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Morning Briefing for pub, restaurant and food wervice operators

Wed 17th May 2023 - Update: M&B H1 lfl sales up 8.5%, Buffett’s Diageo stake, salt in pizzas, Brixton Academy
M&B reports H1 lfl sales up 8.5%: Mitchells & Butlers (M&B), the All Bar One, Toby Carvery and Harvester operator, has reported like-for-like sales growth of 8.5% for the 28 weeks ended 8 April 2023 versus HY 2022, built on volume growth in both food and drink. Like-for-like sales in the first half comprised an increase in like-for-like food sales of 5.8% and of like-for-like drink sales of 12.8%. It said that costs remain a challenge but that the medium-term cost outlook “is now improving”. For the six weeks since the period end, including the benefit of the Easter weekend in both years and all at full rates of VAT, the business delivered like-for-like sales growth of 8.9%. Total sales across the period were £1.282bn, which the company said reflected 10.6% growth on HY 2022, supported by increases in both volume and spend per head. Operating profit of £99m (HY 2022 £121m) was generated, with adjusted operating profit of £100m. Prior year figures include £53m of government support initiatives, including £43m benefit from the temporary reduction in the rate of VAT on food and non-alcoholic drink sales. On a statutory basis, pre-tax profit for the half year was £40m (HY 2022 £57m). The business said it made a strong start to the year with like-for-like sales growth of 6.5% over the first ten weeks, primarily driven by drink sales growth. It said that as expected, growth significantly increased in the final five weeks of the first quarter due principally to last year being impacted by the emergence of the omicron variant which resulted in a downturn in activity across much of the festive season. Like-for-like sales for the quarter were up 10.4% against FY 2022. M&B said: “Sales remained resilient through the second quarter with strong performances on key trading dates and from our drink-led, city centre pubs, especially in London, that are benefitting from a further return of office working and tourists visiting. Across the quarter, we recorded like-for-like sales growth of 6.4%, comprising drink sales growth of 9.9% and food sales growth of 5.2%. Against FY 2019, like-for-sales grew 9.7% over the first half, with growth driven by spend-per-head as volumes remain below pre-covid levels. Comparing our sales performance versus the wider market, we are currently outperforming the Coffer Peach tracker by between 2-3% on like-for-like sales each month.” The business said it has been encouraged by the strength of trading throughout the first half of the year with the return to office working continuing, city centres becoming stronger, tourist numbers recovering and guests across the country continuing to enjoy the hospitality sector. It said this has continued since the period end with trading over the past six weeks, including the benefit of the Easter weekend in both years and all at full rates of VAT, delivering like-for-like sales growth of 8.9%. The company said: “This gives us optimism for the future, although we continue to remain mindful of the cost-of-living challenge facing our guests. There are indications that cost inflation headwinds across the supply chain are starting to abate, although they continue to present a challenge in the near-term. Energy prices have fallen back materially from earlier market highs and early evidence suggests that cost increases in other areas, notably food, will soon start to slow. Our cost guidance for the current year remains in line with that previously announced as we anticipate an inflationary cost headwind across our circa £1.8bn cost base at the lower end of the 10-12% range before mitigation. We continue to work hard to mitigate as many of these pressures as we can through both driving sales growth and identifying and implementing cost efficiencies. This should allow margins to start to rebuild towards pre-covid levels.” Over the first half, M&B completed 90 investment projects comprising 81 remodels, three conversions and six acquisitions. It said it was continuing to see “strong performances from our investment projects”. Its conversion programme includes the trial of Browns in suburbia, stretching the brand beyond its usual high street location. The first trial site opened in August 2022 and the second opened in December 2022, with both sites “performing strongly”. Arrowsmiths, its new competitive socialising darts concept, is now established within two O’Neill’s sites, Solihull and Watford, and providing a “strong return from secondary space”. Phil Urban, chief executive of M&B, said: “We are pleased to report a strong first half performance delivering continued like-for-like sales growth and outperformance against the market. The trading environment for the hospitality sector remains challenging with inflationary costs putting pressure both on the industry’s margins and disposable income of our guests. However, we are encouraged by the resilience of trade to date, including the most recent six weeks at 8.9% like-for-like sales growth, and also by early signs of the medium-term cost outlook improving. We remain focused on our Ignite programme of initiatives and our successful capital investment programme, driving cost efficiencies and increased sales. Combined with our diverse portfolio of established brands, value proposition, enviable estate locations and talented people, we believe we are well positioned to continue to outperform the sector.”

Latest Who’s Who of UK Food and Beverage to feature 680 companies, released on Friday: The latest Who’s Who of UK Food and Beverage will feature 680 companies when it is released to Premium subscribers on Friday (19 May). This month’s edition includes 13 new companies and 31 updated entries and more than 178,000 words of content. The companies, listed in alphabetical order, will have their most recent results reported as well as broader information around Ebitda, plans and trading style available. The database merges Companies House information, interviews and other public information to provide an easy to reference and exhaustive guide to the sector. Premium subscribers also receive access to four other databases: the Propel Multi-Site Database, produced in association with Virgate; the New Openings Database; the Propel Turnover & Profits Blue Book; and the UK Food and Beverage Franchisor Database. 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 to upgrade your subscription. 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.

