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Wed 4th Nov 2020 - Shepherd Neame – ‘we are determined to emerge from crisis in a position of strength’
Shepherd Neame – ‘we are determined to emerge from crisis in a position of strength’: Brewer and retailer Shepherd Neame, the owner and operator of 319 pubs in Kent and the south east, has reported it traded well up to the outbreak of covid-19 and has shown resilience since lockdown eased. The first eight month period of the financial year to 29 February 2020 saw turnover up +4.6% and underlying profit before tax up +6.1%. However, turnover for the year decreased to £123.6m (2019: £145.8m) demonstrating the impact of three months’ closure. Statutory loss before tax was £12.1m (2019: profit £3.5m). It reported pubs continued to outperform the market to 31 October with managed like-for-like sales at 66% of last year’s levels and managed like-for-like sales for open sites -13.4%. Tenanted like-for-like pub income was at 75% of prior year. Own brand beer and cider volumes were at 98% of the prior year level. Total own beer volume were at 92% of the prior year level. Chief executive Jonathan Neame said: “This has been the most challenging period any of us in the hospitality industry have ever faced. I am incredibly proud of how everyone across the business has reacted, and the ingenuity and team spirit shown by our licensees and team members during this time has been inspiring. Trading during the summer months was encouraging, highlighting the strength of our offer and people’s undiminished desire to go out and socialise in a safe environment with family and friends. We have worked hard to drive positive cash flow in the new financial year and have sufficient liquidity for the foreseeable future. We welcome the ongoing support from the Chancellor, but the sector faces a very tough winter as we return to lockdown with fresh uncertainties. Shepherd Neame has weathered many crises in its long history and I am determined that we emerge from this crisis in a position of strength, ready to seize the opportunities that lie ahead.” Chairman Miles Templeman added: “The covid-19 pandemic has inevitably had a profound effect on the financial performance of the business and caused us to pause all planned activity. However, I am hugely impressed by how the business responded to these changed circumstances and addressed each of the many challenges in a positive, methodical and professional way. From the outset it was clear to the board that the safety and well being of our team members, licensees and customers would be our overriding priority. The various measures that were quickly put in place are outlined in the chief executive’s report but demonstrate clear and decisive leadership during the crisis from the senior team, as well as the caring attitude and community spirit that so defines Shepherd Neame. Shepherd Neame’s operating and financial model is robust and the business is resilient. Its business is balanced with three different operating divisions, each with its own distinct financial and market characteristics. Additionally the business is underpinned by a high quality freehold asset base and a strong balance sheet, and entered into the crisis with sensible levels of leverage. We recognised quickly that our tenanted business was likely to recover fastest and therefore it was vital to support our licensees to ensure that they would be able to resume trading as soon as restrictions were lifted, without a financial burden overhanging their businesses. Managed pubs have a high fixed cost base inherent in businesses of this size, and so need higher turnover to achieve their profitability. Thus, their recovery was always going to take longer. However, it is most encouraging to see how strong and rapid the recovery has been in most outlets over the summer, up until the point that further restrictions were introduced. We have 15 managed pubs in the City and West End of London which we did not re-open until September 2020. These are great pubs but we are concerned for their future in the short term, as central London footfall has been significantly reduced, with few tourists and most commuters working from home. The Brewing and Brands business has been able to operate throughout to supply off trade customers. This provided much needed cashflow at a time when other sources of cash were foreclosed. It is pleasing to see how all three business divisions have started their recovery path with resilient trading in the first part of the new financial year.”

Bloomberg to continue rent and service charge holiday for another six months: Landlord Bloomberg has written to its tenants in Bloomberg Arcade stating it has decided to continue the rent and service charge holiday it brought in at the end of March up to the end of June 2021, Propel has learned. The landlord wrote to its tenants in Bloomberg Arcade in June stating it had decided to continue the rent and service charge holiday it brought in at the end of March for the remainder of 2020. It has now written to them again and granted them another six months of rent and service charge holiday. That means in total it will have provided rent and service charge free for 15 months. One tenant described the move as being “amazing support” and a “great example to all landlords”. Restaurants that will benefit from Bloomberg’s decision include Brigadiers, Vinoteca, Homeslice, Bleecker Burger and Caravan.

