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Morning Briefing for pub, restaurant and food wervice operators

Mon 28th Mar 2022 - Update: Starbucks, Brighton Pier Group, Domino’s, pint prices
Starbucks to open 140 new UK sites this year as British operation swings back to profit: Starbucks is to open 140 new coffee shops in the UK this year after its British operation swung back into profit after losses in 2020 and resumed paying corporation tax. In the first year of the pandemic, the US-owned company received a tax credit of £4.4m in the UK after racking up a pre-tax loss of £40.9m. The business, which has more than 1,000 outlets in Britain, was forced to seek a £25m loan from its US parent to help offset a decline in trading. It has paid back the loan and confirmed that it had taken none of the government support in the form of covid loans or furlough money. According to accounts to be filed this week at Companies House, revenues in the year to 3 October 2021 rose by 35% to £328m as sales recovered in its company-owned stores and franchised sites, reports The Times. At the operating level, Starbucks swung from a loss of £37.4m to a profit of £16.5m. Starbucks, which was founded in 1971, has more than 33,000 cafes and entered Europe in 1998. The UK is its biggest European market. At the year-end it had exactly 1,000 stores, of which 297 were company-owned and 703 run by franchisees. Last year it opened 14 company-owned stores while five shut permanently. It said since the pandemic it had sought rent concessions from landlords of sites where trade had been hit and to “restructure leases”. It said: “We successfully managed to negotiate rent concessions with many landlords in the year. Where leases are no longer competitive, we will use break clauses in lease agreements.” The company expects to open about 140 UK stores this year, half of them drive-thru sites. It also continued to increase its delivery business, adding deals with Just Eat and Deliveroo during the year that lifted the proportion of sales from delivery channels to 9%. The average spend on a delivery order was £12 compared with £5 instore. Starbucks admitted its sales had been affected by the still-sluggish footfall in high streets and said that some of the pandemic trends were persisting “with working from home and hybrid working evidently now a normal pattern of life for many Starbucks’ customers”. Starbucks has been impacted by shortages of HGV drivers and packaging, rising supplier costs and shipping delays as well as labour shortages. In response to the inflationary pressures it lifted prices on espresso-based drinks by 3%. The company also files accounts this week for its Europe, Middle East and Africa (EMEA) business, which is based in London and comprises 3,900 stores in 43 markets but excludes the UK operations. Improving revenues pushed the division from a loss of $74m to an operating profit of $40.5m. Starbucks EMEA reported a UK corporation tax charge of $13.2m compared with $3.1m the previous year as it returned to profit. Headline profits of Starbucks EMEA include dividend income of $150m, down from $183.4m in 2020. Duncan Moir, president of Starbucks EMEA, said the company had continued to be impacted by covid this year as the Omicron variant hit the industry, although since the easing of restrictions it had experienced “a sharp bounce-back”.

Variety of cafe bar operators set to join updated Premium Database of Multi-Site Companies: A variety of cafe bar operators are among the 69 new multi-site companies being added to the next edition of the Propel Premium Database of Multi-Site Companies, which will be released on Friday (1 April), at midday. The updated Propel Multi-Site Database, which is produced in association with Virgate, features Mia Group, which operates nine restaurants and cafes in Edinburgh. Also added is four-strong Yorks Cafe, which was founded and is owned by Simon Ford, and is set to open its fifth site in Birmingham’s Paradise development in the spring. In addition, Wakefield-based The Capri Group, which has been owned and run by Paymen Karimi and his family since 1996, and now has five sites, will be featured. Meanwhile The Dowry, a cafe-bar based in the Shetlands, which is led by Stuart Fox, and is set to double up by opening in the Shetland Museum in May, is included. Premium subscribers will also receive a 5,155-word report on the new additions to the database. The comprehensive database is updated monthly and provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different. It features more than 2,000 companies. Premium subscribers will also receive the eighth edition of the New Openings Database, which is produced in association with StarStock, on Friday, 8 April, at midday. It focuses on newly announced openings and upcoming launches in the sector and is updated every month. The eighth edition also includes a 17,000-word report on the new additions to the database. Premium subscribers also receive access to another database – the Propel Turnover & Profits Blue Book, which is produced in association with Mapal Group. The Blue Book, which is also updated monthly, provides an insight into UK operator turnover and profitability over five years, profit conversion and directors’ earnings. 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.

