The end of the road?

A fortnight ago The Publican was alerted to the fact that things were not quite right at London & Edinburgh Swallow Group (L&ES).

Insiders suggested that staff at L&ES' Maidstone head office were "leaving in their droves" and that the pubs and hotels group had called in accountants Ernst & Young and its own auditors BDO Stoy Hayward to conduct what executive chairman Alan Bowes later described as a "straightforward exercise" to look at the best way forward for the company.

Bowes told The Publican the accountants were going to advise the board of its "strategic and operational options", a process which he said would take "between four to six weeks". As it turned out, it seems the options of which he spoke were deemed somewhat limited by the bean-counters, who wasted little time in putting the group into administration.

Few senior industry figures said they were surprised at the news, which was officially announced on September 14, a week after the consultants began their assessment. Those in the company had also seen the writing on the wall for some time.

"Many of us knew a year ago we heading for trouble," says one former employee who, like all of those who contacted The Publican, did not want to be named.

The Publican has also been contacted by several suppliers who say they stand to lose thousands, in some cases hundreds of thousands, of pounds as a result of L&ES going under.

"Some companies should come with a wealth warning," said one who'd recently dealt with the group, while another said L&ES owed him around £100,000 and he was wondering if he would see any of it.

A number of insiders have spoken of the group's ambitions to become one of the country's largest pub and hotel groups, and point to that ambition as underlying the group's failings. Bowes himself, in an email to staff three weeks ago, remarked that "the recent period of unprecedented growth has resulted in some strain on the operations of the Group". Former L&ES staff suggest that the drive for growth cost the company its life and its employees their livelihoods.

Three years ago the group had around 100 pubs and 20 hotels and grew to 10 times that, but without the structures in place to support such a booming business, life was always going to be tough.

L&ES' strategy of sale and leaseback deals was legendary and soon the money wasn't there to pay the rent, according to one member of staff.

Those close to the heart of the group say many of its internal systems were poor. "It was the worst controlled accounts environment I'd ever known," said one staffer. "No-one knew who to pay, no-one knew who money was being paid to. Money was going out but none was coming in. The company was like a giant credit card and you can only go on like that for so long."

The staffer added that one supplier was overpaid by £250,000 - by cheque and direct debit - which showed "an absolute lack of control regarding money going out".

Asked why staff didn't speak up earlier about their concerns regarding the future viability of the company, one former employee said: "We've got mortgages to pay."

London & Edinburgh Swallow Group responded to this article with the following statement: "A spokesman on behalf of the former board completely refutes the allegations that have been made by former employees. If you care to consult Companies House for copies of the audited accounts these will show the true position of the companies."