Half Yearly Report

RNS Number : 4125A

Peel Hotels PLC

08 October 2009

PEEL HOTELS PLC

INTERIM RESULTS

For 28 weeks ended 23 August 2009

# Turnover up 5.5% to £7,192,103 (2008: £6,819,298)

# Profit before interest down 11.9% to £483,355 (2009: £549,180)

# Profit after tax up 119.9% to £1,146,714 (2008: £521,430)

# Gearing on Shareholders' funds 61.4% with interest covered 1.2 times

# 95 bedroom Norfolk Royale in Bournemouth (A.A.four star) acquired for £8,250,000 on 1 June 2009

# Earnings per share

Basic 8.2p (2008: 3.8p)

Diluted 8.2p (2008: 3.7p)

# In order to be prudent the Board have decided not to pay an interim dividend (2008: 2.0p) however if the current improvement in trading is sustained they are keen to recommend a final dividend

Chairman Robert Peel said: "Clearly the interim trading results have been impacted by the economy, however our trading has improved over the past few months although it is difficult to determine if this is a gain in market share arising from the continued upgrading of our Hotels or a stabilising market place. We are optimistic that our sales will actually grow on a like for like basis by the year end but it remains to be seen if we can achieve revpar growth which will be key to the ultimate year end result."

8 October 2009

Press Enquiries: 020 7266 1100

Nominated adviser and broker 020 7418 8900

KBC Peel Hunt

David Davies

Nicholas Marren

CHAIRMAN'S STATEMENT

Results

In the twenty eight weeks to 23 August 2009 turnover increased 5.5% to £7,192,103 (of which £702,402 was in respect of the Norfolk Royale Hotel in Bournemouth which we acquired on June 1 2009). Operating profit decreased 12.0% to £483,355 (of which £244,408 was in respect of the Norfolk Royale Hotel).

The decrease in like for like sales from our Hotels in the period was 3.1% with overall costs down 0.6%. However Hotel operating profit decreased 21.7% on a like for like basis clearly illustrating the high operational gearing of a Hotel business. Accommodation revenue per available room (revpar) decreased 8.8% with occupancy down 8.9% and average room rate flat.

The lack of commercial activity in terms of cutbacks in overnight stays, conference and training courses has continued in the first half and clearly impacted our results. Our occupancy in the last eight weeks of the first half was up on a like for like basis and this trend has continued in the first four weeks of the second half, but as I stated in my 2008/2009 Annual Report it is impossible to predict when the economy will start to recover.

The results have been impacted by profit decline at the Bull Hotel in Peterborough and the Cosmopolitan Hotel in Leeds, where in addition to poor occupancy levels, the relaunch costs of the name change and the opening costs of the Cosmopolitan Restaurant and Bar have had to be absorbed. I am glad to report that the significant losses suffered at the Strathdon Hotel have been arrested in recent months and we expect to be able to report a significant improvement in its trading by the year end.

The four Star AA listed Norfolk Royale Hotel in Bournemouth was acquired on 1 June 2009 for a consideration of £8,250,000 and has traded well up to expectations in the short time it has been in our ownership. This acquisition gave the Company the additional benefits of actually making use of one of our two financial instruments committed on 24 June 2003 (the Cap and Collar that was costing us 6.99% less LIBOR on £7,000,000 that we had repaid, from 14 April 2009 to 1 June 2009) and a significant saving on Capital Gains Tax (due on the sale of the Avon Gorge Hotel in September 2007).

Group overheads decreased by 7.8% amounting to a saving of £33,051 on the previous year and depreciation and amortisation increased 6.7% to £600,264 reflecting the increase in capital expenditure.

Tax has been provided at an effective rate of 25%, totalling £19,180, less an adjustment of £1,089,174 for an overprovision of capital gains tax for prior years, leaving an overall credit to our profit and loss account of £1,069,994. The substantial overprovision arises from the claiming of rollover relief by way of the acquisition of the Norfolk Royale Hotel against an element of the charge suffered on the disposal of the Avon Gorge Hotel. Basic earnings per share were 8.2p compared with 3.8p in the comparative period on a weighted average of 14,012,123 (2008:13,852,041) shares in issue. There were no share options exercised in the period.

Finance

On the 23 August 2009 net debt stood at £14,510,066 representing loans totalling £12,715,534 and an overdraft of £1,794,532. Gearing on Shareholders' funds was 61.4% with interest covered 1.2 times. Net debt increased £10,653,150 compared with the previous year end.

On the 1 June 2009 the Company took a loan of £12,331,100 to finance the acquisition of the Norfolk Royale Hotel and to refinance the existing LIBOR loan (which had an outstanding balance of £3,506,063 as at 28 May 2009).

