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Morning Briefing Strap Line
Thu 28th Jan 2021 - Update: Oakman, re-opeming, PPHE, Britvic, Fever-Tree and Diageo
Oakman Inns reports ‘substantial pipeline of sites’: Oakman Inns and Restaurants has reported it has a ‘substantial pipeline of sites ready for development during 2021’. It stated: “In addition to existing sites in Buckingham, Wokingham and Epsom they have now added a substantial freehold site in Harpenden. Further announcements are expected in the near future with a number of negotiations taking place to further accelerate growth.” Oakman’s executive chairman Peter Borg-Neal said: “We believe that there is a huge unsatisfied consumer demand for premium public houses right across the UK. Large pubs with a strong all day food offer, a high level of amenity and, most importantly, great people running them is the future of the pub market. We want to play a big part in fulfilling that demand.” The company added: “Oakman’s growth ambitions will require funding and, with private equity funds focussing on distressed assets, Oakman launched an equity fund raise just before Christmas aimed at private individuals. Despite the unhelpful backdrop of the national lockdown there has been an excellent response.” Chief investment officer, Steven Kenee said: “I am thrilled to announce that we have already received applications for over £3.6m of shares and we are quietly confident that we will reach the £4.5m target we set for this round. I am also really pleased that we have welcomed 170 new shareholders into the Oakman family. Their participation demonstrates the trust and affection our customers have for their local Oakman Inn. To meet all our ambitions, we will require further funding; however, we only want business partners who are interested in long-term, intelligent investment into a sustainable business model.” Oakman delivered a record quarter during the time the business was able to trade during 2020 and chief executive Dermot King, is bullish about the prospects of the business when the time comes to reopen. He said: “Our remarkable performance last year has left us brimming with confidence for the future. Reopening will, of course, be a challenge but the fantastic teams that delivered that performance are still with us and are raring to go again. We will open all our pubs on the very first day we are allowed to do so, and we expect to trade very strongly from day one. During lockdown we have worked hard to keep our people engaged and we have also developed some exciting new products that will add to our forward momentum.” The company added: “Oakman’s near-1,000 employees have been kept engaged and in good spirits. A massive Facebook group for existing team members provides a range of activities from wellness sessions, voluntary online training courses, quizzes, photographic competitions, baking tournaments and even a fund-raising 5K Run, Ride or Walk for the MIND charity. Zoom meetings, support groups and a policy of ensuring that those excluded from government financial support or furlough schemes are found employment are all designed to ensure that no team member falls through any cracks.” King said: “It may not be clear yet when we will be able to open, but when the time comes, our people and our pubs will be ready and better than ever. In the meantime, we have some excellent new sites in the development pipeline. Chef director, Ross Pike, has been busy creating new ‘Oakman at Home’ dining opportunities for their regulars. The Cook at Home Meal Kits feature Home Comfort favourites such as their Slow Roast Belly of Pork (£12 pp) and the Ultimate Burger (£10 pp) from their restaurant menu. A special three-course Valentine’s Feast has been added with a series of more dishes and themed boxes promised over the coming weeks. At The Royal Foresters, they have opened an experimental Deli and Bakery for locals and lockdown chefs desperately seeking that missing ingredient, and more dishes have been added to their growing Takeaway Menu including more wood-fired Pizzas, Sunday Roasts and Meal Bundles.” King added: “We have the teams, we have the kitchens, we have the sustainable food suppliers and now we have established a second-to-none delivery service, we will be powering ahead with our new services. Many of our regulars and neighbours have been asking us to make our food available across the 12 counties we currently operate in.”

Telegraph – pubs and restaurants shut until May as part of the three stage re-opening plan: The Daily Telegraph has claimed the government is working on proposals which could see most shops closed until April, and pubs and restaurants shut until May as part of a three-stage plan to release Britain from lockdown. The newspaper stated: “On Wednesday, Mr Johnson announced that schools will not reopen before March 8, and even that would depend on the success of the vaccine rollout and the rate of covid-19 deaths and cases. Promising to publish a ‘roadmap’ on February 22, he said that would allow Britain to ‘begin steadily to reclaim our lives’. A senior government source said the current thinking would mean that, once schools return, it could be at least another month after that before non-essential shops would be allowed to open. The ‘staggered approach’ would mean that if schools open in March, shops would be unlikely to get the green light until April, while pubs and restaurants could remain closed until May. Amid concern that the return of schools could increase the ‘R’ rate of virus reproduction, officials are working on the phased approach to opening up, which would see restrictions released at least a month apart so their impact could be closely monitored.” A Whitehall source told the newspaper: “If schools do open in March, and the priority is certainly to open schools first, then it will mean other things have to remain closed for some time. We have to avoid the situation last time where the return of schools meant far greater household mixing across the board. So that means we’d be likely to wait at least another month for non-essential retail, and a month beyond that at least for pubs and restaurants.” 

