18th Sep 2006 07:02
Dawnay Shore Hotels plc18 September 2006 For Immediate Release 18th September 2006 Dawnay Shore Hotels plc Interim results for the 26 week period ended 2 July 2006 Highlights • DSH* like for like hotel EBITDA increases by 4.3% • Valuation** uplift increases net asset value per share to 375p+ up 117% since year end • Strong demand in corporate and meetings sector with rooms revenue up 6% in these segments • Significant boost to operating performance at Hinckley post renovation • Walton Hall redevelopment on target for completion in 2007 • Furlong hotels, including The Lygon Arms, integrated as Paramount Signature Hotels * Excludes Walton Hall which is under redevelopment ** The hotels have been valued as individual assets hence the valuation excludes any portfolio premium + Increase is after allowing for the carried interest that would be payable to the DSH Founder Investors. NAV per share at 2 July 2006, after allowing for the carried interest, is 375p versus 173p at year end H1 2006 H1 2005 % change (Unaudited) (Unaudited)Turnover £47.0m £46.1m 1.8%Hotel Operating Profit* £15.9m £15.2m 4.3%Occupancy 66.5% 68.1% (2.4%)Average Room Rate £71.38 £68.13 4.8%Revenue per Available Room £47.45 £46.40 2.3%Total Revenue per Available Room £100.79 £99.44 1.4% * HOP is EBITDA for the individual hotels, excluding head office costs The above figures exclude Walton Hall which is under redevelopment. Areconciliation of the Turnover and Hotel Operating Profit to the ConsolidatedFinancial Statements is included in the sections that follow. Charles Prew, Chief Executive of Dawnay Shore Hotels plc, said: "We are pleased with the progress achieved in the first half of the current yearwith the key measures of profitability and total turnover growth bothoutperforming our peer group. The growth in hotel operating profits isespecially encouraging given rising energy costs. We are starting buildingworks on over 200 new rooms this year across the group and we have a very activeand ongoing programme of refurbishment within our hotels. "The uplift in individual hotel asset values is also very encouraging and recenttransactions in the hotel market continue to highlight the attraction of adiversified chain of UK premium regional hotel assets." Press enquiries: Dawnay Shore Hotels plc 020 7834 8060Guy NaggarCharles PrewHoward Shore 020 7468 7911 Shore Capital and Corporate 020 7408 4090Graham Shore Citigate Dewe Rogerson 020 7638 9571Margaret George Notes to Editors 1. DSH was established in 2004 by Dawnay, Day and Shore Capital, andcurrently owns a portfolio of 20 four star regional hotels in the UnitedKingdom. DSH now operates under the Paramount brand of distinction and has alsocreated a signature group of hotels. The portfolio includes the world famousThe Lygon Arms Hotel, a member of the Leading Hotels of the World located in theCotswolds; the prestigious Paramount Carlton Hotel in Edinburgh and theParamount Oxford Hotel. Paramount hotels offer extensive banqueting, conferenceand leisure facilities and many of them have architectural and historicalsignificance. 2. During the planned five year investment period, a number ofpossibilities for exit will be explored. These include flotation of the Company,transfer of the properties into a retail investment structure or REIT and saleof the DSH Group in its entirety to another hotel group or private equity buyer. 3. 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 138 19 Y City 4 Paramount Hinckley Island Hotel, Leicestershire 349 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 132 9 Y Country 8 The Lygon Arms* 69 4 Y Country NORTHERN ENGLAND 9 Paramount Imperial Hotel, Blackpool 180 15 Y City/Coast 10 Paramount Majestic Hotel, Harrogate 156 8 Y City 11 Paramount Redworth Hall Hotel, County Durham 100 14 Y Country 12 Paramount Shrigley Hall Hotel, Golf & Country Club, 148 11 Y Country Cheshire 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 152 13 N City / Coast WALES 20 Paramount Angel Hotel, Cardiff 102 7 N City Total 2,708 * Paramount Signature Hotel Chief Executive's Statement Review of Operations and Financial Performance After significant expansion of the portfolio during 2005, DSH now owns twentyhotels comprising in excess of 2,700 rooms across the UK. Management focusduring 2006 is on integrating the three