Oakman Inns has announced Board changes, given a company update, and shares reaction to the Chancellor's Summer Economic Statement.
From 1 August 2020, Dermot King will become Chief Executive, Peter Borg-Neal will become Executive Chairman, and Mike Smith will step down from the Chair but will remain on the Board as a Non-Exec
Mike Smith (pictured left) said, “I informed Peter back in 2018 that I intended to step down as Chairman ahead of my 60th Birthday in October of this year. Having chaired the business since our first site opened in 2007, it has always seemed crystal clear to me that it was Peter’s destiny to become Executive Chairman of the business that he founded and has led so brilliantly over the years.
'Clearly, this could only be possible with a cogent succession plan and our initial conversations eventually led to the appointment of Dermot King as our Chief Operating Officer in January 2019.
'Dermot and Peter have since formed an outstanding working relationship and, despite the current challenges, all our stakeholders can look forward to the future with great confidence.”
Peter Borg-Neal (right) said, “Mike Smith has played a huge part in the success of Oakman Inns – as a major investor, an astute Chairman and a as personal friend of mine. I am delighted that he has agreed to remain on the Board, and I would like to take this opportunity to publicly thank him for his guidance and support over so many years.
“Once we started to look for my successor back in 2018, we quickly landed on Dermot as our first choice and was delighted when he accepted our offer to join as COO. He and I have a complementary skill set and over the past eighteen months we have formed a strong partnership.
'Going forward, Dermot will take responsibility for day to day management of the business, driving efficiency and profitability whilst I shall devote more time to our development and growth.”
Dermot King (centre) added, “I am honoured and delighted to become CEO of such an outstanding business. Having spent the last eighteen months working alongside Peter and the team I genuinely believe there is no limit to what we might achieve.
“We remain deeply ambitious for the Company and as market leaders in the growing Premium pub sub-sector, we believe that the opportunities ahead of us for this deeply talented team, are very exciting.”
Prior to the impact of the Coronavirus pandemic, Oakman was trading well with LFL sales up 4.3% year to date and total sales +14.3%. However, the sudden closure of the business in week 38 of the financial year has meant that for the year ending June 30th sales of £31.5m+ represent a sales decline of 17.3% over the previous year.
Borg-Neal said, “The sudden closure of the business and the subsequent unwinding of the working capital position put the business under considerable financial strain.
'However, in addition to Government funding, supportive trade creditors, lenders and landlords gave the management team sufficient breathing space to resolve the company’s funding in the medium-term.
'Consequently, Oakman has been able to complete a £1.8m equity raise from existing shareholders and a £2.1m Coronavirus Business Interruption Loan from Santander.”
King added, “The funding and banking processes were led by our CIO, Steven Kenee, who, with the support of our Finance Director, Koula Achillea did a magnificent job dealing with a complex and challenging set of circumstances. Having underpinned our cash position we will now look to raise further funds to ensure that the business is well placed to take advantage of growth opportunities once the current crisis ends.”
He went on, “The Chancellor’s VAT reduction on food and accommodation for the next six-months from 20% to 5% for six months will be a substantial boost for our cash-flow and also help maintain a fair pricing policy. His £10 ‘Eat Out to Help Out’ voucher scheme in August will allow customers to see for themselves that responsible relaxation, sensible socialising and the forgotten enjoyment of a family get-together is now possible, thanks to HMG.”
Borg-Neal said, “The Chancellor’s Job Retention Bonus is a real fillip. At least 60% of our staff are under 30 and we are widely recognised as one of the outstanding employers, not just in our sector, but in the UK. We will be huge supporters of Mr Sunak’s Kickstart Scheme because that is where the future lies. Giving 16-24-year-olds confidence, self-discipline and a team spirit built around a solid work ethic will provide a future for those that want to kick on.
“We are focusing on strengthening our Balance Sheet to ensure that we can not only withstand any further shock wave but will also be ready to organically grow the business going forward through M&A and commercial property partnerships.
“To deliver this equity funding, we are considering a number of options including attracting a strategic investor and holding a retail fund-raising. We are therefore asking The Chancellor to urgently consider for the Autumn Budget the provision of investor tax breaks and the lifting of all restrictions on the Enterprise Investment Scheme for the rest of the financial year 2020/21.”
Managing lockdown & reopening
All 28 pubs were opened on July 4th, and early trading has been positive. Over the first few days of trading since reopening Oakman has achieved satisfactory sales with Like-For-Likes being at 82% of last year over the weekend, but at 104% over Monday and Tuesday.
Unsurprisingly, the company is experiencing higher operating costs due to the cost of COVID-safe compliance, rising food prices and additional labour costs driven by operational complexities.
However, they are confident that the VAT cut announced by the Chancellor on Wednesday, July 8th, will provide significant margin mitigation and, together with the “Eat Out To Help Out” Scheme will help boost demand in August as well as helping get people back into the swing of enjoying eating out once again.
The majority of Oakman’s 1000+ team members were furloughed, and all but a few have now returned to work, with Oakman delighted by the significant support of the Job Retention Bonus.
Oakman took a leadership position with respect to developing the operating protocols in association with UKHospitality. We were selected by HMG as a ‘hero company’ for the sector and our team has been involved with various departments such as BEIS, and worked with the Cabinet Office to produce a public information film (link): “EnjoySummerSafely”.
The Chancellor’s announcement does not alter the fact that there remains considerable uncertainty regarding the UK’s economic outlook and possible long-term changes in consumer behaviour, thanks to a falling consumer pound.
However, Oakman believes that the business is well-positioned to succeed given its rural locations, large sites, premium positioning and strong food sales.
Borg-Neal said, “Our decision to press on with our reopening programme three weeks ahead of July 4th and our success in retraining and motivating our people, means that we have been able to reopen in considerable style.
'Concerning organic growth, Oakman has an excellent pipeline of ‘shovel-ready’ sites located in Buckingham, Wokingham, Epsom and Hatfield. The first three are expected to open in 2021 and Hatfield in early 2022. However, while timings will be extended due to the closure and rebuild periods, we see no reason why the previous forecast cannot be achieved.
'Indeed, we believe that the crisis will create significant opportunities for further growth, which should allow a business of our calibre to outperform the previous forecasts once the economy recovers.”