20th Sep 2007 07:02
Dawnay Shore Hotels plc20 September 2007 For Immediate Release 20th September 2007 Dawnay Shore Hotels plc Interim results for the 26 week period ended 1 July 2007 Highlights • Strategic review of DSH successfully concluded • 45 year leases granted to Barcelo which has taken over operational management of Paramount Hotels • Increased certainty of income through lease structure • Room count increased from 2,708 rooms to 2,872 rooms • Substantial capital investment in renovation and room additions enhances quality and operating potential of portfolio • DSH rent formula from year 4 takes account of profitability (subject to a minimum rent) • Review underway of DSH capital and corporate structure H1 2007 H1 2006 % change (Unaudited) (Unaudited)Turnover £48.4m £47.9m 1.1%Hotel EBITDA* £15.7m £15.6m 0.6%Occupancy 65.8% 66.3% (0.8%)Average Room Rate £72.51 £71.09 2.0%Revenue per Available Room £47.69 £47.14 1.2% * Hotel EBITDA is for the individual hotels, excluding head office costs Peter Procopis of Dawnay Shore Hotels plc, said: "We are pleased that operating performance has remained steady despite theeffect on occupancy of the substantial renovation works undertaken across theportfolio. Looking ahead, we are delighted with the completion of the Barcelotransaction and look forward to working with a very high quality hotel operatorto add value to the portfolio. By maintaining ownership of the hotels, DSH willcontinue to benefit from the significant real estate and operational potentialof these exceptional assets." Press Enquiries: Dawnay Shore HotelsHoward Shore 020 7468 7911 Dawnay Shore HotelsPeter Procopis 020 7834 8060 Citigate Dewe RogersonPatrick Donovan 020 7638 9571 Notes to Editors 1. Paramount was established in 1994 and was acquired by Dawnay Shore HotelsPlc in July 2004. Following further acquisitions it now owns 20 four andfive-star hotels across Scotland, Northern England, Central England, SouthernEngland and Wales, including the Lygon Arms in the Cotswolds, the Carlton Hotelin Edinburgh, The Marine in Troon, The Majestic in Harrogate, The Imperial inTorquay, The Imperial in Blackpool and The Oxford Hotel in Oxford. 2. The hotels offer extensive banqueting, conference and leisurefacilities and many of them have architectural and historical significance. TheGroup has 2,872 bedrooms and around 20,000 square metres of conference andmeeting rooms and offers extensive facilities to both corporate and leisureguests. 3. On 9 November 2006, the Board announced that it had appointed N MRothschild and Shore Capital as joint financial advisers to undertake astrategic review of the Company's business. During the strategic review theBoard considered options including a potential sale of the business as a wholeand received indicative expressions of interest from potential acquirers. Italso examined the option of creating a REIT. The outcome of the review wasannounced on 24 August 2007 and the completion of the Barcelo transaction on 6September 2007. The Company remains in an offer period pending a review of itscapital structure and a potential corporate reorganisation. A furtherannouncement will be made at the appropriate time. 4. DSH's hotel locations are shown below: CENTRAL ENGLAND No. of meeting Health & Bedrooms rooms Leisure Location 1 Billesley Manor Hotel* 72 10 Y Country 2 Paramount Cheltenham Park Hotel, Cheltenham 152 11 Y Country 3 Paramount Daventry Hotel, Northamptonshire 155 19 Y City 4 Paramount Hinckley Island Hotel, Leicestershire 362 21 Y Country 5 Paramount Oxford Hotel, Oxford 168 25 Y City 6 Paramount Palace Hotel, Buxton 122 7 Y Country 7 Paramount Walton Hall Hotel & Spa 202 21 Y Country 8 The Lygon Arms* 77 4 Y Country NORTHERN ENGLAND 9 Paramount Imperial Hotel, Blackpool 180 15 Y City/Coast 10 Paramount Majestic Hotel, Harrogate 167 8 Y City 11 Paramount Redworth Hall Hotel, County Durham 143 14 Y Country 12 Shrigley Hall Hotel, Golf & Country Club, Cheshire* 148 11 Y Country SCOTLAND 13 Paramount Carlton Hotel, Edinburgh 189 10 Y City 14 Paramount Marine Hotel, Troon 89 4 Y Coast 15 Paramount Stirling Highland Hotel, Stirling 96 6 Y City SOUTHERN ENGLAND 16 Combe Grove Manor* 42 5 Y Country 17 Paramount Basingstoke Country Hotel 100 12 Y City/Country 18 Paramount Imperial Hotel, Torquay 152 8 Y Coast 19 Paramount Old Ship Hotel, Brighton 154 13 N City / Coast WALES 20 Paramount Angel Hotel, Cardiff 102 7 N City Total 2,872 * Paramount Signature Hotel Board of Directors' Statement Review of Operations and Financial Performance The interim results cover the 26 weeks ended 1 July 2007. Throughout thisperiod and up to 6 September 2007 DSH owned and managed the Paramount group ofhotels and as with prior years DSH was responsible for all operating risks andbenefits accruing from