London Town reports £24.7m loss

Tenanted and leased operator London Town Taverns made a loss of £24.7m last year and is in discussions about securing long-term finance after breaching its bank loans.

London Town, which operates 176 of its own pubs and manages 124 pubs — including 61 for other pub operators — and has 14 for sale, said adjusted Earnings, Before Interest, Depreciation and Amoritisation was £1.5m for the year to 28 December 2008 compared to £3.1m in 2007 and the loss for the year expanded to £24.7m from a loss of £11.6m. Sales increased from £11.4m to £25.9m.

The overall rent level was down 13% to £3.3m due to a "number of concessions to assist tenants with more difficult trading conditions" and a reduced number of tenanted pubs. Income from drinks fell 4% to £2.6m.

Its managed division made a loss of £474,000 but a number of units have now been handed back at the end of the lease or tenancy. The number of pubs it manages for third parties has increased from 61 at the end of 2008 to 155 by May 2009.

London Town also incurred an impairment charge of £12.7m due to a write-down in property values. "This substantial charge reflects the poor profits experienced in 2008 of certain of the Group's leased and managed pubs and weak future prospects for them in a difficult trading environment," it said. The average value of its pubs fell from £555,000 to £484,000.

The group's pub assets are financed by a combination of bank debt, deep discount bonds and short term loans. It breached its bank loans in 2008 and has continued to do so in 2009. The bank loans have been classified as current despite their scheduled repayment date being 2011 because the breach of loan covenants enables the bank to seek immediate repayment of the bank loan.

"The directors are engaged in continuing discussions relating to the terms and covenants of the group's bank loans and anticipate that new covenants can be agreed that will reflect the current operations and business structure of the group," it said.

"The directors expect satisfactory terms will be agreed and that sufficient loan facilities will continue to be available to the group and have therefore prepared the financial statements on a going concern basis."

Chief executive Billy Buchanan said: "The group continues to trade in line with expectations in what remains a challenging market place for the pub industry. Since the period end the number of pubs under management for other pub owners has grown significantly and managed pubs now outnumber leased pubs. At the end of May 2009 the total number of pubs in the group was 401 of which 235 were managed, 157 were leased and 9 were held for resale.

"The group will continue to focus on the growth of its managed pubs division as well as continuing to review further opportunities for business growth possibly through selective acquisitions where appropriate.

"The group will also benefit from a significantly lower and fixed interest cost on its bank debt as a result of recent interest rate swap agreements."