The Cap and Collar on £7,000,000 of our debt finishes on the 12 October 2009 and thereafter, in simple terms the fixed interest swap at 5.83% plus margin of 1.95% is payable initially on £10,034,700 and thereafter on a declining balance until the swap ceases on 11 April 2014. The balance of the loan is charged at six monthly LIBOR plus a margin of 1.95%.

In view of the disappointing trading result and in order to be prudent the Board have decided not to pay an interim dividend (2008: 2p) but will review the situation at the year end. The Board are comfortable with the ongoing finances of the Company and if the recent improvement in trading results is sustained the board would be keen to recommend a Final Dividend. Shareholders will note that in the previous financial year the Company paid 5.5p in total for the year (2p interim 3.5p final).

Capital Expenditure

The acquisition of the Norfolk Royale Hotel cost £8,685,134 including Stamp Duty and fees. We continued our strategy of investing in our product and £2,200,854 was spent on upgrading our Hotels and the continuing installation of an integrated property management system and EPOS systems in each of the Company's Hotels and at our administration office in Leeds.

Work was completed at the Cosmopolitan Hotel, Restaurant and Bar (formerly the Golden Lion Hotel) and this property has been totally transformed into a Boutique Hotel. At the Caledonian Hotel in Newcastle 15 bedrooms have been upgraded to very high standards and all the Hotel corridors, doors, stairs and landings renovated. We continue the ongoing bedroom refurbishment at the Midland Hotel using our own in house resources, as opposed to using contractors.

Shareholders

We are delighted to welcome Shareholders to our Hotels where they can see for themselves the improvements that we have made, whilst enjoying a beneficial discount. All Shareholders are entitled to a 30% discount, using the special reservations number 0207 266 1100 or e-mail info @peelhotel.com. Shareholders can keep in touch with progress in the Company and various promotional initiatives by visiting our website www.peelhotels.co.uk.

We are about to launch a unique Christmas gift offer which essentially gives the recipient and their partner two nights stay on any dates in January and February 2010 (except for 12/13 February), inclusive of dinner each night and English breakfast each morning in an executive room in any of our 9 Hotels. The cost of the gift is £99 (which will not be mentioned on the voucher) and the real worth of the break is over £300. To buy gift wrapped vouchers contact us on 0207 266 1100.

The Future

Our trading has improved over the last few months but it is difficult to determine if this is a gain in market share arising from the continued upgrading of our Hotels or a stabilising market place. Whilst commercial UK is still under severe pressure to contain costs there are increasingly more opportunities in the Leisure market particularly due to the weakness of the pound against almost all currencies.

Our product has never been so good and whilst we are optimistic that our sales will actually grow on a like for like basis by the year end it remains to be seen if we can achieve revpar growth which will be key to the year end result.

Robert Peel

Chairman

08 October 2009

DIRECTORS AND ADVISORS

Directors

Robert Edmund Guy Peel Executive Chairman

Clement John Govett Non-executive Director

Keith Peter Benham Non-executive Director

Norbert Paul Gottfried Petersen Chief Operating Officer

Secretary

Thring Townsend Lee & Pembertons

Kinnaird House, 1 Pall Mall East, London SW1Y 5AU

Registered Office

4th Floor, 111 Old Broad Street, London EC2N 1PH

Company registration number 3473990

Auditor

Grant Thornton UK LLP

No 1 Whitehall Riverside, Leeds, LS1 4BN

Bankers

Royal Bank of Scotland Plc

280 Bishopsgate, London EC2M 4RB

Registrars

Computershare Services Plc

PO Box No. 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH

Solicitors

Thring Townsend Lee & Pembertons

Kinnaird House, 1 Pall Mall East, London SW1Y 5AU

Davidson Large

Royal House, 110 Station Parade, Harrogate HG1 1EP

Stockbrokers

KBC Peel Hunt Ltd

4th Floor, 111 Old Broad Street, London EC2N 1PH

PROFIT AND LOSS ACCOUNT

For the period ended 23 August 2009

			28 weeks		28 weeks		Year
			ended		ended		ended
			23/8/2009		24/8/2008		8/2/2009
			Unaudited		Unaudited		Audited
	Note	£	£	£	£	£	£
Turnover			7,192,103		6,819,298		12,720,245
Cost of sales			(5,719,864)		(5,285,976)		(9,988,967)
Gross profit			1,472,239		1,533,322		2,731,278
Administrative expenses
Depreciation		(600,264)		(562,471)		(1,073,635)
Other		(388,620)		(421,671)		(750,548)

			(988,884)		(984,142)		(1,824,183)
Operating profit Interest payable & similar charges			483,355 (406,635)		549,180 (111,348)		907,095 (242,666)
Profit on ordinary activities
before taxation			76,720		437,832		664,429
Taxation	2		1,069,994		83,598		378,246

Profit on ordinary activities after taxation			1,146,714		521,430		1,042,675

Earnings per share	3
Basic			8.2p		3.8p		7.4p
Diluted			8.2p		3.7p		7.4p

There are no recognised gains and losses other than stated above. Accordingly, no statement of total recognised gains and losses is given.

