27th Sep 2005 07:01
Hotel Corp (The) PLC27 September 2005 27 September 2005 For Immediate Release The Hotel Corporation Interim Results for the Six Months Ended 30 June 2005 The Hotel Corporation plc ("the Company"), the AIM listed investment companyowning 49.9% of Dawnay Shore Hotels plc ("DSH"), announces its interim resultsfor the six months to 30 June 2005. DSH is today separately announcing interimresults for the same period. Highlights The Hotel Corporation • Profit, including revaluation gain, of £9.3m • Independent valuation of hotels translates into significant growth in net assets per share, to 144p, up 21.0% since 31 December 2004. • Interim dividend of 2.6p per share DSH • Total revenue increases to £40.4 million (up 2.5% like for like) • Paramount Hotels now operates 17 hotels • Room renovation completed at Imperial Blackpool and substantial renovation underway at Hinckley Island Hotel • Acquisition of Walton Hall, near Stratford Upon Avon for £15.2m Barclay Douglas, Chairman of The Hotel Corporation plc, said: "DSH continues to focus on the integration of the 3 Hanover hotels, acquired atthe beginning of the year. All the hotels in the chain are now operating underthe distinctive Paramount brand and additional benefits are expected from thisbranding. The major renovation of The Hinckley Island Hotel is due forcompletion early in 2006 and the re-launch of this 349 room hotel is a key DSHmanagement priority. The acquisition of Walton Hall, at the end of Juneprovides a further exciting opportunity for DSH to build share in the highquality four star hotel market." Press enquiries The Hotel Corporation 0207 638 9571Barclay Douglas Citigate Dewe Rogerson 0207 638 9571Margaret George 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 17 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 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 both on the Company's own results and then those of DSH. Theconsolidated balance sheet of DSH as at 3 July 2005, the consolidated profit andloss account and consolidated cashflow statement of DSH for the 26 weeks ended 3July 2005 are also provided in this statement. Results of the Company Revenue for the period, including bank interest, was £1.03m and, followingadministrative expenses, operating profit amounted to £0.9m. In addition, theprofit includes a credit categorised as investment gains amounting to £8.4m,arising from the measurement of the Company's investment in the ordinary sharesof DSH at their fair value, in accordance with International Financial ReportingStandards. Including this investment gain, total profit before tax was £9.3m.No tax is payable for the period as the Company is registered as a tax exemptcompany in the Isle of Man. Basic and diluted earnings per share were 26.8pincluding these investment gains, and 2.6p 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 £314.3m (excluding Walton Hall which is shown at cost), which wascarried out by Colliers Robert Barry, third party independent valuers, as at 30June 2005. This translates into a net asset value per share in the capital ofDSH of £1.87 per share which compares with the price of £1.10 at which HCL lastacquired shares in DSH in January 2005. Given the highly leveraged structure ofDSH (approximately four times the level of debt to equity), movements in thevaluation of DSH (both upwards and downwards) will have a magnified effect onthe value of the Company's shareholding in DSH. Dividend HCP has declared an interim dividend of 2.6 pence per ordinary share. The ex-divdate will be 5th October 2005 and a record date of 7th October 2005. Paymentwill be made to the shareholders on the 21st October 2005. DSH results Financial review DSH's results for the period cover the 13 Paramount hotels held throughout theperiod together with the 3 Hanover hotels whose acquisition was completed inJanuary. When acquired, these 3 hotels were showing a relatively weakperformance with occupancy and room rates considerably below industry norms forhotels of their character and location. During the period under review, theyhave been integrated into the chain and are now operating under the Paramountbrand. The largest, Hinckley, is undergoing a major renovation to bring itsinternal fittings up to the standards of the rest of the chain. During theperiod DSH also renovated the Imperial Hotel Blackpool, which was completed inJune ahead of the party conference season. Near the end of the period on 27 June 2005, DSH acquired Walton Hall, a formertimeshare, leisure and banqueting complex, for £15.2m. Given the timing of theacquisition no trading results for Walton Hall are reflected in the period. For hotels in the category operated by DSH, turnover is always weighted towardsthe second half of the year as January and February are particularly weak monthsfor conferencing and leisure breaks. As DSH was not trading prior to July 2004it is not possible to compare its current results with the same period of theprevious year but the table below compares certain key performance indicatorsfor the 26 week period ended 27 June 2004. As the hotels were previouslycontrolled by a private equity owner with a different capital structure, it isnot meaningful to compare like-for-like financial information below the level ofoperating