Preliminary Announcement

RNS Number : 4314G

Peel Hotels PLC

12 May 2011

 



PEEL HOTELS PLC

PRELIMINARY ANNOUNCEMENT

Final results for financial year ended

6 February 2011

PEEL HOTELS PLC

HIGHLIGHTS

# Turnover up 7.6% to £15,263,682 (2010: £14,186,042)

# Profit before interest up 64.2% to £1,298,676 (2010: £790,980)

# EBITDA up 42.1% to £2,828,522 (2010: £1,990,627)

# Profit before tax £555,329 (2010: Loss £88,559)

# Earnings per share Basic and Diluted 3.6p (2010: 0.8p)

'In spite of very difficult market conditions there has been a significant improvement in occupancy and a respectable improvement in accommodation revenue per available room (REVPAR). Net debt has decreased £1,350,847 compared with the previous year. The Board have erred on the side of caution in respect of deciding not to recommend the payment of a dividend but hope to be in a position to pay a dividend to Shareholders in respect of the current financial year'.

Robert Peel

Chairman                                            Press Enquiries:

12 May 2011                                      Peel Hunt LLP

                                                            Capel Irwin

 CHAIRMAN'S STATEMENT

RESULTS

The Company has adopted International Financial Reporting Standards (IFRS) for its financial statements for the year ended 6 February 2011. Information relating to the transition from UK GAAP is highlighted in note 5 to this announcement. The key change to the profit before tax of the Company has been to include the movements in the fair value of the Company's interest rate swap during the year within the profit and loss.

Like for like hotel revenues increased by 2.2% and like for like hotel profits after depreciation and before Company administration costs increased by 14.1%. REVPAR (accommodation revenue per available bedroom) increased 4.7% in the year with occupancy up 8.2% and average room rate down 3.2%.

Total turnover increased 7.6% to £15,263,682 (2010: £14,186,042). Operating profit for the full year increased 38.5% to £1,094,901 (2010: £790,980). EBITDA (Earnings before interest, tax and depreciation) was £2,828,522 (2010: £1,990,627).

The pre-tax result before profit on disposal of a staff house in Newcastle and the fair value movement on the swap was £61,699 (2010: Loss £74,106). The pre-tax result was a profit of £555,329. Tax has been provided at a rate of 28%, less the discount on deferred tax liabilities, giving an effective rate of 25%. Last year there was a substantial credit to the tax provision amounting to £1,214,635. This had arisen from claiming roll over relief on the acquisition of the Norfolk Royale Hotel against a part of the charge to tax on capital gains suffered on the disposal of the Avon Gorge Hotel. Earnings per share on basic and diluted basis were 3.6p (2010: 0.8p basic and diluted adjusted for the adoption of IFRS).

In spite of very difficult market conditions there has been a significant improvement in occupancy and a respectable improvement in REVPAR. Like for like sales have increased whilst wages and ancillary costs have been carefully controlled. At the same time we have continued to ensure the maintenance of our hotels. Guest satisfaction levels have never been higher and the AA (Automobile Association) quality ratings have improved in each of our properties.

Shareholders might have noticed that the Company has been much more proactive throughout the year in its marketing strategy successfully targeting the discretionary spend market through advertising in various journals and the national press to compensate for the Governmental and Corporate cutbacks on overnight accommodation throughout the provincial market within the United Kingdom.

FINANCE

As at 6 February 2011 net debt stood at £13,443,723 representing loans totalling £12,609,477 and an overdraft of £945,432 less £111,186 cash at bank. Gearing on Shareholders' funds was 61% with interest covered 1.1 times. Net debt decreased by £1,350,847 compared with the previous year.

Shareholders will be aware that the Company has a fixed interest swap at 5.83%, plus margin of 1.95%, on a declining balance currently £9,050,700, until the swap ceases on 11 April 2014. As I informed Shareholders in my statement with the Interim Accounts in October last year, following a review by its bankers in regard to the Company's debt profile, from 12 October 2010 they have increased the margin to 2.5% on £9,500,000 whilst increasing the margin on the balance from 1.95% to 4% over six monthly LIBOR. Margin on the Company's overdraft remains the same at 2.5% over Base Rate.

