The Company closed all its pubs, inns and hotels on 20 March 2020 following the directive from the UK Government that all hospitality businesses should shut.
The Company then quickly took all possible steps to secure the business, protect cash flow and take advantage of the support measures put in place by the Government. These included:
- Putting over 90% of the workforce on furlough leave;
- Only allowing staff in key roles and those securing our properties to work – which meant that the business was operating and being safeguarded by a skeleton team;
- The Board and Executive team all taking pay cuts of up to 30%;
- Taking advantage of business rate exemptions across its retail properties, which are available for the 2020/21 business rate period;
- Assisting pub tenants to claim grants across all the tenanted pub estate which assisted the tenanted pubs to survive and come through the crisis;
- Claiming pub grants directly where they were available for the pubs that we operate on a managed basis;
- Negotiating either suspension of contracts with suppliers, or reduced costs during the period of disruption;
- Agreeing payment deferrals with HMRC for VAT and PAYE;
- Temporarily pausing deficit contributions to its defined benefit pension funds; and
- Putting all non-essential capital expenditure on hold.
Liquidity and Financing
The Company renewed its banking facilities in Q1 2020 and at 31 March 2020 had net debt of £65.4m with total facilities of £82m giving it liquidity headroom of over £16m. During the period of closure, the Company monitored its cash flow very closely and at the end of June 2020 net debt had increased to £71.8m. Whilst this was an increase of £6.4m during the period of closure, £12m of headroom remained against the Company’s existing facilities and with the support of its banks its banking covenants were relaxed.
The Company is currently giving consideration as to whether it is necessary to increase facilities further as a prudent measure to ensure that it has sufficient facilities to deal with the ongoing uncertainties that might arise over the winter period.
The Company reopened all its pubs, inns and hotels on 4 July 2020 or shortly thereafter and the leisure facilities, swimming pools and spas reopened towards the end of July.
Since reopening trade has built steadily, aided by the significant measures of government support in the form of the VAT reduction on accommodation, food and soft drinks from 20% to 5%, which took effect on 15 July 2020 and remains in place until 12 January 2021. In addition, the Eat Out to Help Out scheme ran during August and boosted customers coming to eat in the early part of the week. The fine weather and the increase in staycations due to the travel restrictions put in place to prevent UK citizens from going abroad has also assisted our recovery.
Reopening the business, under our “Stay Safe” covid-friendly operating procedures, has been a significant challenge for our teams, but they have done an amazing job of getting going and starting on the road to rebuild our position. I would like to thank them for the way in which they have helped to build a rigorous, safe and comfortable environment for our customers whilst balancing that with our fundamental objective of providing a warm and welcoming environment, being hospitable and making our guests feel at ease.
In our pubs our Area Business Managers have been a tremendous support for our tenanted pubs, helping them to understand the new environment that we are all operating in. They have assisted, where needed, in helping our tenanted pub partners to access grants, plan for re-opening and providing clear guidance on the full range of support that the Company is able to offer, including rent concessions and the restocking of spoilt beer. It has been our underling objective that wherever possible, and in the overwhelming majority of cases, that the Company will do everything we can to give our tenanted pubs the best chance of coming out the other side of the crisis able to re-establish their business and thrive once more.
Our suppliers have also faced some major challenges in restarting a supply chain that had been shut down for over three months, and whilst there have been some minor issues, their efforts in supplying us during reopening have been greatly appreciated.
What has become very clear in reopening is that the visibility we had last year on forward bookings has been greatly shortened, and we see no sign that this will change as we enter the winter. Against this background, we have taken the unwelcome decision to initiate a programme of redundancies to ensure our cost base reflects the environment that we expect to operate in over the coming months and protect the business against significant ongoing uncertainty.
The preservation of cash continues to be an absolute priority, as a result the Company took the decision that it will not pay a final dividend for the year ending 31 March 2020. Future dividends will be reviewed when normal trading levels resume.
Annual General Meeting
In normal times we would have had our AGM in July and invited shareholders to meet the Board and ask questions.
Having taken into consideration the current measures published by the UK Government restricting public gatherings, the Board is in the unprecedented position that it is forced to take the decision that shareholders will not be invited physically to attend this meeting.
The AGM will therefore be conducted as a closed meeting on 30 September 2020 with the business of the AGM limited to the formal business section only and a necessary quorum established by the Company and its Directors.
Ahead of the meeting I would ask you to return the proxy form indicating your votes for the resolutions. Any questions that you have should either be sent with the proxy form or by e-mail to email@example.com. A summary of the questions and answers together with the results of the resolutions will be published on our website after the AGM.
For further information, please see Notice of Meeting here.
Annual Report and Shareholder Meeting
It is was not possible to have the year-end results audited whilst the business was closed and staff were furloughed, therefore the Company has taken advantage of the extra-ordinary three-month extension to the normal filing deadline for Annual Report and Accounts by Companies House. This means that these documents will be filed at Companies House by the end of December 2020.
We expect to publish our Annual Report and Accounts in mid-October; it is important to us to see those shareholders who like to attend our general meetings and if it is by then possible we will hold a shareholder meeting to approve the Annual Report and Accounts, for shareholders to be able to attend in person, during November. We will confirm dates in due course.
The Company was trading very strongly prior to this crisis. Since reopening we have seen steady growth in sales and are encouraged that our net debt has stabilised and begun to reduce. However, whilst social distancing rules are in place the capacities and permitted activities in our properties are restricted and therefore sales will not be capable of returning to pre-crisis levels until those restrictions are no longer required.
Our hotels business is dependent on both corporate and leisure customers, and whilst there are a significant number of people still working from home, the former are likely to be present in lower numbers which will most likely adversely impact our business over the winter months; we are hopeful that some of this will be partially mitigated by the continuing trend for people to stay in the UK and take leisure breaks.
The Company benefits from the fact that it owns the freeholds of all of its properties and is therefore not under pressure to pay third party landlords rent, as others in the industry are having to do. However, it does have financing obligations in the form of interest payments to its funders. We are committed to taking those difficult and necessary decisions in the short term to preserve the long-term future of the business and once again flourish for the benefit of all our stakeholders.
I understand that the decision to pass on the final dividend will be an unpopular one, it is not one that has been taken lightly, nor without thought of the impact that it might have on our shareholders. I would like to thank all of our shareholders for their support as we come through this crisis. I would also like to thank our dedicated teams throughout the Company who are working so hard to re-establish the strong position that we were in at the start of the year.
Whilst this pandemic is unexpected, the Company embarked upon Covid-19 and shutdown in good health. Our initial experience upon reopening has been better than we had at first hoped, however the coming months are likely to test us again. The Company has been through troubled times before and has a strong asset base and an experienced management team to assist in finding a pathway through the challenges we face.
Executive Chairman, Daniel Thwaites PLC