Derek Pain: Problems pile up for shell-shocked pubs
No Pain, No Gain
Saturday 11 July 2009
Four weeks ago I warned that shareholders in Pubs'n'Bars would suffer a sobering time when their results appeared. Unfortunately, the figures are even more distressing than I expected.
Almost every pub company has had a tough time. The recession, the smoking ban, miserable summer weather, continuous increases in excise duty, and supermarket competition have inflicted a bitter toll. For the heavily borrowed contingent, such as Enterprise Inns, Punch Taverns and little Pubs'n'Bars, the devastation has been unimaginably harsh.
Punch sought solace through a cash call and it looks as though Pubs'n'Bars, a constituent of the no pain, no gain portfolio, needs to resort to the same tactic. Let's hope it gives all shareholders the opportunity to decide whether to invest through a rights issue, rather than making new shares available to a privileged few by opting for a share placing.
Certainly the company is in an uncomfortable position with its auditors talking about the "existence of a material uncertainty, which may cast significant doubt about the group's ability to continue as a going concern".
I have moaned about the new accounting rules on many occasions. It is a travesty how they make life more difficult, particularly for small, overstretched companies. Pubs'n'Bars is yet another victim of these heavy-handed, ill-conceived and unjustified impositions.
First, it should be acknowledged that the group traded poorly last year, and it made little progress in the second half. But the near £9m loss (against a restated £342,000 profit) is, in real money, an illusion. Indeed, it could be argued that there was actually an underlying profit of nearly £1.1m against £1.8m last time.
A series of special charges and property write-downs have provoked a breaching of banking agreements. Consequently, relatively long-term loans have been reclassified as repayable within one year. Talks to restructure the loans – some £34.3m – are underway and, if they are successful, it is probable that the interest bill will be inflated. In 2008, the group endured a 43 per cent interest increase to £2.5m.
Last week, I mentioned that Private & Commercial, the hire purchase group, faced higher bank charges. Clearly, in these days of low interest rates, some banks are not only reshaping their balance sheets (with the help of taxpayers) but improving their income by increasing charges whenever they can.
Non-trading costs that hit Pubs'n'Bars, which has around 100 outlets, included a £5.3m freehold property write-down and a £1.6m lease impairment and amortisation charge. Accountancy costs, partly reflecting assistance over the new rules, rose from £54,000 to £122,000. Not surprisingly, no dividend is being paid.
The shares now bump along at around 4p. The portfolio paid 23.5p last year, while an earlier price brushed 50p. I realised the pubs game had encountered problems, but thought they had been accommodated when the shares more than halved. How wrong can you be?
I should have sold earlier, but now feel it is too late to do so. Still, Julian Tolley, analyst at stockbroker Hoodless Brennan, advocates a sale.
More encouraging tidings from two other constituents. Mears, the support services group, continues to expand its order book. It has won further contracts worth £70m, and has options on deals valued at £20m. So far this year, the social housing and domiciliary care group has been awarded contracts worth £175m. More are in the pipeline.
Chairman Bob Holt is remarkably cheerful. He says the "level of opportunities has never been stronger" and looks forward to organic and acquisition growth. The group is not experiencing – and does not expect – any slowdown in public spending in its trading areas, he adds.
Hargreaves Services, with interests ranging from coal mining to transport and waste disposal, is the other constituent in fine form. Chief executive Gordon Banham believes the group is on target to hit profit estimates – the stock market expects around £28.5m – and is looking to accelerate growth, particularly on the coal front. Hargreaves takes in the Maltby Colliery in Yorkshire and has expressed interest in open cast sites.
The group has also said it is pondering a move from AIM to full listing. This month another constituent, the Booker cash and carry group, completed such a journey. If Hargreaves does make the transition, it will mean that a third of the portfolio's membership is fully listed.
Compare with the Independent: See how much you could save by switching credit cards. Compare now
- 1 Easter egg hunt horror as mother finds dead body under deck of house
- 2 A bottle of wine a day is not bad for you and abstaining is worse than drinking, scientist claims
- 3 Unbeliebable: The White House offer 'no comment' to anti-Justin Bieber petition
- 4 Loch Ness Monster found on Apple Maps?
- 5 How We Met: Alison Moyet & Emma Kennedy: 'I knew we'd be friends because she was happy to make a prat of herself'
The food poverty scandal that shames Britain: Nearly 1m people rely on handouts to eat – and benefit reforms may be to blame
Scottish independence: It is the English who should be on their knees, begging the Scots to vote ‘No’
'Sinful': Video of British Muslims dancing to Pharrell Williams's hit Happy comes under attack
Nigel Farage: I’m taking on the status quo, and the Establishment’s fighting back
Abdullah Deghayes: My son was the martyr of a just cause, says father of British teenager killed in Syria conflict
Ukraine crisis: Helicopter gunships take country closer to all-out war
iJobs Money & Business
Negotiable: Harrington Starr: Database Team Lead ( Leadership, Sybase, Compute...
£40000 - £50000 per annum + Bonus+Benefits+Package: Harrington Starr: C#.NET D...
£25000 - £35000 per annum + Bonus+Benefits+Package: Harrington Starr: VB.NET S...
£45000 - £55000 per annum + Bonus and Benefits: Harrington Starr: Trade Suppor...
Day In a Page
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar
A newly refurbished one-bedroom flat in the heart of Mayfair, close to Grosvenor Square
A charming four-bedroom house overlooking Burleigh Square Park, close to Thorpe Bay
A three-bedroom farmhouse with a large inglenook fireplace and exposed beams
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds