Bosses at the business have considered the impact of a third lockdown in Jersey and Guernsey during January-February 2022 alongside a UK lockdown.
This was done to assess the robustness of a ‘severe but plausible downside’ scenario of such a situation occurring due to ongoing uncertainty around Covid-19. Details of the scenario planning were set out in Caledonia TLG’s recently published annual report as Liberation Group reported strong trading since pandemic restrictions had eased across the UK, Guernsey and Jersey.
The lockdown scenario made a number of assumptions – that the business had a gradual return to ‘normal’ trading to November 2021 and the UK government imposing a lockdown in January 2022 lasting nine weeks – closing pubs – with payroll support made available.
They ‘concluded that such occurrences would not result in breach of any banking covenants and liquidity could still be maintained by actions under the control of the directors’.
In such a situation, operating cost and capital expenditure cash-saving mitigation plans within the directors’ control included reducing variable labour levels to reflect lower volumes of trade, reducing pub overheads, plus reducing and deferring maintenance and development projects as well as other discretionary spend.
Even without payroll support, the business could survive, it concluded.
‘Under both scenarios, the group is able to operate within its committed facilities and operates within the minimum liquidity covenant throughout the next 12 months.’
Liberation Group said its financial figures demonstrated the benefits of its geographical and channel diversification.
Its pubs and inns and brewing and distribution divisions achieved pre-tax earnings of £0.7m. and £1.7m. respectively, even though the pandemic had reduced turnover by 23%.
Liberation Group also said the funding of the acquisition of pubs from Wadworth and Co by its supportive shareholder, Caledonia Investments, increased the strength of its balance sheet. Net external debt of £38.5m. at January 2021 was consistent with January 2020, but the value of freehold assets increased £27.3m. to £128.1m.
Group chief financial officer Simon Hope said: ‘The focus of everyone in the group on the importance of cash yielded obvious results in the year to January 2021 and this has continued during the first half of the current financial year.
‘We enter the second half with stronger liquidity than at the end of January and we are well placed to fund our ambitious development plans and merger and acquisition strategy when the opportunities arise.’