge, Coventry, Newcastle-upon-Tyne, Reading, Southampton and York on its radar. Meanwhile, revenue in its retail division was up 28%, with a fourth year of double-digit growth in supermarket sales. Within Pieminister’s brand licensing division, partnerships with brands such as Vans, Picture House Cinemas, Go Ape and the Hilton Group have led to 12% growth. Towards the end of the financial year, Pieminister embarked on a national roll-out of its home delivery service via UberEats and Deliveroo. All this has led to the company reporting a pre-tax profit of £349,000, compared with a loss of £310,000 the previous year. Gross margin increased from 21% to 24%. During the period, Pieminister stepped up its commitment to invest and innovate across all areas of the business. Part of the investment was to support the expansion of its bakery in Bristol. In addition to its long-term commitment to high farm animal welfare and other ethical ingredient sourcing policies, Pieminister became the first UK supplier to become certified plastic-free across its retail, wholesale and mail order packaging in the summer. This move was made in conjunction with a fresh new brand look across the whole business. Co-founders and managing directors Tristan Hogg and Jon Simon said everyone within the 300-strong team should be given a voice and “the chance to make positive differences to Pieminister and the planet”. This led to the formation of its Inside Out council that aims to “identify bold moves and agree actions to build an even more open and ethical Pieminister” – driven by people within all areas and at all levels of the business. Simon said: “Our plan is to continue to develop a strong brand presence in both retail and food service channels and to deliver the best, most ethical pie experience in the UK. There are many exciting plans afoot as we enter 2020. In particular, we’re preparing to launch a major tree-planting initiative this spring, which we hope will also encourage the most committed carnivores to try our ever-growing range of plant-based pies and patties, for the health and well-being of both people and planet.”

Arkell's reports turnover and pre-tax profit boost: Swindon-headquartered brewer and retailer Arkell’s Brewery has reported turnover increased 4.7% to £24.2m for the year ending 31 March 2019, compared with £23.1m the previous year. Pre-tax profit rose to £3.32m, compared with £3.30m the year before. A dividend of £598,000 was paid, which was the same as the year before. It sold one closed site in Lechlade and a flat in Faringdon. The company is redeveloping three of its sites – the Old Fox Inn, Highworth, The Cycle Club in Swindon and the Stratton Reform Club – into flats, which it plans to let. Arkell’s is also set to start work on its first new-build pub in more than 15 years, at Crest Nicholson’s Tadpole Garden Village development in north Swindon. In his report accompanying the accounts, chairman James Arkell said: “I'm glad to say we hung on to our profit and advanced a little. With no purchases we have consolidated, but never cease to reinvest in our pubs. Total spent is more than £3.5m in the year. Over the past 12 months the big building project has been The Carpenters Arms in Burghclere, near Newbury, costing more than half a million pounds. With 471 letting rooms across our estate, we have started to refurbish our older rooms to keep them up to date. A total of 20 rooms were completed in the year.”

BigDish reports losses deepen, sees 2020 as ‘turnaround story’: BigDish, the food technology company that operates a yield management platform for restaurants, has seen its losses deepen after it wrote down the value of its assets. Pre-tax losses for the six months to 30 September 2019 amounted to £1.05m, compared with losses of £0.39m on-year. BigDish said it had £1.30m of cash at the end of September and sufficient funding to meet its strategic objectives until the the third quarter of 2020. Chief executive Tom Sumner said: “Since joining BigDish on 2 December we have been able to streamline operations and reduce cash burn significantly in order to improve and be more effective as a business in 2020. We have sufficient funding runway in order to increase the pace of restaurant acquisition, which is the key performance indicator for the year ahead. It is my expectation that 2020 will be a turnaround story for BigDish and our shareholders.”

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