The review cost the Company £72,547 in fees, charges and expenses which is being amortised over the term of the loan and will cost a further £47,520 over the same period. It is indeed unfortunate that the increased margin in the case of our swap translates into an even higher overall cost of borrowing. Shareholders' will note that the cost of buying out the swap has decreased substantially over the past few months and this trend is likely to continue.  We continue to monitor the cost of buying out the swap but currently it would make little economic sense.

I pointed out in my interim statement that the severe increase in the costs of borrowing would encourage us to dispose of our ancillary property. We sold 31, Grosvenor Gardens, the staff house for the Caledonian, Newcastle on 2 February 2011 for a consideration of £415,000 giving rise to net profit on disposal of £203,775. Post Balance Sheet and on 28 March 2011 we sold 21/23, The High Street, Wallingford, the staff house for the George Hotel in Wallingford, for a consideration of £470,000 and at a substantial profit.

The proceeds of both these disposals have been used to make additional repayments of part of the Company's bank loan over and above the regular semi-annual repayment instalments.

It is perhaps worth mentioning that currently we pay back £446,000 per annum on our loans and this combined with utilisation of the proceeds of the two asset sales, notwithstanding the margin hikes that have been inflicted on us, will ensure an on-going lessening of the overall annual interest cost.

The Board have decided regrettably not to recommend a Dividend in respect of the 2010/2011 Financial Year. The Board have erred on the side of caution in respect of deciding not to recommend the payment of a dividend but hope to be in a position to pay a dividend to Shareholders in respect of the current financial year.

CAPITAL EXPENDITURE

We have slowed down our capital expenditure as indicated in the interim statement and last year's annual report and this we will continue to do until such time as the economy recovers. The acceleration of capital expenditure in the two years, following the sale of the Avon Gorge Hotel, has lessened the pressure to embark on major projects. The Estate is broadly in good condition and we continue to work towards achieving AA four star ratings in the majority of our portfolio.

£515,102 was spent in the year and over half of this sum was spent on the Midland Hotel in Bradford and the Norfolk Royale in Bournemouth. We continue to renovate bedrooms at the Midland Hotel and we have completed improvements to one floor of bedrooms at the Norfolk Royale Hotel which completes the upgrade of each of the hotel's 95 bedrooms.

In addition to such capital expenditure a further £570,154 (2010: £509,117) was expensed through the profit and loss account in the year on repairs and renewals which clearly demonstrates our commitment to maintaining and improving the quality of our Estate.

SHAREHOLDERS

It is always a great pleasure to welcome Shareholders and their families to our hotels where they can see for themselves the improvements we have made whilst enjoying a beneficial discount. All Shareholders are entitled to a 30% discount, using the special reservation number 0207 266 1100 or e-mail [e-mail]. Shareholders can keep in touch with progress in the Company and various promotional initiatives by visiting our website www.peelhotels.co.uk.

THE FUTURE

Clearly there is oversupply in the provincial market place and the consequential reduction of rates, accelerated through cost cutting by Government Departments and Corporations alike, is a real challenge in the short to medium term.

We believe we can continue to improve our occupancy through aggressively marketing our product which, in the main, is in excellent shape and in prime positions within its various locations. Owing to the high operational gearing of a hotel business relatively modest improvements in sales translate into attractive improvements in profits. We continue to evaluate our cost base with a view to eliminating costs that do not affect the wellbeing and satisfaction of our guests.

We are considering a number of management contract opportunities as we believe entering into such arrangements would help improve profits by effectively amortising the Company's overheads.

