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Morning Briefing for pub, restaurant and food wervice operators

Wed 21st Sep 2022 - Update: UK businesses to benefit from price cap on energy bills, Fridays and City Pub updates
UK businesses to benefit from price cap on energy bills: UK businesses will be protected from soaring energy bills under an emergency government scheme that ministers hope will prevent a wave of corporate collapses. The support scheme – to be set out later this morning by the government – will cap the wholesale costs that energy suppliers can incorporate into businesses’ bills, but will not determine the final rate paid by corporate customers. Prime minister Liz Truss this month announced a huge energy support package costing about £150bn under which the government pledged to help UK households and companies with surging gas and electricity bills. Truss at the time announced that domestic energy bills would be capped at about £2,500 per annum for the typical household over the next two years. But the details of the business scheme were delayed because of challenges in devising it and the complexity of corporate tariffs. Truss told ITV News on Tuesday the scheme “will make sure that businesses are protected from those very high prices that were being predicted”. The FT reports that under the government plan, energy suppliers will be allowed to incorporate a capped wholesale price of 21.1p per kilowatt-hour for electricity and 7.5p/kWh for gas when calculating rates for corporate customers. It will apply to all energy contracts signed with suppliers since 1 April and will last for six months from 1 October, according to government insiders. But the capped wholesale prices will not be the final rates that businesses pay as there will be other charges on top – in a move the insiders said would allow a degree of competition to remain in the market. The retail cap announced by ministers this month for household energy bills was set at 34p/kWh for electricity and 10.3p/kWh for gas. The intervention is expected to reduce companies’ electricity bills by 50% and cut their gas costs by a quarter. Details are expected to be announced by the business secretary Jacob Rees-Mogg at 9am.

Premium subscribers to receive videos from Propel Multi-Club summer conference and fourth edition of UK Food and Beverage Franchisor Database on Friday: Premium subscribers will be given exclusive access to the recording of the Propel Multi-Club summer conference on Friday (23 September), at 9am. The videos will include CGA’s managing director UK and Ireland Jonny Jones; Garrett FitzGerald, founder of Butchies; Steve Magnall, co-founder of Two Magpies Bakery; Johnnie Tate, founder of Yard Sale Pizza; Kam Dehdashti and Jamie Hazeel, co-founders of Little Door & Co; Alasdair Murdoch, chief executive of Burger King UK; Will Beckett, co-founder of Hawksmoor; Richard Colclough, managing director of Parogon Group; David McDowall, president and chief operating officer at BrewDog; and Andrew Andrea, chief executive of Marston’s. Olivia FitzGerald, chief sales and marketing officer of Zonal, hosts a panel of industry leaders who will share their lived experiences and discuss ways hospitality can overcome the current challenges, including how they are working with Hospitality Rising to grow and come back stronger. Meanwhile, Fleet Street managing director Mark Stretton hosts a panel on the future of delivery featuring Just Eat’s head of strategic accounts Kirsten Bohlke; Mario Aleppo, founder of Fireaway Pizza; Nathan Wall, chief operating officer at Tiny Cloud Kitchens; and Joe Heather, general manager at Deliverect. Meanwhile, 15 new franchisors expanding in the UK and abroad have been added to the latest UK Food and Beverage Franchisor Database, which will also be sent to Premium subscribers on Friday, at midday. The fourth edition will feature 155 companies and almost 70,000 words of content, providing insight on the offer, locations, cost and other key details. Premium subscribers also receive access to The New Openings Database; the Propel Multi-Site Database, produced in association with Virgate; and the Turnover & Profits Blue Book, produced in association with Mapal Group. 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 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. They 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.