PPHE expects phased recovery in 2021: PPHE Hotel Group, the international hospitality real estate group which develops, owns and operates hotels and resorts, has reported despite the disruption caused by the pandemic, it continued to make strategic progress through 2020. Its development pipeline has been reviewed with most projects progressed as planned, albeit with some minor delays due to government restrictions. Construction of Art’otel London Hoxton continued, for which the group secured a £180m loan in April. Group room revenue for the year was £63.6m, despite property closures and reduced capacity from March 2020 onwards (2019: £250.6m). Reported RevPAR was £29.4, reflecting occupancy of 28.0% (2019: 80.6%) and decreased average room rate of £105.1 (2019: £128.5). As lockdowns and travel restrictions are gradually eased, the group anticipates strong domestic demand will return in the first instance, as seen in July and August 2020, followed by international leisure and business travel. Domestic business in July and August last year accounted for almost 90% of group room revenue in the UK and 76% in Germany, and in the Netherlands 84% of room revenue was either domestic or from bordering countries. This demonstrates the appeal of the group’s hotels in their domestic markets. Boris Ivesha, president and chief executive, said: “Following a good start to the financial year, our performance was significantly impacted following the onset of the covid-19 pandemic, nevertheless we continued to extend and make good progress with our development pipeline. The resulting prolonged periods of both international and domestic travel restrictions across our markets led to a significant reduction in both group room revenue and occupancy. We took decisive action to mitigate the impact of the pandemic, rapidly adapting our operations and demonstrating the group’s resilience. Whilst the near-term trading environment remains challenging, mired by further government-imposed lockdowns to stem the spread of the virus, we are encouraged that vaccine programmes are being rolled out in all the markets in which we operate. As restrictions are eased, we anticipate a phased recovery driven by strong consumer demand for leisure travel, which we experienced in the summer of 2020. Our unique owner-operator model, well-invested estate and strong brands provide a strong foundation from which to benefit and capitalise on this demand.”

Fever-Tree reports 20% sales increase in UK off-trade, 60% decline in on-trade: Fever-Tree has reported sales were £252.1m in the year to 31 December 2020, down just 3%. It stated: “(We) delivered a resilient performance in 2020, underpinned by strong sales and strategic progress in the off-trade and e-commerce channels across our regions which helped to mitigate the impact of widespread closures of the on-trade during the year. The group’s performance in the UK in 2020 reflected not only our ability to adapt quickly to the shifts in consumer behaviour posed by covid-19 but also the underlying strength of our brand with both our customers and consumers. The group’s off-trade sales increased by c. 20% compared to 2019 as we took proactive steps to build on the growing popularity of long mixed drinks as an everyday affordable treat at home. We worked closely with our retail and spirits partners, launched new flavours and formats such as our Premium Soda range and 15x150ml can packs, and upweighted our marketing spend, enabling us to drive greater consumer trial and awareness at home. This resulted in a significant uplift in household penetration and Fever-Tree finished the year as the clear market leader with a value share of 40.1%. As expected, our on-trade sales were impacted by the periods of lockdown and on-going restrictions during the year, leading to a decline of c. 60% year-on-year. While the on-trade currently remains closed, we continue to maintain strong relationships with our on-trade partners and are well placed to benefit from this as the sector begins to reopen in the coming months.” Tim Warrillow, chief executive of Fever-Tree, said: “I am very proud of how the Fever-Tree team has responded over the course of 2020 and the results that we have delivered. The last twelve months have highlighted the strength of the Fever-Tree brand amongst our consumers and customers as well as the fantastic team and partners we have in place. We made a conscious decision not to furlough any of the team while continuing to invest in the opportunity ahead and this has positioned us well as we look beyond the current uncertainty. The covid-19 pandemic has thrown up many challenges but it has also accelerated the trends we have been talking about for a number of years – namely the growing interest in premium spirits and long mixed drinks as at-home mixing has taken hold not only with consumers but retail and spirits partners alike. Our ability to capitalise on and drive this trend has seen Fever-Tree reach more households and become a feature in more fridges worldwide than ever before. While our performance across the off-trade in the UK and Europe has been very encouraging, special mention must be made of our performance in the US, Australia and Canada, where we have seen outstanding growth in the past twelve months underlining the global opportunity still ahead for the brand. I am of course mindful that uncertainty remains especially in terms of the timing of reopening of the on-trade across many markets but our performance over the last year, combined with our track record against the competition and the supportive global trends gives us confidence in the future growth potential for Fever-Tree.”