Robert Peel

Chairman

12 May 2011

Statement of Comprehensive Income

for the year ended 6 February 2011

					2011		2010
			Note		£		£
Revenue					15,263,682		14,186,042
Cost of sales					(12,271,069)		(11,546,545)
Gross profit					2,992,613		2,639,497
Administration expenses					(657,721)		(634,417)
Depreciation					(1,239,991)		(1,214,100)
Profit on disposal of property					203,775		-
Operating profit					1,298,676		790,980
Finance income					406		123
Finance expense					(1,033,608)		(865,209)
Fair value movement on derivative					289,855		(14,453)
Profit /(loss) before tax					555,329		(88,559)
Income tax					(55,351)		202,121
Profit and total comprehensive income for the period attributable to owners					499,978		113,562
Earnings per share			3
Basic & diluted (pence)					3.6		0.8

Statement of Changes in Equity

for the year ended 6 February 2011

Year ended 6 February 2011	Share Capital	Share premium account	Profit and loss account	Total
	£	£	£	£
Balance brought forward at 8 February 2010	1,401,213	9,743,495	10,401,199	21,545,907
Employee share options	-	-	1,769	1,769
Transactions with owners	-	-	1,769	1,769
Profit and total comprehensive income for the period	-	-	499,978	499,978
Balance at 6 February 2011	1,401,213	9,743,495	10,902,946	22,047,654

Year ended 7 February 2010	Share Capital	Share premium account	Profit and loss account	Total
	£	£	£	£
Balance brought forward at 9 February 2009	1,401,213	9,743,495	10,771,808	21,916,516
Employee share options	-	-	6,253	6,253
Dividends paid	-	-	(490,424)	(490,424)
Transactions with owners	-	-	(484,171)	(484,171)
Profit and total comprehensive income for the period	-	-	113,562	113,562
Balance at 7 February 2010	1,401,213	9,743,495	10,401,199	21,545,907

Balance Sheet

at 6 February 2011            

		2011	2010	2009
		£	£	£
Assets
Non-current assets
Property, plant and equipment		38,583,903	39,513,792	29,661,798
Deferred tax asset		251,707	342,189	338,142
Total non-current assets		38,835,610	39,855,981	29,999,940
Current assets
Inventories		106,788	112,840	92,945
Trade and other receivables		1,244,761	1,130,180	1,205,298
Current tax asset		-	97,382	-
Cash at bank and in hand		111,186	104,912	132,405
Total current assets		1,462,735	1,445,314	1,430,648
Total assets		40,298,345	41,301,295	31,430,588
Equity and liabilities
Equity attributable to owners
Share capital		1,401,213	1,401,213	1,401,213
Share premium		9,743,495	9,743,495	9,743,495
Retained earnings		10,902,946	10,401,199	10,771,808
Total equity		22,047,654	21,545,907	21,916,516
Liabilities
Non-current
Borrowings (due after one year)		10,663,422	11,557,618	3,004,781
Deferred tax liabilities		1,618,568	1,771,811	782,250
Non-current liabilities		12,281,990	13,329,429	3,787,031
Current
Trade and other payables		2,023,531	1,861,992	1,394,033
Borrowings (due within one year)		2,891,486	3,341,864	984,540
Current tax liabilities		121,436	-	2,140,818
Derivative financial instruments		932,248	1,222,103	1,207,650
Current liabilities		5,968,701	6,425,959	5,727,041
Total liabilities and equity		40,298,345	41,301,295	31,430,588

The accompanying accounting policies and notes form an integral part of these financial statements.

