LETTER FROM THE COMPANY TO PREFERENCE SHAREHOLDERS
6th November 2020
Dear (Preference) Shareholder.
COMPANY UPDATE
Coronavirus
The Coronavirus pandemic continues to provide a very challenging environment for S.A. Brain.
Following pubs in Wales being permitted to reopen indoors on 3rd August, we traded strongly throughout the month, assisted by the UK Government’s Eat Out To Help Out Scheme and some good weather. We also enjoyed a promising early September when we were trading ahead of our expectations. However, from mid-September we experienced increasing restrictions in our key trading areas in South Wales, including travel constraints, a ban on households mixing indoors and the 10pm curfew, which set us back significantly.
As I write, we are in the midst of the Welsh Government’s ‘fire-break’ and while it is good news that the First Minister has confirmed that pubs in Wales may reopen next Monday, 9th November, we are still working through the implications of the revised set of restrictions.
Throughout the pandemic, we have been taking actions to minimise cash burn by taking full advantage of the UK Government’s furlough scheme, payment deferrals and other financial support, while saving costs wherever we have been able to do so.
We are also constantly exploring other ways to raise cash to bolster our financial position, such as the sale of selected freehold assets.
Refinancing and bank support
As set out in our update letter of 8th July, the Company has been undertaking a refinancing process. This generated interest from a number of parties, but as the situation with the second wave of the pandemic has created ever greater uncertainty, those interested parties have decided to withdraw their interest for the time being. We expect to continue the refinancing process when there is more clarity on prospects for the hospitality industry in general and the Company specifically.
Our banks, HSBC and Lloyds have extended the support for the business through to end-January 2021 and we remain in regular dialogue with them relating to cash flow and a longer-term extension of the facilities. However, their support through to January does not provide sufficient comfort for our auditors, PwC, to sign-off our 2018-19 accounts on a going concern basis, as that requires a 12-15 month look forward.
Dividend
For all the reasons set out above, the Company is not in a position to commit to any future dividends at this time.
Prospects
Once again, it is impossible for us to look forward with any certainty about prospects for the remainder of the financial year. The Board remains focused on securing the future of the business for the benefit its employees, shareholders and supply chain by refinancing the business such that we are able to focus on delivering our 3-year plan to increase EBITDA and reduce our leverage.
We will provide further updates in due course. In the meantime, if you have any questions, please contact me via email on john.rhys@sabrain.com or calling our office on 029 2040 2060.