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Morning Briefing for pub, restaurant and food wervice operators

Wed 30th Mar 2022 - Update: Shepherd Neame and Barkby Group results, food inflation
Shepherd Neame reports trade back to pre-pandemic levels, returns to profit: Kent-based brewer and retailer Shepherd Neame has reported sales have picked up “significantly” since the lifting of “Plan B” restrictions with trade now back at pre-pandemic levels. Sales in its managed pubs and hotels for the 13 weeks to 26 March 2022 were at 110% of 2020 levels. For the nine weeks to 26 February 2022, like-for-like tenanted income was 97% of 2020. The company, which operates 302 pubs, also reported a return to profit and the payment of an interim dividend. The company stated: “The aftermath of this crisis will continue to impact us for a while yet, as it is likely that consumers will be affected by the inflationary pressures facing the economy and that disposable income will be squeezed. Further, we now face a new crisis in Ukraine which will create greater uncertainty and higher inflation. If this inflation becomes embedded, it will become more important than ever that we drive great service and premium experiences to ensure that our offer remains competitive for the long term. We have rebuilt a strong platform for the company and look forward to the future with optimism. However, consumer confidence is expected to remain fragile. We must remain agile whilst focusing on taking the right decisions for the long term health of the business.” Revenue for the 26 weeks ending 25 December 2021 has recovered to the same level as the first half of financial year 2020 with £78.7m of sales. Underlying Ebitda rose substantially to £11.3m (first half of 2021 restated: £3.4m). Statutory profit before tax was £5.4m (first half of 2021 restated: loss of £7.2m). Like-for-like retail sales were 89% of 2020 in the 26 weeks, but more than 100% in restriction free periods. It said most central London pubs were trading near normal as back to work footfall increases. An interim dividend of 3.50p declared – the first dividend since October 2019. Shepherd Neame said it had successfully remobilised the business after the disruption of the pandemic and recovered demand. Net debt excluding lease liabilities as at 25 December 2021 was £82.4m (£92.5m at 26 December 2020). The business paid all the remaining VAT liabilities to HM Revenue & Customs by the end of January 2022 and all deferred rent payments. Net debt excluding lease liabilities as at 26 March 2022 was £78.5m. A Coronavirus Large Business Interruption Loan of £25m taken out at the start of the pandemic has now been retired and the company is performing within pre-pandemic financial covenants. As previously reported, the company has appointed Jonathon Swaine as managing director of its pubs division, who joins in the summer. Chief executive Jonathan Neame said: “I am pleased to report a strong rebound in the first half of the year despite ongoing restrictions and operational challenges during the period. We are now back to pre-pandemic trading levels, have strong cash flow and have returned to profitability. Our business is in good shape and has traded well following the lifting of all restrictions. However, the current economic uncertainties are putting inflationary pressure on the sector which will impact margins. We have a robust and resilient business and a strong platform from which to build. We move forward with confidence and are pleased that we can now resume investment across our business at pre-pandemic levels. To support this we have strengthened our management team with a highly experienced and proven operator to help take the pub business forward. We are looking to the future with cautious optimism and are excited about delivering an uninterrupted Easter and summer for the first time in three years.”

Variety of bakery and coffee shop concepts set to join updated Premium Database of Multi-Site Companies: A variety of bakery and coffee shop concepts 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 87-strong bakery brand Wenzel’s, which is a family-run business, and has recently opened a new bakery at 70 High Street, in Chelmsford. Also added this month is Edinburgh-based coffee shop and bakery Fortitude, which was founded by Helen Coburn in 2014, and has recently opened a third site, in Newington Road. In addition, London-based catering firm Humdingers Catering, which was founded by Robert Hunningher in 2006 and has two bakeries and soup kitchens, will be featured. Meanwhile, bagel concept The Steamhouse, which is owned by Ashley Baker and now has four sites in its portfolio, is included. Premium subscribers will also receive a 5,156-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 17,700-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.

Barkby Group to focus on pub business as it plans disposal of coffee division: Premium gastropub operator Barkby Group is to focus on its pub and property businesses as it revealed plans to disposal of its Workshop Coffee and Cambridge Sleep Sciences businesses in the near future. The company said trade across its seven-strong pubs has been in line with expectations and was looking for further acquisitions to grow the business. Of its pubs division, the group stated: “Strong trading between July and September 2021 with record revenue and profits in that quarter. All venues remained open for trade throughout the second quarter, however trading over the festive period was impacted by the Omicron variant. We continue to strengthen the management teams in our pubs, despite well publicised recruitment challenges across the industry. Management is confident the business is well positioned for the traditionally busy spring and summer seasons. Following the reduction of government restrictions at the start of the financial year, Barkby’s pub business had a record quarter of revenue and profits between July and September 2021. The second quarter of the financial year was partially disrupted by the Omicron variant, particularly over the festive period. We believe our focus on excellent food and service, with a boutique accommodation offer, is well positioned for local communities and customers holidaying in the UK. As part of our expansion strategy, Barkby entered an agreement to lease the Ebrington Arms in June 2021.” The group reported overall revenue for the 26 weeks to 30 December 2021 was £8.1m (2020: £7.8m), with Ebitda of £0.7m (2020: £1.2m loss) and a net loss including one-off relocation costs for its roastery and start-up costs for Cambridge Sleep Sciences, of £0.7m (2020: 2.0m). Both of the group’s core businesses, real estate and Barkby Pubs were profitable for the 26 week period recording net profits of £930,000 and £171,000 respectively.

Food price inflation at highest rate for decade: Food price inflation has hit its highest level in almost a decade, according to two closely watched surveys, suggesting the squeeze on household incomes may be even tighter than previously thought. The Times reports grocery inflation reached 5.2% last month, the biggest increase since April 2012, Kantar figures show, while inflation in shop prices reached its highest level since September 2011, the British Retail Consortium (BRC) said. Industry analysts have warned food price inflation could be between 10% and 15% by the end of the year. The war in Ukraine has had an impact on energy costs, but it will also affect the prices of grain and food oils. Ukraine and Russia are big producers of wheat and sunflower oil. According to the latest shop price index compiled by the BRC and NielsenIQ, the price of basic items in shops has risen at its fastest pace in more than a decade. Inflation in shop prices hit 2.1% in March, up from 1.8% in February, to reach its highest level since September 2011. The biggest contributor to rises was the cost of basic food items, which accelerated to 3.3% in the year to March, up from 2.7% last month, the BRC said. The index was based on the price changes of a basket of 500 essential goods, half of which are food items. It does not include utilities, fuel or any other categories included in the consumer prices index, the headline measure of inflation. It was conducted in the first week of March and compares prices with the same period last year.

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