Propel Newsletter Archive Page

Fuller’s sales continue to rebuild, total gas and electricity costs expected to rise by c.£10m: Fuller’s has reported that its sales continue to rebuild from the impact of the pandemic with total sales in the first 25 weeks of the financial year up 3% against pre-pandemic levels and up 50% on the same period last year. On a like-for-like basis, it said that sales for the 25 weeks to 17 September 2022 are 21% up on last year. However, it said that the global energy crisis is “causing significant increases in our expected costs for gas and electricity in the current financial year”. The company said: “Earlier in the year we had forward purchase contracts in place to cover 50% of our forecast annual gas and electricity requirements. More recently the energy markets have seen costs increase even further to unprecedented levels. With growing uncertainty, and the risk of even higher market costs for energy as we head into the winter months, we have purchased additional forward contracts to cover what we anticipate will be our annual requirement, providing surety for the months ahead. On 8 September 2022, the government announced a new six-month scheme that will offer support to businesses at a similar level to that offered to consumers. As the details are yet to be published, we do not know, and are unable to quantify, the extent to which the scheme will mitigate increased costs. Prior to realising any financial benefit from this scheme, we expect our total gas and electricity costs in the current year to be c.£18m against a prior year figure of £8m. We have made good progress implementing a number of initiatives, with more to follow, which reduce our energy usage and help mitigate these cost increases over the medium term.” During the first half of the financial year, the company has opened The Queen’s Arms, a landside pub at Heathrow Terminal Two, The Queen’s Terminal. In addition, it is close to completion on two further sites. In the year to date, the business said it had sold four non-core unlicensed premises, generating proceeds of £6.9m, and plan to use part of these proceeds to fund a repurchase of up to one million ‘A’ shares in the company. Chief executive Simon Emeny said: “While sales continue to recover from the effects of the pandemic, we are conscious that consumers face increasingly challenging times ahead. Businesses across the hospitality sector are experiencing unsustainable increases in energy costs. Despite having proactively purchased forward contracts to limit the impact on Fuller’s, we will see significant increases this year and do urge the government to provide much needed clarity on its proposed support package so that we can plan accordingly. We are looking forward to the forthcoming World Cup and our first restriction-free Christmas for three years. The future may present more obstacles to navigate, but Fuller’s is a long-term company with a clear vision and the people, properties, and financial fire power to deliver consistent returns in the long term.”

Tasty – Cost of living pressures beginning to impact on revenue in H2 2022: Wildwood operator Tasty has said that the cost-of-living pressures is beginning to impact on revenue in H2 2022, and that “inflationary pressures on food, labour and utility costs, and the cost of living crisis, will inevitably impact the performance of the company for at least the remainder of the year”. The 54-strong company reported revenue up 85% to £21.5m in 26 weeks ended 26 June 2022, with underlying earnings up from £800,000 to £2.7m on an adjusted basis. After an impairment charge of £1.6m, it made a pre-tax loss of £2.7m. It said that in the period under review, it benefited from unrestricted dine-in sales and also grown its takeaway and delivery business. However, the company said it had seen a slowdown in the second half due to its focus on dine-in and changing consumer habits. The company said: “Following the difficult period of the pandemic, we started 2022 expecting the year to be less challenging. Sales performance compared to 2019 was strong but has been marred by labour shortages and inflationary pressures impacting the hospitality industry. These cost pressures became more acute towards the end of the first half of 2022. Like many of our competitors and the economy in general, we are facing severe headwinds. Inflationary pressures on food, labour and utility costs and the cost-of-living crisis will inevitably impact the performance of the company for at least the remainder of the year. Having navigated our way successfully through the difficult periods in the recent past, we are in a good position to manage these challenges once again; through a tight focus on cost controls and ensuring that we are delivering an excellent experience for our customers. We have agreed heads of terms for a new Wildwood site in Oxfordshire. Our Dim T brand has experienced a resurgence, and we are converting the former underperforming Wildwood in Loughton to a Dim T, which is due to open in the autumn. Whilst there is a strong pipeline of sites identified, due to current uncertainties, we have slowed our previously announced expansion plans and will cautiously approach any new openings as we brace ourselves for an even more challenging economic environment, which is beginning to adversely impact our profitability in the second half of 2022. Utility cost management and pressure on revenue as living costs continue to rise will be our biggest challenges over the coming months, although we await details of the government’s support package. We will endeavour to mitigate all pressures carefully by continuing to focus on savings and customer experience. Despite these uncertainties the board remains confident of managing current challenges and the group will cautiously consider future expansion opportunities for growth.”

