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Legion seeks buyer for loss-making trading arm

Governance | Tania Mason | 14 Sep 2009

The Royal British Legion is pulling the plug on the trading arm that runs its network of new ex-servicemen’s clubs after three consecutive years of losses.

The trustees are trying to find a buyer or buyers for the nine clubs which were launched four years ago as high-street hubs for welfare provision and comradeship. Clubs generally operate out of the Legion’s properties and RBL Trading Ltd, which operates the network, borrowed £7.4m from the charity to refurbish nine of its premises to become New Legion Clubs. 

The New Legion Clubs were intended to help generate new members for the Legion and were meant to be self-sustaining. But RBL Trading made a loss of nearly £1.8m in the year to September 2008, on top of losses of £773,000 and £230,000 for 2007 and 2006.

This prompted the trustees earlier this year to commission a review, which found that the clubs were not generating nearly as many new members as had been hoped, and had not become the beacons of service delivery that the charity had intended.

Communications director Stuart Gendall said the clubs had been hit by the recession, the smoking ban and an aging membership, and had not performed as expected.

The charity is now trying to sell the clubs as a going concern, either altogether or separately, in a bid to preserve the 100-odd jobs and repay the rest of the loan.  The trading company still owes “£4m to £5m”, according to Gendall.

He admitted the decision to dispose of the clubs was not a popular one within the charity because the need to maintain comradeship amongst members was so important. But the subsidiary could not keep trading at a loss.

The network of older Legion clubs, which are effectively private members’ clubs that operate independently with a licence to use the Legion brand, are unaffected by the review.

Pall Mall HQ sold for £20m

Separately, the Legion sold its Pall Mall headquarters in February this year for £20m, well below the original £33m price agreed with the eventual buyer last year.

The £33m sale was due to complete at the end of 2008 but the buyer defaulted and was prepared to forfeit their £3.3m deposit as property prices dived in the recession.

In November, the property was revalued at the Legion’s request at £15m, while the purchaser received valuations as low as £7.5m. Eventually a revised sale price of £20m was negotiated and the sale was completed on 12 February at a profit of £17m.

The charity has moved to new premises in Borough High Street, London SE1, purchased by the charity in December 2006 to enable all head office staff to be based in the same building. The total cost of purchase and renovation of the building came to £24.3m.

During 2007/8, the charity’s total income grew by 9.4 per cent to £104m, due partly to a record £30m Poppy Appeal collection.

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