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Thu 7th Jan 2021 - Update: Deltic sold for £10m, M&B possible equity raise, Oakman
Deltic sold out of administration for £10m: Nightclub company Deltic Group was sold out of administration to Scandinavian company Rekom Group for £10m, an administrator’s report has stated. Rekom bought 44 venues out of its 55 sites. The report states that Deltic had substantial creditor arrears that could not be paid including rent arrears of circa £9.4m as at 30 November 2020 and approximately £7.7m due to HMRC. Consideration had been given to a CVA but a funding requirement of £12m would have been required with no certainty of when covid-19 restrictions would be eased or the level of government support during any closure period. There will not be a dividend for unsecured creditors. The deal to sell Deltic includes a provision that 25% of any gain on any of the properties sold within a period of 12 months from the completion date would be returned to the administration estate from the purchaser for the benefit of creditors. Deltic had £896,414 in cash at the bank at the time of the administration. It has sub-tenants at five properties who have £212,000 in rent arrears. Deltic’s secured creditor is owed £9,648,928 and is expected to receive full repayment. The report states that Deltic had been seeing progress with a turnaround plan before the pandemic. It states: “Results declined once more in the year ending February 2020, with draft unaudited accounts showing Ebitda of £9m from turnover of £103m. Capex totalling £6.7m was invested over late 2018 and early 2019 in purchasing and rebranding the three Tiger Tiger sites to the group’s Eden brand. The new concept was not immediately successful, with the three venues losing a total of £2m in the financial year 2020. During the 2020 financial year, the poor performance of the underlying estate and the failure of the Eden strategy became apparent to the directors so in September 2019 the board instructed a full strategic review to be carried out. This resulted in both personnel and strategic changes late in 2019. The early results of these changes, seen in January and February 2020, were positive in both sales and profit in these months significantly ahead of prior year. Therefore the directors were convinced that, prior to the onset of covid-19, their turnaround plan was working and expected to deliver a strong performance for the 2021 financial year.” After the lockdown began the company was absorbing cash of circa £800,000 each month. A marketing process for the business produced four final offers – the winning £10m Rekom offer was matched by a £10m offer for just 22 of the company’s sites. Two other offers were for £6m and £6.75m respectively. The party offering £6.75m offered a revised sum of £7m and a deferred sum of £4.5m payable within 90 days. This offer was rejected based on doubts about deliverability of the transaction before Christmas.

M&B to explore equity raise; cash burn at £35m-£40m a month: Mitchells & Butlers (M&B) is to explore an equity raise, to give it “increased financial and operational flexibility”, as it said that its ongoing monthly cash burn had returned to between £35m to £40m. The company said: “We welcome recent positive news on vaccine approval and roll-out but the future facing the hospitality sector remains extremely uncertain. It is not possible to estimate with any confidence what restrictions on our ability to trade lie ahead of us and for how long. As a result, the directors believe it is prudent to explore an equity capital raise, to give the group increased financial and operational flexibility. No decision has yet been made with regards to the timing, size, or terms of any such equity capital raise.” The group currently has cash balances on hand of £125m, with all facilities drawn. With no sites trading, it said that ongoing monthly cash burn has returned to the level previously disclosed in relation to the last shutdown, at approximately £35m to £40m before payment of debt service (representing interest and amortisation) of £50m per quarter. The next quarter payment date for debt service is 15 March 2021. In a trading statement covering the 14 weeks ended 2 January 2021, the company said that total sales across the quarter were 67.1% below prior year. On a like-for-like basis (for sites when open, excluding periods of closure) trading has been 30.1% down on prior year across this period. Throughout the period, M&B said it had again reduced discretionary capital expenditure and operating costs to a minimum. Phil Urban, M&B chief executive, said: “We are now in a third national lockdown. I am consistently impressed by the resilience and energy of our teams as we repeatedly open and close businesses that we have invested in to make covid secure and urge the government to better understand the huge impact these restrictions are having on the hospitality sector. The Job Retention Scheme is temporarily protecting some employment but there is a real and pressing need for support for businesses themselves if we are to return to being the vibrant sector and important employers that we were. Mitchells & Butlers was a high performing business going into the pandemic and with the support of our main stakeholders I have every confidence that we can emerge in a strong competitive position once the current restrictions on us are lifted.”

Oakman Group – we will forego £250,000 if you use our sites for vaccination: The chief executive of pub and restaurant group, Oakman Inns, Dermot King, is offering to forego the Chancellor’s latest lockdown grant of up to £250,000 if he allows National Health Trusts to use Oakman Inns’ venues as vaccination centres. Under the business grants scheme outlined by Rishi Sunak yesterday, Oakman Inns would have received more than £250,000 during the next four months, but King is ready to give that back to the government to help pay for a bigger and quicker vaccination roll-out. King said: “The only route to any normality is through mass vaccination and for that the NHS needs to be able to work at scale. The entire hospitality industry is desperate to re-open as quickly as possible before we have huge scale redundancies across the sector.” There are reports today that there are plans to use pharmacists to deliver vaccinations, and King says allowing them to work in large pubs and restaurants would mean they could be more effective. Oakman Inns has 28 properties across many of the Home Counties and the Midlands, and like many pubs and restaurants, they have large refrigeration areas to help with storage and are covid-19 safe. King explained: “Our pubs have large indoor spaces and in some cases large car parks and accommodation, which could accommodate large numbers of people around the clock. Clearly, the money offered by the Chancellor yesterday would help us in the short-term, but realistically the only way all of us can get back to normal is to get the country vaccinated. We would rather let the government keep their hand-out to invest it in using hospitality venues as vaccination centres for the greater good of all. The hospitality sector has the venues, it has the infrastructure, the venues are sitting empty, and our offer even includes a contribution towards the cost of the scheme. We want to help the government and the people of the UK beat covid-19 because the quicker we’re vaccinated, the more lives we save, the more jobs we save, the more businesses we save, and we’re prepared to do whatever it takes to see that happen.”

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