UK retailers and pub owners look to mini-Budget for help: The UK retail and hospitality industries have called on new chancellor Kwasi Kwarteng to provide urgent financial support in his mini-Budget on Friday to offset the “cost of business” crisis unleashed by surging inflation. The FT reports Britain’s retailers have warned inflation will add a further £800m to business rates in the coming year because of the way the property-based tax paid by companies is calculated. In a letter sent to Kwarteng last week, seven hospitality industry bodies and campaign groups also said businesses “could not wait any longer” to understand the level of government support for energy bills and whether they could afford to enter into costly new fixed-term contracts. “The initial announcement helped businesses breathe an initial sigh of relief, but most are still in the dark as to how the guarantee might help them,” said the letter. The vast majority of UK businesses renew their fixed-term electricity and gas contracts in October. The trade bodies, including UKHospitality, the British Beer and Pub Association and the Campaign for Real Ale, also called for a reduction in VAT on food and drink sales, and a temporary cancellation of business rates for the sector. The bodies pushed for clarity on government support in the long term, adding that short term relief will provide a lifeline for businesses “on the brink of closure, but more support is needed, as well as a plan beyond the next six months”. The letter said: “We need policies that ensure our survival through the winter which will allow us to invest in the long-term potential of our sector, action on the tax burdens that are stunting our growth and a government that understands the extremely critical situation we’re currently in.” A British Retail Consortium (BRC) letter called for a long-term commitment from the government to business rates reform and solutions to labour shortages. The trade group also accused the government of confused policymaking, saying a “lack of joined-up thinking when it comes to policies related to the industry, many of which are adding significantly to the cost burden the industry is dealing with and require significant investment of time”. The BRC said the government should pause “any initiatives that are not urgent in the current challenging economic environment”.

Christou – Why can’t Pret be like McDonald’s – we haven’t really got a British brand that has done that, so this is our aim: Pret A Manger chief executive Pano Christou has said that the company’s plans is to become a global brand on a par with McDonald’s. Talking to the Daily Mail, he said: “There is still plenty of opportunity for us (in the UK). Wherever there is not a Pret, I am thinking how can I get one in there.” He also wants to carry on growing overseas, adding to the existing 200 outlets in the US, Europe, and further afield. “France has been our most successful new market,” he says. There are also plans to open in Spain, in Kuwait and in India. “We want to be genuinely worldwide. Why can’t it be like McDonald’s – we haven’t really got a British brand that has done that, so this is our aim.” Having survived covid, Pret is now having to deal with huge increases in fuel bills, just like countless other businesses. “Energy costs are huge for us,” he says. “We are hedged until the end of this year. We haven’t hedged for next year but you can see the increases are 150% to 200%. So it is enormous. It is the number one cost challenge we’re facing now. Over the past year, we’ve seen huge cost increases in all kinds of ingredients and materials, but the ones we’re seeing in energy prices are on a different level. I know there’s been some discussion about a VAT drop – and if that does happen, it will be a massive boost for many businesses. But we also need to do more than hope for a handout. We have to do what we can to manage the risk and adapt.” Ingredients in Pret products are also going up. Sunflower oil, much of which comes from Ukraine, is rising in price, as is wheat. “We have seen big increases in milk. Coffee beans have gone up by 40%. We try to mitigate what we pass on to customers. We have put up prices around about 6% overall. Coffee was £2.95 last year, we moved it up to £3.10. People are not making their own sandwiches at home to save money yet. We did see that in 2008 with the financial crisis, so we might see it again.”