Brighton Pier Group reports ‘robust’ outlook with trading ahead of expectations, first-half revenue up 33% on pre-covid levels: Brighton Pier Group has reported a “robust” outlook for the business with trading ahead of expectations and revenue in the first half of its financial year up 33% on pre-covid levels. Revenue for the 26 weeks ending 26 December 2021 was up 178% to £22.8m (2020: £8.2m) and profit before tax was £6.6m (2020: £2.7m). Group Ebitda stood at £7.9m (2020: £1.9m) The company stated: “This has been driven by the sound underlying performance in all divisions as well as the successful integration of Lightwater Valley theme park, which is trading above expectations. A consistent gross margin performance, the reduction in VAT and rates relief has enabled the group to make good progress on maximising earnings and paying down debt. The outlook for 2022 is robust. Given these excellent results and a current strong trading performance, the board expects profits for the 52 weeks ending June 2022 to be ahead of market expectations.” The company said it enjoyed a record summer trading period boosted by pent-up demand and disposable incomes accrued during lockdown Lightwater Valley is now being positioned for a good summer with investment in new food and beverage outlets and rides. Lightwater Valley delivered revenue of £3.9m in the period. In September 2021, the group paid £1.3m to settle the deferred consideration and working capital for the purchase of Lightwater Valley. Brighton Pier delivered “another consistent performance”, the business said with new EPOS technology installed to better capture customer data going forward. The pier delivered revenue of £9.2m in the period (2020: £5.8m) with like-for-like sales up 15% on 2019. The bar portfolio has been “optimised for growth and traded ahead of expectations”. The division reported revenue of £6.0m in the period (2020: £0.7m) with like-for-like sales (for only 23 weeks as the division was only able to re-open from the end of July 2021) up 27% on 2019. The bars division started the second half well with new year’s sales 9% up on 2019. The group stated: “We continue to see returning students and young professionals enjoying their nights out in much the same way as they did before the closures. Focus continues to be on quality products, exceptional service and varied entertainment. The group believes reduced competition in many towns and cities (as a result of permanent business closures following the pandemic) will continue to benefit the business.” The business also reported a good performance from the golf portfolio with the two recently integrated sites – Rushden Lakes and Plymouth Drake Circus – meeting return on investment targets. The division delivered revenue of £3.7m (2020: £1.7m) with like-for-like sales up 33% on 2019. In its outlook for the rest of the financial year, the group said trading was ahead of market expectations for the year with the UK family entertainment market in a growth phase buoyed by an increasing preference for “staycations”. The company said it has the ability to mitigate inflationary cost pressures in the most part through targeted price increases and operational improvements. It added the primary focus is on organic growth and on looking at opportunities to add golf sites and exploit the potential of Lightwater Valley. Net debt at the period end stood at £8.2m (2020: £12.5m). Since the end of the last financial year the group has reduced net debt by 34%. On 16 March, the group signed a one year extension to its term loan and revolving credit facilities, which were due to expire in December 2022. The facilities will now expire on 5 December 2023. Chief executive Anne Ackord said: “These excellent results show the popularity and cash generative nature of our diversified portfolio of entertainment businesses. The underlying trend for the first half is well above 2019 levels – a more meaningful comparison due to the pandemic. The period has also been boosted further by one off VAT and rates benefits. These factors combined have resulted in the group trading ahead of market expectations. Looking forward, we expect the sales trends to continue, benefiting also from the opportunistic Lightwater Valley acquisition. We believe our asset-backed group is well placed to record an excellent result for the full-year and beyond.”

Price of a pint to soar by Christmas, Adnams warns: The price of a pint of beer is set to get even more expensive by Christmas as Russia’s invasion of Ukraine sends barley costs spiralling by almost a third, Suffolk brewer and pub operator Adnams has warned. The company said a surge in the price of barley, which is key to the brewing process, in response to the war in Ukraine meant it was on track to push prices up for customers later this year. Ukraine typically accounts for just under a fifth of global exports of barley. Adnams sources its barley from the UK, but global shortages are sending costs higher across supply chains. For now, many brewers have enough stocks of barley, but will be buying more later this year. Fergus Fitzgerald, head of production at Adnams, told the Telegraph: “When it comes to that next supply, that’s when we will start to see price increases. The price of barley currently is around 30% higher than it would have been this time last year.” British makers of alcoholic drinks were already battling with a 7.9% rise in costs in January on an annual basis, according to official figures. Fitzgerald said even if the situation in Ukraine was resolved, supply out of the country would “be difficult for some time”, meaning the price of barley is unlikely to drop. For customers, a further price hike could come before the end of the year. He said: “Probably the third quarter and the fourth quarter, that’s when we’ll see more of this coming through, and if you’re dealing with a 25% to 30% increase in costs, then you have to pass some of that on to customers.”

Domino’s appoints new independent non-executive director: Domino’s Pizza Group has appointed Tracy Corrigan as an independent non-executive director, with effect from 5 May 2022. Corrigan will be a member of the board’s sustainability and nomination and governance committees. From 2014 to 2020, Corrigan was the chief strategy officer of Dow Jones & Company, where she oversaw the digital transformation of that business. She previously held a number of senior management roles within Dow Jones and the Financial Times. Corrigan is a non-executive director of Direct Line Insurance Group. Domino’s Pizza Group chairman Matt Shattock said: “The Domino’s board has been transformed over the last two years and is more diverse than ever before, with a rich mix of talent and experience around the boardroom. Domino’s is a digitally-led business with more than 91% of system sales being generated through digital channels. Tracy has broad-based business experience together with a deep experience of enhancing the digital capability of businesses and optimising revenue generation. Tracy’s skill set will be highly complementary to the board. I am delighted to welcome Tracy to Domino’s.”

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