Escape Hunt – ‘recent trading gives us cause for optimism’: Escape room operator Escape Hunt has exchanged contracts for a site at the previous Intu centre in Watford. The company stated: “Contracts are expected to complete within the next week. The Watford site will be the company’s fourteenth owner operated site, after the Brewery Quarter in Cheltenham and the recent acquisition of the former franchisee site in Dubai. Games for the Watford site have been manufactured and are currently in transit for installation. Fit-out is expected to commence later this month and, under the guidance currently available, the company does not expect any significant impact on timing as a result of the lockdown. Fit-out at the company’s site at Brewery Quarter in Cheltenham is substantially complete and, subject to any further covid-related restrictions, progress is not expected to be impacted by lockdown. The site was due to open during November 2020 but will now open as soon as practicable once the lockdown restrictions are lifted. Revenue over the week beginning 26 October 2020 which coincided with schools’ half term week, including the sales from new sites and digital products, was 25% ahead of the same period last year. On a like-for-like basis, the company’s eight mature UK sites traded at 96% of the 2019 level, despite four of the sites being adversely affected by either the government’s tier two, tier three or the Scottish covid-related restrictions. As previously announced, Basingstoke opened to the public on 29 October 2020 and initial trading has been the strongest in any of the company’s new sites to date. The other recently opened site in Norwich delivered sales usually associated with a fully mature site, despite it being only five weeks old. In all the company’s UK owner-operated sites, the Ebitda conversion ratios have been substantially better than in prior periods, assisted by more efficient labour usage and benefitting from the flexible furlough scheme and VAT reductions. Digital and remote-play products have also begun to contribute meaningfully. Their turnover in recent weeks has been growing strongly and the resultant Ebitda contribution has exceeded the equivalent Ebitda from of a separate, mature site. In the six weeks prior to half term week, trading at the company’s UK owner-operated sites subject to the lowest level of government restrictions had continued to enjoy an encouraging performance. In contrast, sites which were subject to tier two or, in particular tier three or the Scottish restrictions had seen an impact through reduced turnover albeit that the higher Ebitda conversion rates had resulted in positive Ebitda contribution from the estate (before central costs) with overall performance ahead of management’s expectations. Following the strong half term trading, it is particularly frustrating that under the new restrictions expected to come into effect on Thursday 5 November, Escape Hunt’s UK owner-operated sites will be required to close during the lockdown which is currently anticipated to end on 2 December 2020. However, staff will be eligible for the government’s furlough scheme, which the Chancellor of the Exchequer has confirmed will continue until 2 December. This, combined with stringent cost control measures already in place, will facilitate the company’s ability to manage cash during the lockdown period as was the case earlier this year.” Richard Harpham, Escape Hunt’s chief executive said: “Recent trading gives us cause for optimism in relation to our UK owner-operated site strategy and our ability to recover once lockdown restrictions are lifted. We have been enormously encouraged by the performance of sites which have not been subject to the most severe restrictions and, in particular, our new sites in Norwich and Basingstoke, which have both traded strongly since opening, vindicating our site choices. We are delighted to have exchanged contracts on a site in the former Intu centre in Watford which we believe has the potential to be a very strong performer. Unless further changes are announced, we do not expect the lockdown to have a significant impact on our ability to fit-out the site. Whilst the opening of Cheltenham will be delayed due to the lockdown, fit-out should be completed and the site is expected to open as soon as practicable once the lockdown restrictions are lifted. Whilst it is hugely disappointing to be forced to close once again, we enter the second lockdown with a suite of digital and remote play options that did not exist six months ago, that are beginning to contribute, and to which we will shift our focus during this period of closure.”

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