Honeycombe drops forecasts on tough trading

Honeycombe Leisure is finding the traditional pub market tough going, but says its skill at managing pubs successfully on behalf of other operators gives it an advantage.

With its year end on May 1, the company said like-for-like sales are currently running at 2.8 per cent behind last year.

Alongside the generally poor trading conditions, the company said that site closures due to refurbishments and poor weather across the year had been a factor.

In addition, Honeycombe said some of its venue bar sites have faced localised pricing pressures as competition increases, as well as increased utility costs, door staff charges rising as a result of SIA registration, and increased Sky fees.

The company has also made a £140,000 loss on one pub sale and expects a £200,000 loss on the planned sale of another.

This combination of factors means "the company's reported results will now be below current market expectations." The final dividend is also being reduced to 0.95p

Honeycombe's dedicated division, set up to manage pubs on shorter-term contracts, has now signed a twelve-month agreement to run 27 sites for Scottish & Newcastle Pub Enterprises. The pubs are part of the package acquired by property tycoon Robert Tchenguiz from Spirit last year.

In addition, deals have been done with Wolverhampton & Dudley, Avebury and Admiral Taverns to bring the total of new pubs under Honeycombe management to 41.

Nectar Taverns, set up by Honeycombe under the government-backed Enterprise Investment Scheme, now has 26 sites trading, and three under development and a further site in legals.

A second venture capital vehicle, Amber Taverns, has been set up, backed by £4.5m in equity and a £10m bank overdraft. A third new vehicle is currently raising £9m in funding to roll out Honetycombe's Ma Hubbards concept.

The EIS vehicles generate income for Honeycombe through management fees.

Sandy Anderson, chairman, said: "The competitive pressures in our traditional market of pub ownership underlines the merit of pursuing a strategy of providing our proven management services skills to other operators.

"In this, we have made good progress; and in arranging funding to roll-out this business, which, over the medium term, will also reduce group indebtedness and drive profitability."