Tim Martin renews calls for tax equality with supermarkets as Wetherspoon reports 13.1% rise in half-year lfl sales: Tim Martin has renewed calls for tax equality for pubs with supermarkets as Wetherspoon reported a 13.1% rise in half-year like-for-like sales. In the 25 weeks to 22 January 2023, like-for-like sales were 13.1% higher than the same period a year ago and 0.7% lower than the same period immediately before the pandemic, the 25 weeks to 26 January 2020. Like-for-like sales in the last 12 weeks were 17.8% higher than the same period a year ago and were 2.0% lower than the pre-pandemic period. The Coffer CGA Business Tracker, which monitors sales for the UK pub and restaurant sector, reported that one-year like-for-like sales for the sector in December 2022 were +15.0%, while Wetherspoon’s like-for-like sales in December were +21.3%. Martin said: “We are cautiously optimistic about the company’s prospects for the financial year. The biggest threat to the hospitality industry is the vast disparity in tax treatment between pubs and restaurants and supermarkets. Supermarkets pay zero VAT in respect of food sales, whereas pubs and restaurants pay 20%. This tax benefit allows supermarkets to subsidise the selling price of beer. We estimate that supermarkets have taken about half of the pub industry's beer volumes since Wetherspoon started trading in 1979, a process that has likely accelerated following the pandemic. Pub industry directors have, in general, failed to campaign for tax equality, which is an important principle of taxation. Unless the industry campaigns strongly for equality, it will inevitably shrink relative to supermarkets, which will not help high streets, tourism, the economy overall, or the ancient institution of the pub.” Wetherspoon’s free cash flow is expected to be substantially in excess of profits as a result of a cash inflow of approximately £170m from the October 2022 sale of interest rate swaps. At 22 January 2023, the company’s net debt was £745m, approximately £60m lower than the company reported at the same stage in FY2020, before the pandemic. Since January 2020, the company has invested £80.4m in the freehold reversions of 31 properties, of which Wetherspoon was previously the tenant. In the period under review, the company has repaid government CLBILS loans of £100m, which had been due to mature in August 2023. Financial headroom at the period-end (29 January 2023) is expected to be circa £225 million. The company opened two pubs in the period and has sold ten, the sale of which resulted in a cash inflow of £2.9m. Some 35 pubs remain on the market, and the company currently has a trading estate of 844 pubs. Wetherspoon was also recently recognised by the Top Employers Institute as a ‘Top Employer in the United Kingdom’ for 2023, the 18th time that Wetherspoon has been certified by the body.
Number of McDonald’s franchise operators to join updated Premium Database of Multi-Site Companies: A number of McDonald’s franchise operators are among the 51 new multi-site companies being added to the next edition of the Propel Premium Database of Multi-Site Companies, which will be released on Friday (27 January), at midday.
The updated Propel Multi-Site Database, which is produced in association with Virgate, features
I&A Restaurants, which is led by Ismail and Ann-Marie Anilmis, and operates 18 stores across Bedfordshire, Warwickshire, Oxfordshire and Hertfordshire. Also added this month is
Capital Arches, which operates 30 McDonald’s restaurants across London, and is led by managing director Claude Abi-Gerges. In addition,
Lambtrad, which operates 12 sites across Somerset, and is led by managing director Tim Lamb, will be featured. Meanwhile,
White Rose UK, which operates 13 restaurants in the south west of England, and is led by David Wynne, is included. Premium subscribers will also receive a 3,200-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 2,769 companies. Premium subscribers will also receive the next edition of the
New Openings Database on Friday, 3 February, 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 12,000-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, which was sent to Premium subscribers for the first time this week. 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 jo.charity@propelinfo.com to upgrade your subscription. Subscribers also receive access to Propel’s library of lockdown videos and 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 our 6am send-out; regular video content and regular exclusive columns from Propel group editor Mark Wingett.
