Hawthorn Leisure CEO Mark Davies: The business will be stronger than ever

Positives have been in short supply during lockdown, with even the prospect of reopening failing to raise many spirits, as the government dithers and delays over a definitive date.

One silver lining is that hard pressed publicans have found time to give a lick of paint to their premises, Hawthorn Leisure CEO Mark Davies says.

“I’m reliably told that every single fence and every single wall has never looked so immaculate in our portfolio,” he explains. “I don’t think there’s a fence left to paint!”

Light-heartedness aside, it’s part of a wider point about successfully pressing pause on the 700-strong community pub business, and getting in good shape to bounce back.

Davies sits on the board of the British Beer and Pub Association (BBPA), and so is only too aware of the frustration over the lack of clarity over a reopening date.

As per an open letter to the Prime Minister, the industry has given a final deadline of midnight tonight (19 June) for a notice on reopening in time for 4 July.

But as far as Hawthorn is concerned, the pub operator is prepared to open the majority of its estate on 4 July, with two metre distancing.

The company, part of New River real estate investment trust, reports 75% of its tenants and 99% of its pub partners plan to reopen on the government-teased date.

Though proud of this fact, Davies is clearly frustrated over these missed deadlines, despite his measured tone.

“It is reassuring that so many of our partners and tenants are intending to open from the 4th of July, if that’s what the date is going to be,” he says.

“But it is far from ideal that the government has been dithering this week. We were supposed to get the official guidance on Sunday, but we didn’t.”

He attributes the delay to further research over distancing, and sees clear political will to reduce to one metre, though is resigned this could take more time.

Yet with a skew towards wet-led community pubs, Hawthorn Leisure’s estate is lean to operate, Davies confident it can run effectively even at two metres.

Challenges aside, he is proud with how the business has managed its period of closure, and its support of tenants and partners, with 97% saying the business had exceeded or met expectations of support during lockdown.

This has involved deferred rent, since 25 March until the end of June, with tenants agreeing to paying 50% of arrears.

Some 95% of tenants have received a government grants, while all pubs will recieve a support grant from Hawthorn Leisire, which is effectively equivalent to a month’s rent free for July and August.

Post opening, Hawthorn will continue work with individual tenants on a site by site basis, via business development managers.

Including rent relief and other support, this amounts to a £7m package of support.

“It’s not an insignificant amount, but we’ve got the financial capacity to do that,” Davies says.

“We are not restricted with a highly levered balance sheet with bondholders and bank debt.

“We’ve got no borrowings at all in our company, so we can run the company and apply the strategies that we feel are right.”

In a further sign the business is looking to make the reopening count, the executive team have just signed off on £4.5m in capex improvements.

Despite his optimism, 2020 all could have been so different, with the company buoyant after two off-market acquisitions last year, one from Marston’s, another of Bravo Inns, with 2019 a “great year” for the business.

Still, Davies emphasises the way the company has handled the crisis as a credit to its people, generating goodwill from suppliers, employees and partners.

“It’s been a challenging period,” he says. “But the team have been absolutely outstanding providing support to tenants and partners.

“The rewards are coming through. We’ve generated enormous goodwill, because we’ve put people at the heart of our agenda. We are getting extremely positive feedback.

“No one’s ever dealt with anything like this before and we’re all getting ourselves ready now to reopen and bounce back.

“The business will, we believe, be stronger than ever, as a consequence of the goodwill that we’ve generated.”

Lockdown has not seen a complete halt to activity, with £6m collected in non-core pub disposals over the period.

The operator has also announced a trio of promotions, with Andy Parker, Mark Brooke and Ed Little joining its executive committee.

After a bullish 2019, Davies says the business will aim to pick up where it left off.

“The team have done such a great job for us, the bounce back plan we have every confidence in, and we want to get these pubs reopened, protect our people, protect the future, and that will naturally lead to further opportunities.

“There was a good portfolio of acquisitions out there before covid, and there’ll be more to come later in the year.”