Luminar 'in danger of breaching bank covenants' after losing £114m

SHARES in Luminar lost more than one-third of their value yesterday as the nightclub operator plunged into the red and analysts predicted it would breach its banking covenants.

The company ended the day as the biggest faller on the FTSE All-Share index after unveiling a 114 million loss before tax for the year to 25 February.

Luminar – which has four clubs in Scotland, including its Jam House joint venture with former Squeeze musician Jools Holland in Edinburgh – booked 127.8m of asset write-downs.

Turnover dropped by 10 per cent to 173.1m as youth unemployment led to fewer clubbers venturing out to spend cash.

Like-for-like sales have fallen by 19.4 per cent in the first ten weeks of the firm's current financial year, adding to the pressure on new chief executive Simon Douglas, who joined the firm on 8 March.

Douglas, who previously had a long career in retail with HMV and Zavvi, has already closed or sold four of the company's 87 clubs – none of which was in Scotland – and has identified a further five that are "likely" to be sold in the next three months.

A spokesman said the company was not releasing details of which clubs would close.

Luminar – which also trades under the Oceana and Liquid brands – also announced the departure of finance director Robert McDonald, who will be replaced by Philip Bowcock, who joins from Barratt Developments, where he was chief financial controller.

Douglas has also appointed a new marketing director to help turn around the business.

He said: "By focusing on the operational basics and embracing more modern marketing methods, we will engage and entertain our customers and ensure our offer remains relevant.

"We are confident that this more-focused strategy, well executed, will restore value to our shareholders over time."

Nigel Parson, an analyst at Evolution Securities, said Luminar was now "likely" to breach its banking covenants this summer and that such a breach would "trigger an expensive renegotiation of banking terms".

He added: "The finance director has no appetite for this work and has resigned. Some 10m of cost-savings have been identified and there is 50m of freehold assets on the books: the new chief executive, Simon Douglas, has a mountain to climb."

Paul Hickman, an analyst at KBC Peel Hunt, added: "The worsening of current trading, resignation of the finance director and exceptional losses some three times market capitalisation, add to the challenges facing the company."

Both brokers carry "sell" recommendation on the company, while analysts at Numis retained their "hold" rating.

Luminar's other clubs north of the Border are Lava Ignite in Edinburgh and Liquid & Envy in both Aberdeen and Dundee.