Preston-based pub and hotel operator Honeycombe Leisure has pulled the plug on short-term management contracts after they proved to be “a disastrous and costly foray”.
In its interim results, the group said these contracts had lost the company £350,000 and diverted management time and focus from its core business.
“It became clear that the assumptions we based our business plan on were overly optimisted and flawed,” admitted chief executive James Baer.
Nevertheless, the group has retained long-term management contracts for the Ma Hubbard’s restaurant chain and Nectar pub estate.
The success of the Nectar venture – which netted the group fees in excess of £1.5m over three years – has allowed it to set up a new Venture Capital Trust company, Amber Taverns.
In the six months to 30 October 2005, Honeycombe boosted turnover by 22% to £22.5m (2004:£18.4m).
However, like-for-like turnover dropped by 4% thanks to challenging conditions (especially in the high street), the absence of a major football tournament, licensing reform and the trouble with short-term contracts.
Pre-tax profit soared by 165% from £230,000 in 2004 to £609,000 in 2005.
The group, which was approached by a mystery buyer in November, owns and/or manages 111 pubs and inns in the North of England.
By Angela Frewin
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