Fridays parent reports 14% drop in lfl revenue: Hostmore, the parent company of Fridays, 63rd+1st and Fridays and Go, has reported that its revenue for the ten weeks since 3 July was 14% lower than the FY19 comparable period. The company said this reflected the impact of weaker consumer demand and other factors including rail strikes (which are expected to continue periodically in the second half) and heatwaves. It said this impact had been partially offset by ongoing cost saving initiatives. The company said: “Trading conditions are expected to remain challenging, exacerbated by inflationary pressure on the consumer and the risk of higher utilities supply pricing. The group’s focus remains on continuing to mitigate the impact of these as far as possible. The group welcomes government intervention measures announced on 8 September 2022, which we expect will alleviate pressure on the consumer and mitigate the impact of higher utilities pricing in coming months. The beneficial impact of measures to further support businesses is awaited. In the absence of further government support measures having been confirmed and considering both the uncertain consumer demand and the enduring inflationary environment as we enter our traditionally busiest period of the year, like-for-like revenue expectations for the second half are now forecast to be 11% lower than the FY19 comparative. The impact of current utilities pricing, after the mitigation of the hedges contracted for, would result in an incremental cost of c.£5.8m in FY23 over the comparable FY22 period. For the 26 weeks to 3 July, total revenue stood at £98.5m (2021: £39.9m). The company said that comparable like-for-like revenue was up 145% compared to HY21 and down 7% compared to pre-covid HY19, in line with expectations. It said that trading compared to FY19 was lower in the stadium (events led) and city centre (working from home) categories with the south-east and north-west most affected. Monthly consumer demand fluctuated significantly as compared to FY19. Group Adjusted Ebitda (pre IFRS 16) stood at £7.1m, an improvement on the prior year loss of £3.3m due to increased revenues, cost mitigation activity and the execution of landlord concession agreements”. Robert B. Cook, chief executive, said: “We have delivered a stable performance for the first half of FY22 despite the undeniable and growing pressures on the consumer in the current environment. Against this tough backdrop, we have also taken swift action to manage the inflationary impacts that we and the rest of the sector face. We continue to develop our customer proposition and to apply a laser focus on our unique portfolio of iconic and vibrant hospitality brands. Nearly 200,000 customers per week visited our restaurants through June and July, showing the broad appeal of our attractive locations for consumers looking to have some downtime and enjoy a memorable occasion. Pleasingly, guest feedback is increasingly positive, with both Fridays’ and 63rd+1st’s Guest Opinion Scores improving since December; it is thanks to our incredible people that we are able to create such a fantastic experience for customers. We will continue to adopt a cautious approach, reflecting ongoing uncertainty in the UK trading environment and in particular utilities pricing, mitigating costs wherever possible, whilst continuing to invest in our proposition, our people and new sites. We, like many others in the sector, await further clarity on more government intervention to support the hospitality industry in light of the inflationary pressures being felt by consumers and hospitality businesses alike, particularly in relation to energy.” The company said Two Fridays openings are planned for the final quarter of FY22 and discussions for further store opening opportunities are ongoing. It said that its net bank debt has reduced from £26.2m to £23.7m in the eight weeks since the period end. It said: “Net bank debt at 2 October 2022 is expected to be approximately £32.5m and will continue to peak at each quarter end principally due to the timing of the quarterly payments of VAT and landlord rent obligations.”

