'Ongoing uncertainty': 'we have taken the unwelcome decision to initiate a programme of redundancies to ensure our cost base reflects the environment we expect to operate in over the coming months' Thwaites' Richard Bailey said
Lancashire-based brewer and pub operator Daniel Thwaites has taken the 'unwelcome decision' to initiate a programme of redundancies in light of uncertainty around winter trading conditions.
The operator of about 250 venues said this would help keep its cost base in tune with trading forecasts for the wider sector over the coming months and “greatly shortened” visibility on forward bookings.
In a letter to shareholders, executive chairman Richard Bailey said: “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.”
Since lockdown restrictions eased on 4 July, Thwaites reopened all its sites and saw trade recover steadily with the help of the VAT cut on food and non-alcoholic drinks, the Government-backed Eat Out to Help Out discount scheme and the increase in staycations due to travel restrictions.
The brewer and operator also said it hopes the continued trend for UK leisure breaks would mitigate the impact of less corporate travel.
Funding required?
Thwaites is also said to be considering extending its banking facilities following a renewal in Q1 2020.
On 31 March 2020 the company had net debt of £65.4m with total facilities of £82m providing liquidity headroom of more than £16m.
While Thwaites’ net debt increased by £6.4m to £71.8m during the 105 days of enforced pub closure, £12m of headroom remained against the company’s existing facilities with banking covenants also relaxed with the support of its banks.
“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,” Bailey added.
Thwaites will also not pay a final dividend for the year ending 31 March 2020, with the “preservation of cash an absolute priority”.
Need for clarity
While Bailey, who is also chairman of the Independent Family Brewers of Britain, praised Prime Minister Boris Johnson and Chancellor of the Exchequer Rishi Sunak fronted Government's response to Covid-19, he said more clarity is now paramount in ensuring that the body’s 29 members, which count more than 3,238 pubs and 47,000 workers under their remit and contribute more than £2.1bn in gross value added to the UK economy, can continue their recovery.
"We're all very worried about how the pub industry will fare once schools go back and what happens into the months of October and November when we've got darker evenings, when the outside areas of pubs won't be so easy to use and when capacity the constraints that we've currently got really bite,” he told The Morning Advertiser.
"There's still so much uncertainty and we've heard conflicting messages about relaxation of distancing - and distancing is such an important point for pubs.
“[We need] some clarity about how the Government sees the further relaxation of measures over the coming winter months when the beer gardens are shut, when capacity is reduced and when pubs might face much more difficult times.”