Britvic reports 5.8% decline in revenue in First Quarter: In the first quarter to 31 December 2020, Britvic has reported total revenue was £328.1m. The company stated: “On a comparable basis of constant currency and excluding the disposal of the French private label juice business, this represents a 5.8% decline on last year (reported revenue declined 9.8%). Our brands continued to win in the channels open to us, further extending at-home share gains in our key growth markets of GB and Brazil. In GB total revenue declined 4.1%, with strong at-home growth of 11.9% offset by a decline of 32.5% in out-of-home, resulting in adverse pack and channel mix. Brazil revenue continued to grow strongly at +25.6%, whereas comparable Rest of World revenue fell 19.3%. The introduction in GB and Ireland of tighter pre-Christmas covid-19 restrictions, and the subsequent national lockdown measures, have put further pressure on sales in both the hospitality sector and on the go consumption. While there remains considerable uncertainty over the depth and duration of future restrictions, we anticipate they will remain in place at least through our second quarter. Consequently, we would expect performance to continue to be significantly affected by similar adverse channel and pack mix to that which we saw in the second half of FY20, and gradually improve following the lifting of restrictions. While we will continue to be disciplined in our management of cash and discretionary spend, we remain confident in our strategy and in the momentum we have built in the channels open to us; it therefore remains our intention to rebuild investment behind our brands, routes to market and people during our second half. We expect to make further progress against our strategic initiatives this year, however profit growth will remain subject to the pace of the easing of restrictions.” Chief executive Simon Litherland said: “Trading in the first quarter continued to be impacted by covid-19 restrictions. Our portfolio of family favourite brands has however again performed well in the channels open to us, assisted by the additional flexibility we now enjoy as a result of investment in our GB supply chain. I remain very proud of how the Britvic team continue to respond with pace and agility to the changing landscape. While the introduction of the latest restrictions will undoubtedly impact this year’s results, we will continue to implement our strategy. We therefore intend to rebuild investment behind our brands, people and planet initiatives and stay focused on our medium and long-term potential. Britvic is a fantastic business operating in a highly resilient category. With a team of dedicated and passionate people and market-leading brands, we are confident that we will continue to successfully navigate the pandemic, emerge stronger, and be at the forefront of the recovery when it comes.”

Diageo reports strong performance in challenging environment: Diageo has reported net sales down 5% to £6.874bn in the six months ended 31 December 2020. Operating profit dropped 10% to £2.239bn. Chief executive Ivan Menezes said: “We delivered a strong performance in a challenging operating environment, returning to top line organic sales growth during the half. We rapidly pivoted to the channels and occasions most relevant to consumers and invested behind new opportunities. This more than offset the impact of on-trade restrictions and the decline in Travel Retail. North America, our largest market, performed particularly strongly and ahead of our expectations. Consumer demand has been resilient and the spirits category continues to gain share of total beverage alcohol. Across other regions we delivered strong sequential improvement compared to the second half of fiscal 20. This reflects improved market share performance through excellent execution in the off-trade channel, and the partial re-opening of the on-trade channel in certain markets. Organic operating margin improved compared to the second half of fiscal 20 driven by increased operating leverage and tight control of discretionary expenditure. The decline compared to the first half of fiscal 20 reflected an adverse channel and portfolio mix. We expect margins to improve as the on-trade and Travel Retail recover and with the continued benefit of everyday efficiency. Our proprietary tools and data-led insights are enabling us to invest smartly in effective marketing and innovation. We continue to strengthen brand equity, premiumise our portfolio and expand our digital capabilities. I am proud of the creativity and adaptability of our people and their exemplary commitment to supporting our customers and communities. Our $100 million global commitment to support the recovery of the hospitality sector has already reached around 30,000 outlets in seven countries. We expect ongoing volatility and disruption in the second half of the year, particularly in the on-trade channel, which will make performance more challenging. The medium and long-term growth drivers and opportunities for our business remain intact and I am confident in our strategy, the resilience of our business and Diageo’s ability to emerge stronger.”

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