Honeycombe Leisure

AVOID

31/01/2005

Pub operator Honeycombe Leisure blamed bad weather and three under-performing sites for poor trading at the interim stage to October. Like-for-like sales fell 2.5% but turnover increased 12.2% to �18.4m. A pre-tax loss of �17,000 was converted into a profit of �230,000. As well as running their own estate, Honeycombe manages pubs for Nectar Taverns. Nectar One, a VCT-qualifying vehicle, currently runs 23 sites, which when fully invested in March with 28 venues will provide �600,000 annually in fees. Overall return on capital for investors is over 20%. Nectar Two and Three are being set up in the next six months, the latter concentrating on the Ma Hubbard value-for-money dining concept for the Great English Pub Company. It runs six Ma Hubbards, but there have been a few teething troubles, as administrative expenses increased �330,000 during the period due to the lease payments to the owners. Honeycombe was also hit with a tax charge of �1.2m for disposals of a number of its pubs, which originally would have benefited from roll-over relief but, intent on growing its management services rather than the core estate, the company made a provision for the tax. Trading conditions are still reportedly challenging, although, of the three poorly performing sites, one was refurbished and is trading well and another was sold at a profit. Net debt is still sky high at �33.1m, but disposals are being made to reduce it. House broker Charles Stanley has downgraded its pre-tax forecast from �2.6m to �1.6m. Avoid.