Furlong hotels, property enhancements tothe portfolio and maximising returns from all Group hotels. In particular,significant attention is being dedicated to leveraging value from the renovationand re-launch of the Hinckley Island Hotel and Walton Hall, as well asidentifying opportunities to add rooms to the portfolio. To achieve the integration of the Furlong hotels, service standards that willapply to all Paramount Signature Hotels have been defined and rolled-out at eachhotel. In addition, back office procedures and front office IT systems havebeen brought into line with the rest of the Group. The next step in theSignature strategy is to convert a number of the existing hotels to thisstandard and Shrigley Hall is the first of the original portfolio of hotels tobe converted. This conversion is due to take effect at the end of September2006. Across the Group, a key strategy during 2006 is to identify and implementmeasures to counter-act the significant cost pressures (mainly rising energycosts) that are affecting the hotel industry as a whole. These measures includeboth revenue strategies and containment of controllable costs. As detailedbelow, the effect of this strategy is reflected in the Group achieving revenueand profitability growth which has outperformed the peer group. As shown on the attached Consolidated Financial Statements, on a total Groupbasis (including all 20 hotels) DSH's turnover for the 26 week period ended 2July 2006 was £47.9m, generating hotel operating profit of £15.6m (excludingWalton Hall, turnover was £47.0m and hotel EBITDA was £15.9m). Afterdepreciation, central and other costs, operating profit was £7.2m. Net interestpayable was £11.6m and included £9.1m of interest on senior debt and £2.0m ofinterest on the deep discounted bonds which are owned by DSH shareholders. Notax is payable and the loss for the financial period was £4.4m. Following its acquisition in June 2005 Walton Hall is undergoing a majorredevelopment which will result in the conversion of 132 timeshare units into195 bedrooms and the construction of a large conference centre. Due to thescale of the redevelopment the hotel is operating at minimal capacity, and isexcluded from the comments that follow. H1 2006 H1 2005 % change (Unaudited) (Unaudited)Turnover £47.0m £46.1m 1.8%Hotel Operating Profit* £15.9m £15.2m 4.3%Occupancy 66.5% 68.1% (2.4%)Average Room Rate £71.38 £68.13 4.8%Revenue per Available Room £47.45 £46.40 2.3%Total Revenue per Available Room £100.79 £99.44 1.4% * HOP is EBITDA for the individual hotels, excluding head office costs The above figures exclude Walton hall which is under redevelopment. Areconciliation of the HOP reported above, of £15.9m, and the Operating Profit of£7.2m is shown with the Consolidated Profit and Loss Account. The unaudited 2005 comparatives include pro-forma results for the hotelsacquired during 2005 and will therefore differ from the 2005 results in theConsolidated Financial Statements. On a like for like basis (excluding Walton Hall) turnover was 1.8% ahead of theprior year. Although occupancy was down by 1.6 percentage points, average roomrate (ARR) increased by 4.8% giving an increase of 2.3% in revenue per availableroom. Leisure demand was slow in the first quarter impacting certain leisurereliant hotels, namely, Torquay, Shrigley, Redworth Hall and Troon. Demand wassignificantly stronger in the second quarter but leisure travel remains pricesensitive and susceptible to competition from products such as budget airlinesoffering international travel deals to domestic tourists. The hotels inEdinburgh, Cardiff, Hinckley and Cheltenham are performing substantially aheadof expectations as both the corporate and meetings segments have been verystrong in these locations. Total DSH room revenue from these segments hasincreased 6% year on year. The focus of the Group's revenue strategy is on maximising ARR on high occupancynights as this results in greater profit conversion versus occupancy-led revenuegrowth. This strategy has been a key element in the increase in hotel operatingprofit of 4.3% over the previous year. As anticipated, energy costs for theperiod were around £630,000 higher than the comparable period and without thisincrease EBITDA would have increased 8.4%. In particular EBITDA at Cheltenhamwas ahead of the prior year by 44% driven