BALANCE SHEET AS AT 23 AUGUST 2009

23/8/2009

24/8/2008

8/2/2009

Unaudited

Audited

Note

Fixed assets

Tangible assets

39,947,522

28,862,530

29,661,798

Current assets

Stocks

125,089

84,028

92,945

Debtors

1,551,152

1,124,381

1,205,298

Cash at bank and in hand

1,654,734

132,405

1,676,241

2,863,143

1,430,648

Creditors (due within one year)

(5,622,698)

(4,677,903)

(4,519,391)

Net current liabilities

(3,946,457)

(1,814,760)

(3,088,743)

Total assets less current liabilities

36,001,065

27,047,770

26,573,055

Creditors (due after one year)

(11,773,134)

(3,488,495)

(3,004,781)

Provisions for liabilities

(588,000)

(707,000)

(588,000)

Net assets

23,639,931

22,852,275

22,980,274

Capital and reserves

Called up share capital

1,401,213

1,412,613

1,401,213

Share premium account

9,743,495

9,845,705

9,743,495

Profit and loss account

12,495,223

11,593,957

11,835,566

Equity shareholders' funds 4

23,639,931

22,852,275

22,980,274

CASH FLOW STATEMENT

For the period ended 23 August 2009

			28 weeks		28 weeks		Year
			ended		ended		ended
			23/8/2009		24/8/2008		8/2/2009
			Unaudited		Unaudited		Audited
	Note	£	£	£	£	£	£
Net cash inflow from
operating activities	5		1,765,173		711,207		1,269,258
Returns on investments
and servicing of finance
Interest paid		(318,840)		(50,833)		(181,745)
Net cash outflow from
returns on investments
and servicing of finance			(318,840)		(50,833)		(181,745)
Taxation
UK corporation tax (paid)/received		(818,644)		64		64
Tax paid			(818,644)		64		64
Capital expenditure Purchase of tangible fixed asset		(10,885,988)		(700,341)		(2,010,773)
Net cash outflow from capital
expenditure			(10,885,988)		(700,341)		(2,010,773)
Equity dividends paid			(490,424)		(2,592,243)		(2,874,765)
Net cash outflow before
financing			(10,748,723)		(2,632,146)		(3,797,961)
Financing Issue of ordinary share capital New Loans		- 12,831,100		113,610 -		- -
Loan repayments		(4,009,314)		-		-
Net cash inflow
from financing			8,821,786		113,610		-
(Decrease) in cash	6		(1,926,937)		(2,518,536)		(3,797,961)


Reconciliation of net debt
(Decrease) in cash in the period			(1,926,937)		(2,518,536)		(3,797,961)
Cash inflow from
change in net debt			(8,821,786)		-		-
Change in net debt resulting from cashflows			(10,748,723)		(2,518,536)		(3,797,961)
Non cash changes			95,573		(9,982)		(18,538)
(Increase) in net debt in the period			(10,653,150)		(2,528,518)		(3,816,499)
Net debt at beginning of period			(3,856,916)		(40,417)		(40,417)
Net debt at end of period	6		(14,510,066)		(2,568,935)		(3,856,916)

NOTES TO THE INTERIM RESULTS

For the period ended 23 August 2009

1. Basis of accounting

The interim financial information has been prepared on the basis of the accounting policies consistent with those applied in the
last Annual Report.

                         The financial information set out in respect of the year ended 8 February 2009 does not constitute the Company's statutory
                         accounts for that year but is derived from those accounts. Statutory accounts for that year have been delivered to the Registrar
                         of Companies. The auditor reported on those accounts and their report was unqualified. The interim financial statements have
                         been reviewed by the Company's auditor and a copy of the auditor's review report is attached to this interim report.

2. Taxation

Tax has been provided at a rate of 25% which represents the expected effective rate for the full year less an adjustment for prior
year capital gains tax.

3. Earnings per share

Earnings per share are based on the profit after taxation, and on the weighted average number of shares in issue during the
period.

