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Morning Briefing for pub, restaurant and food wervice operators

Fri 28th Apr 2023 - Update: McManus Pub Co FY results, food inflation, business confidence
McManus Pub Co reports encouraging H1 trading performance: McManus Pub Company has reported an encouraging trading performance in the first 26 weeks of its current financial year, with like-for-like sales holding up well and on par with the same period in 2022. The Northampton-based group said that as cost of living increases bite, it is seeing a sales mix swing from food to wet led pubs. It comes as the group, which currently operates a predominately freehold pub estate of 21 pubs across Northern Home Counties and Essex, reported that during challenging year – 52 weeks ended 30 July 2022 – it had seen “significant progress”. It said that sales returned to pre pandemic levels and the group now has a refurbished estate from which to move forward with “a secure financial base and experienced management team”. The group added three freeholds to its trading estate during the year and said it will consider further opportunities “as they arise to drive sustainable growth”. The company said that group sales in the year exceeded pre pandemic levels, with sales revenue up by £5,818,527, 66.4% to £14,586,593, and like-for-like sales up 17.1% on pre pandemic trade. Group operating profit increased by £666,193 to £1,804,559, a “significant uplift on pre pandemic levels”. Pub Ebitda stood at £2.889m (2021: £2.256m), while group Ebitda was £2.199m (2021: £1.501m). Pre-tax profit stood at £1.750m (2021: £976,000). It said that payroll cost increased £659,096 and average pay rate increased 9.3%. On higher sales payroll cost as a percentage of sales reduced to 31.0% (2021 34.9%). During the period it acquired the freehold coaching inn, The Old George Hotel, Stony Stratford, and The Windmill, Northampton. Both purchases were funded from cash flow. It said that significant investment and refurbishment work was undertaken during the year with £2,497,296 invested and over the last three years total £4,152,816 invested. The business said that food and drink inflation escalated during the year placing pressure on gross margins. It said: “For 2022, due to no pub closures and hospitality VAT rate reduction the profit margin increased to 72.6% (2021 – 72.5%). Where possible we have attempted to pass cost increases on whilst maintaining good value to our customers and remain price competitive. The shortage of labour was a challenge throughout the year, average pay rates increased by 9.3% due to the skilled staff shortage of and national minimum wage increase. Even with these shortages we were able to keep all pubs open without restricting trading hours. Pub and head office payroll cost increased £659,096 on higher trading activity, after furlough grant net off the payroll cost as a percentage of sales reduced to 31.0% (2021 34.9%). Due to rising energy prices the group has focused on reducing energy usage as much as possible through installing energy saving equipment and encouraging best practice, average consumption across the pub estate has been reduced by 12%. During the year, a former £1,750,000 HSBC revolving credit facility was termed out on a 11-year repayment term, increasing total term debt £1,110,785 to £7,727,873. Additionally, the group entered into deferred interest rate SWAP agreement, hedging two thirds of its term debt at 1.15% fixed interest rate from March 2023. The group remains in a very strong financial position and its operational gearing remains low.” Gary McManus, chairman of McManus Pub Group, said: “Post pandemic through challenging conditions the group has achieved a strong recovery. Acquisitions and refurbishments have strengthened the pub estate. Together with an experienced management team, the group is in healthy position to weather future storms and expand when appropriate.”

Updated Premium Database of Multi-Site Companies released today, 23 businesses being added: A total of 23 new multi-site companies, operating 181 sites, have been added to the next edition of the Propel Premium Database of Multi-Site Companies, which will be released today (Friday, 28 April), at midday. The updated Propel Multi-Site Database, which is produced in association with Virgate, includes regional restaurant operators, growing café brands, and expanding hotel operators. Premium subscribers will also receive a 2,000-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. The database now features 2,832 companies. Premium subscribers will also receive the next edition of the New Openings Database on Friday, 5 May, at midday. It focuses on newly announced openings and upcoming launches in the sector and is updated every month. The next edition also includes a 5,000-word report on the new additions to the database. Premium subscribers also receive access to three other databases: the Propel Turnover & Profits Blue Book; the UK Food and Beverage Franchisor Database; and the Who’s Who of UK Food and Beverage. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription. Premium subscribers are also to be given exclusive access to the recording and slides to Propel Multi-Club Conferences. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before; regular video content and regular exclusive columns from Propel group editor Mark Wingett.

