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Mon 6th Mar 2023 - Update: Caffè Nero set to open more 90 sites this year as FY revenue nears £350m, Starbucks plans 100 new UK coffee shops
Caffè Nero set to open more 90 sites this year as FY revenue nears £350m: Caffè Nero, which operates more than 1,000 sites across ten markets, has said it is set to open more than 90 sites this year as revenue increased 69% in the year to 31 May 2022 to £349.1m (FY21: £206.5m). The business said: “Following a return to normal levels of sales after the covid-19 pandemic, the group is cautiously returning to its store growth schedule with a roll-out programme for FY23 of over 90 stores worldwide.” The company, which owns the Harris + Hoole and Coffee#1 brands alongside its own eponymous coffee chain, saw operating profit increase to £30.4m (FY21: £13.3m) and pre-tax earnings move from a loss of £16.7m to a loss of £7.6m. Total brand Ebitda in the year stood at £57.65m (2021: £38.5m), with Caffe Nero UK contributing £46.7m, Harris + Hoole £828,000 and Coffee#1 £10.4m. The business paid £35m on finance costs and interest to service its debt pile. It also received £45m in government support since 2021. It said: “The improvement in profitability was driven principally by the recovery in sales but also by ongoing cost restraint in every country (including the CVA in the UK); this was partially offset through a reduction in government support. For example, VAT in the UK at the start of the year was 5%. This rose to 12.5% in October 2021 and returned to pre-covid levels of 20% in April 2022.” The company said it usually targets an annual range of 3-5% growth in worldwide like-for-like sales. It said: “Following the forced temporary store closures and ongoing trading restrictions throughout both the years ended May 2021 and May 2022, the group did not use like-for-like sales as a key performance measure in FY22. Instead, it assessed trading by comparing sales in FY22 to the year prior to the pandemic (FY19) in order to derive a sales percentage versus a “normal foundation”. In the UK, this figure averaged 87% trading versus normal for the year (compared to 56% in FY21), but by year end FY22, gross sales had reached 100% of FY19. Other territories varied in their FY22 trading versus normal, from Ireland at the low end, at 80%-plus by the May year-end, versus normal FY19 sales to Poland at the high end, with 120%-plus FY22 sales in May 2022 versus normal FY19 sales.” On its three main brands, the company said: “Typically, Caffè Nero would expect to open 70-90 new sites worldwide in a year, but this expansion strategy was halted by the disruption and temporary closures forced by the onset of covid-19. As a result, only 20 Caffè Nero stores were opened during the year, while 19 stores were closed as a result of the pandemic. At the year end, there were 875 Caffè Nero stores trading worldwide, including transport hubs where the business trades as Nero Express. Harris+ Hoole is a speciality artisan coffee house brand operating in high streets, supermarkets and airports in the UK. No new sites were opened during the financial year, and the total number of stores in the UK at the year-end remained at 40. With its recovery in trading during the year, H+H returned to profitability, and the directors believe it has strong potential alongside Caffè Nero. Coffee#1 is a distinctive and successful coffee brand operating solely in the UK and principally in Wales and the south west of England. It is seen as one of the leading coffee brands in that region. Coffee#1 opened two new stores during the financial year and closed one, bringing its total number of stores to 101 at the year end.” Alongside the impact of covid restrictions, the company said two more factors also affected the year: a hostile takeover attempt against the company (by the EG Group), which was also linked to a High Court case, and the refinancing of group's debt. It said: “Both of these pressures made an already challenging situation even more difficult. However, by the last quarter of our year (March-May 2022), many of these factors had dissipated or disappeared, and the trading and operations of the group was returning to normal.” In February 2022, the group acquired an additional 33% of its subsidiary Coffee#1 from SA Brain, taking its ownership of the brand to 76.5%.

Latest edition of Propel Turnover & Profits Blue Book shows 64% of companies in profit, up from 62% last month: The Propel Blue Book of Turnover and Profit, to be sent to Premium subscribers this coming Friday (10 March), shows 64% of the 709 largest sector companies are now in profit. The Blue Book shows 455 companies in profit and 254 reporting losses. This is an improvement from last month, when 62% of companies were reporting a profit. The Blue Book is updated each month and ranks companies by turnover, profit and profit conversion, listing directors’ earnings for the past five years. Premium subscribers also receive access to four other databases: the Propel Multi-Site Database, produced in association with Virgate; the New Openings Database; the Who’s Who of UK Food and Beverage; and the UK Food and Beverage Franchisor Database. Premium subscribers are also to be given exclusive access to the recording and slides to Propel Multi-Club Conferences. 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 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.

