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Morning Briefing for pub, restaurant and food wervice operators

Wed 26th Jul 2023 - Update: Ofgem to strengthen business energy contract protection, Marston's, Revolution and Just Eat
Ofgem to strengthen business energy contract protection: The UK’s energy regulator, Ofgem, has unveiled its intentions to improve protections for businesses. The proposed measures include extending micro-business protections to cover all businesses, ensuring that energy bills provide transparency on payments to energy brokers and establishing a redress scheme for businesses to resolve disputes more effectively. Additionally, Ofgem aims to address concerns surrounding “deemed contract rates” for customers who have not yet agreed to specific contractual terms with their energy supplier. By providing better guidance on these rates, the regulator aims to prevent potential issues like overcharging, thus enhancing consumer confidence and trust in the industry. The regulator has also appealed to the government to consider introducing further protections, particularly in areas it lacks the power to regulate, such as energy brokers. The proposed changes also call for businesses to have access to the energy ombudsman, allowing them to seek resolution and assistance when facing difficulties with their energy suppliers. UKHospitality chief executive Kate Nicholls said: “Ofgem’s market review is extremely welcome, as energy continues to be a critical concern for hospitality businesses. It’s great to see that our ongoing campaigning has been acknowledged and that action is being taken to provide some much-needed support. By opening up new channels of communication, extended protections and more guidance, businesses across the industry can benefit from levels of support that simply have hitherto been lacking. UKHospitality has continued to raise the reckless behaviour of some energy suppliers with government, with some offering rates well above wholesale prices, hiking standing charges, demanding eye-watering deposits, and, in some cases, refusing to work with hospitality companies. A recent member survey shows that energy costs are up 80% year-on-year and almost half of businesses who signed a contract at the peak of the energy crisis fearing their business is at risk of failure. While it has been a long time coming, it is reassuring to see that Ofgem is now doing what it can to support the hospitality sector. Energy companies must be held to account, and we are committed to continuing to work with Ofgem and government to ensure the market is future-proofed. The recommendations in this review must be actioned urgently, as delays could lead to further business failures – of which there have been a significant number.”

Two days to go before release of updated Premium Database of Multi-Site Companies, 17 businesses being added: A total of 17 new multi-site companies, operating 52 sites, have been added to the next edition of the Propel Premium Database of Multi-Site Companies, which will be released on Friday (28 July), at midday. The updated Propel Multi-Site Database, which is produced in association with Virgate, includes regional café operators, growing restaurant brands, and expanding experiential concepts. Premium subscribers will also receive a 1,300-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 2,883 companies. Premium subscribers will also receive the next edition of the New Openings Database on Friday, 4 August, 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 4,000-word report on the new additions to the database. Premium subscribers also receive access to three other databases: the Who’s Who of UK Food and Beverage; the Propel Turnover & Profits Blue Book; and the UK Food and Beverage Franchisor Database. Propel will next month launch the UK Food and Beverage Franchisee Database – the first time that profiles of 100 of the top food and beverage franchisees have been available in one place in the UK. The go-to database, which features many of the big franchise operators running Costa Coffee, McDonald’s and Domino’s sites, brings together a wealth of information on an increasingly important part of the market, and the first edition will feature more than 32,000 words of content. The sixth major database exclusive to Premium subscribers, it will be sent out bi-monthly, including new entries and updates to existing entries. The companies, listed in alphabetical order, will have their most recent results reported as well as broader information around the company’s background, site numbers and board make-up. 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 are also being given exclusive access to the recording and slides to Propel Multi-Club Conferences. They 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.