City Pub Group reports trading volumes holding up: City Pub Group has said that it is in its “strongest financial position since inception”, and that trading volumes have returned to pre-covid levels and are “holding up in a very challenging cost environment”. The company posted revenue of £26.1m for the 26 weeks to 26 June (H1 2021: £8.9m), with adjusted Ebitda of £3.4m (H1 2021: (£0.0m)). Adjusted profit / (loss) before tax stood at £1.3m (H1 2021: (£2.0m)). The business said that trading across the summer since the half year end has remained positive and following the government’s announcement of the Energy Price Cap “we anticipate that trading will remain resilient for the rest of the year”. In the face of macroeconomic challenges, it said its focus currently is on the existing estate, albeit with intention to purchase further shares in the Mosaic Pub and Dining Group (currently have a 37% stake) to give control in 2023. Chairman Clive Watson said: “Trading volumes, as anticipated, have returned to pre-covid levels and are holding up in a very challenging cost environment. Inflation continues to impact our business. The disposal of six pubs in April for £17m has put the company in an even stronger position with very low net debt and what we believe is amongst the lowest gearing in the sector, however we continue to urge the government to do more for hospitality particularly on business rates and providing two to three-year visas to alleviate the labour shortages. City Pub Group is a dynamic business which benefits from having a wonderful estate of high-quality freehold pubs. From our position of strength, we will adopt an entrepreneurial approach to retailing and embrace technology. We will continue to run our existing business ever more efficiently, our current focus, before turning our attention to building the company by acquisition when the time is right.” The group currently operates 40 trading sites, with the Bath Cider House (formerly The Nest) due to open in October. A further two sites are in legals. It said that it intends to commence a share buyback of up to £3m over the next 12 months. Watson said: “The group is in its strongest financial position since inception, with very low bank borrowings and low financial commitments due to the largely freehold nature of its estate. We are totally focussed on running the most efficient business that we can and mitigating as much of the increased costs we are facing to take advantage of the opportunities that will exist in the marketplace as others less fortunate than us seek solutions to their corporate situations. We are monitoring the market more closely than ever before. The culture within City Pub Group is strong, reflecting the hard work with management continuing to support our staff and looking at ways to increase support over the challenging months ahead. We introduced weekly bonuses to all staff to help improve their pay as well as encouraging them to engage entrepreneurially. We look forward to the next year when we will be in a position to acquire further shares in Mosaic giving us a majority stake and bringing their estate under our control. Mosaic consists of nine freeholds and two leaseholds and is a high-quality estate similar and complementary to our own. The pub is a resilient and robust part of British life, but pub owners and operators need to continually adapt and evolve to and ever-changing environment. For our part we have recognised that we need to adopt a more entrepreneurial approach to how we retail our pubs and how we further embrace technology. Our head office team will continue to be developed to make sure that it can spot every trend, learn from the best and use every technique to improve retail performance. The board is pleased with the progress the company has continued to make but recognises that there are still further improvements to be made. Between now and our trading statement update in January, tangible improvements will be prioritised to achieve a positive impact on our sales levels.”

Ten Entertainment on trajectory for a strong full year performance in line with expectations: Ten Entertainment Group has said it is on trajectory for a strong full year performance in line with expectations, with sales growth in the first half of FY22 “extremely strong” compared to H1 19. The company reported 52.6% total sales growth in the 26 weeks to 26 June compared to 2019, with 36% like-for-like footfall growth. It saw +0.5% like-for-like sales growth compared to 2021 in the 11 weeks since 27 June, with bowling prices frozen at 2019 levels to maintain “value for money and drive footfall”. Total sales for the period stood at £63.2m (2019 H1: £41.4m), group adjusted Ebitda at £22.5m (2019 H1: £17.1m), and a pre-tax profit of £15.7m (2019 H1: £7.1m). The company said it invested £3.1m in four refurbishments expected to drive over 30% ROI, with three further refurbishments planned in H2. A new centre in Harlow was acquired and refurbished, while a new-build centre in Walsall opens next week. It said that three more new centres are to come over the next six months with a strong pipeline in place. It has also invested £1.9m in renewing its bowling product creating “significant improvements to customer experience”. Graham Blackwell, chief executive, said: “Our teams have once again raised the bar in the first half of this year and have worked even harder to deliver this impressive result. We have accelerated our growth and redefined the baseline, putting the business in the best possible shape to support our people and our customers through the challenges of the next 12 months. Our sales growth is, and remains, very strong against 2019 and we have consolidated and built upon the gains we made last year. We now have net cash and have resumed our dividend payments while maintaining our focus on investing in the customer experience to continue our growth. We have bucked the trend of many other businesses in hospitality and leisure and our value for money customer proposition is well positioned to continue to deliver strong returns for our shareholders.”

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