Operators must avoid being World Cup wallies

Supermarket fascias are stacked high with discounted beers, pizza delivery drivers are ready to go and pubs and bars up and down England are praying that the national side goes a long way in the World Cup which kicks off in South Africa today.

Failure to get to the knock-out stage could mean bars relying on a cash injection from soccer mania could go under themselves.

As the drinks business reported on Tuesday, the industry could rake in as much as £80 million during England’s group matches alone. At the margins, that may not be enough to save some operators who are already teetering on the brink.

Research by accountants Wilkins Kennedy shows that the number of bar and pub companies going bust has continued to soar in the past year, defying the trend of falling corporate insolvencies across the rest of the economy.

Some 23 pub, bar and nightclub companies became insolvent in the first three months of 2010 alone, a jump of 109% on the 11 that went bust in the first three months of 2009. And remember, these are company failures; the figures do not include insolvencies among individual and tenant licensees or those who shut up shop before the losses became too crippling. They include:

•    Fabric – the London “superclub” that went into administration 10 days ago.

•    Can Du Entertainment – the UK’s biggest independent nightclub operator, owned by private equity firm Close Brother, which put 33 premises into administration.

•    Massive Pub Company (owner of 46 premises including the Tup chain in London and the Sports Café network) which owned 46 premises, went into administration.

•    Laurel Pub Company (owner of Slug and Lettuce, Hogshead, Ha! Ha!, Litten Tree and Yates brands as well as restaurant brands including La Tasca) put 230 premises in its pubs and bars division into administration as part of restructuring.

•    Pubs ‘n’ Bars (owner of 87 community pubs across the South East) went into administration with debts of around £24m.

•    Soho Clubs and Bars sold a selection of its London-based clubs to Novus (owner of the Tiger Tiger chain). The rest of the portfolio stayed with administrators.

Add to that list the off-licences that have disappeared and the fragility of drinks retailing is clear. In fact, Wilkins Kennedy calculated that while the rate of on-licence retail company failures increased by 109% in the 12 months to March, the number of corporate insolvencies fell by 36% to 5,911 from 9,233 in the previous year.

Just how disastrous to suppliers a collapse in either the on or off sector can be is illustrated by the demise of First Quench. The list of creditors read like a Who’s Who of the drinks sector, as Finance on Friday revealed exclusively earlier this year.

Now documents lodged at Companies House show that the group went under owing the taxman £24.7m in unpaid VAT, excise duty and National Insurance arrears. So far, the administrators, KPMG, have clocked up £9.5m worth of charges in unraveling the mess and the hapless unsecured creditors are said to be looking at recouping a paltry 1.4p in the pound.

With the new government’s austerity measures to be unveiled in a couple of week’s time, the outlook for consumer spending is far from rosy.

The sector can ill afford further company collapses. Come on England, the drinks industry needs some rousing performances and a long run.

Finance on Friday, 11.06.2010