Oakman Inns said it is still committed to at least three projects that are in the budget for next year and remains confident that its focus on large sites in rural locations and strong food sales gives it a solid platform to recover quickly.
Founder Peter Borg-Neal said the chain has an “excellent pipeline” of ‘shovel-ready’ sites located in Buckingham, Wokingham, Epsom and Hatfield that will make organic growth possible.
“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.”
All of Oakman’s 28 pubs reopened on 4 July, and early trading has been positive, Mr Borg-Neal said.
In the first few days of trading, like-for-like over the weekend were at 82% versus last year, but at 104% on Monday and Tuesday.
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, it is confident that the VAT cut announced by the Chancellor this week 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.
Prior to the impact of the Coronavirus pandemic, Oakman was trading well with like-for-like sales increasing 4% year to date and total sales up 14%.
However, the sudden closure of the business in week 38 of the financial year has meant that for the year ending 30 June, turnover decreased 17% to £31.5m.
Mr 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.”
Mr Borg-Neal said the business would continue to focus on strengthening its balance sheet to ensure that it 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.”
Meanwhile, Mr Borg-Neal confirmed that from August 1, he will become executive chairman of Oakman, with COO Demot King stepping into his shoes to serve as chief executive.
The rejig follows the resignation of current chair and investor Mike Smith, who will remain on the board as a non-executive director.