Pubs 'n' Bars sees little light at the end of the tunnel

AIM-listed pub operator Pubs 'n' Bars (PnB) said it expects little in the way of economic recovery to help boost its fortunes in the coming year.

The group acknowledged that times were tough for its tenants, all of whom had been given the opportunity to buy the freehold to their pubs. No sales had yet been concluded, it confirmed.

Announcing its results for the year to December 31, 2008, the group said accurate forecasting of its circumstances in the coming months was "extremely difficult".

Current like-for-like sales across the group's 106 pubs were around three per cent down on the same period last year, it said.

PnB reported that turnover for the year rose 11.5 per cent to £22.3m, with gross profits up a little over 10 per cent at £14.9m after costs of sales up nearly 14 per cent at £7.4m.

The group said it made a pre-exceptional operating loss of £6.4m in the year to the end of December 2008, versus a profit of £2.1m in 2007. However PnB said it believed the slide in underlying operating profit was closer to 39 per cent, down to £1.1m from 1.8m in 2007.

The bulk of 2008's exceptional charges - £5.3m - was taken up by a revaluation shortfall on the group's freehold and long leasehold properties, plus £1.1m relating to a revaluation deficit on a derivative.

PnB's pre-tax losses were £8.9m, versus a profit in 2007 of £342,000.

Underlying earnings before interest, tax, depreciation and amortisation fell more than a fifth to £22.4m, prompted by a fall in like-for-like sales, down five per cent due to factors including the smoking ban, an associated fall in machine income and the "general economic downturn", as well as a rise in "administrative overheads".

Earnings per share losses increased from 2.74p in 2007 to 18.96p. No dividend would be paid, the group said, versus 1.75p a share in the previous year.

However PnB said gross margins were held at 67 per cent, since the group had "resisted price cuts and negotiated improved purchase terms", following acquisitions in 2007.

The group's chairman, Keith Chapman, said it gave him "little pleasure" to report the company's numbers.

Chapman noted that the fall in the group's property values meant it had breached its banking covenants. PnB was consequently in talks with its banks on how to restructure its banking facilities, with any resolution likely to lead to higher bank charges for the group.

As a result, "steps have been taken to reduce the group's overheads", he added.