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11 August 2022

Opinion from Adrian Leopard & Co

News impacting business from Adrian Leopard & Company - Insolvency Practioners & Mediators

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Specialist Leisure Group goes into administration including some well-known names.
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Specialist Leisure Group goes into administration including some well-known names.

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Names like Shearings, National Holidays, Bay Holidays and many others included.

On 22nd May the Specialist Leisure Group entered into administration. It was reported on television but certainly the impact of this collapse was not evident. One of its subsidiaries is Shearings the coach company and that broadly is all that was reported.

Today, every company in the group has had its website taken down and replaced with a simple but blunt notice telling customers that the businesses have all ceased to trade, all bookings cancelled and none will be re-scheduled, and what they need to do about getting their money back.

The list of companies shown on the revised site is quite formidable and without a doubt this could affect many people. The list includes Shearings, National Holidays, UK Breakaways, Bay Hotels, Coast & Country Hotels, Country Living Hotels, Caledonian Travel, Wallace Arnold Travel and Sporting breaks.com.

This is a big deal. The list of individual hotels listed on the website runs to between 40 and 50. Basically the site reports that none of these hotels will re-open.

If you think you might be affected by any of the businesses going down, check the notice for yourself at this link:

https://www.bayhotels.co.uk/#hotels

I said a few weeks ago that I suspected that there would be significant business failures in the hospitality industry but I must admit that I had not expected this particular fast ball. A look at the accounts filed with the Registrar of Companies give some clues as to why this has happened. In the year ended December 2017, the group showed a profit after taxation of £1.9 million and a balance sheet surplus of £17 million. Unfortunately the problems emerged in 2018 and the group lost £3.09 million, leaving a balance sheet surplus of £13.9 million. The company was, on the face of it, still solvent.

What is not known is what happened in 2019 but the company blames the Brexit referendum and the beast from the east as reasons for losses arising. It is very early days yet and there have been no announcements to my knowledge but I suspect there will be little doubt that the coronavirus has put the top hat on it all for this unfortunate group, and with little immediate sign of relief.

What we do know is that the company had “underlying health problems”. Covid-19 will have created a whole new level of pressure but, rather like with human beings, the damage really seems to be being suffered by those who already have a problem. By its own admission in its accounts, this company already did. They included a discussion as to whether the company could be certified as able to continue on a going concern basis. No doubt matters will become clearer over the forthcoming days and weeks.

What does this mean for the hospitality industry? There are now 50 closed hotels which are not going to re-open after the lockdown has finished, certainly not under the existing management. They are all closed and one must presume that they will go up for sale. It is possible that a large group will acquire them or some of them as a job lot; there are some quite nice hotels in the portfolio. However my guess is that if such purchases do take place, they will be at “very reasonable prices” indeed. Such purchases would mean that those funds would not be available to acquire other hotels. Even selling them all individually is going to bring about a huge downwards pressure on the market.

And this is just one group. Of course 50 closed hotels means more business for the rest but I think that there will be buyers out there to pick up hotels like these at reasonable prices. These businesses are no longer going concerns so the TUPE rules will not apply; moreover the new owners will have the opportunity to structure their businesses as they choose from the word go and whilst this means building turnover back up, modern internet marketing systems can be very effective if they are well managed. It is to be hoped that the new employers will be able to offer jobs to the now redundant staff. However setting up a business from scratch will be quite an expensive job, hence the capital value of these assets is going to be greatly reduced. The chances of the group remaining solvent after it has been wound up are sadly very low indeed.

As I said, it is early days and it will be necessary to watch this space to see how the administrators decide to move things forward. The fact the businesses are all closed does beg the question whether administration is in fact the right insolvency process. I am not sure how a business which is not a going concern can be rescued as a going concern!

Lockdown has not yet been lifted and yet we have begun to see a lot companies going to the wall. At the moment, lockdown is like a shield and defender – a veil covering current events. I am sorry if I appear as the harbinger of doom and gloom but when lockdown finishes, the veil will be lifted and soon thereafter the latent damage will start to emerge. In the words of Ronald Reagan, “you ain’t seen nothin’ yet”.

Adrian Leopard 23-05-20

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