H&H shifts up a gear

Family brewer Hardys & Hansons is dismissing talk about moves by the big players to acquire it, and is determined to grow it alone. By Hamish Champ.

Steeped in tradition as it is, the world of the family-run brewer is not known for its hard-nosed approach to business. So when Nottingham-based Hardys & Hansons (H&H), founded more than 170 years ago, announced the sudden departure of its long-standing managing director Tim Bonham at the end of last year, the news came as a shock to many in the trade.

In wood-panelled boardrooms across the country, family brewers were in high dudgeon over the move. Mr Bonham, a popular figure in the industry, had been in the top slot at H&H since 1998 and only a matter of days earlier had also been announced as chairman of the Independent Family Brewers of Britain.

Others, noting the potential for H&H to become the latest regional brewer to fall under the acquisitive gaze of some of its nearby competitors, suggested the group was being dressed up for sale.

The new-look management dismissed - and continues to dismiss - such speculation. Instead there is an air of confidence about where the group is heading, still as a family-held, independent company, led by its new managing director, Jonathan Webster. He joined the company back in 1998 as retail director, having previously worked for Bass and Tom Cobleigh, and was appointed to the H&H Board in the same year.

Aware of the controversy surrounding Mr Bonham's departure, Mr Webster prefers not to dwell on the reasoning nor the manner behind his leaving the company, instead noting that the decision was not the conspiratorial one suggested by critics, rather it was commercially based. Whether or not Mr Bonham was seen as being past his sell-by date and that to take H&H forward in today's fast-moving business the board felt it needed a younger man in the driving seat, he isn't saying.

Links with other players​

What Webster does talk about, however, is the need to make H&H a consumer-focused and business-savvy entity in today's highly competitive market. If criticism comes his way as a result, Webster seems to be prepared to accept it.

"Doing things in the future the way we've been doing them in the past will not be enough," he says. "We have to build beyond that, looking at opportunities through investment and capital expenditure and linking up with other players in partnerships where they can work to our advantage." One such arrangement saw H&H buy a package of five pubs from Whitbread along with associated lodge bedrooms operating under the Premier Travel Inn franchise.

And while he is aware of the crucial role that the heritage of a company such as H&H plays in its ability to attract customers to both its beer and pubs, Mr Webster does not want to live in the past. "The brewery is an integral part of our brands' credentials. It is an endorsement of our pubs," he says. "But it isn't a case of being good just because we are 'old'. We're using contemporary colours and designs for our 'H' branding, for instance. And we're keen to drive innovation across the estate. If there are ideas out there that we can use, why not use them?"

With an estate comprising 76 managed and 182 tenanted pubs, the group's retail activities are spread throughout Nottingham itself and extend into the East Midlands, Yorkshire, Lincolnshire and the North West. The group wants to grow in these markets and beyond, but repeats an oft-quoted industry mantra of not overpaying for assets.

Operationally, H&H pulled out of contract brewing last year and brewery restructuring means the operation has potential to grow - there is an annual 65,000-barrel production plan - and as part of a new "routes to market" campaign it is targeting new customers including supermarkets and larger entertainment venues.Its pubs, which range from historic city centre outlets such as Ye Olde Trip To Jerusalem - built into a cave at the base of Nottingham Castle - through to community locals and family-friendly establishments, feature more than 6,000 restaurant covers, with nearly 30 pub-restaurants running to 200 covers each. Managed house food turnover topped £19m last year.

Still, while many of its pub and restaurants are full to capacity on a Sunday lunchtime, trading proved tough throughout 2005, and after five years of consistent growth, operating profits fell one per cent to £14.3m, on turnover up seven per cent at £81.5m.

The performance dip was the result of the usual cost pressures plus "upfront revenue costs" relating to the group's investment programme throughout the year, says Mr Webster. The 2005 numbers illustrate a decline, but the question of comparables is one that vexes a number of industry executives, including Mr Webster. "We declare uninvested like-for-likes, which we see as the proper view to take with regard to assessing the performance of the underlying business. We've seen some like-for-like managed trend improvement since Christmas in both wet trade and food."

Getting better value​

Tenants, meanwhile, are encouraged through a range of support services and sales across this part of the estate grew by 1.5 per cent in 2005. Nevertheless, the group's 2005 trading performance, together with the management changes, means there are those who see H&H as prime takeover material, especially with the likes of nearby Wolverhampton & Dudley Breweries and the slightly further afield Greene King hoovering up much of the competition. Again, the response is a firm "no". "How do we respond to these declines?" asks Mr Webster. "We're sharpening people's acts up, getting better-value offers on board and so on. We aim to be competitive."

He speaks of H&H being "retail-led", and that while driving the H&H brand is vital there is no "one size fits all" approach to the pubs themselves. Moving forward, there will continue to be a "proactive and innovative approach" to acquisitions, as well as the cash to back it up. More than £50m has been spent on acquisitions and refurbishments over the past five years.

Deals such as last year's £16.9m Premier Travel Inn arrangement clearly illustrate the way the company can do business. Plus there are new builds and one-off deals. Debt levels might be expected to grow, as Webster says he has no adversity to gearing up for the right acquisitions.

Meanwhile, managed houses will be transferred over to tenancies "where appropriate", as cost pressures bite.

The group has also transferred its shares to the Alternative Investment Market (AIM), a move Mr Webster says is "designed to enhance business flexibility, reduce the administrative burden for shareholders and bring inheritance and capital gains tax benefits".

On more general industry issues, Mr Webster says he would have preferred pubs to be able to choose whether to go no smoking or not, but with the legislation likely to favour an outright ban he sees "little point in sticking our heads in the sand over the matter - especially as a lot of our customers don't want to smoke". More than 90 per cent of the group's 256 pubs have "viable outdoor areas," and up to £2m is being spent surveying the estate's facilities for smokers.

Meanwhile, extended hours are proving broadly profit neutral. "People aren't necessarily drinking more, but their drinking occasion is more civilised," says Mr Webster.

In the equally civilised world of family brewers, where feathers are rarely ruffled, it seems H&H is prepared to make some tough decisions to strengthen its hand going forward.