By Scott Wright

AUDITORS for Crieff Hydro Limited have highlighted a “material uncertainty” which “may cast significant doubt” on its ability to continue as a going concern, as chief executive Stephen Leckie declared a staff shortage was threatening the recovery of the hospitality industry.

The auditors’ warning comes in new accounts for the Perthshire-based group, which underline the devastating financial impact of the coronavirus pandemic on the hospitality industry.

However, Mr Leckie declared the company was on track to return to profit in the current year, boosted by strong demand since restrictions began to ease in the spring.

The company, which owns a portfolio including Peebles Hydro, the Ballachulish Hotel in Glencoe and the eponymous Crieff Hydro resort, made a loss of £3.2 million for the year ended February 28, following a profit of £1.2m the year before. With lockdowns forcing the closure of its hotels for 25 weeks of the year, turnover tumbled to £12.1m from nearly £33m the year before.

Writing in the accounts, the auditors note that cash flow forecasts for the group signal that it will require its bank to “waive covenant terms and assume a refinance event in the forecast period”. The auditors add: “Neither the waving of covenant terms or refinance have been obtained and are not guaranteed.”

The accounts for Crieff Hydro show bank loans and overdrafts totalled £22.9m, up from around £18m.

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But speaking to The Herald yesterday, chief executive Stephen Leckie declared the group was fortunate to be underpinned by a “strong thick balance sheet” and had the confidence of its bank when asked to comment on the “material uncertainty” raised by auditors.

And while he admitted the loss was a “sore one”, Mr Leckie said: “We thought we were going to lose much more than that. We thought at one point we were going to lose more than double that.”

Mr Leckie added: “The bank like the management, they like the way the company is run, and they like the figures. They accept we have all taken a bit of a whack last year and, unlike others, we are back in the game this year. However, I am also conscious that many of my chums and colleagues who are reliant on international travel are not having a great year.”

Mr Leckie said the “biggest challenge” immediately facing the hospitality industry is an acute staff shortage, which is widely attributed to new immigration rules brought by Brexit and people moving to jobs in other sectors during the pandemic. The Crieff Hydro group is currently facing a shortfall of between 70 and 100 roles.

Mr Leckie declared the issue is “throttling our expectation of [a] return to profits because we can’t open our restaurants.”

He said: “We don’t have chefs, [and] we don’t have waiting staff. When we closed Crieff [because of lockdown] we had 140 live-in members of staff. When we reopened in May we had five.”

Mr Leckie revealed that the company’s management has decided to limit the capacity of the hotels to 80 per cent in the coming months because of the ongoing staff shortage. Lunch services will also be restricted at some hotels.

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Asked what government could do to help ease the staffing crisis, Mr Leckie, who chairs the Scottish Tourism Alliance, said: “The plea to Westminster is: please give us a short-term emergency visa [to recruit people from the EU].”

Noting that such a measure was also needed for sectors such as haulage, which is facing a shortage of around 100,000 HGV drivers, he said: “How are we expected to recover if we don’t get the staff in?”

The Crieff Hydro group is forecast to return to the black in its current financial year – even though the hotels only began reopening from May and were forced to trade under significant restrictions in the subsequent weeks.

Trading is benefiting this year from strong demand from the staycation market as well as the ongoing reduction in value-added tax and the business rates holiday, the latterr saving the group £1.5m. But, commenting from a wider industry perspective, Mr Leckie warned the outlook for next year is shrouded by uncertainty on international travel. Support measures such as the VAT cut and business rates relief will also be withdrawn.

Mr Leckie said: “This year is looking good. The challenge is next year. If restrictions don’t lift completely, and international travel does not return, this industry will continue to suffer.”

He added: “The silver bullet for recovery is not the staycation market. It is a whole lot more than that. Speak to any airport or anyone reliant on groups and tours, [or] the international conference market, and they will say, what recovery?”

The accounts show Crieff employed an average of 744 people across the group over the year, down from 827.

The company invested £600,000 in improving its hotels over the period.