Tortilla publishes first ESG report: Tortilla, the largest fast-casual Mexican restaurant group in the UK, has published its first Environment Social Governance (ESG) report. The report sets out the group’s sustainability commitments and five areas of focus for future initiatives, which are aligned to the United Nations Sustainability Development Goals (SDGs), and the brand’s ESG performance for the 2021 financial year and the first six months of 2022. The company said its ESG strategy is based on three core pillars: to reduce its impact on the environment; to attract, develop and retain its people and core values; and to enhance its positive impact on society and the communities where it operates. It said that highlights of its progress in line with these focus areas include; maintaining zero waste to landfill status, procuring 100% renewable electricity and offsetting gas, turning all waste cooking oil into bio-diesel, launching a partnership with food waste organisation Too Good To Go with all raised funds going to ESG initiatives, launching a local burrito donations programme, driving wellbeing and career progression through the Tortilla apprenticeship scheme, and raising more than £37,000 for charity over the past year. The company’s commitments include developing a net zero roadmap, verified by the Science Based Targets Initiative (SBTi), and implementing strategies to reach this; reducing waste; improving data capture across all staff and implementing further training initiatives to aid retention and support long-term career progression; and finally, to strengthen governance around ESG including through becoming ISO 27001 certified by 2023. Richard Morris, chief executive at Tortilla, said: “We are proud to be sharing our first ESG report, as we emerge from and continue to navigate what has been a very challenging period for many. The pandemic and the months since have shown the importance of building a business that is resilient and sustainable in its operations, and customers are expecting this from us now more than ever. The urgency of issues such as climate change and growing socio-economic challenges is clear, and our focus now is on our plans and commitments to reducing our impact on the environment while enhancing our positive impact on our communities and society as a whole. This will be a central part of our business operations moving forward, and I look forward to reporting on our progress in this area over the coming years.”

Four-day working week backed by 86% of trial companies: Almost nine in ten companies taking part in a ground-breaking trial of a four-day working week have said they are likely to extend the policy beyond the six-month test period. The Times reports a survey canvassing opinions at the halfway stage of the trial found that 88% of respondents said it was working well, while 86% said they were likely to consider maintaining the shorter working week once the six-month experiment had come to its end. More than 70 organisations, spanning a local fish and chip shop to larger companies in sectors including information technology, retail, construction, food and hospitality, signed up for the trial, which began in June. It is being run by 4 Day Week Global, a not-for-profit group, in partnership with Autonomy, the think tank, researchers at Boston College and the universities of Oxford and Cambridge, as well as the 4 Day Week Campaign, a body lobbying for a 32-hour working week with no reduction in pay. The trial covers more than 3,300 workers and a total of 41 companies responded to the mid-term survey. “The positive feedback is incredibly encouraging,” Kyle Lewis, co-director of Autonomy, said. He added that the trial would provide information that “can support other organisations and sectors considering switching to a four-day week in the future”. On a scale of one to five indicating how smooth the shift had been, with a grade of one representing “extremely smooth”, 78% of respondents rated the move to a shorter week either one or two. 46% of businesses surveyed said productivity had been maintained at “around the same level”; 34% reported a “slight” improvement and 15% a “significant” one.

Pied a Terre invites staff to dine for free on days off: Michelin-starred restaurants are following in the footsteps of major retailers by offering staff free meals in order to help them cope with soaring bills this winter. The Telegraph reports Pied a Terre, London’s longest-standing Michelin-starred restaurant, has added a note to staff payslips saying that they can take leftover food home at the end of the day and are welcome to come into the restaurant on their days off for free meals. David Moore, who owns the restaurant, said it was important to offer extra support this winter because workers “don’t want to be seen to be needing it” and he doesn’t see the cost-of-living-crisis going away anytime soon. Another Michelin-starred restaurant, which does not want to be named, is weighing up whether to introduce an “emergency larder” for any staff struggling with their food shopping. The decisions come as Britain suffers the worst inflation crisis in 40 years, with the country battling an income squeeze driven by rising food and energy bills. Major retailers have responded by putting up free hot meals, with John Lewis and Waitrose offering free meals to workers over the Christmas period in an effort to attract staff and support squeezed households with the mounting cost of living. The employee-owned company said last month that it would offer English breakfasts and Sunday roasts between 3 October to 6 January to staff in shops and distribution centres, including any of its agency workers. Sainsbury’s also announced a £25m investment in what it called a “cost of living support package” for hourly paid colleagues last week to support them with rising household costs, which will give staff access to basic food items during shifts from October until next year. “The free food will ensure that colleagues can have something to eat while they are at work,” the supermarket giant said.