Warren Buffett’s Berkshire Hathaway reveals stake in Diageo: Warren Buffett’s Berkshire Hathaway has disclosed a $41.3m stake in Diageo, the FTSE 100 maker of Johnnie Walker whisky and Tanqueray gin. The Times reports that the conglomerate’s investment in Diageo, the world’s biggest spirits group, was revealed in a quarterly filing which disclosed its exposure to stocks as of 31 March 2023. Equities backed by Berkshire and Buffett, the veteran investor dubbed the “Sage of Omaha,” are closely monitored. He did not mention its holding of 227,750 shares in Diageo when addressing tens of thousands of loyal disciples at the group’s annual meeting in Nebraska earlier this month. It was disclosed as a result of Berkshire tweaking how it reports investments, directly listing the holdings of General Re, a subsidiary, alongside its main portfolio of stocks. Diageo, based in London, has a stock market valuation of almost £80bn. The group’s brands include Guinness, Baileys cream liqueur and Smirnoff vodka. Its primary listing is in London, but in addition it has American depository receipts on the New York Stock Exchange.

Half of pizzas on sale in the UK contain a whole day’s allowance of salt: Half the pizzas eaten in Britain contain all of the salt that government scientists say we should be eating in a day, new research reveals. The Guardian reports that nutritional analysis of 1,387 different pizzas bought in shops, supermarkets, takeaways and restaurants shows that one of the Domino’s range has more than three days’ worth of salt in it. The brand’s sizzler standard mozzarella stuffed crust medium pizza emerged as the UK’s saltiest pizza in the research. It contains 21.4 grams of salt, which makes it saltier than seawater. In contrast, the maximum daily intake, as recommended by the Scientific Advisory Committee on Nutrition (SACN), is just six grams. However, average consumption remains about 8.4g – 40% higher than the official target. Takeaway pizzas contain more than double the amount of salt found in supermarket-bought ones. Two-thirds of pizzas sold in restaurants and takeaways have 6g or more. Zizzi, Franco Manca and Crosta & Mollica are the retailers and manufacturers with the saltiest pizzas per 100g, while Domino’s, Papa John’s and Caprinos are the worst offenders in the restaurant and takeaway sector, Action on Salt found. However, it also identified the brands with the smallest amounts of salt per 100g. Goodfella’s, Morrisons and the Co-op are the retailers and manufacturers whose pizzas contain the lowest amounts of salt, with Bella Italia, PizzaExpress and Fireaway among the restaurant and takeaway operators offering the least salty pizzas. A spokesperson from Domino’s Pizza Group said: “At Domino’s we offer over 400 choices of pizza designed to suit a range of dietary requirements and preferences, to be shared with friends and family. Within our wide range of pizzas, there are large variations in salt content, including – as the report points out – pizzas where the salt content has been reduced significantly. Action on Salt’s work is important, but they have failed to make clear that our medium pizzas are significantly more substantial than supermarket pizzas in the survey and feed up to three people. When shared in that way, most of our range is below the government’s daily targets for salt and calories. We recognise the importance of offering our customers more choice, and we are continuing to explore new ways to reduce the salt content of our pizzas.”

Campaign to Save Brixton Academy delivers over 20,000 representations to Lambeth Council: The Campaign launched to Save Brixton Academy, which ended last night at midnight, has delivered over 20,000 representations to Lambeth Council, gaining support from The Prodigy, Muse, Defected, Mixmag, NME, Music Week, Skunk Anansie and many more, on top of the 107,000 music fans which have signed the petition to keep the Brixton Academy open. Michael Kill, chief executive of the NTIA, said: “We have been overwhelmed with the level of response to this campaign, with over 20,000 representations made by music fans to Lambeth Council with support from The Prodigy, Muse, Defected, NME, Mixmag, Music Week, Skunk Anansie and many more. I have had hundreds of conversations with people on this campaign journey, across all walks of life, journalists, bankers, nurses, builders, baristas etc, about their experiences at the Academy. People are emotionally invested in this venue, and it’s clear they are not willing to give it up without a fight.” George Fleming, chief executive of Save Our Scene, said: “The response to this campaign has been immense and further highlights the public’s desire for Brixton Academy to have a future as a live music venue. Lambeth Council must do everything they can to preserve Brixton Academy. Displacing a community would be a dangerous move which could result in a lot more work for themselves and the Met police.” Gianluca Rizzo, managing director Brixton BID, said: “The huge support for the Brixton Academy with 20,000 letters submitted to Lambeth and thousands of messages across all social media show the importance of this venue. However, we cannot forget that a delayed decision has a negative impact on Brixton businesses, in fact since its closure, over half a million pound per week is being lost in visitors spending. Let’s turn the lights back on for Brixton.”

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