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Morning Briefing for pub, restaurant and food wervice operators

Mon 21st Mar 2022 - Update: Mowgli, VAT and NI rises, Marston’s, small brewers
Mowgli reports trade significantly up on pre-pandemic levels: Mowgli, the Indian street food concept led by Nisha Katona, has reported trading ‘materially above’ pre-pandemic levels since the lifting of restrictions in July 2021. The company, which has opened in Cheltenham and London’s Charlotte Street since restrictions were lifted, has a pipeline of five further openings in place – this includes restaurants in Scotland, Brighton and Preston. Reporting full year results to 31 July 2021, the company stated: “Following the full re-opening in May 2022 the group has seen a very strong return to trade with sales significantly up on pre-pandemic levels. Turnover for the period was down £2.7m to £8.6m. This is wholly attributable to covid-19 enforced closure and trading restrictions. Adjusted Ebitda, which excludes exceptional and one-of costs related to the opening of new restaurants, was £619,000 (20320: £533,000). Control of overhead allowed the group to trade at a profit despite the severe impact on its business in the year.” The company reported a loss before tax of £3,207,707 (2020: £3,089,656). It received government grants of £2,736,287 (2020: £1,612,405). 

Latest edition of Propel Turnover & Profits Blue Book sent to Premium subscribers: The latest edition of the Propel Turnover & Profits Blue Book, which is produced in association with Mapal Group, has been sent to Premium subscribers. The latest Blue Book sees a further 12 companies added, taking the number of UK pub, restaurant, cafe and hotel operators featured to 546. The Blue Book, which is updated monthly, shows the full damage done to the sector by the pandemic, with 348 companies making a combined loss of £7.6bn compared with 198 companies in profit – making a combined £828.9m. Losses now outstrip profits in the sector almost ten times over. Total turnover of the companies stands at £25.9bn. The Blue Book, which is updated every month, provides an insight into UK operator turnover and profitability over five years, profit conversion and directors’ earnings. Premium subscribers also receive the New Openings Database, produced in association with StarStock, and the Multi-Site Operators Database, produced in association with Virgate, which are also updated each month. Premium subscribers are also to be given exclusive access to a new database early next month. The UK Food and Beverage Franchisor Database will be an exhaustive guide to the companies offering a food and beverage franchise in the UK and be updated every two months. The first edition will feature more than 100 companies, providing insight on the offer, locations, cost and other key details. The first edition provides almost 25,000 words of content. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email to upgrade your subscription. Subscribers also receive access to Propel’s library of lockdown videos and Friday Wrap interviews and now also have access to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out; regular video content and regular exclusive columns from Propel group editor Mark Wingett.

Chancellor considering plan to wipe out National Insurance rise for lowest paid workers: Rishi Sunak is considering plans to wipe out the National Insurance (NI) tax rise for lower paid workers. The chancellor could ease the pressure of the 1.25% NI hike by raising the thresholds at which people start to pay the tax. Depending on where he sets the threshold, it could allow him to declare that no worker below the median national wage of £27,500 a year will lose out financially from the NI increase – placing the burden instead on higher earners. Such a move is being recommended across the political spectrum from the left-leaning Resolution Foundation to the centre-right Centre for Policy Studies (CPS) in recognition that it is too late for Boris Johnson and the chancellor to cancel the NI rise – as Labour has demanded. “It is a way of doing something that doesn’t look like you are abandoning the NI increase but softens the impact on low earners,” said a senior Tory MP. Asked by the BBC’s Sophie Raworth about raising NI thresholds, Mr Sunak ducked the question and instead defended the NI rise as necessary to prevent the “unpalatable, unacceptable situation” of millions waiting longer for NHS treatment and as part of efforts to restore the public finances. But he added: “Going forward my priority is to cut tax and put money back in people’s pockets. You saw that at the Autumn Budget, I was very clear about that and the direction of travel over the rest of the parliament is that.” The NI starting threshold is currently £9,600 and will rise to £9,900 this April. The CPS said last week that raising it to £11,284 would protect low and median-wage workers from a real terms NI tax rise of £182.21. This would cost the Treasury about £5 billion a year. Another less ambitious option, to raise it to £10,700, would cost about half of the £5 billion, but only protect workers on wages up to around £20,000.

Nicholls – VAT rise will hit London businesses hard: UKHospitality chief executive Kate Nicholls has told City AM that the government’s plans to increase VAT from current rates of 12.5% to highs of 20% at the start of next month will see some London businesses “become unviable overnight”. She said the consumer tax hike will worsen the UK’s cost-of-living crisis, as she claimed London hospitality businesses will be particularly hard hit. Nicholls’ warned the VAT hike is being passed at the “worst possible time”. “We are really fearful that consumer confidence will crumble and the incremental growth we have seen in footfall in London will be reversed,” Nicholls said. “That is bad news for London and for the national economic recovery as a whole.” As the hospitality businesses that are most reliant on international travellers that also have the highest costs, Nicholls raised concerns that the “tentative green shoots of recovery in London’s hospitality sector” will die off. 

