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Luminar parts company with auditor PwC

PricewaterhouseCoopers asked to resign days before nightclub operator enters crucial talks with lenders

Luminar, Britain’s biggest nightclub operator, has parted company with its auditor days ahead of an important deadline in its crisis talks with lenders.

The move against PricewaterhouseCoopers comes as a surprise as the board had asked shareholders to re-elect the accountancy firm as auditor only six weeks ago.

Heavily indebted Luminar has been struggling for more than two years as trading has been hit hard by soaring youth unemployment. A string of profit warnings has seen its share price decline from over 800p in 2007 to below 20p three years later. Today the stock is passing hands at less than 6p.

In December the ailing business refinanced its borrowings with Lloyds Banking Group, Barclays and Royal Bank of Scotland. New three-year loans of £99m came with an interest rate of 7.8%.

Since then trading has continued to be dire, forcing Luminar to go cap in hand to its lenders again ahead of a May debt covenant test in order to secure a waiver.

The banks, which in effect control the business, are providing temporary financing to keep the business alive but have set a deadline of the end of this month by which time they will review the situation.

The removal of PwC requires Luminar to send out a circular to all shareholders, enclosing a statutory letter from the accountancy firm. The letter states: “We have been informed by the company that it is of the view that a fresh audit relationship would benefit the company moving forward and has asked us to resign [our] position as auditor to the company.”

The August bank holiday weekend is likely to prove a busy one for the company and its banks. However, it is thought the lenders are unlikely to push the business into administration so close to the start of the university year, which begins next month. Freshers’ week partying at colleges and universities across Britain traditionally provide one of the busiest trading spells for Luminar.

Some of the company’s actions in recent times is thought to have greatly angered several shareholders. In late 2009 a £37m equity raising diluted the company’s share base by two-thirds, but Luminar founder Steve Thomas promised the money would be spent on new sites and upgrading to boost sales. Six weeks later, however, the company issued a series of profit warnings and its expansion ambitions were suspended. Thomas was ousted as chief executive in February last year.

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