Caffè Nero reports a strong half-year

Caffè Nero reports a strong half-year recovery

Premium coffee house brand, Caffè Nero, has announced robust trading for its half-year (June 2021 to November 2021), including strong like for like sales growth.

The company also announced that its sales during the Omicron period (December 2021 to January 2022) were resilient at 82% of normal trading (FY19). In fact, trading in the UK since many government restrictions have come off in late January 2022 has moved up to over 90% of the business’s normal pre-Covid trading pattern, they report.

For the first half of its current financial year FY22 (June 2021 to November 2021), Caffè Nero reported sales of £135.7m, an increase of 211% for the same period in 2020, and an EBITDA of £29.4m, which is higher than its pre-Covid level.

During the first half of FY22, Caffè Nero also experienced a notable and encouraging increase in several of its newly established sales channels. Its delivery business, through UberEats, generated £3.4m of revenue. Likewise, its coffee at home business for the same period achieved sales of £1.3m (the latter is a channel selling Caffè Nero’s coffee products via supermarkets, Amazon and its own web site). These new distribution channels are now on target to generate over £10m of incremental revenue for the business in its current financial year, say the company - a significant development since the pre-Covid period.

Caffè Nero founder and group CEO, Gerry Ford commented: “We’ve seen a very encouraging first half of our financial year. Our business showed great resilience and recovery. Further, even with the emergence of the Omicron variant, our sales have held up. We are now trading at 90% of pre- pandemic levels and we expect to see that improve further over the coming weeks and months.”

Caffè Nero has also reported its annual results for the financial year ending May 2021 (FY21). During that period, UK sales reduced from £239.7m (FY20) to £153.3m (FY21), a decrease of 36%. This was caused by government restrictions requiring the company’s stores to be closed or to be restricted to take-away trade only and to be constrained in the number of seats allowed within the stores. The reduction of revenue subsequently meant that the group generated a loss of £16.6m for the year.

Commenting on the FY21 accounts, Gerry Ford stated: “There is no doubt the pandemic and government enforced lockdowns had a significant impact on our business. The figures from our FY21 accounts show just how damaging these limitations on our trading were. We were in survival mode throughout the period. But a loss for that year of £16.6m was an improvement on the previous year, and there were signs of strengthening towards the end of the year.

“We entered FY22 with a bit of momentum, having been cash positive each month in the previous six months. Once the government restrictions came off in July 2021, our business was able to strengthen and push forward. Our first half of FY22 reflected how resilient our core business is if we are allowed to trade with few restrictions.”

Parliamentary inquiry recommends VAT stays at 12.5%

An inquiry by a group of influential MPs has recommended that VAT for the hospitality and tourism sectors stays at 12.5% beyond March.

The All Party Parliamentary Group (APPG) for Hospitality and Tourism, concluded that VAT should not return to 20% this April, citing UKHospitality data revealing that the lower rate would bring benefits including jobs, international competitiveness and social wellbeing.

Writing in the Inquiry into the Retention of the 12.5% rate of VAT report, Kate Nicholls, chief executive of UKHospitality, which provides secretariat services to the Hospitality and Tourism APPG, said: “The hospitality and tourism industry has been the hardest hit by the COVID-19 pandemic. However, with the right support, it can play a crucial role in the country’s economic recovery and help rebuild people’s wellbeing after they have had to live under social restrictions for the past two years.

“Hospitality and tourism is a major economic sector, because its businesses are community hubs that bring everyone together, across the entire nation. This will remain true as we learn to live with Covid.

“However, for businesses to provide the best possible service, they need to return to financial strength. We welcome this report from the APPG on hospitality and tourism, which highlights the importance of keeping VAT at 12.5% to achieve this.”

A UKHospitality member survey cited as part of the inquiry showed that nine in 10 businesses believed retention of 12.5% VAT was crucial to their recovery; while other figures published in the report show that all but one region of the UK employs more than 650,000 people in hospitality and receives over £3.5bn in tourism expenditure from visitors, with domestic tourism redistributing £25bn per annum from urban to rural and seaside economies – ‘the largest form of non-governmental redistribution of wealth in the UK’ – making hospitality and tourism ‘key economic drivers in every region of the country’.

In its conclusion, the inquiry report states: “The evidence submitted to the APPG…strongly supports the case for retaining the current 12.5% rate of VAT to support the industry in playing a key role in the UK’s economic recovery and the Government’s wider agenda, such as Net Zero and levelling-up.”

The report also stated: “Across every area, the inquiry found a substantial case for retaining the current 12.5% rate of VAT and, thus, the APPG recommends this policy remains in place beyond March.”