Food inflation passing its peak, says Sainsbury’s boss: The boss of Britain’s second-largest supermarket chain expressed optimism yesterday that inflation had peaked in some food categories after soaring costs cut into its full-year profits. The Times reports J Sainsbury reported profit before tax of £690 million for the 12 months to 4 March, down 5% year-on-year from £730m, after it spent £560m on keeping prices down in the face of fierce competition from rival discounters. Sales over the period rose to £31.5bn, up from £29.9bn last year, boosted by a strong performance from Argos. Simon Roberts, chief executive, held off from saying that the peak in food price inflation had passed, but did say that there was a chink of light, with prices dropping for some products such as milk and fresh food as commodity prices begin to fall. “In some areas I’ve been more encouraged [to say that food inflation has peaked], but in others, let’s see how the next few months play out,” he said. “There is still a lot of inflation in the system. We’ve seen this week a little bit of inflation come down, which is good to see. Those prices that went up first and earliest should be the first to come down, for example milk.” Roberts said extensive food shortages that had been sweeping through the supply chain were largely starting to recover. “We’re dealing with some real [weather] extremes and that is putting pressure on our supply chains ... we won’t have everything we need all the time. Other than peppers and eggs, we’ve recovered. Eggs probably won’t recover for a while.”

‘Slash taxes or tourists will shun the hotspots’: The chancellor is facing renewed pressure from the retail industry to reintroduce tax-free shopping for tourists. The scheme allowed visitors from non-EU countries to recover the VAT on purchases bought within the trip but was withdrawn by the Treasury on 31 December, 2020, during the pandemic. Last autumn, when Jeremy Hunt said he would keep the 20% levy in place, the Treasury estimated that the so-called tourist tax brings in about £2bn a year to the exchequer. But the decision to scrap tax-free shopping has had significant implications for the likes of Harrods, Selfridges, Liberty, and Fortnum & Mason – all popular tourist hotspots. The Times reports that the New West End Company, which represents 600 retail, restaurant, hotel and property owners, said the loss of this scheme has effectively added a 20% premium to goods such as shoes and watches, putting London at a disadvantage to destinations such as Paris and Madrid where visitors from the US, China and Gulf Co-operation Council (GCC) countries continue to enjoy equivalent schemes. This week, at the Business Connect conference in London, which saw around 200 high-profile chief executives given the opportunity to question the prime minister, Gerry Murphy, the chairman of Burberry, said removing it in 2021 had made the UK “the least attractive shopping destination in Europe”.

Business confidence at highest for a year: Business confidence reached its highest level since May last year as bosses become more optimistic about the wider economy, a new survey has found. The Times reports that confidence reached 33% on the monthly index this month, up from 32% in March, the latest monthly sentiment index by Lloyds Bank showed. The survey of 1,200 businesses between 3 and 16 April found that overall economic optimism rose by five points to 28%, which is also close to a one-year high. The increase follows an 11-point rise in March as businesses benefit from a fall in wholesale gas prices, better-than-expected consumer spending and an improvement in economic forecasts for growth. A majority of businesses expect to increase their prices in the coming year, with 61% of respondents to the survey planning to do so. Nearly half, or 47%, of businesses are looking to recruit, marking the fifth consecutive month that anticipated staffing levels have increased. Pay growth hit its highest level in seven months, with 27% of businesses expecting to increase wages by at least 3%. Paul Gordon, managing director of relationship management, business and commercial banking at Lloyds, said: “It is great to see business confidence continuing to increase, hitting a near one-year high. Hiring intentions have also shown improvement since the start of the year, now sitting significantly higher than pre-lockdown levels. This is an encouraging sign of investment intent, but that could be tempered by wage inflation pressures and a hot employment market.”

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