this activity. With effect from 7 September 2007, as a result of the leases granted towholly-owned subsidiaries of Barcelo Corporacion Empresarial, S.A. ("Barcelo"),DSH has become a hotel investment company with a secure and growing incomestream from a blue chip tenant. The Board of DSH envisages that the Company'scontinuing growth will come not only from further development of the existingproperty portfolio, but also from acquiring additional hotels and taking asimilar approach with Barcelo. The Board believes that DSH's strategic alliancewith Barcelo will play an important part in the Company's growth. As shown on the attached Consolidated Financial Statements, on a total Groupbasis DSH's turnover for the 26 week period ended 1 July 2007 was £48.4m,generating hotel-level EBITDA of £15.7m. After depreciation, central and othercosts, operating profit was £6.4m. Net interest payable was £12.5m and included£10.0m of interest on senior debt and £2.0m of interest on the deep discountedbonds which are owned by DSH shareholders. No tax is payable and the loss forthe financial period was £6.1m. H1 2007 H1 2006 % change (Unaudited) (Unaudited)Turnover £48.4m £47.9m 1.1%Hotel EBITDA* £15.7m £15.6m 0.6%Occupancy 65.8% 66.3% (0.8%)Average Room Rate £72.51 £71.09 2.0%Revenue per Available Room £47.69 £47.14 1.2% * Hotel EBITDA is for the individual hotels, excluding head office costs Interest expense was around £0.9 million greater than the previous year, mainlyreflecting the cost of capital expenditure facilities drawn to add rooms andrenovate the Group' s portfolio. Dividends DSH's policy remains to distribute its net surplus cash flow from time to timeand during the period a dividend of £1,260,000 was paid. Trading in the firsthalf of the year is traditionally less buoyant than the second half and as inprevious years no dividend is proposed in relation to this period. Goingforward, the Board of DSH intends to review its capital structure. As a resultof the secure income stream generated by the leases and the resultant higherproperty valuation, the Company expects to be able to increase its borrowing.This extra funding should enable the Company to repay the deep discount bondsissued to its investors and, following a capital reduction, to return furthervalue to shareholders. Property valuation External property valuers Colliers Robert Barry reported that the investmentvalue, based on the Barcelo lease terms, of DSH's interest in the 20 Paramountproperties is £556.3 million. This valuation is after deducting 1.5% (of value)for assumed purchaser's costs. The overall valuation compares favourably withthe 31 December 2006 vacant possession value of £530.2 million which made nodeduction for assumed purchaser's costs. The 31 December 2006 valuation, ratherthan this new valuation on an investment basis, has been used to draw up theinterim accounts as DSH continued to operate the hotels until 6 September 2007.However, as required by SSAP 19, the properties will be classified as investmentproperties from 7 September 2007 and an updated investment valuation will besought at the year end and reflected in DSH's financial statements. In addition to the above valuation of £556.3 million, certain non-hotel assetshave been carved out of the lease to Barcelo and it is estimated that furthervalue in excess of £6 million should be generated from these retained assets. Property development In line with stated strategy, DSH has continued to exploit the developmentpotential of its property portfolio through room additions and renovation during2007. Whilst operating performance remained steady the renovation works didimpact occupancy during the period. The capital investment has substantiallyimproved the quality and capacity of the hotels and this is expected to have apositive impact on profitability and consequently on DSH rent, in the mediumterm. At the end of 2006 the Group operated 2,708 rooms whilst at the time of grantingthe leases to Barcelo this had been increased to 2,872 rooms, representing a 6%(164 rooms) increase. The Walton Hall redevelopment was fully completed duringthe period and this landmark hotel is a key focus as Barcelo takes overoperational management. Other hotels where rooms were added and renovationsundertaken included the Lygon Arms, Majestic Hotel, Redworth Hall, Daventry,Hinckley and Brighton. At present DSH holds planning and other permissions where construction has notyet been committed for 316 hotel rooms and 1,581 square metres of conference /meeting space. In addition the Group continues to pursue a significant number offurther permissions. The agreement with Barcelo envisages that DSH as landlordand Barcelo as tenant will agree value-enhancing projects of this nature and itprovides a formula for these improvements to