3rd May 2005 07:00
Hotel Corp (The) PLC3 May 2005 The Hotel Corporation plc Maiden Preliminary Results The Hotel Corporation plc ("the Company"), an AIM listed investment companyowning 49.9% of Dawnay Shore Hotels plc ("DSH"), announces its maidenpreliminary results for the period from incorporation on 7 June 2004 to 31December 2004. DSH is today separately announcing maiden results for the periodfrom its incorporation on 26 April 2004 to 2 January 2005. Highlights The Hotel Corporation • Profit, including revaluation gain, of £6.0m • Independent valuation of hotels translates into significant growth in net assets per share, up 18.6% at year end DSH • Hotel EBITDA of £14.3m, in line with expectations • Revenue per available room up 6.1% on same period of 2003 • Progressing the significant property development potential within portfolio • Increasing share of business, conference and leisure market across the UK • Integration of 3 Hanover hotels in January 2005 going to plan, benefiting from centralised systems across the group Barclay Douglas, Chairman of The Hotel Corporation plc, said: "We launched this company in July to provide an opportunity for investors inpublic equity to gain exposure to private equity transactions in the hotelsector. Trading in DSH during this maiden period has matched our expectations.Integrating the Paramount and Hanover hotels is going to plan and DSH isbuilding market share in its targeted four star hotel segment, whilst pursuingambitious plans to maximise the value of surplus land within the portfolio.This represents an excellent start and we have positive expectations for asuccessful 2005." Press enquiries The Hotel Corporation 0207 638 9571Barclay Douglas Citigate Dewe Rogerson 0207 638 9571Patrick DonovanMargaret GeorgeFiona Mulcahy Notes to Editors The Hotel Corporation plc 1 The Hotel Corporation is an AIM listed company which was established as a means for investors in publicly quoted companies to gain an interest in Dawnay Shore Hotels plc. It is currently a 49.9% shareholder in DSH, which owns a portfolio of 16 four star regional hotels in the United Kingdom. Under the Paramount brand of distinction, the hotels include the prestigious Carlton in Edinburgh and the Oxford Hotel in Oxford. The hotels offer extensive banqueting, conference and leisure facilities and many of them have architectural and historical significance. 2 The Hotel Corporation is an Isle of Man company, with its principal place of business and registered office in Douglas, Isle of Man. Chairman's statement I am pleased to report a successful maiden set of preliminary figures for theperiod ended 31 December 2004. Background The Company was formed as a means for investors in publicly quoted companies togain an interest in Dawnay Shore Hotels plc ("DSH"). DSH is the vehicleestablished by Dawnay, Day and Shore Capital to acquire an initial group ofhotels and to use this platform to develop a chain of four star British regionalhotels. As the Company's principal asset comprises its interest in DSH, thisstatement will focus both on the Company's own results and then those of DSH.The balance sheet of DSH as at 2 January 2005 and the profit and loss account ofDSH for the period ended 2 January 2005 are also provided in this statement. The DSH directors believed that the timing in the hotel cycle was advantageousfor such acquisitions and that the strong net cash flows expected from DSH'soperations should enable substantial distributions to its investors during theplanned five year period of investment. Following this period, a number ofpossibilities for exit would be explored. These include flotation of DSH,transfer of its properties into a retail investment structure and sale of theDSH Group in its entirety to another hotel group or private equity buyer. On 12 July 2004, DSH acquired the Paramount Group, a chain of 13 four starhotels across Britain, with extensive banqueting, conference and leisurefacilities, for an aggregate cash consideration of £215 million before expenses.This was financed through equity and mezzanine finance subscribed by clientsof Shore Capital and by senior debt, in the amount of £177m, provided by AngloIrish Bank. At the same time, the Company raised £22 million through a placingby Shore Capital of 22 million Ordinary Shares at £1 per share and the Companysubscribed for £21.7m of units in DSH. On 17 December 2004, the Company raised£13.25m from investors and subscribed for a further £10.6m of units in DSH.These units comprise equity in DSH and deep discount bonds issued by awholly-owned subsidiary of DSH. The total amount invested by the Company in DSH as at 31 December 2004 was£32.3m. Results of the Company Revenue for the period was £651,000 and, following administrative expenses,operating profit amounted to £556,000. In addition, the profit includes acredit categorised as investment gains amounting to £5,435,000, arising from themeasurement of the Company's investment in the ordinary shares of DSH at theirfair value, in accordance with International Financial Reporting Standards.Including this investment gain, total profit before tax was £5,998,000. No taxis payable for the period as the Company is registered as a tax exempt companyin the Isle of Man. Basic and diluted earnings per share were 29.42p includingthese investment gains, and 2.76p without it. The Company has valued its shareholding in DSH