The Sefton Group made a pre-tax loss of £6.23m last year, according to the latest annual report presented to shareholders.
But the figures do not include this year’s controversial £4.5m government bail-out – and if write downs and property losses are excluded, the accounts show the Group actually returned a modest level of operating profit in 2012.
In his statement for the report, company chairman Sir Miles Walker says the logic of the bail-out was ‘compelling’.
Under that deal announced in April, government approved a £1.3m loan repayable over five years and a £3.2m sale and lease back agreement for the Middlemarch site.
At the time, Chief Minister Allan Bell said the deal was designed to prevent the debt-ridden group from going under.
But in his statement, Sir Miles says ‘substantial if not conclusive’ progress had already been made in the company’s debt-reduction strategy by mid-2012, with total debts falling from a high of £96m in early 2010 to a ‘more manageable’ £56m.
As a result, the group was able to negotiate a restructure with the banks.
He said a combination of short-term requirement for working capital and longer-term plans to redevelop the Palace led in July last year to propose a sale and leaseback of the Middlemarch site to Manx government.
Sir Miles reveals that differences over valuation led to the form of the deal changing from a simple land sale to a combined land sale and loan – which in turn ‘led to controversy and some confusion in the reporting of the overall group restructure’.
But he says: ‘We believed, and continue to believe, that the logic for both parties is compelling.
‘From a Sefton Group perspective, we avoided the need to unconditionally sell the site, which could have raised the working capital that we needed but could have stymied our ability to ultimately redevelop. From a government perspective it provided a commercial return and ensured the Middlemarch site remained available for the town centre redevelopment.’
The chairman blames the debt problems on the ‘sea change in banking’ following the 2008 credit crunch. Cheap loans that financed growth previously were no longer available and the Group was saddled with £43m of interest rate swaps and was left paying £1.8m a year more in interest than would have been otherwise have been the case.
Following the completion of the restructure, overall consolidated group debt now stands at £24m. The bail-out is not reflected in the 2012 accounts although property losses of £5 m resulting from the 2013 restructure are.
The group recorded a pre-tax loss of £6.23m for the year (down from £6.30m in 2011). Excluding property write-downs and one-off costs, it returned a modest level of operating profitability, according to the accounts.
Sir Miles says the Sefton Group could now drive forward with its medium-term strategy to redevelop the Palace within a new-build facility. He said financial performance within the core hotel and leisure business continues to improve as a result of stable revenues and lower costs.
The annual report and accounts will be received at the Sefton Group’s 89th AGM at the Sefton Hotel on October 28.