add to the Company's rental incomethrough the leases. As stated above, DSH has also excluded from the leasedproperties certain non-hotel assets. Prospects Trading during July was ahead of the prior year driven by the strength of theprovincial hotel market and by the substantial capital investment. Augusttraditionally relies heavily on the leisure segment and the very poor weatherduring this month affected the operating performance. As noted above, witheffect from 7 September DSH's income comprises rental income from Barcelo. Thefirst year's rent is £28 million, rising to £30 million in the second and thirdyears and to between £31 million and £34 million in the fourth year, dependingupon hotel profitability. Thereafter the rent will be adjusted by inflationwhich can be supplemented in later years by a link to hotel profitability. TheDirectors believe that this arrangement provides security of income whilst alsoallowing DSH to share in future upside. Refer to Appendix 1 for a summary ofthe lease terms. Employees On completion of the lease transaction, DSH's employees transferred to entitiescontrolled by Barcelo. DSH wishes to thank all employees for their hard work andenthusiasm in creating such a strong and successful hotel chain and looksforward to working with them as they become a part of an exceptionalinternational hotel company. Peter Procopis - 20 September 2007 Dawnay Shore Hotels plcConsolidated Profit and Loss Account26 Weeks Ended 1 July 2007 Unaudited Unaudited Audited 26 weeks ended 26 weeks ended Year ended 1 July 2007 2 July 2006 31 December 2006 £'000 £'000 £'000 Turnover 48,430 47,902 101,228 Cost of Sales (5,594) (5,765) (12,166) Gross profit 42,836 42,137 89,062 Administrative Expenses (36,457) (34,973) (70,334) Operating Profit 6,380 7,164 18,728 Loss on sale of fixed assets - - (2) 6,380 7,164 18,726 Interest receivable and similar income 30 86 160Interest payable and similar charges (12,541) (11,696) (23,662) Loss on ordinary activities before taxation (6,131) (4,446) (4,736) Tax on loss on ordinary activities - - 1,474 Dividends (1,260) (398) (398) Retained loss for the financial period (7,391) (4,844) (3,660) No statement of Total Recognised Gains and Losses has been presented as allitems have been reported in the profit and loss account. Note: Reconciliation of Operating Profit 1 July 2007 £mHotel EBITDA 15.7Depreciation and Amortisation (4.5)Central and other costs (4.8)Operating Profit as shown above 6.4 Dawnay Shore Hotels plcConsolidated Balance SheetAs at 1 July 2007 Unaudited Unaudited Audited As at 1 July As at 2 July As at 31 December 2007 2006 2006 £'000 £'000 £'000 Fixed assetsIntangible assets - Goodwill 9,263 9,652 9,523Tangible assets 543,398 467,973 527,550 552,661 477,625 537,073 Current AssetsStocks 745 832 862Debtors 8,477 7,509 9,995Cash at Bank and in hand 3,946 2,190 2,407 13,168 10,531 13,264 Creditors amounts falling due within one year (27,785) (22,583) (22,947) Net current liabilities (14,617) (12,052) (9,683) Total assets less current liabilities 538,044 465,573 527,390 Creditors amounts falling due after more than one year (339,434) (307,040) (321,389)Provision for liabilities and charges (8,021) (9,478) (8,021) Net assets 190,589 149,055 197,980 Capital and reservesCalled up share capital 1,658 1,658 1,658Share premium account 32,137 32,137 32,137Revaluation reserve 168,043 120,461 168,043Profit and loss account (11,249) (5,201) (3,858) Equity shareholders' funds 190,589 149,055 197,980 Dawnay Shore Hotels plcConsolidated Cash Flow Statement26 Weeks Ended 1 July 2007 Unaudited Unaudited Audited 26 weeks ended 26 weeks ended Year ended 31 1 July 2007 2 July 2006 December 2006 £'000 £'000 £'000 Net cash inflow from operating activities 11,633 10,212 24,530 Returns on investments and servicing of financeInterest received 30 86 160Interest paid (5,429) (9,575) (19,488)Interest paid on finance leases (22) (37) (57)Dividends paid (1,260) (398) (398) Net cash outflow from returns on investments and servicing (6,681) (9,924) (19,783)of finance TaxationCorporation tax paid - - - Capital expenditurePurchase of tangible fixed assets (19,875) (7,351) (23,169)Sale of tangible fixed assets - - 34 Net cash outflow from capital expenditure and financial (19,875) (7,351) (23,135)investment AcquisitionsPurchase of Hotels - - -Purchase of subsidiary undertakings - - (197)Cash balances less overdraft acquired with hotels and - - -subsidiary undertakings Net cash outflow from acquisitions - - (197) Net cash outflow before financing (14,923) (7,063) (18,585) FinancingIssue of share capital - - -New term loans raised 18,251 4,551 17,802New bonds issued - - -Bank loan note issued - - 114Bank loans repaid - - -Bonds repaid (1,416) (1,591) (3,091)Term loan issue costs (266) - -Repayment of