As reported by The Morning Advertiser (MA), Hawthorn Leisure purchased Bravo Inns, the operator of 44 wet-led community pubs predominantly located in north-west England, in December 2019 for a fee of £17.9m – increasing its pub estate to 698 sites.
“It's a great little business, Bravo, we really like it,” Hawthorn Leisure’s CEO Mark Davies told MA. “Often when you acquire a company or a portfolio, you get a little bit of disruption at the beginning that can impact performance but Bravo was positive over the Christmas period, which is great.”
Davies added that Hawthorn planned to fully integrate the 44 recently acquired sites into its wider portfolio by 1 April 2020 and intended to retain and invest in the Bravo brand.
“It has excellent people, a really good portfolio and we're really pleased with it,” he added. “It adds an extra dimension to the business, takes our operator managed portfolio to over 100 sites – we expect to be 150 operator managed sites by the end of this year. It's a format we're really investing in.
“We've obviously seen the success that people like Craft Union have had in operator managed and we admire the results they're experiencing and are beginning to see the benefits of our investments into operator managed. Bravo's a great addition to that."
Ready for regulation
With Hawthorn’s estate now numbering just shy of 700 pubs, Davies added that the pubco was consistently monitoring its position in relation to pubs code regulations, which came into force on 21 July 2016 and apply to all pub-owning businesses with 500 or more tied pubs in England and Wales.
“The statutory code is something we monitor regularly and officially monitor on a quarterly basis,” he said. “It excludes our pubs in Scotland – where we're a big investor, we have over 100 pubs in Scotland – and it only relates to leased and tenanted pubs and excludes our free-of-tie and operator managed pubs.
“We're not far off 500. We are currently monitoring that and, while we're already applying the voluntary code, if at any point we were to be captured by the statutory code in the next 12 months we're ready for it.”
According to its latest financial results covering the nine months to 31 December 2019, the operator of 698 community pubs recorded like-for-like EBITDA (earnings before interest, depreciation and amortisation) growth per pub of 4.9% off the back of “solid” Christmas trading.
What’s more, Hawthorn Leisure reported that pub occupancy remained high across its estate, increasing to 97.9% from the 96.7% registered in September 2019.
“At the half year, we were up 5.5% for the first six months but we did highlight that the rate of growth was expected to moderate in the second half,” Davies explained.
“In the first half of the year we were benefiting in full from the synergies that we achieved from the acquisition of Hawthorn and putting the Hawthorn portfolio together with the original NewRiver pubs. We continue to deliver good like-for-like growth, which is great. We're pleased with our Christmas performance.”
According to Davies, like-for-like sales from tenanted and leased businesses – which comprises 90% of Hawthorn Leisure’s estate – we were up 1% year on year over the Christmas period.
“We've seen a few trends coming through,” he added. “In some locations, we see customers drinking slightly less but they're prepared to pay more for what we would call premium lagers – that's a trend we've been monitoring now for some time and are seeing that coming through quite consistency.”
As reported by MA in November 2019, Hawthorn Leisure currently represents around 22% of NewRiver REIT, with the FTSE 250 company’s pub arm the seventh largest tenanted pub operation in the UK.
NewRiver, revealed that net property income from its pubs rose to £13.6m in the six months to 30 September – a 27% increase versus the same period in 2018 when the figure hit £10.7m.
Speaking to MA in November, Davies explained that Hawthorn Leisure is poised to ramp up investment in its pub portfolio to the tune of “at least £3m” in the next six to 12 months.
Offering an update on capex plans for Hawthorn’s estate, Davies added: "By the end of the financial year, we will have invested more capex in our portfolio than any previous year and are already looking to 2021. Our aspirations and expectations for the business are high.”