Manchester brewer and pub retailer Hydes managed to renegotiate its bank borrowing last year after a cash squeeze caused a breach of one of its covenants, the company's annual accounts reveal.
"Accounting irregularities" resulted in Hydes seeking substantial debt repayments from a dozen or so tenants at a time when the economic downturn was accelerating.
Hydes stated: "Many tenants, unable to repay the debt, handed back the keys and we faced the challenge of recruiting new tenants at a very difficult time.
"The profitability of the managed estate has been adversely affected by the need to run eight tenanted sites under management following the often sudden departure of tenants.
"In such circumstances these houses have suffered significant losses, but at least temporary management has enabled them to stay trading and improved the prospects of recruiting good quality tenants."
Overall, managed pub profit declined by 14% after taking into account losses from temporary management of £138,000. The company's 59 tenanted pubs saw profits decline 14.8% to £2.49m.
The company said: "We are supporting deserving tenants in the difficult trading environment by discounting supplies and helping them improve the performance of their businesses, including marketing initiatives and expansion of food offers."
The value of the company's pub estate dropped £1.02m to take account of falling property prices. Its net debt rose from £7.36m to £9,53m in the year to 31 March 2009. The company is selling six under-performing pubs with a view to reducing debt to £7.5m by March this year. Contract brewing saw a volume shortfall on the Boddington contract — barrelage was down 5,879 barrels on 2008 at 23,062 barrels.
The company stated: "InBev is obliged under the terms of the contract to deliver the agreed barrelage. Towards the end of the year we (started) brewing further products to assist with the recovery of the shortfall."
Turnover was up slightly in 2009 at £22.78m, but exceptional operating expenses of £1,42m produced a loss of £1.32m compare to a profit of £722,590 the year before.