principal under finance leases (107) (181) (307)Net cash inflow from financing 16,462 2,779 14,518 Increase/(Decrease) in cash 1,539 (4,284) (4,067) Notes: 1. ACCOUNTING POLICIES The interim financial information for the 26 weeks ended 1 July 2007 has beenprepared in accordance with applicable United Kingdom accounting standards usingpolicies consistent with those applied to the year ended 31 December 2006 andthe 26 weeks ended 2 July 2006. The interim information, together with thecomparative information contained in this report for the year ended 31 December2006, does not constitute statutory accounts within the meaning of section 240of the Companies Act 1985. This interim financial information has not beenaudited or reviewed by the Company's auditor. The statutory accounts for theyear ended 31 December 2006 have been reported on by the Company's auditors,Deloitte & Touche LLP, and delivered to the Registrar of Companies. The reportof the auditors on those accounts was unqualified and did not contain astatement under section 237(2) or (3) of the Companies Act 1985. 2. SEGMENTAL ANALYSIS The Group's turnover, loss before taxation and net assets are derived from itsprincipal activity within the UK and as such no segmental information has beendisclosed. 3 RELATED PARTY TRANSACTIONS The Group has been involved in transactions with companies within the Dawnay DayGroup and Shore Capital Group which are subject to common control. Profit and loss Outstanding charge creditor at the in the period period end £'000 £'000 Recharge of management costs by Dawnay Day Hotel Management Limited 2,589 933to Dawnay Shore Hotels plc Management fees charged by Shore Capital Limited to Dawnay Shore 469 274Hotels plc Management fees charged by Dawnay Day Hotels Limited to Dawnay 1,176 860Shore Hotels plc The management fee charged by Shore Capital Limited is based on 17 basis pointsof gross asset value per annum. The management fee charged by Dawnay Day Hotels Limited is based on 43 basispoints of gross asset value per annum. 4. DIVIDENDS During the period the Company paid a dividend of £1,260,000 or 3.8p per ordinaryshare (2006: £397,800 or 1.2p per ordinary share). 5. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATINGACTIVITIES Unaudited Unaudited Audited 26 weeks 26 weeks Year ended ended ended 1 July 2007 2 July 2006 31 December 2006 £'000 £'000 £'000 Operating profit 6,380 7,164 18,728Depreciation of tangible fixed assets 4,250 4,000 7,998Amortisation of goodwill 260 194 520Decrease in stocks 117 45 15Decrease / (Increase) in 1,536 55 (2,431)debtors(Decrease) in creditors (910) (1,246) (300) Net cash inflow from operating activities 11,633 10,212 24,530 6. POST BALANCE SHEET DATE EVENTS After the period end, the Company's strategic review was successfully concludedand the Group has entered into arrangements which grant 45 year leases toBarcelo (35 year initial term with two five year renewals). As a result of theleases granted to Barcelo, commencing on 7 September 2007, DSH has become ahotel investment company with a secure and growing income stream from a bluechip tenant. Appendix 1 Details of the Leases 45 year leases (35 year initial term with a tenant's right to renew) will beheld by wholly-owned subsidiary undertakings of Barcelo. In the extremecircumstance that, for at least a year, total hotel EBITDA is less than thetotal rent, then DSH may, in certain circumstances after the end of the thirdyear but before the end of the tenth year, either put the portfolio to Barceloat a fixed price (initially £530 million but increasing with inflation) orcancel the lease on receiving a payment of two years' rent (years 4-7) or oneyear's rent (years 8-10). The leases benefit from a parental company guaranteefrom Barcelo Corporacion for the first three years of the lease in relation torent and for ten years in relation to these other obligations. The rent for the portfolio with its current room capacity is as follows: Year £m1 282 303 304 31-34 (within the band, 65% of hotel level EBITDA)5 based on previous year + annual RPI capped at 5.5% p.a., ("Indexation")10-14 higher of 63.75% of hotel level EBITDA or Indexation15-19 higher of 63% of hotel level EBITDA or Indexation20-24 higher of 62% of hotel level EBITDA or Indexation25-35 higher of 61% of hotel level EBITDA or Indexation If agreed improvements (such as room additions) are made, the extra rent will be65% of the agreed EBITDA increase resulting from the development. The leases are standard UK full repairing and insuring leases with the Tenantbeing responsible for maintaining the properties' furnishings, fixtures andequipment, towards which DSH has agreed to make a contribution. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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