Losses of £188m place severe strain on Luminar
NIGHTCLUB group Luminar has announced full year pre-tax losses of £1.1m compared to a profit of £5.5m for the previous year as bad weather and restrictions on discretional spend impacted sales.
Shares were down almost 13% in early trading.
The group, which runs the Oceana clubs in Birmingham and Wolverhampton, and a Liquid venue in Nuneaton, saw losses after discontinued operations, exceptional items and tax reach £188m, which it said was in line with expectations.
The poor performance has also impacted on a recently negotiated £99m lending facility with its banking group, which comprises Lloyds TSB, Barclays Capital and RBS.
The new facility, which has been effective since December, comprises two term loans of £44m and £40m repayable over three years and a revolving credit facility (RCF) of £15m. The weighted average cash interest rate for the new facility is 7.8%.
In its annual results statement, Luminar said: “Severe adverse weather conditions experienced in December combined with the continued deterioration in market conditions since that time have placed significant stress on the financial covenants.
“At the February 2011 testing date the group continued to operate within the required parameters. However, trading conditions have remained difficult and operating results have been worse than anticipated, such that it appears likely that a covenant breach would arise when next tested at the end of May 2011 and a short term liquidity problem may arise during the summer months due to scheduled amortisation payments.”
However, the group said it had maintained a strong relationship with the banks, to the extent they had agreed a prospective waiver on the May testing.
The banking group is also working with the company on a debt restructuring programme.
The Luminar directors said they believed the banks would remain supportive and that the discussions would result in a debt restructuring arrangement which would allow the group to continue trading as a going concern.
However, they said if an agreement could not be reached then the group is “unlikely to be able to operate within the existing terms of the New Facility and it is likely that a breach of the financial covenants would occur at the covenant testing point at the end of August 2011 and future liquidity risk would arise thereafter”.
Total sales for the year amounted to £137.3m, compared with £169m the year before. Earnings before interest, tax, depreciation and amortisation reached £22.9m for the full year and the group said the rate of sales decline had improved during the second half.
Cash generation reduced net borrowings by £10.5m to £82.2m, compared with £92.7m in the previous year.
Sales for the first nine weeks of the current year are 13.9% down on 2010.
Simon Douglas, chief executive, said: “Whilst the marketplace remains challenging, the business is continuing to focus on operational excellence and responding to customer demands.
“The results for the year, while disappointing, show some early indications of improvements in like for like trends. Equally encouraging is the early evidence that initiatives introduced midway through the year appear to be gaining traction and are diversifying our offerings and revenue streams.”
