Hawthorn eyes expansion to ‘at least double its estate’

Hawthorn announced plans to list on the stock market​ as a standalone quoted business yesterday (Wednesday 14 April).

Parent company NewRiver stated it will look at the potential for an initial public offering (IPO) of Hawthorn after a strategic review meaning the pub group would launch as a separately-listed company.

CEO Mark Davies — who sits on the British Beer & Pub Association board, has steered the pub company since 2019 and served as chief financial officer at NewRiver for 12 years — will lead the IPO opportunity and step down from the NewRiver board in due course.

Future expansion is something Hawthorn is looking at, with high ambition to increase its estate significantly.

“You can't be too defined about. There will be natural thresholds that we will be targeting as a management team,” Davies said.

“We are 700 or so pubs today, we would like to get to 1,000 pubs at some point soon and we can probably get there quite quickly.

“Longer term, we could at least double the size of the platform from there or possibly go even further.

“We will be patient, opportunistic where we can be but we are ambitious and dynamic and the management team can do deals. That's how we built Hawthorn to what it is today so all of that is recognised.”

However, the pub group boss wasn’t held to a specific number but he was optimistic about the business’ future.

He added: “If there are opportunities coming, it's kind of inevitable we will be one of the top three phone calls people make to get stuff done. There's no define number.

“Historically when we have been asked that question we have had one eye on a big part of the NewRiver REIT and being able to only go to a certain threshold as part of the wider NewRiver business.

“Going forward, when we get this IPO away, those restrictions just fall away. In many ways, the sky is the limit so there is no number, no upper limit, that's for sure.

“The opportunities will come. I don't think there's as much distress and foreselling in the market some have commented about, I don't think that's the case.”

On the IPO process, Davies stated Hawthorn was well-positioned to run it while touching on his experience with investment.

Going in a different direction

Davies said: “I personally have done a lot of investor meetings over the years, probably in excess of 2,000 investor meetings in the past 12 years in my capacity as NewRiver chief financial officer.

“It will be the same investors, same audience that I will naturally be engaging with on the IPO in the next few weeks. We know the IPO market is strong, we have all seen that recently.

“We believe there will be strong investor appetite out there to do this. Fundamentally, by doing this it accelerates our ambition to become the number one community pub company and scaling up and building a bigger business.

“It has been great being owned by NewRiver for so many years but going in a different direction with a separate listing and an IPO is definitely the right way forward.”

The intention to float had been in the pipeline for a while before the company announced it, holding off until the majority of its estate was open again.

“This is something we have been thinking about for a while, something I have been working on for some time, these things don't happen overnight,” Davies said.

“Careful consideration goes into all this. We could definitely have announced this sooner if we had wanted to we just felt psychologically among other things, we wanted to have the portfolio open and trading before making a statement as important as this and that has been the priority up until this week.

“If I go back to the very original deal we did with Marston's eight years ago, we were thinking there could be an opportunity to float this business at some point. It's always been one of a number of options we have considered.

“I have worked in the listed arena for a long time, I believe there will be a strong support and backing. It's always been a credible option.

The completion of the intention is expected to take place in the next few months but an exact date can’t be confirmed at this time.

Davies said: “We can't really comment [on when completion of the IPO will take place] because there are a number of determining factors, not least market conditions and all the usual things you could expect.

“What I can say is we are ready and very confident, hence the statement. The textbook answer is an IPO can take anything up to 12 weeks.

“We are well-placed to be able to achieve that within that timetable no doubt, but we are not going to be hurried into doing something that is not right for NewRiver or for Hawthorn.”

While the company is primed to move quickly, Davies also said it wouldn’t rush into anything if the time wasn’t right.

People-first culture

Davies added: “We will take our time if we need to, I'm keen to crack on and get it done but that's my mentality and the management team is firmly behind me on that.

“If market conditions change and then there's talk of another lockdown or something of that nature then it's time to press the pause button and take stock.

“We can't control the uncontrollables but it's helpful we can get it done within the next couple of months, if that's the right thing to do.”

The Hawthorn boss emphasised how the intention wouldn’t impact existing licensees and the company culture would remain.

He added: “One thing that won't change in all of this is our people-first culture. It has been absolutely one of the resounding secrets to our success.

“Everyone believes in the community-wet-led pub model that we focus in on but the people side is ultimately at the heart of the business, it's part of our DNA and it will be part of our future success.

“We are proud of the feedback we get back from our pub partners and operators and we want to maintain that level of goodwill.”

When it came to the prospects in the overall pub market at present, Davies was optimistic about the future.

He said: “The sector as a whole is in better condition than some people have commented on but there are going to be opportunities as well, it's inevitable.

“There will be some sort of consolidation that plays out there over the next few months. That's why we are keen to crack on and get this done as quickly as we can and if the opportunities do come and I'm right, we will be well-placed to explore those opportunities further down the line.”

Looking to the future, the company is planning to invest further into its estate over the next year, Davies explained.

He added: “Other than the float work and the completion of that, it's kind of business as usual. “Getting all our pubs open, we have got just over 60% thus far we want to get to 100% on Monday 17 May.

“The £9m of investment we have put in over the past 12 months, I could see us doing up to £15m of investment over the next 12 months. A lot of that will go into outdoor space, extending capacity, creating socially-distanced and safe environments, that will be a clear focus for the management team.

“There will be opportunities to acquire that we can look at, no doubt and in many ways, that will be exciting and something we can talk about in due course. It's people first, we are people-led business, not because it's written on a chart on the wall, we actually mean it and people really love this company, who work for us.

“Business as usual, keep doing what we are doing, even better then we will achieve our ambitions.”