by aggressive sales and marketingstrategies and at Hinckley by 41%, benefiting from the impact of the renovation. Direct operating costs, including payroll, have been tightly controlledresulting in a £525,000 reduction year on year and leading to profit conversionduring this period of 33.9% (or 35.2% before the increase in energy costs)versus 33.1% in the previous year. Interest expense was around £1.4 million greater than the previous year, mainlyreflecting the cost of the facility used to acquire the three Furlong hotels(100% debt funded) and funds drawn for the Hinckley renovation. Dividends DSH's policy remains to distribute its net surplus cash flow from time to time.Trading in the second half of the year is normally much stronger than the firsthalf and the Board of DSH will review payments of dividends in respect of thecurrent financial year at the conclusion of the year. During the period DSHpaid a dividend of £397,800. Property valuation The DSH hotel portfolio was valued by Colliers Robert Barry at £445 million(excluding Walton Hall but including the three Furlong hotels) as at 2 July2006. The 2005 interim valuation by Colliers Robert Barry was £314 millionfor the 16 hotels owned by the Group at that time. The revaluation incrementshown in the financial statements of approximately £90 million mainly relates tothese 16 hotels and represents a 30% increase over the previous year'svaluation. The impact of this is to increase the DSH net asset value per shareby 117% since the year end (124% since June 2005). Segmenting the portfolio to show the various acquisitions made by the Group, thecurrent valuation represents a per room value as follows: • 19 hotels: £173,000; • 16 hotels excluding Furlong: £169,000; • Original 13 Paramount hotels: £182,000. The valuation above is based on guidelines issued by RICS and this requires thateach property is valued taking into account its individual trading potential.The valuation methodology also assumes that each property is sold individually.In the opinion of Colliers Robert Barry, if the Group's hotels were valued andsold as one portfolio a premium over the £445 million valuation would berealised. The net asset value per share at 2 July 2006, after allowing for the carriedinterest that would be payable to the DSH Founder Investors, is 375p against173p at the year end. Property development In line with stated strategy, DSH continues to exploit the development potentialof its property portfolio through room additions. The room additions for 2006are summarised as follows: Hotel Number of rooms Status New Within Total Completed Work commenced To be commenced Estimated build existing completion structure Cheltenham 9 9 March 2006Walton Hall 64 64 March 2006 Q1 2007Redworth Hall 40 3 43 March 2006 January 2007Lygon 9 9 August 2006 Q1 2007Shrigley Hall 18 3 21 Q4 2006 Q4 2007Carlton 24 24 Q4 2006 Q2 2007Stirling 4 4 Q4 2006 Q1 2007Majestic 10 10 Q3 2006 Q1 2007Torquay 9 9 Q4 2006 Q2 2007Daventry 15 15 Q4 2006 Q2 2007Brighton 2 2 Q4 2006 Q1 2007 58 152 210 In addition to all of the above, planning permission has been secured andconstruction has started on a 1,300 square metre conference facility atParamount Walton Hall & Spa. This is significantly larger than the originalplan for an 800 square metre centre. Also, a major renovation of The Lygon Armsis currently being planned and will be started by the beginning of 2007. DSH is also committed to enhancing earnings by renovating existing hotel roomsand public areas where a business case exists. The following is a summary ofactivity in this area: • Paramount Shrigley Hall, Cheshire - 8 bedrooms and main bar completed; 24 bedrooms refurbishment started; • Paramount Cheltenham Park, Cheltenham - refurbishment started on 23 rooms; • Paramount Redworth Hall, County Durham - 8 bedrooms and reconfiguration of reception completed; • Paramount Imperial, Torquay - 29 bathrooms completed; • Paramount Daventry, Northamptonshire - refurbishment started on 101 bedrooms Prospects Significant investment has been made in re-launching the Paramount website whichhas seen an increase of over 100% in revenue booked in the first half of theyear as compared to the same period last year. The Paramount Special Eventsprogramme was also launched this year bringing with it a new income stream forthe hotels. In