Honeycombe Leisure's future in the balance

An upbeat Christmas has failed to dispel deep pessimism in the City about the long-term prospects for pub chain Honeycombe Leisure.

The operator itself has warned that without a rescue soon it may not be able to continue trading.

The chain, which operates the Amber Taverns and Ma Hubbards brands, said last week that sales over the two-week Christmas period were up 3.2%, against a 3.4% drop overall in the six months to 29 October 2006.

Pre-tax profits for the period were £900,000, against £500,000 at the same point in 2005, on turnover of £18.8m, down from £22.5m in 2005.

But it is the chain's future that continues to concern City observers.

Chairman Sandy Anderson said his talks to take the company back into private hands were continuing, as were discussions with an unnamed third-party buyer.

"Whilst discussions to date have been constructive, the independent directors reiterate that there can be no certainty that any of these options under review will result in a transaction or an offer being made," stressed Anderson.

Although the group's current banking arrangements, including nearly £30m of debt, have been extended to the end of this month, negotiations on a further extension are still in the balance.

One City analyst described the chain's situation as "parlous", with the main stumbling block to any buy-out being the high levels of debt.

"The company's position has deteriorated over the past two to three years, from having been quite usefully profitable it's now only marginally profitable," he added.

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By Nic Paton

E-mail your comments to Nic Paton](mailto:chris.druce@rbi.co.uk?subject=Honeycombe Leisure's future in the balance) here.

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