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House of Commons Refreshment Department
Trading Account 1998-99
REPORT
By the Additional Accounting Officer
1. Foreword
The Refreshment Department has been one of six
separate departments of the House of Commons since April 1980
and is responsible for the provision of catering services to Members,
their staff, staff of the House and guests visiting the House
of Commons.
The House of Commons Commission is responsible
for setting overall policy and for making key decisions regarding
the delivery of services to the House, including those provided
by the Refreshment Department. The present financial arrangements
of the Refreshment Department were approved by the Commission
and implemented in April 1993. Under these arrangements, staff
costs for the Department are carried on the House of Commons Administration
Vote, with the exception of staff costs for banqueting and souvenir
services, which are borne on this Trading Account. The cost of
accommodation, utilities, rents, rates, telecommunications and
capital improvements are carried on the House of Commons Works
Vote, although contributions to the cost of some improvements
projects are made through the Trading Account. All other operating
costs of the Department are borne on the Trading Account and must
be met from the income collected from customers. The House of
Commons Commission have decided that the whole of the Refreshment
Department's activities should in future be presented under cover
of the House of Commons Resource Account. This is therefore the
last year in which the Department's Trading Account will be published
in the current format.
The management of the Refreshment Department
are responsible for the planning and delivery of catering services
within the financial remit agreed by the House of Commons Commission.
They are guided in this by the Catering Committee, and, on financial
aspects of the Departments' operations, by the Finance and Services
Committee.
2. Services Provided
The Refreshment Department operates a total
of 29 trading outlets, including 26 food and beverage operations
and 3 souvenir shops. These outlets are spread between three buildings
on the Parliamentary estate: the Palace of Westminster, 1 Parliament
Street and 7 Millbank. The principal services provided can be
categorised as:
| (a) | House services, comprising 7 self-service
cafeterias, 6 restaurant dining rooms and 8 bars. |
| (b) | Banqueting services, comprising 5 dedicated
rooms and 6 other outlets when not in use for House services. |
| (c) | Souvenir sales, comprising 1 shop and
2 kiosks. |
In addition to these principal activities, the
Refreshment Department is responsible for catering in The Speaker's
State Apartments for the Speaker's official and private entertaining.
Other activities of the Department include the provision of vended
refreshments, the supply of mineral water for the Committee Rooms
and occasional catering in Westminster Hall.
3. Trading Volumes
The level of demand for catering services in
1998-99 was exceptionally high and for the first time, the Department
served more than 1 million meals during the year. This was an
increase of almost 8 per cent on the previous five years' mean
average of 934,000 meals, and was 6 per cent over the volume budgeted
for the year.
Since the introduction of the present financial
arrangements six years ago, the patterns of business have fluctuated
as follows:
Number of Meals Served
| |
1993-94 |
1994-95 |
1995-96 |
1996-97 |
1997-98 |
1998-99 |
6 Year
Mean |
| Cafeterias |
796,000 |
787,000 |
821,000 |
797,000 |
802,000 |
864,000 |
811,000 |
| Dining Rooms |
41,000 |
54,000 |
47,000 |
52,000 |
54,000 |
58,000 |
51,000 |
| Banqueting |
92,000 |
87,000 |
83,000 |
81,000 |
77,000 |
87,000 |
85,000 |
| Total |
929,000 |
928,000 |
951,000 |
930,000 |
933,000 |
1,009,000 |
947,000 |
Whilst much of this volume increase was derived from the
cafeteria business, it is particularly noteworthy that the number
of meals served in the Department's dining rooms was the highest
since the introduction of the present financial arrangements in
1993. This was achieved despite the significant downturn in demand
for catering services on Thursday evenings following the introduction
in January 1999 of the revised hours of sitting of the House on
Thursday and an extra constituency week when the House did not
sit in February. Similarly, there was an increase in demand for
banqueting services, reversing a four-year business trend.
