British Country Inns (BCI), the freehold pub operator, saw losses widen across its four Enterprise Investment Scheme (EIS) companies in the year to 1 February 2014 mainly due to “heavy impairment and depreciation charges” after an estate review.
However, the group said that recover in trade is finally occurring, having experienced five consecutive trading periods with turnover and trading profit ahead of budget. It also said the value of its country pubs has finally “turned the corner”.
Turnover in the year declined in all but one of the companies following disposals, although like-for-like sales were “broadly in line”. Two of the companies, BCI and BCI2, are expected to be “entirely free of debt” once the planned disposals are concluded, while BCI3 and BCI4 now have no debt.
Net losses at the initial BCI company widened from £260,155 to £853,405 across the year. For BCI2 it moved from £204,178 to £1m, for BCI3 it went from £165,164 to £1.1m, and for BCI4 is widened from £206,956 to £977,713.
At the five-strong BCI, turnover fell 26.3% to £1.9m after it disposed of the Lion in Leavenheath, near Colchester, and part of the Red Liion near High Wycombe to a residential developer, yielding c £180,000 for the company. House trading profit declined from £198,827 to £104,843. Since the year end BCI has disposed of the Three Horseshoes in Cockfield, near Bury St Edmonds and has put the George in Nettlebridge up for sale.
Turnover at BCI2 (six sites) fell 2.3% to £2.2m. Since the year end it sold one pub, converted another to tenancy and is close to concluding the sale of the Woodfalls in Salisbury for £435,000. House trading profit fell from £243,463 to £205,305.
For BCI3 (five sites), turnover fell 23.5% to £1.8m, mainly due to one disposal at the end of 2012; no disposals occurred in the year. BCI3 is currently undertaking minor improvements at two sites. House trading profit grew from £168,455 to £177,373.
BCI4 (four sites) saw turnover fall 5.9% to £2.3m after it sold two pubs. House trading profit was in line at £182,781.
The operator said the high level of impairment across the four groups follows a review with its auditors and likely sales prices of the pubs following a review with Christie + Co at the end of 2013.
In a statement included in all four BCI company results, director Martin Sherwood said: “Generally it appears that the market in the first quarter of 2014 is now much more positive and active than last year - indeed a director of Colliers International has said ‘the market is beginning to take off, we haven’t seen anything on this scale since 2007’.
“We are hopeful this will in time lead to better values for our pubs.”
Sherwood added that in recent months the “long expected recovery” in the company’s trade “has finally begun to occur”. “The overall improvement began last December and we have now experienced five consecutive trading periods with turnover and trading profit levels running ahead of budget.
“Trading over the Christmas and New Year period was satisfactory and held up well during the late winter, despite the severe flooding experienced in many parts of the UK.
“However, there is always a lag in timing between improved trading and improved asset values. The value of country pubs continued to drift during 2013 but now appears to have finally turned the corner. There is also recent evidence of interest in country pubs from overseas buyers looking to acquire ‘unloved assets’.”
Sherwood said the group is “making every effort to provide an exit for shareholders at a reasonable price in the fairly near future”.