Approved by the board 12 May 2011                                                                                                                        

Robert Peel, Director

Norbert Petersen, Director

Cash Flow Statement

for the year ended 6 February 2011

		2011	2010
		£	£
Cash flows from operating activities
Profit for the year		499,978	113,562
Adjustments for:
Equity settled share-based payment expenses		1,769	6,253
Financial income		(406)	(123)
Financial expense		1,033,608	865,209
Fair value movement on derivative		(289,855)	14,453
Income tax income		55,351	(202,121)
Profit on sale of property		(203,775)	-
Depreciation		1,239,991	1,214,100
Operating profit before changes in working capital and provisions		2,336,661	2,011,333
UK corporation tax received/(paid)		100,706	(1,050,566)
(Increase)/decrease in trade and other receivables		(68,504)	80,749
Increase in trade and other payables		109,360	273,374
Increase/(decrease) in inventories		6,052	(19,895)
Net cash from operating activities		2,484,275	1,294,995
Cash flows from investing activities
Interest paid		(1,063,907)	(760,549)
Acquisition of property, plant and equipment		(515,102)	(11,066,094)
Sale of property, plant and equipment		408,776	-
Net cash from investing activities		(1,170,233)	(11,826,643)
Cash flows from financing activities
New loans		500,000	13,331,100
Loan repayments		(861,105)	(4,228,616)
Equity dividends paid		-	(490,424)
Net cash from financing activities		(361,105)	8,612,060
Net increase/(decrease) in cash and cash equivalents		952,937	(1,919,588)
Cash and cash equivalents at the beginning of the period		(1,787,183)	132,405
Cash and cash equivalents at the end of the period		(834,246)	(1,787,183)
For the purposes of the cash flow statement, cash and cash equivalents comprise:
Cash and bank balances Bank overdraft		111,186 (945,432)	104,912 (1,892,095)

Notes

(forming part of the financial statements)

1              Basis of preparation

The financial statements from which this preliminary announcement has been extracted have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs").  The financial statements have been prepared under the historical cost convention, except for derivative financial instruments which are included at their fair value.

These results represent the first annual financial statements the Company has prepared in accordance with its accounting policies under IFRS and the comparatives for 2010 have been restated from UK GAAP to comply with IFRS.  An explanation of how the transition to IFRS has affected the reported financial position, financial performance and cash flows of the Company is provided in Note 5.  This note includes reconciliations of equity and profit for comparative periods reported under UK GAAP to those reported for those periods under IFRS.

The IFRS accounting policies have been applied consistently to all periods presented in these financial statements from the date of transition on 9 February 2009.  They also have been applied in preparing an opening IFRS balance sheet at 9 February 2009 for the purposes of the transition to IFRSs, as required by IFRS 1.  The impact of the transition from UK GAAP to IFRS is explained in Note 5.

The financial statements are presented in sterling.

2          Publication of non-statutory financial statements

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

The statement of comprehensive income, the statement of changes in equity, the balance sheet and the cash flow statement have been extracted from the Company's financial statements for the year ended 6 February 2011 upon which the auditors' opinion is unqualified and does not include any statement under section 498(2) or 498(3) of the Companies Act 2006. Those financial statements have not yet been delivered to the Registrar.

3          Earnings per share

Basic earnings per share

The calculation of basic earnings per share year ended 6 February 2011, was based on the profit attributable to ordinary shareholders of £499,978 (2010: £113,562) and a weighted average number of ordinary shares outstanding of 14,012,123 (2010: 14,012,123).  No shares were issued in 2011 or 2010.

Diluted earnings per share

There were no potentially dilutive options in issue in 2011 and 2010 and consequently there is no difference between basic and diluted earnings per share.

 

4        Dividends

Details of the dividend payments made during the year are set out below

	2011	2010
	£	£
Dividend of 3.5p per share paid 26 June 2009	nil	490,424

5       Explanation of transition to Adopted IFRSs

As stated, in the accounting policies, these are the Company's first annual financial statements prepared in accordance with IFRS.  In preparing its opening IFRS balance sheet and comparative information for the financial statements for the year ended 6 February 2011, the Company has adjusted amounts reported previously in financial statements prepared in accordance with UK GAAP. 

IFRS 1 'First Time Adoption of International Financial Reporting Standards' - contains certain optional exemptions to assist companies in the transition to IFRS.  The Company has elected to take the following exemptions:

IFRS 3 'Business Combinations' - advantage has been taken of the optional exception from full retrospective application of IFRS3, and consequently, this standard has not been applied to acquisitions made before 8 February 2009.

The details of how the transition from UK GAAP to IFRS has affected the Company's financial position and financial  performance, are set out in the tables below.  The adjustments have been required to comply with the following reporting standards:

IAS39 - derivatives are required to be included in the balance sheet at their fair value.  This has resulted in the recognition of a liability at 9 February 2009 of £1,207,650, representing the fair value of the interest rate swaps in existence at that date.  The results for the year ended 7 February 2010 have been reduced by £14,453, representing the increase in the fair value of the instruments in the year.  A deferred tax asset has been recognised in relation to this liability.

