Derek Pain: Problems pile up for shell-shocked pubs

No Pain, No Gain

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.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Trainee Consultant - Surrey/ South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Day In a Page

    Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

    Fishing is on Nigel Farage's mind

    Ukip leader casts a line to the disaffected
    Who is bombing whom in the Middle East? It's amazing they don't all hit each other

    Who is bombing whom in the Middle East?

    Robert Fisk untangles the countries and factions
    China's influence on fashion: At the top of the game both creatively and commercially

    China's influence on fashion

    At the top of the game both creatively and commercially
    Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

    The man known as GOD has a reputation for getting the job done

    Lord O'Donnell's three principles of rule
    Rainbow shades: It's all bright on the night

    Rainbow shades

    It's all bright on the night
    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before