the face of a challenging market in the leisure sector, theseinitiatives are expected to yield substantial benefits for the remainder of 2006and going forward. Valuations have increased over the period. Nevertheless, DSH continues to seek"bolt-on" acquisitions which fit its investment criteria and is focused onpurchasing synergistic assets with the right geographic fit for its portfolioand the appropriate facilities to attract leisure and corporate customers.Considerable development potential still remains within the existing portfolioand DSH will continue to seek to exploit these opportunities. Employees The Directors thank the staff for their continuing commitment, enthusiasm andenergy. Charles Prew - 18 September 2006 Dawnay Shore Hotels plcConsolidated Profit and Loss Account26 Weeks Ended 2 July 2006 Unaudited Unaudited Audited 26 weeks ended 26 weeks ended Year ended 2 July 2006 3 July 2005 1 January 2006 £'000 £'000 £'000 Turnover 47,902 40,424 89,458 Cost of Sales (5,765) (4,951) (10,932) Gross profit 42,137 35,473 78,526 Administrative Expenses (34,973) (29,355) (60,214) Operating Profit 7,164 6,118 18,312 Profit/(loss) on sale of fixed assets - - 127 7,164 6,118 18,439 Interest receivable and similar income 86 186 318Interest payable and similar charges (11,696) (10,172) (20,772) Profit on ordinary activities before taxation (4,446) (3,868) (2,015) Tax on profit on ordinary activities - - 1,554 Dividends (398) - - Retained profit / (loss) for the financial period (4,844) (3,868) (461) Note: Reconciliation of Operating Profit 2 July 2006 £mHotel EBITDA excluding Walton Hall 15.9Walton Hall Loss (0.3)Depreciation and Amortisation (4.2)Central and other costs (4.2)Operations Profit as shown above 7.2 Dawnay Shore Hotels plcConsolidated Balance SheetAs at 2 July 2006 Unaudited Unaudited Audited As at 2 July As at 3 July As at 1 January 2006 2005 2006 £'000 £'000 £'000 Fixed assetsIntangible assets - Goodwill 9,652 7,505 9,846Tangible assets 467,973 333,217 375,207 477,625 340,722 385,053 Current AssetsStocks 832 729 877Debtors 7,509 8,020 7,564Cash at Bank and in hand 2,190 4,618 6,474 10,531 13,367 14,915 Creditors amounts falling due within 1 year (22,583) (23,485) (23,373) Net current liabilities (12,052) (10,118) (8,458) Total assets less current liabilities 465,573 330,604 376,595 Creditors amounts falling due after more than 1 (307,040) (257,968) (302,482)yearProvision for liabilities and charges (9,478) (10,635) (9,495) Net assets 149,055 62,002 64,618 Capital and reservesCalled up share capital 1,658 1,658 1,658Share premium account 32,137 32,137 32,137Revaluation reserve 120,461 32,026 31,180Profit and loss account (5,201) (3,819) (357) Equity shareholders funds 149,055 62,002 64,618 Dawnay Shore Hotels plcConsolidated Cash Flow Statement26 Weeks Ended 2 July 2006 Unaudited Unaudited Audited 26 weeks ended 26 weeks ended As at 1 January 2 July 2006 3 July 2005 2006 £'000 £'000 £'000 Net cash inflow from operating activities 10,212 13,958 28,051 Returns on investments and servicing of financeInterest received 86 186 318Interest paid (9,575) (10,980) (19,436)Interest paid on finance leases (37) (40) (75)Dividends paid (398) - - Net cash outflow from returns on investments and servicingof finance (9,924) (10,834) (19,193) TaxationCorporation tax paid - - - Capital expenditurePurchase of tangible fixed assets (7,351) (2,383) (7,565)Sale of tangible fixed assets - - 1,114 Net cash outflow from capital expenditure and financialinvestment (7,351) (2,383) (6,451) AcquisitionsPurchase of Hotels - (76,807) (75,104)Purchase of subsidiary undertakings - (16,716)Cash balances less overdraft acquired with hotels andsubsidiary undertakings - - (51) Net cash outflow from acquisitions - (76,807) (91,871) Net cash outflow before financing (7,063) (76,066) (89,464) FinancingIssue of share capital - 1,320 1,320New term loans raised 4,551 58,400 97,325New bonds issued - 1,200 1,200Bank loan note issued - - 3,595Bank loans repaid - (652) (25,389)Bonds repaid (1,591) (1,788) (3,475)Term loan issue costs - (1,503) (2,065)Repayment of principal under finance leases (181) (220) (499)Net cash inflow from financing (2,779) 56,757 72,012 Decrease in cash (4,284) (19,309) (17,452) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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