Regent shares plunge on profits warning

News Analysis: Stock exchange may investigate fall in price

THE RAPID growth of pub operator Regent Inns came to a dramatic halt yesterday when it issued a profits warning caused by "inconsistencies and inaccuracies" in its accounts and the incorrect calculation of key sales figures. Regent also blamed weaker profits at new branches caused by increased competition and delays in opening new branches.

Regent Inns' shares plunged 44 per cent on the warning, falling 140p to 176.5p. The news dragged down shares in rival pubs companies, such as JD Wetherspoon and Slug & Lettuce, which have been trading on high ratings. There may be a stock exchange inquiry into the steady fall in Regent's shares ahead of yesterday's announcement. Analysts have cut profit estimates for Regent from around pounds 16m to pounds 13m.

Regent Inns said that a review by new finance director Paul Huberman, who joined from Asda Properties in March, had uncovered a number of inconsistencies in various accounting treatments totalling pounds 1.7m. The board has also reviewed the basis of its like-for-like sales and found they had been calculated incorrectly.

Like-for-like sales for the year to date are now said to be running at 1.5 per cent higher than the same period last year. At the time of its half-year profits in February, Regent said its like-for-like sales were 7 per cent ahead.

Regent stressed that its financial results for earlier years were not affected, that there was no "black hole" in the accounts and no evidence of "improper conduct" by directors.

Analysts said the business had been built up as an entrepreneurial company but was now moving towards a more corporate structure and culture as it grew.

Clive Watson, the former finance director, left in February to pursue other interests. Mr Watson, who was finance director of Regent for eight years, issued a statement yesterday to clarify his position. It said: "The current-year budgets were prepared in July 1997 and were approved by the group's executive board. These were reviewed by the full board of Regent Inns in September and the components of the budget received their full endorsement." It is understood he was only informed of the company's impending announcement in the early hours of yesterday morning.

Sector analysts said the trading problems at Regent were not a surprise given the rapid expansion undertaken by all the major pubs groups. Nigel Popham, of Teather & Greenwood, said Regent's problems could be "the tip of the iceberg" as far as other smaller pubs operators were concerned.

"Pub chains have spent vast amounts of money on building up their estates just at a time when consumer demand is slowing and competition in the high street is at its most intense. The statement from Regent doesn't paint too rosy a picture for the industry as a whole," said Mr Popham.

There has been an explosive growth in new themed pubs, including Regent's Australian-themed Walkabout Inns, but this has forced pub rents into a relentless spiral, particularly on the high street where most new bars are located. "There are too many people spending too much money too quickly for people to make an adequate return on their investment," one analyst said. Whitbread says it has been "walking away from more sites than ever" recently, deterred by high rentals.

Whitbread estimates that concept bars such as Bass's All Bar One and its own Hogshead brand have staying power in the longer term, but they question the longevity of so-called "fashion pubs". Pub groups have already cut back on opening Irish themed bars as they feel this sector of market has neared saturation.

Whitbread said: "There has been this mad rush to catch up by some operators, particularly in food pubs where the growth is strongest. Operators have been paying through the nose for available sites, but these costs must be stretching people's models on viability."

Until yesterday, Regent Inns had been one of the stock market's success stories. Floated in 1993, the shares soared eightfold to a high of 388p earlier this year helped by a booming pub market, high margins and a rapid roll-out of new outlets. But critics have warned of over-expansion just when higher interest rates are hitting consumer spending.

Start your day with The Independent, sign up for daily news emails
News
Legendary blues and rock singer Joe Cocker has died of lung cancer, his management team as confirmed. He was 70
people70-year-old was most famous for 'You are So Beautiful'
News
people
Sport
Chelsea manager Jose Mourinho
footballLatest score and Twitter updates
Arts and Entertainment
David Hasselhof in Peter Pan
The US stars who've taken to UK panto, from Hasselhoff to Hall
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Life and Style
Approaching sale shopping in a smart way means that you’ll get the most out of your money
life + styleSales shopping tips and tricks from the experts
News
newsIt was due to be auctioned off for charity
Life and Style
A still from a scene cut from The Interview showing North Korean leader Kim Jong-un's death.
tech
Environment
Sir David Attenborough
environment... as well as a plant and a spider
Voices
'That's the legal bit done. Now on to the ceremony!'
voicesThe fight for marriage equality isn't over yet, says Siobhan Fenton
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.

iJobs Job Widget
iJobs Money & Business

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

SThree: Trainee Recruitment Consultant - LONDON

£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

SThree: Graduate Recruitment Consultant

£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...

Day In a Page

Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

Clocks, rifles, swords, frogmen’s uniforms

Surrounded by high-rise flats is a little house filled with Lebanon’s history
Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

Four months after the bombardment, Gaza’s wounds are yet to heal

Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
Gastric surgery: Is it really the answer to the UK's obesity epidemic?

Is gastric surgery really the answer to the UK's obesity epidemic?

Critics argue that it’s crazy to operate on healthy people just to stop them eating
Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

Homeless Veterans appeal: Christmas charity auction

Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
Pantomime rings the changes to welcome autistic theatre-goers

Autism-friendly theatre

Pantomime leads the pack in quest to welcome all
The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'