20th Sep 2007 07:02
Hotel Corp (The) PLC20 September 2007 20 September 2007 For immediate release The Hotel Corporation plc Interim results for the six months ended 30 June 2007 The Hotel Corporation plc ("the Company"), an AIM listed investment companyowning 49.9% of Dawnay Shore Hotels plc ("DSH"), announces its interim resultsfor the six months to 30 June 2007. DSH is today separately announcing interimresults for the 26 week period ended 1 July 2007. Highlights The Hotel Corporation • Barcelo transaction with DSH reaffirms the value of The Hotel Corporation's investment • Net asset value per share maintained at 290p pending a December 2007 investment revaluation • Interim dividend of 2.7p (2006: 2.65p) DSH • 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 Barclay Douglas, Chairman of The Hotel Corporation plc, said: "We are very pleased with the outcome of the DSH strategic review. Ourinvestment is now strongly underpinned by a long lease with a top hotel operatorand is structured to allow value to be created in a variety of ways lookingahead to the future." Press enquiries The Hotel Corporation 0207 638 9571Barclay Douglas Dawnay Shore Hotels plc 0207 638 9571Peter Procopis Citigate Dewe Rogerson 0207 638 9571Margaret George 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 Bedrooms No. of Health & Location meeting Leisure rooms 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 Chairman's statement I am pleased to report on the interim figures for the first six months of thecurrent year. As the Company's principal asset comprises its interest in DSH, this statementwill focus on the results of both the Company itself and also of DSH. Theconsolidated balance sheet of DSH as at 1 July 2007, the consolidated profit andloss account and consolidated cashflow statement of DSH for the 26 week periodended 1 July 2007 are also provided in this statement. Results of the Company Revenue for the period, including bank interest, was £1.68m (2006: £1.24m) and,following administrative expenses, operating profit amounted to £1.5m (2006:£1.1m). Total profit before tax was £1.5m. No investment gains were recordedduring this 6 month period as the hotel assets of DSH were not revalued byexternal valuers as at the period end, which they were in the comparable periodof 2006. This was because they were revalued after the completion of thestrategic review in their new status as investment properties and it would notbe appropriate to use this carrying value for the end of June when DSH was stilloperating the hotels. Including investment gains of £29.8m, total profit beforetax for the comparable period of 2006 was £31.0m. No tax is payable due to thezero corporate taxation provisions in the Isle of Man. Basic and dilutedearnings per share were 4.5p (2006: 3.2p and 89.4p including the investmentgains). The Company values its shareholding in DSH on the basis of the net asset valueof DSH as set out in that company's unaudited accounts. The post balance sheeteffect of the independent professional valuation of DSH's hotel propertiesshowed a further increase to £556 million (31 December 2006: £530m). DSH'saccounts themselves include the valuation of its portfolio of hotels of £530million, carried out by Colliers Robert Barry, third party independent valuers,as at 31 December 2006. The directors are therefore of the opinion that it isappropriate to carry the investment at the same value as at 31 December 2006. Dividend The Company has today declared an interim dividend of 2.7p per ordinary share(2006: 2.65p). The ex-div date will be 26 September 2007 and the record date 28September 2007. Payment will be made to shareholders on 22 October 2007. Dawnay Shore Hotels plc - 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. We are very pleased with the outcome of the DSH strategic review. Ourinvestment is now strongly underpinned by a long lease with a top hotel operatorand is structured to allow value to be created in a variety of ways lookingahead to the future. Barclay DouglasChairman20 September 2007 Income StatementFor the six months ended 30th June 2007 Unaudited Unaudited period period Audited from 1 from 1 year January January to 31 2007 until 2006 until December 30 June 2007 30 June 2006 2006 Notes £'000 £'000 £'000Continuing Operations Revenue 5 1,622 1,192 2,185Administrative expenses (107) (111) (231) Profit from operations 1,515 1,081 1,954 Bank interest receivable 57 45 92Investment gains-unrealised 2 - 29,829 49,169 Profit before tax 1,572 30,955 51,215 Taxation - - - Profit after tax for the period fromcontinuing operations 1,572 30,955 51,215 Earnings per share Basic and diluted 3 4.5p 89.4p 147.9p Balance SheetAs at 30th June 2007 Unaudited Unaudited Audited as at as at as at 30 June 30 June 31 DecemberAssets 2007 2006 2006 Notes £'000 £'000 £'000 £'000 £'000 £'000Non-Current Assets Investments 2 97,976 78,636 97,976 Current Assets Trade and other receivables 7 13 10Cash and cash equivalents 2,331 2,325 2,321 2,338 2,338 2,331 Total assets 100,314 80,974 100,307 Equity & Liabilities Capital & Reserves Share Capital 1,731 1,731 1,731Share Premium Account 33,300 33,301 33,300Retained Earnings 65,266 45,909 65,252 100,297 80,941 100,283 Current Liabilities Trade and other payables 17 33 24 100,314 80,974 100,307 Net asset value per share 290p 234p 290p Statement of changes in equityFor the six months ended 30th June 2007 Share Share premium Retained capital account earnings Total £'000 £'000 £'000 £'000 Balance at 31st December 2006 1,731 33,300 65,252 100,283Profit for period - - 1,572 1,572Dividend paid - - (1,558) (1,558) Balance at 30th June 2007 1,731 33,300 65,266 100,297 Cash flow statementFor the six months ended 30th June 2007 Unaudited Unaudited Audited period from period from period 1 January 1 January Year to 2007 until 2006 until 31 December 30 June 2007 30 June 2006 2006 Notes £'000 £'000 £'000Net cash inflow/(outflow)from operating activities 4 518 85 (41) Investing activities Interest receivable 57 45 92Purchase of investments - - -Proceeds received on the maturity ofInvestments 993 993 1,986 Net cash from investing activities 1,050 1,038 2,078 Financing activities Dividends paid (1,558) (1,108) (2,025)Preliminary expenses - (7) (8) Net cash (used in) financing activities (1,558) (1,115) (2,033) Net increase (decrease) in cash and cashEquivalents 10 8 4 Notes to the AccountsFor the six months ended 30th June 2007 1. Basis of Accounting The financial information in this announcement has been prepared in accordancewith the recognition and measurement criteria of International FinancialReporting Standards (IFRS). Certain information and disclosures normallyrequired to be included in the notes to the annual financial statements havebeen omitted or condensed. These interim financial statements should be read inconjunction with the financial statements and the notes thereto in the Company'sAnnual Report for the year ended 31st December 2006. The accounting policiesare consistent with those set out in the Company's financial statements for theyear ended 31st December 2006. The statutory accounts for the year ended 31st December 2006 have been filedwith the Registrar of Companies and contained an unqualified audit report. 2. Investments Unaudited Unaudited Audited period from period from Year 1 January 1 January to 31 2007 to 30 2006 to 30 December June 2007 June 2006 2006 £'000 £'000 £'000Classified as:Fair value through Profit and Loss Investments 81,426 62,086 81,426Held to maturity 16,550 16,550 16,550 97,976 78,636 97,976 Fair value through Profit or Loss Investments Fair value at start of period 81,426 32,257 32,257Increase in fair value - 29,829 49,169 Fair value at end of period 81,426 62,086 81,426 The investment classified as 'Fair Value through Profit and Loss' shown aboverepresents a holding of 16,550,000 ordinary shares of £1 par value in DawnayShore Hotels plc, which comprises 49.92% of the issued share capital of thatcompany. Investments in the ordinary shares of Dawnay Shore Hotels plc ("DSH")held at the balance sheet date are measured at their fair value. In determiningthe fair value attributable to the ordinary shares in DSH, the directors drewupon the net asset value of DSH as set out in the financial statements of thatcompany as at 31 December 2006 and utilised that net asset value for eachordinary share held in DSH by the Company, making an appropriate adjustment forthe carried interest attributable to the founder shares in DSH (as defined inthe Hotel Corporation plc prospectus issued on 9th July 2004). In the absenceof an updated valuation of the DSH Hotel portfolio as at 30 June 2007, thedirectors have adopted a valuation which used the same DSH net asset value as at31 December 2006 making an appropriate adjustment for the carried interestattributable to the founder shares in DSH at that date. 2. Investments (continued) Unaudited Unaudited Audited period from period from Year 1 January 1 January to 31 2007 to 30 2006 to 30 December June 2007 June 2006 2006 £'000 £'000 £'000Investments Held to MaturityAt start of period 16,550 16,550 16,550Additions - - -Redeemed in period (993) (993) (1,986)Amortisation of Discount 993 993 1,986 At end of period 16,550 16,550 16,550 The investments included above represent unlisted investments in unsecured deepdiscount bonds issued by DSH (Finance) plc, a subsidiary of Dawnay Shore Hotelsplc, maturing at nominal value over a period of five years. The bonds have acoupon rate of nil percent. Notes to the Accounts For the six months ended 30th June 2007 3. Earnings Per Share Unaudited Unaudited Audited period from period from Year 1 January 1 January to 31 2007 to 30 2006 to 30 December June 2007 June 2006 2006 Basic and diluted earnings per share 4.5p 89.4p 147.9pThis comprises:Basic and diluted earnings per share fromoperations and bank interest 4.5p 3.2p 5.9pBasic and diluted earnings per share frominvestment gains Nil 86.2p 142.0p The calculation of basic earnings per share isbased on the following data: 2007 2006 2006 £'000 £'000 £'000EarningsProfit from operations and bank interest 1,572 1,126 2,046Investment gains - 29,829 49,169 Net profit for period 1,572 30,955 51,215 Number of sharesWeighted average number of ordinary shares for thepurpose of basic and diluted earnings per share 34,619,050 34,619,050 34,619,050 There are no convertible investments in existence at 30 June 2007 and thereforediluted earnings per share does not differ from basic earnings per share. 4. Reconciliation of Profit from Operations to Net Cash fromOperating Activities Unaudited Unaudited Audited period from period from Year 1 January 1 January to 31 2007 to 30 2006 to 30 June December June 2007 2006 2006 £'000 £'000 £'000 Profit from operations 1,515 1,081 1,954Decrease/(increase) in receivables 3 6 9(Decrease)/increase in trade and other payables (7) (9) (18)Amortisation of discount on investments (993) (993) (1,986) Net cash inflow/(outflow) from operating activities 518 85 (41) Notes to the Accounts For the six months ended 30th June 2007 5. Revenue Unaudited Unaudited Audited period from period from year 1 January 1 January to 31 2007 to 30 2006 to 30 December June 2007 June 2006 2006 £'000 £'000 £'000 Amortisation of discount on purchase of investments 993 993 1,986 Dividend received 629 199 199 1,622 1,192 2,185 Additional Information The following additional information has been supplied to the company by Dawnay Shore Hotels plc and should be read in conjunction with the interim results of the company 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 (339,434) (307,040) (321,389)yearProvision 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) 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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