on the basis of the net assetvalue of DSH as set out in that company's accounts, without seeking to apply anyadjustment. DSH's accounts themselves include a valuation of its portfolio ofhotels of £235.1m, which was carried out by Colliers Robert Barry, third partyindependent valuers in November 2004. This translates into a net asset valueper share in the capital of DSH of £1.37 per share. Given the highly leveragedstructure of DSH (approximately four times the level of debt to equity),movements in the valuation of DSH (both upwards and downwards) will have amagnified effect on the value of the Company's shareholding in DSH. DSH results These results show the performance of the Paramount Hotels acquired by DSH fromAlchemy in July 2004. They do not include any contribution from the secondacquisition, of three Hanover hotels, which was completed in January 2005.Given that Paramount was previously controlled by a private equity owner with adifferent capital structure, it is not meaningful to compare like-for-likefinancial information below the level of operating profit. The table belowtherefore compares certain key performance indicators for the 25 week periodended 2 January 2005 with the 24 week period ended 28 December 2003. H2 04 (Unaudited) H2 03 (Unaudited) % changeOccupancy 77.1% 77.9% -1.1%Average Room Rate £66.11 £61.65 +7.2%Revenue per Available Room £50.95 £48.04 +6.1%Turnover £36.4m £33.2m +9.7%*Hotel Operating Profit(1) £14.3m £13.4m +6.7%* (*25 weeks to 2 January 2005, 24 weeks to 28 December 2003) Trading in DSH for the period ended 2 January 2005 was in line withexpectations, whilst the integration process continues to plan. Under CEOCharles Prew, appointed during the period, Management's decision to focus on theconference and leisure market has been fully justified, with the Groupincreasing its share of the market. Results for DSH during the 25 week period ended 2 January 2005 showed turnoverof £36.4m and hotel operating profit of £14.3m. After central costs including£600k of professional fees and other costs incurred in connection with theabortive acquisition of a second portfolio of hotels in September 2004,operating profit was £7.9m. After interest paid (including in respect of thesenior debt and the first series of deep discounted bonds), DSH achieved profitbefore tax of £21,000. Excluding the aborted fees and costs mentioned above,profit before tax would have been considerably higher. DSH's policy remains todistribute its net surplus cash flow from time to time and anticipates thepayment of dividends in respect of the financial year ending 31 December 2005. These results do not include any contribution from the Hanover hotels, whichwere acquired by DSH in January 2005 for £57m, before expenses, and have ingeneral performed in line with expectations since acquisition. However, thepipeline of conference bookings at Hinckley (one of the Hanover hotels acquiredin January) had decreased before acquisition. DSH's conference sales team hasbeen working hard to remedy this and enquiry levels are now strong. Wetherefore expect a performance uplift at Hinckley in the latter part of 2005. The hotel portfolio of the Paramount Group was valued by Colliers Robert Barryon an existing use basis and following the guidelines of the RICS at £235.1million, as at 18 November 2004. This equates to a value per room of £130,000and represents an increase of 9.3 per cent over the consideration paid by DSHfor the acquisition of the Paramount Group on 12 July 2004. As DSH'sacquisition of Paramount was financed with a substantial element of senior debt,this implies a much larger increase in the value of the net assets of DSHattributable to its shareholders (including the Company). The gain resulting from this revaluation has been recognised in the incomestatement of the Company and results in a net asset value per share of theCompany as at 31 December 2004 of £1.18. This translates, on a pro-forma basis,to a net asset value per share of £1.23 in respect of the shares issued on theCompany's flotation. Property Development - DSH DSH has worked to extract development value from the entire portfolio; this hastaken two main directions. Firstly, by building value in the business throughadditions to the stock of hotel rooms, and secondly through developments whichinclude alternative use for part of the site or the construction of newbuildings. New hotel bedrooms cost approximately £65,000 to build but have a currentaverage value of £130,000. DSH has targeted hotels for development where theuplift is expected to be above average, thus maximising the potential value tothe business. Across the portfolio, DSH has formulated detailed plans to add a further 315hotel rooms, of which 189 rooms have already received planning consent; itintends to submit applications for the remaining 126 which it believes have goodprospects of obtaining consent. DSH now intends to move forward, initiallyselecting for capital expenditure those sites with the greatest potential value. In addition, it has identified further significant opportunities, for whichplans are less advanced, to build rooms in other parts of the hotel portfolio. There is a significant opportunity for a comprehensive re-development of thefive star Imperial Hotel Torquay, subject to planning consent. A striking newcliff-top building will include an enlarged landmark Imperial Hotel andInternational