by The PMA Team
Losses at management services company Honeycombe Leisure have widened from £100,000 to £800,000 in what chairman Sandy Anderson has described as the 'most challenging year in the company's history.
Investors were also told of a £403,000 hit from balance sheet errors and unrecorded liabilities from the previous year. Its shares slid to 25p, giving it a market capitalisation of £8m a significant discount on the 40p-a-share net asset value of the 50 pubs Honeycombe owns.
Joint chief executive Bryan Wardman told the MA he was 'surprised by the share price fall. 'We put a profit warning out some months ago and we actually over-achieved on what we promised. But we've had strong support from our institutional investors this week.
There have been suggestions that Honeycombe might sell the rest of its freehold pubs and return proceeds to shareholders. But Wardman indicated that the capital gains liabilities that would be created made this a 'non-starter.
Wardman said that previous balance-sheet errors had been discovered after the arrival of new finance director Tracey Alston in February. Deepening losses at Honeycombe came despite the addition of 42 management contracts in March: it now runs 57 pubs this way.
Fee income from these management contracts increased 93% to £650,000 during the year although the majority of extra management services sites came on board around Easter and only made a six-week contribution. Honeycombe runs 27 S&NPE pubs, 15 Punch sites, eight Avebury sites, six Admiral Taverns and one Wolverhamp-ton & Dudley pub. It typically charges these companies between £200 and £450 a week to run pubs on short-term contracts. Honeycombe also has management contracts with three VCT-qualifying com-panies Nectar Taverns, Amber Taverns and a third that has been formed to expand the Ma Hubbard's concept.
Fees at Nectar rose from £300,000 to £700,000 although its board is undertaking a review that could lead to a sale. Wardman added: 'We intend to push ahead on the management services side of the business.
House broker Charles Stanley said Honeycombe had been valued at £45m with a letting premium of £4.5m. 'This implies an equity value of £15m (or £10.5m excluding the letting premium) which compares to the current market capitalisation of £8m.