Marston’s hikes drink prices: Drink prices in West Midland-based Marston’s restaurants and pubs have risen in recent days by between 20p and 45p on average in the last week, The Express and Star has reported. They are also up by up to 20p a pint at Wetherspoon pubs – and small Midlands brewer Joule’s has warned of big price rises down the line. The level of increases varies between pub restaurants and drinkers’ pubs. Some products have gone up by more than 45p and for others there has not been a rise. The newspaper reported: “The rises have not so far affected food prices at its chains that include Marston’s Two for One, Generous George, Milestone Rotisserie, Milestone Carvery and Pitcher & Piano.” A spokesman for Marston’s added: “The price increase is a direct impact of the soaring energy prices and operating costs as being experienced by all businesses and households across the country. The company has joined other brewery and pub groups in writing to the chancellor, Rishi Sunak, asking for further financial help when he makes his Spring Statement to the Commons on Wednesday. Marston’s is among those calling for the current 12.5% VAT rate for food and drinks sold in the hospitality sector to be maintained. Chief executive Andrew Andrea has previously warned that if the planned return to the full 20% rate is implemented April, Marston’s might be compelled to increase prices in response. The British Beer and Pub Association has also written to the chancellor asking for financial help for pubs including extending the energy price cap to small businesses.”

Butlin’s owner Bourne Leisure eyes bid for Parkdean Resorts: The American private equity giant behind Bourne Leisure is mulling a bid for one of Britain’s biggest holiday park groups. Bourne and its owner Blackstone are working with investment bankers from Bank of America on a possible takeover proposal for Parkdean Resorts, The Times has reported. Parkdean has been put up for sale by Onex Corporation, the Canadian investment group that bought the caravan parks operator for £1.35bn at the end of 2016. It is unknown who else is considering a bid for Parkdean but a combination with Bourne would create a holidays giant. While Bourne is best known as the owner of Butlin’s, it also operates the Haven caravan parks business and the adult-only Warner Leisure Hotels. It is thought that Blackstone and Bourne believe Parkdean would fit well with the Haven business, which runs 37 parks around the country. Parkdean operates 66 parks from Newquay in Cornwall and Carmarthen Bay in Wales to Dornoch in the Scottish Highlands. It emerged in the autumn that the company and its owner Onex had appointed bankers from Morgan Stanley to start working on a possible sale. Bourne and Blackstone are circling a bid for Parkdean at the same time as they seek a buyer for Butlin’s. The iconic resorts brand, which was founded in 1936, was acquired by Bourne in 2000. In its heyday it was known for its frontline redcoat staff, some of whom went on to become household names like Des O’Connor. Butlin’s has three parks and is the smallest of Bourne’s three businesses. It emerged in November that investment bankers from Rothschild had been hired to explore a possible sale. Onex’s decision to look for a buyer for Parkdean comes amid a surge in interest in Britain’s holiday parks industry among private equity firms and other investment groups.

Small brewers feel bitter at tax bonus for cider makers: Small brewers have expressed alarm at the government’s proposed reform of alcohol duty, and want to know why the mooted tax on cider will be only half the rate on beer. The government, which announced a review of alcohol duty in March 2020, launched a consultation in last year’s budget aimed at simplifying the “complex, burdensome and inconsistent” tax system. Hailed by Rishi Sunak as “the most radical simplification of alcohol duties for over 140 years”, the new system was designed to reduce the number of main duty rates from 15 to six under the principle of “the stronger the drink, the higher the rate”. Ian Fozard, of the Society of Independent Brewers and chairman of Rooster’s Brewery, in Harrogate, told The Times that under the present system beer duty is linked to strength whereas cider is taxed at a flat rate equivalent to 44% of a similar strength beer. He said that the brewing sector’s hopes that the issue would be addressed in the reforms had been dashed, despite statements of support for equivalence across drinks sectors and support for this from the health lobby. “Perversely the government is still proposing to tax beer and cider on a significantly different basis despite those two drinks categories clearly being equivalent products in terms of strength and consumer appeal,” he said. Fozard said that the cider industry would also continue to benefit from the so-called farm gate exemption, whereby the first 70 hectolitres – 12,318 pints – of production are exempt from duty and producers do not have to register with HM Revenue & Customs. He said it was ironic that, if the government were to bring in equivalence between beer and cider, the Treasury would raise £350m more tax.

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