<p>Commentary:</p>

<p>- net loss &pound;273k, cash out &pound;514k: why? &nbsp;EBITDA of &pound;9k looks far better than the operating cash outflow when you include VAT and PAYE</p>

<p>- deferred VAT payment of &pound;72k in July</p>

<p>- on the cash flow, there looks like a formula error in that the cost of goods sold items have not been totalled in August 20 so the actual position could be &pound;20k worse</p>

<p>- no reference to depreciation in the P &amp; L</p>

<p>- where is the balance sheet and a source and application of funds!!</p>

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<p><strong>Shareholder Update:</strong></p>

<p>Enclosed is the first draft P&amp;L and cash flow forecasts for Maida Vale Leisure Ltd.</p>

<p>For the period August &ndash; December 2020 we have assumed a drop in F&amp;B revenue of 50% in line with industry standards. This is driven by Government forced social distancing requirements and a significant drop in customer demand and spend per head. For the period January &ndash; July 2021 the discount to &ldquo;normalised revenue&rdquo; narrows until reaching 85% of normalised revenue in July 2021.</p>

<p>As more detail is provided by Government on how pubs can operate in a post COVID-19 environment we will be able to develop the forecasts further. There could be an ability to take advantage of weekly trading patterns across the Harcourt Inns estate and move staff accordingly and hence reduce wage costs although this will be subject to a reorganisation of the group.</p>

<p>Whilst the pub will make a small operating loss in the 12 month period, the exceptionally high non operating cost base will result in a large net loss. Although a proportion of the non operating costs can be accrued to reduce the cash burn, further capital will need to be raised through debt or equity and coupled with any accrued fees &amp; loan interest, shareholder returns will be further diluted.&nbsp; &nbsp;</p>

<p>Furthermore, the existing debt facilities need to be refinanced in October 2020 and given the current climate this may prove challenging. Having spoken to several banks (Natwest/RBS, Metro, Coutts &amp; Cynergy) regarding CBILS unfortunately repayment terms under CBILS is six years which makes monthly loan repayments unsustainable. We are now in preliminary discussions with asset-based lenders, Cynergy and Coutts to provide loan facilities outside of CBILS and discussions are ongoing.</p>

<p>The company is applying for a bounce back loan to aid short term cash flow.</p>

<p>There is now an urgent need to reorganise the structure of MVLL (and the wider portfolio) to clear out non operating costs and streamline operations to enable the long term viability of the pub. Options are being explored, subject to tax advice, that maintain EIS qualifying status as part of any restructuring.</p>

<p>Harcourt Inns expects to be able to bring on board two highly experienced business operators in the next few weeks to help guide the group through a challenging transition period, the medium-term effects of COVID-19 and hopefully the subsequent long term success of the Hero of Maida and the group as a whole. Although we aren&rsquo;t in a position to mention names at this stage one appointment, as Chairman, is a highly regarded operator and CEO having built and subsequently sold a multi-billion pound operational real estate business and the other appointment, who will become a non executive director, built and sold one of London&rsquo;s most successful pub, dining and hotel groups over the last 15 years. These two new appointments will be subject to any reorganisation of the wider group.</p>

<p>We intend to provide shareholders with a reorganisation proposal in July 2020 and we also intend to provide shareholders with the latest set of management accounts and a balance sheet this month.</p>