IAS12 - previously under UK GAAP, there was no requirement to provide deferred tax, in respect of those assets, against which capital gains rollover relief had been claimed. Under IAS 12, deferred tax must be provided against the difference between the qualifying net book value of those assets and their reduced tax base cost. Accordingly, the deferred tax provision was increased by £194,250, as at 9 February 2009 and by a further £1,016,561 in the year ended 7 February 2010.

Notes (continued)

5              Explanation of transition to Adopted IFRSs (continued)

Reconciliation of equity

		9 February 2009			7 February 2010
		UK GAAP	Effect of  transition to adopted IFRSs	Adopted IFRSs	UK GAAP	Effect of transition to adopted IFRSs	Adopted IFRSs
		£	£	£	£	£	£
Non-current assets
Property, plant and equipment		29,661,798	-	29,661,798	39,513,792	-	39,513,792
Deferred tax asset		-	338,142	338,142	-	342,189	342,189
Current assets
Inventories		92,945	-	92,945	112,840	-	112,840
Trade and other receivables		1,205,298	-	1,205,298	1,130,180	-	1,130,180
Taxation receivable		-	-	-	97,382	-	97,382
Cash and cash equivalents		132,405	-	132,405	104,912	-	104,912
		1,430,648	-	1,430,648	1,445,314	-	1,445,314
Total assets		31,092,446	338,142	31,430,588	40,959,106	342,189	41,301,295
Non-current liabilities
Borrowings		3,004,781	-	3,004,781	11,557,618	-	11,557,618
Deferred tax liabilities		588,000	194,250	782,250	561,000	1,210,811	1,771,811
Current liabilities
Trade and other payables		1,394,033	-	1,394,033	1,861,992	-	1,861,992
Borrowings		984,540	-	984,540	3,341,864	-	3,341,864
Income tax		2,140,818	-	2,140,818	-	-	-
Derivative financial instruments		-	1,207,650	1,207,650	-	1,222,103	1,222,103
Total liabilities		8,112,172	1,401,900	9,514,072	17,322,474	2,432,914	19,755,388
Net assets		22,980,274	(1,063,758)	21,916,516	23,636,632	(2,090,725)	21,545,907
Equity attributable to equity holders of the parent
Share capital		1,401,213	-	1,401,213	1,401,213	-	1,401,213
Share premium		9,743,495	-	9,743,495	9,743,495	-	9,743,495
Retained earnings		11,835,566	(1,063,758)	10,771,808	12,491,924	(2,090,725)	10,401,199
Total equity		22,980,274	(1,063,758)	21,916,516	23,636,632	(2,090,725)	21,545,907

Notes (continued)

5              Explanation of transition to Adopted IFRSs (continued)

Reconciliation of profit for 12 months ended 7 February 2010

		UK GAAP	Effect of  transition to  Adopted IFRSs	Adopted IFRSs
		£	£	£
Revenue		14,186,042	-	14,186,042
Cost of sales		(11,546,545)	-	(11,546,545)
Gross profit		2,639,497	-	2,639,497
Administrative expenses		(634,417)	-	(634,417)
Depreciation		(1,214,100)	-	(1,214,100)
Operating profit before net financing costs		790,980	-	790,980
Financial income		123	-	123
Financial expenses		(865,209)	-	(865,209)
Fair value movement on derivative		-	(14,453)	(14,453)
Profit / (loss) before tax		(74,106)	(14,453)	(88,559)
Taxation		1,214,635	(1,012,514)	202,121
Profit for the year		1,140,529	(1,026,967)	113,562

There are no material differences between the cash flow statement presented under Adopted IFRSs and the cash flow statement presented under UK GAAP.

6              The annual report for the period ended 6 February 2011 will be posted to Shareholders by 16 May 2011.  The Annual General Meeting will be held at George Hotel, High Street, Wallingford, OX10 0BS on Wednesday 8 June 2011 at noon.

 

END

 

 

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