Spa, plus a mix of residential property for individual or multiownership. DSH has presented the scheme to key local stakeholders and received afavourable initial response. The planning process is a complex matter and is expected to be protracted.However, the opportunity to create a world class resort hotel, which is expectedto generate significant revenues for DSH, is being strongly pursued. Dividends - the Company As described in the Company's Prospectus dated 9 July 2004, it is the Board'spolicy that, subject to the availability of distributable reserves, dividendswill be paid to shareholders when the Directors believe it is appropriate andprudent to do so. Accordingly, an interim dividend of 2.5 pence per share waspaid on 11 March 2005 in respect of the 22,000,000 ordinary shares issued by theCompany at flotation and the Directors are not recommending a final dividend inrespect of the period. Going forward, the Company expects to continue to paydividends reflecting the cash flow received from DSH and retaining only suchcash within the Company as is needed to fund its ongoing expenses and any shortterm requirements for investment. It is expected that the next dividend to be paid will be in respect of the June2005 interim accounts, relating to the redemption of deep discount bonds by DSH(Finance) plc, a subsidiary of DSH, and any additional income accrued by theCompany. Annual General Meeting Notice convening the Company's first Annual General Meeting, to be held atBurleigh Manor, Peel Road, Douglas, Isle of Man, IM1 5EP on Wednesday, 25 May2005, will be enclosed with the Company's report and accounts for the period, tobe despatched to shareholders shortly. Prospects I am very pleased with the two excellent businesses that DSH has acquired, andwith their trading to date. The new management team, under CEO Charles Prew,has settled in well and the hotels are performing ahead of the industry average,particularly in terms of conference bookings. DSH is also experiencing verysatisfactory levels of demand for weekend and leisure breaks. DSH remains interested in adding value to the portfolio if suitable acquisitionscan be found which meet its financial criteria. Valuations, however, haveincreased over the period and DSH would only be interested in assets with theright geographic fit for its portfolio and the appropriate facilities to attractleisure and conference trade. Considerable development potential still remainswithin the existing portfolio and DSH will continue to seek to exploit theseopportunities. As noted in the preliminary announcement by DSH today, David Pantin has steppeddown as Chairman of DSH (effective 20 July 2005) to be better able to pursue hisvarious business interests which involve significant travel. The Directors ofthe Hotel Corporation thank David for his commitment and contribution to DSH inits first period of trading. The Directors of the Hotel Corporation believe that the rationalisation of thehotel sector will continue to provide attractive opportunities for DSH. Therehas been an encouraging start to the year and we look forward to the rest of2005 with confidence. As a sign of this confidence, the Company invested afurther £1.36m in units of DSH in February 2005. Barclay DouglasChairman 3 May 2005 The Hotel Corporation Plc Income Statement For the period from 7th June 2004 to 31st December 2004 2004 Notes £'000 Continuing Operations Revenue 651Administrative expenses (95) Profit from operations 556 Bank interest receivable 7Investment gains - unrealised 2 5,435 Profit before tax 5,998 Taxation - Profit after tax for the period from continuing operations 5,998 Basic and Diluted Earnings per Share 3 29.42 p This comprises: Basic and diluted earnings per share from operations and bankinterest 2.76 p Basic and diluted earnings per share from investment gains 26.66 p The Hotel Corporation Plc Balance Sheet As at 31st December 2004 2004Assets Notes £'000 Non-Current AssetsInvestments 2 37,740 Current AssetsTrade and other Receivables 12Cash and Cash Equivalents 3,320 3,332 Total Assets 41,072 Equity & Liabilities Capital & ReservesShare Capital 1,731Share Premium Account 33,308Retained Earnings 5,998 41,037Current LiabilitiesTrade and other Payables 35 Total Equity & Liabilities 41,072 The Hotel Corporation Plc Statement of Changes in Equity For the period from 7th June 2004 to 31st December 2004 2004 £'000 Profit for the period 5,998 Issue of share capital 35,039 Balance at 31st December 2004 41,037 The Hotel Corporation Plc Cashflow Statement For the period from 7th June 2004 to 31st December 2004 2004 Notes £'000 Net Cash Outflow From Operating Activities 4 (72) Investing Activities Interest Received 7Purchase of Investments (32,305)Proceeds received on the maturity of Investments 651 Net cash used in Investing Activities (31,647) Financing Activities Issue of Share Capital 35,039 Net cash from Financing Activities 35,039 Net increase in cash and cash equivalents 3,320 The Hotel Corporation Plc Notes to the Preliminary announcement For the period from 7th June 2004 to 31st December 2004 1. Basis of accounting The financial information in this announcement has been prepared in accordancewith the International Financial Reporting Standards (IFRS). The informationdoes not constitute statutory accounts within the meaning of the Isle of ManCompanies Acts 1931 - 2004 . The statutory accounts for the period ended 31December 2004 will be finalised on the basis of the financial informationpresented by the directors in this preliminary announcement and will bedelivered to the Companies Registry in the Isle of Man following the Company'sAnnual General Meeting. 