4. Trading Performance and Control of Operations
Total sales were £4.55 million, an increase of 8 per
cent over last year and almost 4 per cent above budget. In particular,
this increase was contributed from food sales, which increased
by 11 per cent over last year. Souvenir sales, however, were disappointing,
showing a small decrease of 1 per cent.
Of the total income of £4.55 million, house services
contributed £2.12 million (46.5 per cent), banqueting contributed
£1.78 million (39.0 per cent) and souvenir sales contributed
£0.66 million (14.5 per cent). For the first time in five
years, the share of total income contributed by house services
did not increase this year.
The Department has consistently exceeded its gross profit
target in recent years. During 1998-99, most selling prices were
held at last years' levels and special promotions were used as
a mechanism to reduce profit margins in the cafeterias. Despite
this, cafteria food gross profit margins remained unchanged and
beverage gross profit margins showed an improvement in almost
all areas.
Banqueting staff costs increased slightly from a level of
41.5 per cent (excluding service charge) of banqueting turnover
last year to 41.8 per cent this year. The contract for cleaning
the Parliamentary Estate was called in during the year and a decision
was made to let a separate contract for the cleaning of the Refreshment
Department's premises. Although the new contract was let at a
significantly higher annual cost, the standard of cleaning has
improved considerably and other savings have been made to partially
off-set the increased cost of £80,000. General expenses and
administration costs consequently showed an overspend of some
£30,000 against budget, but bearing in mind the high volume
of business, this represented a cost increase of just three pence
per cover.
Overall, the trading surplus for the year was £357,813
or 8.0 per cent of turnover. This compares with a target of 5
per cent and a figure of £445,476 (10.6 per cent) in 1997-98.
The Refreshment Department's policy for the payment of creditors
is to pay within an average of 45 days of the delivery of goods
or services. During the autumn of 1998-99, a system to assess
the performance against policy was introduced. For the final four
months of 1998-99, creditors were paid within 45 days for 94 per
cent of invoices and within 30 days for 80 per cent of invoices.
5. Year 2000 Issues
| (a) | All Refreshment Department business systems have been
tested during 1998-99 and in all cases were year 2000 compliant.
Additionally, the Department is participating in the House of
Commons Convergence Programme and co-operating with the Project
Manager for Millennium Compliance. |
| (b) | The Department's policy is to identify all suppliers
and systems which are pertinent to the Department's business.
These are then assessed for their importance and prioritised accordingly.
Where necessary, suppliers are contacted and asked for statements
regarding their Y2K status. Depending on their response alternative
suppliers may be identified as a contingency. Systems which are
not fully compliant are reviewed for replacement or modification
and contingency plans are devised. |
| (c) | There are adequate business systems in place to operate
manually if required, but we are awaiting the Risk Assessment
on other operating equipment, not operated by the Refreshment
Department. The Department's suppliers have not yet all provided
details of their general plans to address the year 2000 issues. |
| (d) | No contingency costs have been included in the Refreshment
Department's budget for 1999-2000. |
6. Working Capital and Accumulated Surplus
At the start of the financial year 1998-99, an amount of
£421,324 (being 10 per cent of 1997-98 turnover) was carried
forward as "working capital", with the remaining balance
of the accumulated surplus (£1.97 million) set aside to contribute
towards the ongoing programme to modernise the Department's premises.
At the year end, after addition of the operating surplus
(£357,813) and with transfers from capital funds (£24,507),
an amount of £803,644 remained in the "working capital"
fund.
An amount of £348,266 will be transferred to the House
of Commons Administration Vote in the new financial year 1999-2000,
leaving an amount of £455,378 (10 per cent of turnover) carried
forward as "working capital".
A transfer of £500,000 was made during the year from
the accumulated Trading Account surplus to the House of Commons
Works Vote.
After adjustment for interest earned and taxation, the accumulated
surplus set aside for major improvements was £1,692,435 at
year end.
Susan Harrison MHCIMA
Director of Catering Services
(Additional Accounting Officer)
2 July 1999
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