profit. H1 05 (Unaudited) H1 04 (Unaudited) % change Turnover £40.4m £39.4m 2.5%Hotel Operating Profit1 £14.2m £14.0m 1.4%Occupancy 69.2% 67.4% 2.6%Average Room Rate £62.42 £63.55 (1.8%)Revenue per Available Room £43.18 £42.83 0.8% (1) HOP is EBITDA for the individual hotels, excluding head office costs The table compares the results for 2005 with the results of the same 16 hotelsover the comparable period in 2004. It shows that on a like for like basisturnover grew over the period but hotel operating profit grew at a lower rate.This partly reflects a change in the mix of business: the more expensive toservice business travel grew strongly, whilst conference events and leisurebusiness was less buoyant. More significantly if the results of the Hinckley areexcluded from the current and prior year period, hotel revenue and EBITDA show a3.6% and 3.3% growth respectively. In addition, RevPAR growth excluding Hinckleyis 1.9%. DSH's turnover for the six months ended 3 July 2005 was £40.4m, generating hoteloperating profit of £14.2m. After central and other costs, EBITDA was £10.3m.Interest payable on senior debt and deep discounted bonds was £10.2m. The netloss before tax for the period was £3.9m. Dividends As mentioned above, the second half of the year is normally much stronger thanthe first half and the Board of DSH will review payment of dividends in respectof the financial year ending 31 December 2005 at the conclusion of the financialyear. Operating review There has been strong growth in revenue from corporate travel. This reflects animproved performance by the hotel sales managers in offering corporate rates tolocal businesses and more effective selling through the electronic distributionchannels, following the recruitment of an expert in this field. As discussed above, the 3 Hanover hotels are now operating under the Paramountbrand and their businesses are being repositioned to perform at a higher level.The major renovation of Hinckley hotel (£3.2m), which will be a key asset, hashad a short term impact on its performance as did the previously reported weakpipeline of conference bookings before acquisition. Daventry and Hinckley havebenefited from the support of the Conference Sales Team and both hotels are nowachieving a high level of conference enquiries. The benefit of these enquirieswill be most strongly felt after the re-launch of the Hinckley hotel.Basingstoke has benefited from the Paramount Leisure Breaks business. The renovation of the Imperial Hotel, Blackpool, completed in June, also had ashort-term effect, but Blackpool has now picked up significant business: inaddition to hosting two party political conferences this autumn (LiberalDemocrats and Conservative), the hotel will also host the Labour springconference in 2006. The renovation at Hinckley is due for completion early in2006 and a new General Manager is in place to maximise revenue during therenovation and to re-launch the hotel in the first quarter of 2006. These factors and a generally competitive market made conferences and eventsless buoyant than DSH had hoped, with a consequent effect on food and beveragerevenue. DSH is very focused on the conference and events and the sales teamsare working hard to improve this trend. Leisure break business has seen growthyear on year in room nights including an increase of over 50% in bookings madethrough the Central Reservations Office. Customers are becoming more price conscious but DSH is continuing to attractbusiness through tactical marketing. Efforts to maximise returns from theGroup's leisure clubs have been very successful, resulting in a 13% increase inrevenue from leisure club users. Property valuation The DSH hotel portfolio (excluding Walton Hall) has been valued by ColliersRobert Barry as at 30 June 2005 at £314.3 million. Segmenting the portfolio toreflect the fact that 3 Hanover hotels are being integrated and repositioned,the value per room of the original Paramount hotels acquired on 12 July 2004equates to £141,000. This represents an 8.4% increase over the November 2004valuation (value per room of £130,000) and a 17.9% increase over theconsideration paid on acquisition for these hotels on 12 July 2004. The valueper room of the 3 Hanover hotels is £103,750. After revaluation, the net asset value per share in DSH has increased from 137pto 187p (36%) reflecting the company's debt/equity ratio. Property development DSH is working to extract development value from the entire portfolio; this istaking 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 £132,000. DSH has targeted hotels for development where theuplift is expected to be above average, thus maximising the potential value tothe business. We are progressing with the development of additional bedrooms ata number of our hotels where planning permission exists. DSH is constantly focused on improving the existing product. Other projectsduring the period included refurbishing the public areas and 42 bedrooms atBuxton and 40 bedrooms at Stirling (hosts to guests at the recent G8Conference). DSH is submitting an application for planning permission later this year for themajor redevelopment of the Imperial Hotel, Torquay into a world class hotel andresort. The scheme has already received strong support from the key localstakeholders. The most