XP Factory reports revenue growth of more than 300% in ‘transformational year’, group Ebitda of circa £2.6m expected: XP Factory, owner of experiential concepts Boom Battle Bar and Escape Hunt, has reported revenue growth of more than 300% in the “transformational year” of 2022, with group Ebitda of circa £2.6m expected. In the year to 31 December 2022, group revenue of £21.9m was more than 300% of 2021 (£7.0m). Group Ebitda is expected to be circa £2.6m, in line with expectations (2021 £0.1m). In what the group said was a “transformational year of growth”, its Boom Battle Bar estate grew to 27 sites (11 owner-operated and 16 franchised), while five new owner-operated Escape Hunts opened, taking the total to 23 (plus 23 franchised). Escape Hunt owner operated revenue of £9.9m was 64% ahead of 2021, while Boom Battle Bar owner-operated revenue was £8.8m in its inaugural year. In the owner-operated estate, the Norwich Boom Battle Bar acquisition has already been paid back and Boom Battle Bar Cardiff is continuing to perform strongly. The board estimates annualised run-rate revenues from the current business of circa £33m, with a substantial majority of Boom Battle Bar earnout likely to be achieved. A fit-out funding facility of £3.3m was agreed to support additional site growth in Boom Battle Bar in 2023, while cash at year end of £3.2m. The company said: “2022 represented a transformational year in which the board set ambitious targets to grow our newly acquired Boom Battle Bar business whilst continuing to grow Escape Hunt. The targets set for new site roll outs were achieved, and today the group has critical mass in both its Escape Hunt and Boom Battle Bar networks. Sales for the Escape Hunt owner operated network rose 64% to £9.9m for the year, achieving record levels of sales in the final quarter, and in particular in December 2022, notwithstanding the 15% VAT reduction in the 2021 comparatives. While H1 of 2021 was impacted by site closures during covid, the growth in H2 2022 reflects 14.0% underlying like for like growth. Margins in Escape Hunt have continued to surpass internal benchmarks, with the site level Ebitda margin expected to be in excess of 35% for the full year. The like for like Ebitda growth from the owner operated estate in H2, after normalising for the VAT reduction received in 2021, is expected to be approximately 53%. This generated an annualised cash return on invested capital for the Escape Hunt UK owner-operated estate of circa 35%. The Escape Hunt franchise network similarly experienced an improved H2 compared to 2021. 2022 represented a ‘maiden year’ for Boom Battle Bar as we built the foundations of a significant network. 26 Boom Battle Bar sites were open and trading throughout December 2022, compared to only six in 2021. The 27th site, operated as a franchise site, opened on 28 December 2022. Turnover from the Boom Battle Bar owner operated estate was approximately £8.8m, and royalty revenue from the franchise estate was approximately £1.5m. Notwithstanding the impact of train strikes, which affected the London sites on the strike days in particular, December performance gives us significant cause for optimism. Notably, our flagship site in Oxford Street, London. The site opened on 27 November 2022, and performance to date has been very encouraging, with the site recording the highest weekly sales of any site in the network in only its third week of operation. New sites are not expected to be profitable on day one, as operational performance in new sites gradually improves over time and revenue builds through awareness. The older sites in our owner-operated portfolio are now delivering consistent margins within the range the board had previously expected, while newer sites are tracking in line with an expected maturity curve. The board therefore remain confident that the return on capital metrics from our owner-operated Boom Battle Bar estate will be highly attractive and likely to be in excess of the excellent levels achieved in Escape Hunt, once landlord contributions are taken into account. We have recently agreed terms on a fit-out funding facility of £3.3m to support additional site growth in Boom Battle Bar in 2023. The facility is granted on a site-by-site basis and provides extended credit over a 48-month period directly from the fit-out supplier at 5% over base rates. Both acquisitions made during the year have performed very well. The Norwich site, acquired in August 2022, has already fully paid back the cost of acquisition on a cash basis, while the Cardiff site, acquired in September 2022, remains a profitable, high turnover site which is expected to payback the full acquisition price within two to three years. In the 16 weeks between the date of acquisition and the end of the year, Cardiff delivered 12.5% like-for-like sales growth. The turnover achieved within the Boom Battle Bar owner operated and franchise estate, together with the successful expansion to 27 sites during the year, is expected to result in a substantial majority of the 25 million earnout shares being issued to the vendors. The final earnout will be determined through the audit process, with the number of shares to be issued fixed and not impacted by share price movements. There is no cash consideration payable in respect of the earnout. Details of the earnout were set out in the Circular sent to shareholders dated 4 November 2021. The timing of site openings, together with the seasonal importance of October to December, meant that the group’s performance in 2022 was heavily skewed towards the last few weeks of the year and highly sensitive to any changes in opening dates. The increased mix of sites towards owner-operated (11 actual versus six budgeted) paradoxically has a short-term adverse impact on profitability as we lose the benefit of up-front franchise fees and have to account for operating losses in the early weeks and months of operation while the businesses mature. However, despite this, and despite December’s train strikes having an estimated adverse impact of approximately £0.35m on Ebitda, the group still expects to report an adjusted Ebitda, before IFRS 16, in line with expectations, at approximately £2.6m. Cash balances at the year-end were £3.2m.” Richard Harpham, chief Executive of XP Factory, added: “2022 has been a transformational year. We are delighted to have achieved our target of having 27 Boom Battle Bar sites open by the end of 2022 together with the further expansion of our Escape Hunt network. The platform that this combined estate sets up for the group forms the basis for a profitable and cash generative group with very attractive return on capital metrics in future and provides options for us to deliver significant growth for all our stakeholders. In the current climate, we believe that our focus on providing value for money and a highly differentiated social experience resonates strongly.”
UK ‘facing multi-billion pound hole’ ahead of March Budget: The government’s spending watchdog has warned the country is facing a multi-billion pound hole ahead of the Budget in March. In his Autumn statement, the chancellor had announced the Office for Budget Responsibility (OBR) predicted global economic growth would fall by 1.4% this year before rising again over three years, by 1.3%, 2.6% and then 2.7%. But in a new submission to the Treasury, seen by The Times, the OBR has privately warned Jeremy Hunt to expect a bleaker economic future. It plans to revise growth forecasts down by between 0.2% and 0.5%. Sources said the revision was necessary due to weakness in the economy and labour-market shortages. Forecasters have reportedly warned that the government does not have scope for spending announcements, and on 15 March may have to tighten purse strings further than previously expected. “There seems to be a view out there that Hunt suddenly has all this money to play with for tax cuts,” one government source told the Times. “But that is not the view internally. The OBR figures suggest that the prospects for medium-term economic growth will actually be worse than they were in November.” Hunt has reportedly been told by Treasury officials that underlying inflation, including pay growth, could result in interest rates being pushed higher than expected, which in turn could mean a longer recession and a weaker recovery.