Starbucks commits to Britain with plans for 100 new coffee shops: Starbucks has put an end to speculation it could sell its British business with plans to invest £30m here and open 100 new coffee shops. The Telegraph writes the company, which has 1,066 outposts across the UK, said it would spend millions refurbishing its existing branches over the next three years and opening new branches over the next year, following reports last summer that it was considering selling the business. The company considered a sale amid rising competition from rivals such as Pret A Manger and high inflationary pressures. The company said at the time it was “not in a formal sale process”. The investment plans signal that Starbucks is committed to Britain for now. Starbucks’s UK sales rose by 37% to £449m last year, surpassing pre-pandemic revenues for the first time. However, pre-tax profits dropped by a fifth to £10.4m as the climbing cost of everything from coffee beans to cups and energy ate into margins. Starbucks also gave its baristas a pay rise last year, reflecting intense competition in the labour market and a cost of living squeeze on workers. As costs soared last year, Starbucks raised the price of some espresso drinks and iced beverages by approximately 4%. Duncan Moir, president of Starbucks Europe, Middle East & Africa (EMEA), said: “While we are cautious about the macro-economic environment, we will continue to invest to grow the region this year. We plan to open over 100 new stores in the UK and 300 new stores in EMEA, to continue this growth momentum.” New stores will be a mixture of company-owned branches and franchised stores. Starbucks owns about 30% of its outlets directly in the UK, with the remaining 70% run by franchisees. Moir said the coffee chain wanted to open “digitally-forward smaller stores” and more drive-throughs.

Bottle deposit scheme ‘will mean higher prices and fewer choices’: Shoppers in Scotland face a “stratospheric” risk of higher prices for drinks and fewer products on the shelves, retailers have warned, as the planned deposit return scheme (DRS) is engulfed in chaos only five months before it goes live. The Times reports the Scottish Retail Consortium (SRC), which represents Scotland’s retail sector, said there remained a “long list” of issues with the Scottish government’s scheme that could take months to resolve. With retailers and shoppers confused by how the scheme will operate, ministers should abandon the proposed start date of August, the SRC said. In a letter to the first minister, Ewen MacDonald-Russell, the consortium’s deputy head, said: “It is up to the Scottish government to decide whether it is wise or reasonable to press on with an August launch in these circumstances or pause implementation until the catalogue of outstanding issues are fully addressed. If they choose to proceed, they must be aware there is a significant risk DRS will land very badly with Scotland’s shoppers.” Under the scheme being championed by Lorna Slater, the circular economy minister in the SNP-Green alliance at Holyrood, consumers will be charged 20p extra for each plastic or glass bottle or aluminium can of soft or alcoholic drink that they buy. The extra cost will be refunded when the containers are returned to the shops they were bought from, to help cut environmental waste and pollution. Industry leaders and some opposition politicians have called for it to be abandoned because of the likely increase in costs to retailers and shoppers during the cost-of-living crisis.

Employers told to offer more flexible working to fight staff shortages: Increased flexible working would tackle staff shortages that threaten economic growth, experts have said. The Times reports more of the working-age population would take up work or stay in jobs if they were offered greater flexibility on where and how they worked, analysts said. Central bankers have said a labour supply problem risks cutting the UK’s potential for growth. Flexible working has become increasingly popular since covid-19 lockdowns forced people to work from home. Amid staff shortages and record vacancies last year, many companies expanded their flexible working offer to attract recruits. However, most workers still have no option to work in a hybrid manner, figures published by the Office for National Statistics (ONS) show. About half a million workers left their jobs during the pandemic, with no plans to return, pushing up the rate of economic inactivity, which measures the share of working-age people who are neither working nor available for work. Some of the rise was caused by the ageing of the population, which meant a greater share of workers reaching retirement age, but the trend was driven mainly by workers aged 50 to 64 who retired early or had to leave their jobs because of long-term sickness.

Fear of further rail strikes as plug set to be pulled on union talks: Rail bosses are poised to pull the plug on pay talks with the RMT, sparking fears of further industrial action. A leaked letter from Rail Delivery Group (RDG) boss Steve Montgomery to RMT chief Mick Lynch raises the prospect of strikes dragging on for months, reports The Daily Mail. A rail source said: “Talks are going nowhere. This is a union with its head in the sand that refuses to face up to reality. The financial crisis on the railway [caused by the pandemic and falling passenger numbers] won’t go away because the RMT wants it to.” The RMT has refused to put the latest 9%pay offer it has received to members in a vote. But the leaked letter points out that another rail union, TSSA, has accepted the offer. It adds: “In the event that your executive committee is not willing to do this then I regretfully believe we have reached an impasse on progressing our industry level discussions.” The letter says the RMT will have to talk to each of the 15 operators involved separately if it wants to reconvene talks. Separate talks with Network Rail, which manages infrastructure, are also in the deep-freeze. The rejected offer included a 5% base pay rise. The next RMT strike will be on March 16, when staff on the train operators and Network Rail will walk out together. Only 20 per cent to 25 per cent of services will run. More walkouts will take place on March 18 and 30 and April 1. 
Greggs ditches hot cross buns this Easter: Greggs has announced it won’t be bringing back its hot cross buns this Easter. The bakery chain has there will be other seasonal products available but didn’t reveal the specific products that would be available this Easter. Previous ranges have included spring-time chocolate cornflake nests and iced bunny biscuits. A Greggs spokesperson told the Daily Mail: “While Hot Cross Buns won’t be returning to our menu this Easter, keep an eye out for other Easter favourites that will be arriving in our shops soon.” The decision to ditch hot cross buns marks the second year of their absence on Greggs’ shelves, where you could previously get a pack of four for as little as £1.

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