Work out of pub group in Eastern England
Background
Licensed Solutions was requested to take over the management of a public house group of 16 properties in Eastern England by the incoming board of a PLC. The group consisted of 16 properties – 2 freehold and 14 leased from various clients operated from a head office comprising 5 personnel.
The company had lost £500,000 in 9 months, was unable to pay rents, VAT, PAYE and sundry creditors and was right on its bank overdraft limit. The VAT debt alone was £150,000 and key vendors were on the point of refusing to supply the estate.
Many of the properties were losing up to £5,000 due to poor management and the fact that no regular stock takes or operational controls were in place. Wage costs in all the properties were high and unsupervised; no marketing or promotional work had been carried out for over six months. Understandably, morale was at an all time low.
Several creditors, including one of the major landlords, had taken out court orders and VAT and PAYE were threatening winding up petitions.
Initial Activity:
- Visited all properties and the head office within 72 hours of appointment.
- Established management control within the properties.
- Developed financial picture including exact list of creditors and profit forecast.
- Established cash flow requirements and liaised with the Company's bank concerning the overdraft facility etc.
- Prepared an initial report, including an action plan for the PLC board, within one week.
Strategic Focus:
- Creation of robust and credible financial reporting system
- Regular communication with pub management team
- Effective liaison with PLC board and bank manager
- Commercial focus on both profitable trading and the requirement to sell pubs quickly.
Operational Initiatives:
- Handed back two major loss-making properties to landlords. Put seven properties on the market to realise £380,000. Expedited the finalisation of sales on two properties that had stalled. Negotiated schedule of payment of rent arrears with landlords of pubs that were being traded forwards.
- Established budgets for all properties and staff establishments. Produced monthly management accounts within ten days of period end. Analysed and improved margins and wage cost ratios wherever possible.
- Held a meeting of all managers and key personnel to outline situation and boost morale. Closed head office and made surplus personnel redundant. Rationalised management communication system by appointing area manager.
- Liaised with breweries to maintain supplies. Negotiated with large creditors and established agreed payment schedules. Settled smaller creditors and initiated system of “one-stop” shopping via our purchasing associate.
- Developed cost effective marketing plans for each property.
- Basic painting and refurbishment carried out where urgent to improve turnover and increase likelihood of swift sales.
Result:
The group was put onto a sound-trading basis through the summer season with all the properties trading at a profit. The properties were sold steadily throughout period, clearing creditor liabilities and bank overdraft. This allowed the PLC board, with the bank’s agreement, to continue trading in other areas without the threat of the insolvency of this business unit bringing down the entire organisation.
