January 18, 2008 / 9:57 AM / 12 years ago

UPDATE 1-Nightclub firm Luminar faces dancefloor downturn

(adds detail, company, analysts comment)

By Marc Jones

LONDON, Jan 18 (Reuters) - Analysts fear Britain’s biggest nightclub firm Luminar LMR.L could face a tough 2008 after it said fewer clubbers were hitting its dancefloors, despite a solid Christmas and New Year.

Luminar said profit before tax for the year ending February 2008 would be within the 27.5 million to 34.3 million pounds ($54-$67 million) range of analyst forecasts taken from 10 investment banks polled by Reuters.

With fears that pub and club goers will opt to stay at home to cut back on spending in the face of higher bills and living costs, analysts are painting a gloomy picture for the sector over the next year.

Luminar, which runs the Oceana, Liquid and Lava club chains, said trading had toughened in the two-month run-up to Christmas, while the true impact of a ban on smoking in its English and Welsh clubs was starting to become apparent.

“Units with a good smoking solution (over 70 percent of the estate) are outperforming those without such a solution,” the firm said in a statement.

The key Christmas and New Year nights had been “satisfactory”, Luminar said, but in general fewer clubbers were coming through the door now the smoking ban was in force.

Margins improved, however, thanks to bigger-spending older partygoers and cost-cutting measures.

In the three weeks to Jan. 3, like-for-like sales in its big-name clubs were up 4.3 percent compared with a year ago and up 5.7 percent up over 11 months, although the numbers imply a 3.5 percent drop in the second half after a 13.4 rise in the first.

“We have a situation where the branded units are performing worse than the unbranded and both are negative,” said KBC Peel Hunt analyst Paul Hickman.

“This is a serious position for the company given the scale of its capital investment,” he added, cutting his 2009 profit expectation by 9 percent and reducing his rating on the stock from ‘buy’ to ‘hold’.

Luminar shares, which have slumped around 60 percent over the last 7 months, fell as much as 4 percent in early trading.

In addition the firm said it had hedged 140 million pounds ($275 million) of its debt using fixed-rate and cap and collar instruments.

Reporting by Marc Jones; Editing by Erica Billingham and Quentin Webb

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