Marston’s reports 10.9% increase in like-for-like sales, customer demand ‘continues to be good’: Marston’s, the Andrew Andrea-led pub company, has reported a 10.9% increase in like-for-like sales in the 16 weeks to 22 July 2023, as it said the level of “customer demand continues to be good”. It said the increase in like-for-like sales in the 16 weeks reflected the warmer weather in June, which enabled it to maximise the return on investment in its outdoor trading areas undertaken ahead of the summer months. Like-for-like sales for the 42-week period were up 10.7% versus FY2022. It said that both drink sales and food sales have been strong, demonstrating the “steadfast trading resilience of our predominantly community pub estate”. Total retail sales in the group’s managed and franchised pubs for the 42-week period were up 12% on last year. The company said: “The level of customer demand continues to be good, demonstrating that the positive experiences our guests have in our pubs is important and continues to drive demand. As we set out in the interim results, we trialled rolling out the franchise-style model in 13 of our food-led managed pubs to complement the 717 wet-led pubs currently operated under this model. We are very pleased with the result of the trial, with sales growth exceeding our broader food business. As a consequence, we expect to grow the number of food-led partnerships to more than 50 pubs in FY2024.” It said that dividends from Carlsberg Marston’s Brewing Company, in which it holds a 40% stake, are expected to be £11m in the second half of FY2023. It reiterated that reducing net debt, excluding IFRS 16 lease liabilities, to below £1bn continues to be a key focus of its financial strategy and progress is in line with expectations. The company anticipates that net debt, excluding IFRS 16 lease liabilities, will have reduced by £50m-£60m at the end of FY2023, and it expects the same level of debt reduction in FY2024. The company said that as a consequence of “pursuing the operational strategy of simplifying the business and driving efficiencies, together with a more positive outlook on input costs in FY2024”, it anticipates being well-placed to navigate any consumer headwinds. It said: “We believe pubs remain an affordable treat and have consistently proved resilient to pressures on the consumer in previous economic downturns. Looking forward, the group will continue to invest in the future growth of the business and remains well-positioned to deliver positive trading from its community pubs across the UK.” Andrea said: “Marston’s has delivered another strong trading performance, validating the strategy we are implementing and demonstrating the appeal of our pubs. We are making good progress and are beginning to see the benefits of the actions we have taken in the first half, simplifying our trading formats and repositioning our pub portfolio, as well as the investments we have made in our pub gardens and outside trading areas. In addition, we are encouraged by the success of the trial extending the partnership model into our food-led pubs. The trial has been positive and we will extend this model to more than 50 food-led pubs in FY2024. Marston’s pioneered the operator managed agreement in 2009, which now operates in more than 700 wet-led pubs, and we are pleased to lead the evolution of this format and are excited about its future growth potential for our business. We remain focused on delivering on our debt reduction strategy and continue to make good progress in that regard. Whilst macro-economic challenges persist for the time being, we remain encouraged by the group’s trading resilience and that the pub remains an affordable treat for our guests. An improving cost outlook, together with the actions we are taking to maximise efficiencies, leaves Marston’s well-placed to navigate through ongoing economic headwinds.”

Revolution Bars Group reports Peach trading strongly, but group like-for-likes down 8.7%: Revolution Bars Group, which operates 89 premium pubs and bars, trading mainly under the Revolution, Revolucion de Cuba and Peach Pub brands, has said its financial year ended 2 July 2023 is anticipated to be in line with market expectations, aided by a strong trading from its pubs. It said the 21-strong Peach Pubs has continued to trade strongly and in line with business expectations at acquisition, with full year like-for-like sales up 14% ahead of pre-covid like-for-like sales. It said: “The Peach team is now largely integrated into the wider group, our guests are enjoying their experiences in our pubs and gardens, and our menus and amazing service continue to delight. We see significant opportunities to invest in and expand this exciting brand when appropriate to do so.” However, the company said overall group like-for-like sales were down 8.7% versus pre-covid, as trading in its late-night bars has “continued to be difficult with our younger guests struggling financially in the current challenging economic environment”. The company said: “Notwithstanding these trading conditions, we are very pleased to see our Christmas party pre-booked revenue 24.7% up compared to the same time last year, showing that our corporate guests are looking forward to enjoying the festive period with us. We have managed the inflationary cost environment proactively, and are pleased to see wholesale electricity prices reduce from their peak last year. In addition, we have tightly controlled spend across the group in the second half of FY23. We paused our major refurbishment programme in January, having completed five significant refurbs in the preceding six months, when the depth of the challenges faced by the UK economy more generally, and our Revolution guests in particular, became clear. These refurbishments have performed well, outperforming the rest of the estate, and have largely delivered the two-year pay back expectation. Assuming that trading continues in line with our expectations, we are committed to restarting this programme as soon as we are able. Until then we are limiting capital investment to where it is essential to maintain and enhance the condition of the key assets in the estate. With a positive contribution from Peach Pubs, and notwithstanding the challenging trading conditions for our late-night bars, we are pleased to be able to confirm FY23 Ebitda (IAS 17) is expected to be in line with market expectations of £6.6m. The group had net bank debt of £20.8m as at 25 July 2023. We expect the trading conditions we operate in to remain challenging for FY24 and look forward to the all-important peak trading period at Christmas which we hope will be the first uninterrupted peak period since 2019.” Rob Pitcher, chief executive of Revolution Bars Group, said: “Our acquisition of Peach Pubs was well timed given the impact of the economic challenges to the younger guests in our Revolution bars alongside the working from home trend being exacerbated by continued uncertainty on the rail network. The pubs estate is in great shape and I have enjoyed getting to know the teams at the pubs, as well as seeing our guests enjoy themselves in our beautiful gardens. There is a huge opportunity to strengthen and grow this brand and I look forward to us embracing that. Our vision and strategy to delight our guests across all our brands is delivering, and when our guests have the opportunity to go out and enjoy themselves we see them come to us, where our teams across the group love making them feel welcome. FY23 has been very challenging, however we have controlled costs and limited capex in the second half to reduce net debt. I’d like to take this opportunity to thank our teams, in all roles, for their enthusiasm, commitment and resilience, as everything we achieve is down to their hard work.”