		28 weeks	28 weeks	Year
		ended	ended	ended
		23/8/2009	24/8/2008	8/2/2009
		Unaudited	Unaudited	Audited
Average No. shares	Basic	14,012,123	13,852,041	14,012,123
	Diluted	14,017,483	13,928,922	14,100,551

4. Reconciliation of movements in shareholders' funds

		28 weeks	28 weeks	Year
		ended	ended	ended
		23/8/2009	24/8/2008	8/2/2009
		Unaudited	Unaudited	Audited
Profit for the period	1,146,714		521,430	1,042,675
Dividends paid relating to previous year	(490,424)		(2,592,243)	(2,874,765)
Issue of shares less expenses	-		113,610	-
Recognition of equity-settled share based payments	3,367		9,060	11,946
Net increase/(decrease) in shareholders' funds	659,657		(1,948,143)	(1,820,144)
Shareholders' funds at 08/02/09	22,980,274		24,800,418	24,800,418
Shareholders' funds at 23/08/09	23,639,931		22,852,275	22,980,274

5. Reconciliation of operating profit to net cash inflow from operating activities

		28 weeks	28 weeks	Year
		ended	ended	ended
		23/8/2009	24/8/2008	8/2/2009
		Unaudited £	Unaudited £	Audited £
Operating profit	483,355		549,180	907,095
Depreciation	600,264		562,471	1,073,635
Recognition of equity-settled share based payments	3,367		9,060	11,946
(Decrease)/ Increase in stocks	(32,144)		2,758	(6,159)
(Decrease)/increase in debtors	(328,686)		181,280	94,573
Increase/(decrease) in creditors	1,039,017		(593,542)	(811,832)
Net cash inflow from operating activities	1,765,173		711,207	1,269,258

NOTES TO THE INTERIM ACCOUNTS

For the period ended 23 August 2009

6. Analysis of net debt

	At beginning			At end
	of period		Non cash	of period
	9/2/2009	Cash flow	changes	23/8/2009
	£	£		£
Cash at bank and in hand	132,405	(132,405)	-	-
Bank overdraft	-	(1,794,532)	-	(1,794,532)


Debt due within one year	(984,540)	42,140	-	(942,400)
Debt due after one year	(3,004,781)	(8,863,926)	95,573	(11,773,134)
Total	(3,856,916)	(10,748,723)	95,573	(14,510,066)

7. Financing

On the 1st June 2009 the Company took a loan of £12,331,100 to assist with the purchase of the Norfolk Royale Hotel and to refinance the existing LIBOR loan (with an outstanding balance of £3,506,063 as at 28 May 2009). Interest is charged at 1.95% above LIBOR.

The loan is repayable by 9 half yearly instalments calculated on a 20 year capital and interest repayment programme with a final lump sum repayment due 5 months after the date the penultimate instalment is paid.

The Company entered into a collar agreement on £7million which caps the Company interest at 6.99% plus margin of 1.95% on £7million of the new loan. The minimum interest cost is 4.99% plus margin of 1.95% up to 12 October 2009, except when LIBOR is below 4.99% between 24 June 2003 and 12 October 2009; in which case an additional 2% of interest is payable.

The Company entered into a GBP roller coaster callable interest rate swap agreement which commenced on 11 April 2003 and ends on 11 April 2014 with an option for the Royal Bank of Scotland to terminate the agreement from 11 October 2009. Under terms of this agreement the Company fixes its interest payments on £3,526,970 of the new loan not covered by the collar until 12 October 2009, increasing on that date to £10,034,700 when the collar agreement ends. This amount decreases by £492,270 every six months until 11 April 2014.

Under the fixed interest swap the Company pays 5.83% plus margin of 1.95% on these amounts.

The loan and overdraft are secured by a debenture dated 6 March 1998 over all the Company's freehold and long leasehold properties.

Independent review report to Peel Hotels PLC

Introduction

We have been engaged by the Company to review the financial information in the interim financial report for the 28 weeks ended 23 August 2009 which comprises the profit and loss account, the balance sheet, the cash flow statement, and the related notes 1 to 7. We have read the other information contained in the interim financial report which comprises only the Chairman's Statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the Company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusion we have formed.

Directors' responsibilities

The interim financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim figures are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

Our responsibility

Our responsibility is to express to the Company a conclusion on the financial information in the interim financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the interim financial report for the 28 weeks ended 23 August 2009 is not prepared, in all material respects, in accordance with the basis of accounting described in note 1.

GRANT THORNTON UK LLP
AUDITOR
Leeds

HOTEL DIRECTORY

PEEL HOTELS PLC 19 Warwick Avenue London W9 2PS Telephone: 020 7266 1100 FAX: 020 7289 5746
Location	Hotel	Rating	Rooms	Telephone	Facsimile
Bournemouth	Norfolk Royale	****	95	01202 551521	01202 299729
Bradford	Midland Hotel	****	90	01274 735735	01274 720003
Carlisle	Crown & Mitre	****	94	01228 525491	01228 514553
Dunfermline	King Malcolm	****	48	01383 722611	01383 730865
Leeds	Cosmopolitan	****	89	0113 243 6454	0113 242 9327
Newcastle Upon Tyne	Caledonian	****	91	0191 281 7881	0191 281 6241
Nottingham	Strathdon Hotel	****	68	0115 941 8501	0115 948 3725
Peterborough	Bull Hotel	****	118	01733 561364	01733 557304
Wallingford	George Hotel	****	39	01491 836665	01491 825359
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