2. Investments 2004 £'000Equity investments 21,840Held to maturity investments 15,900 37,740Equity investments Investments in the ordinary shares of Dawnay Shore Hotels plc ("DSH") held atthe balance sheet date are measured at their fair value. In determining the fairvalue attributable to the ordinary shares in DSH, the Directors have drawn uponthe net asset value of DSH as set out in the accounts of that company, and haveutilised that net asset valuation to calculate a net asset value for eachordinary share held in DSH by the Company, without seeking to apply anyadjustment. The accounts of DSH include a recent valuation of its portfolio ofhotels that has been provided by an independent professional valuer and preparedin accordance with the rules of RICS. Any resultant gain or loss in the value ofthe Company's equity investment in DSH is recognised in the Income Statement. Held to maturity investments Held to Maturity Investments that are held at the balance sheet date aremeasured at amortised cost less any impairment loss. Where the investments arein bonds that have been issued at a significant discount to their maturityvalue, the discount is amortised over the period to maturity of the bond at theeffective interest rate applicable. The amortisation is recognised in the IncomeStatement for the period. The Hotel Corporation Plc Notes to the Preliminary announcement For the period from 7th June 2004 to 31st December 2004 3. Earnings per Share The calculation of basic earnings per share is based on the following data: Earnings 2004 £'000 Profit for the period 5,998 Number of Shares 2004 Weighted average number of ordinary shares for the purpose of basicearnings per share 20,388,742 There were no convertible instruments in existence as at 31st December 2004 andtherefore diluted earnings per share does not differ from the basic earnings pershare. 4. Notes to the Cashflow Statement Reconciliation of Profit from Operations to Net Cash from Operating Activities. 2004 £'000Profit from Operations 556Increase in Receivables (12)Increase in Trade and other payables 35Amortisation of Discount on Purchase of investments (651) Net cash outflow from operating activities (72) 5. Events After the Balance Sheet Date On 29th January 2005 the Company invested a further £715,000 in the purchase of650,000 ordinary shares of 5 pence each in Dawnay Shore Hotels plc at £1.10 pershare, together with a further £1,001,000 of discounted bonds of £1,000 each inDSH (Finance) plc, purchased for £650,000. On 15th February 2005 the Company announced an interim dividend of 2.5 pence pershare in respect of the 22 million ordinary shares of 5 pence in issue at thetime of flotation in July 2004. The dividend, which amounted to £550,000, waspaid on 11th March 2005. The Hotel Corporation Plc Notes to the Preliminary announcement For the period from 7th June 2004 to 31st December 2004 6. Information relating to Dawnay Shore Hotels plc The profit and loss account of DSH for the period ended 2 January 2005 togetherwith the balance sheet of DSH as at 2 January 2005 is provided below, and havebeen prepared in accordance with applicable United Kingdom accounting standards.These are extracted from the preliminary results announcement made by DSH today. DAWNAY SHORE HOTELS PLCCONSOLIDATED PROFIT AND LOSS ACCOUNTPeriod ended 2 January 2005 "Consolidated profit and loss account" Period ended 2 January 2005 £'000 TURNOVER 36,395Cost of sales (4,984) GROSS PROFIT 31,411Administrative expenses (23,466) OPERATING PROFIT 7,945 Loss on sale of fixed assets (7) 7,938Interest receivable and similar income 217Interest payable and similar charges (8,134) PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 21Tax on profit on ordinary activities 29 RETAINED PROFIT FOR THE FINANCIAL PERIOD 50 All of the group's operations during the period shown above representacquisitions. There is no difference between the profit on ordinary activities before taxationand the retained profit for the period and their historical cost equivalents. The trading period is in respect of the 25 weeks ended 2 January 2005. The Hotel Corporation Plc Notes to the Preliminary announcement For the period from 7th June 2004 to 31st December 2004 DAWNAY SHORE HOTELS PLC CONSOLIDATED BALANCE SHEET As at 2 January 2005"Consolidated and company balance sheet" 2 January 2005 Group £'000 FIXED ASSETSIntangible assets - goodwill 7,685Tangible assets 237,281Investments - 244,966 CURRENT ASSETSStocks 713Debtors 7,582Cash at bank and in hand 23,926 32,221 CREDITORS: amounts falling due within one (23,525)year NET CURRENT ASSETS 8,696 TOTAL ASSETS LESS CURRENT LIABILITIES 253,662 CREDITORS: amounts falling due after more (199,127)than one yearPROVISION FOR LIABILITIES AND CHARGES (10,650) NET ASSETS 43,885 CAPITAL AND RESERVESCalled up share capital 1,598Share premium account 30,877Revaluation reserve 11,360Profit and loss account 50 EQUITY SHAREHOLDERS' FUNDS 43,885 -------------------------- (1) HOP is EBITDA for the individual hotels, excluding head office costs This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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