All Bar One owner warns on cost headache as hospitality sector fights to recover after lockdowns
Hospitality firms face a “major challenge” from higher energy and staff costs as they seek to rebuild following the pandemic, bar and pub operator Mitchells & Butlers has warned.
The company behind brands such as Harvester and All Bar One reported a second year in a row of annual losses though said in recent weeks sales had recovered to pre-pandemic levels.
It said demand seen since venues reopened should help it return to profitability but that higher costs – partly blamed on Brexit – would “inevitably” take their toll on financial performance.
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Mitchells said it faced the likelihood of short-term supply chain issues and profit margins looked set to be lower than before the pandemic due to “notable” inflation in food and utility charges and labour costs, as pay is hiked for roles where applicants are now harder to find.
The group, which employs more than 40,000 people across 1,700 sites, was forced to announce 1,300 job cuts last year as reduced trade put its finances under strain.
Results for the company, whose brands also include Toby Carvery and the Miller & Carter steak house chain, showed a pre-tax loss of £42m for the year to 25 September, narrowing from the £123m loss a year earlier.
Sales were down by 9.6% on pre-pandemic levels from two years before with venues closed or subject to restrictions for much of the period and traditional drinking-focused pubs in large city centres worst hit.
Trading recovered towards the end of the period and in the eight weeks since has been 2.7% up on 2019 – thanks to higher spending per head even as volumes of food and drink sold remained lower.
“However, cost headwinds present a major challenge to the hospitality sector as a whole, most notably in utilities and employment costs,” the company said.
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VAT rise ‘risk too soon’ for fragile hospitality sector
While it was working hard to keep a lid on these, it said “there will inevitably be a residual impact on the current financial year’s performance”.
Chief executive Phil Urban said: “Despite the inevitable challenges faced by our business over the past year we are now well positioned to regain the momentum previously built as we come out of the pandemic.
“The trading environment remains challenging and cost headwinds continue to put pressure on the sector.”
The company said that in the short term “cost pressures are expected to be higher than average due principally to recent escalations in energy costs”.
It added: “Brexit remains an important event for the market and has created risks for the sector, principally around the supply and cost of products and workforce shortages.”
Shares rose 6%.
Richard Hunter, head of markets at Interactive Investor, said: “There is clearly some light at the end of the tunnel and MAB is already seeing the benefits of unrestricted trading.
“The market consensus of the shares as a strong buy indicates a willingness for some to see the current glass as being half-full.”
Business
Ex-Post Office head of IT says Paula Vennells ‘hoped to avoid’ inquiry – and reveals she blocked her number
A former Post Office executive has said she was forced to block ex-boss Paula Vennells’ phone number after the ex-CEO called multiple times asking for help to avoid an independent inquiry into the Horizon IT scandal.
Lesley Sewell, previously the company’s head of IT, told the Post Office inquiry on Thursday that former CEO Ms Vennells had reached out to her four times between 2020 and 2021.
Ms Sewell said that she blocked Ms Vennells’ number due to discomfort with the contact.
In her witness statement to the probe, Ms Sewell said that one of Ms Vennells’ emails referenced the need to fill in memory gaps regarding Horizon and “Project Sparrow”, a committee addressing issues with forensic accountants who identified flaws in the accounting system.
“Paula contacted me on four occasions in total. I recall blocking her number after the last call as I did not feel comfortable with her contacting me,” Ms Sewell said.
“I had not spoken to Paula since I had left POL [Post Office Limited] in 2015.”
Lesley Sewell giving evidence to the Post Office inquiry. Pic: PA
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According to Ms Sewell’s testimony, former chief executive Ms Vennells said that she had “been asked at short notice” to appear before a parliamentary select committee on “all things Horizon/Sparrow and need to plug some memory gaps”.
Ms Sewell says Ms Vennells added: “My hope is this might help avoid an independent inquiry but to do so, I need to be well prepared.”
Ms Sewell, who struggled to contain her emotions and broke down in tears while giving her oath at the start of her inquiry evidence, was offered support and breaks as needed by chairman Sir Wyn Williams.
Sir Wyn told the former executive: “Ms Sewell, I appreciate this may be upsetting for you, Ms Price will ask you a number of questions in a proper and sensible manner, but if at any time you feel you need a break, just let me know, all right?”
Lesley Sewell taking the oath at the Post Office inquiry. Pic: PA
The Post Office has faced significant scrutiny following the ITV drama Mr Bates Vs The Post Office which highlighted the Horizon IT scandal.
The faulty system led to the prosecution of more than 700 sub-postmasters between 1999 and 2015, with many still awaiting full compensation despite government announcements regarding payouts for those with quashed convictions.
London City Airport will on Thursday name its first permanent female chief executive as it targets approval of an expansion plan that would create nearly 1,500 jobs.
Sky News understands that the Docklands airport has told staff that Alison FitzGerald, who has been co-CEO since January alongside finance chief Wilma Allan, has landed the role.
A woman wearing a face mask walks by London City Airport, which suspended its operations during the pandemic
She replaces Robert Sinclair, who left in January after six years to become boss of the High Speed 1 rail link.
The airport is owned by a consortium of Canadian pension funds and Kuwait’s sovereign wealth fund, which have backed a plan to increase its annual passenger traffic from about 6.5m to 9m.
It is appealing against Newham Council’s rejection of a planning application that would see it extend operating hours at the site, which is popular with City commuters.
The airport’s proposals include no increase in the annual number of flights and, in what it claims is a first for a UK airport, a commitment that only cleaner, quieter, new generation aircraft will be allowed to fly in any extended periods.
The runway at London City Airport
The appeal is being reviewed by the Independent Planning Inspector.
Its change of leadership makes London City the second of the capital’s airports to name a new CEO in quick succession, following the arrival at Heathrow of Thomas Woldbye last year.
“London City delivers one of the best passenger experiences in the UK and I’m committed to building on this success even further,” Ms FitzGerald said.
Representatives of Thames Water’s multinational syndicate of shareholders are poised to quit as directors of its corporate entities after refusing to inject the billions of pounds of funding required to bail it out.
Sky News has learnt that a number of board members at companies connected to Kemble Water Finance, Thames’s parent, are expected to resign in the coming days.
City sources described the move as “the logical next step” after the owners of Britain’s biggest water utility said they would not commit more than £3bn to help upgrade its ageing infrastructure and shore up its debt-laden balance sheet.
A default on part of Thames Water‘s holding company debts last month has raised the prospect that the company is heading towards special administration, a form of insolvency that would effectively leave the government liable for managing a utility firm which serves nearly a quarter of Britain’s population.
Money latest:
Rainy day for iconic British brand as profits suffer
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Thames Water under threat
Thames Water is owned by a group of sovereign wealth funds and pension funds from countries including Abu Dhabi, Australia, Britain, Canada and China.
A number of the investors are represented on boards which sit at various points in the group’s labyrinthine capital structure.
It was unclear on Wednesday whether Michael McNicholas, a representative of the giant Canadian pension fund Omers and who sits on the board of Thames Water Utilities Limited, was among those in the process of stepping down.
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Along with the rest of the privately owned water industry, Thames Water faces a crucial moment next month when Ofwat, the industry regulator, publishes its draft determination on companies’ five-year business plans.
The draft rulings will be subject to negotiation before final versions are published in December.
Thames Water and a spokesman for Kemble declined to comment.
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