House of Commons Refreshment Department Trading Account 1998-99 Report

House of Commons Refreshment Department

Trading Account 1998-99


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
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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Prepared 27 July 1999