Just Eat Takeaway reports UK and Ireland returns to GTV growth in second quarter but first-half orders down 9%: Just Eat Takeaway has reported the UK and Ireland returned to gross transactional value (GTV) growth in the second quarter of 2023 as group half-year adjusted Ebitda improved to €143m. Total orders in the UK and Ireland was down 9% to 121 million in the first half of 2023 from 132 million the previous year. Of its UK and Ireland performance, the group stated: “UK and Ireland together made up 27% of the total Just Eat Takeaway orders and 24% of the total GTV during the first six months of 2023. UK and Ireland experienced a 9% decline in orders in the first half of 2023 compared with 2022, which can be attributed to lapping the pandemic tailwinds in 2022. In the second quarter of 2023, the year-on-year decline improved significantly compared with the first quarter of 2023. GTV declined 3% year-on-year to €3,164m in the first half of 2023 from €3,260m in 2022, mainly driven by foreign currency exchange movements. GTV showed positive trends shifting from a year-on-year decline of minus 6% in the first quarter of 2023 to year-on-year growth of 1% in the second quarter of 2023. UK and Ireland revenue declined by 4% to €629m in the first half of 2023 from €658m in 2022, driven by the decline in GTV and targeted promotional campaigns offering reduced delivery fees. Adjusted Ebitda increased to €56m in the first half of 2023 from minus €18m in 2022 and the adjusted Ebitda margin improved to 1.8% in the first half of 2023 from minus 0.5% in 2022 driven by enhanced delivery efficiency through order pooling and simplification of our delivery operation. As a result, the delivery cost per order notably reduced and additional efficiencies were achieved through streamlining our operations. Our grocery business continued to expand at a rapid pace. At the end of the first half of 2023, we had more than 5,000 grocery partners on the platform, a significant increase from the 1,000 grocery partners we had on the platform at the end of the first half of 2022. This offers significant opportunities to grow our future revenues and further optimise our delivery network by expanding our offering to our consumers.” Group revenue in the period was down 7% to €2,588m from €2,779m the year before. Total adjusted Ebitda rose to €143m from minus €134m the previous year. The company stated: “GTV growth is expected to be in a range of minus 4% to plus 2% year-on-year in 2023, with a return to growth skewed towards the end of the year, given the lower absolute order level of the second half of 2022 versus the first half of 2022. Management expects to deliver a positive adjusted Ebitda of approximately €275m in 2023. This guidance includes additional investments in food and non-food adjacencies, wage costs inflation and reflects an uncertain macroeconomic environment. Management expects free cash flow before working capital to turn positive in mid-2024. Management, together with its advisers, continues to actively explore the partial or full sale of Grubhub. There can be no certainty that any such strategic actions will be agreed or what the timing of such agreements will be. Further announcements will be made as and when appropriate.” Jitse Groen, chief executive of Just Eat Takeaway, said: “Since our initial public offering, our objective has been to build and extend large scale and sustainably profitable positions in our markets. With the majority of our orders coming from northern Europe and UK and Ireland, these two segments returning to growth in the second quarter of 2023 is a key milestone. Encouragingly, UK and Ireland is on its way to a similarly high profit margin as northern Europe. The remainder of the business is also showing improving GTV growth and profitability trends, leading to the company fast approaching its positive free cash flow target.” Meanwhile, Brent Wissink is to step down as chief financial officer at the company’s annual general meeting in 2024 to pursue other opportunities. The company said it will begin the process of finding a successor.

M&B’s largest shareholder Joe Lewis charged with ‘brazen’ insider trading in US: Mitchells & Butlers’ (M&B) largest shareholder, Joe Lewis, has been charged in the United States with “brazen” insider trading. The US attorney for the southern district of New York said the 86-year-old billionaire, who also owns Premier League side Tottenham Hotspur, had been indicted for passing company information to friends, private pilots, employees and romantic partners. The British businessman, who is based in the Bahamas and owns circa 27% of the issued share capital in M&B through his investment vehicle Piedmont, faces more than a dozen charges, including securities fraud, reports The Times. US attorney Damian Williams issued a statement via social media detailing the alleged offences. “My office, the Southern District of New York, has indicted Joe Lewis, the British billionaire for orchestrating a brazen insider trading scheme,” Williams said. “We allege that for years Joe Lewis abused his access to corporate boardrooms and repeatedly provided inside information to his romantic partners, his personal assistants, his private pilots and his friends. Those folks then traded on that inside information and made millions of dollars on the stock market because, thanks to Lewis, those bets were a sure thing. Now, none of this was necessary. Joe Lewis is a wealthy man. But as we allege he used inside information as a way to compensate his employees or shower gifts on his friends and lovers. It is classic corporate corruption. It’s cheating and it’s against the law. That’s why Joe Lewis has been indicted and will face justice here in the southern district of New York.”

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