recent acquisition, Walton Hall, on a 65 acre site, housed 132time-share units whose interests have been bought out. Located nearStratford-upon-Avon in a glorious setting, DSH has obtained planning consent toconvert the property into a high quality four star country hotel and spa witharound 200 rooms, substantial conference facilities, leisure and fitness. Therefurbishment is due to commence in January 2006 and will consist of upgradingthe current bedroom stock, adding new bedrooms, building a new conferencecentre, a new restaurant and upgrading the leisure centre. It is planned toinvest £10m into the property. Walton Hall benefits from being located closeto both Stratford and Warwick, where the demand for conference venues is high.With its striking architecture and impressive grounds Walton Hall will be one ofthe most significant conference and meetings hotels in its competitive marketwhen it is re-launched in the autumn of 2006. The Paramount Team has won the bid to be the developer and operator of the firstBritish hotel school which is to be built next to the Bournemouth InternationalConference Centre and have direct links to it. Management DSH appointed Mr Peter Procopis as Finance Director with effect from 1 August2005. Peter brings a wide range of financial skills to DSH having had over 18years experience in the global hotel industry. Peter gained his experience in avariety of roles with Arthur Andersen, Strategic Hotel Capital (where he wasVice President Europe for 5 years) and for the last 2 years at UBS Global AssetManagement where he was responsible for strategy in relation to hotel assets. In addition, DSH has recruited a new sales and marketing director, Manju Goel,who is joining shortly. She was most recently director of sales and marketing atMacDonald Hotels, a chain of 60 hotels, having previously been a director ofglobal sales at Intercontinental and prior to that at Forte and Le MeridienHotels. Prospects I am very pleased with the excellent businesses that DSH has acquired. Theaddition of Walton Hall and re-launch of Hinckley provide a further excitingopportunity for DSH to build share in the high quality four star hotel market. Given the performance to date and current trends, we expect the results for DSHfor the full year of 2005 to be in line with the prior year. DSH continues to seek acquisitions which fit its investment criteria.Valuations, however, have increased over the period and DSH have stated thatthey would only be interested in assets with the right geographic fit for itsportfolio and the appropriate facilities to attract leisure and conferencetrade. Considerable development potential still remains within the existingportfolio and DSH will continue to seek to exploit these opportunities. Barclay DouglasChairman26 September 2005 Independent Review Report To The Hotel Corporation Plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2005 which comprises the income statement, thebalance sheet, the statement of changes in equity, the cash flow statement andrelated notes 1 to 5. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. This report is made solely to the company, in accordance with Bulletin 1999/4issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the company those matters we are required to state to them in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other thanthe company, for our review work, for this report, or for the conclusions wehave formed. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by, the directors. The directorsare also responsible for ensuring that the accounting policies and presentationapplied to the interim figures are consistent with those applied in preparingthe preceding annual accounts except where any changes, and the reasons forthem, are disclosed. The directors are also responsible for ensuring compliancewith International Accounting Standard 34, "Interim Financial Reporting" (IAS34). Review work performed We conducted our review in accordance with the guidance contained in Bulletin1999/4 issued by the Auditing Practices Board for use in the United Kingdom. Areview consists principally of making enquiries of management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the accounting policies and presentationhave been consistently applied unless otherwise disclosed. A review excludesaudit procedures such as tests of controls and verification of assets,liabilities and transactions. It is substantially less in scope than an auditperformed in accordance with United Kingdom auditing standards and thereforeprovides a lower level of assurance than an audit. Accordingly, we do notexpress an audit opinion on the financial information. On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2005. Deloitte & Touche 26 September 2005Chartered AccountantsDouglasIsle of Man Income StatementFor the six months ended 30 June 2005 Unaudited Audited Period from Period from 1 January 2005 to 7 June to 30 June 2005 31 December 2004 Notes £'000 £'000Continuing operations Revenue 993 651Administrative expenses (124) (95) Profit from operations 869 556 Bank Interest receivable 34 7Investment gains - unrealised 3 8,384 5,435 Profit before tax 9,287 5,998 Taxation - - Profit after tax for the period from continuing 9,287 5,998operations Basic and diluted Earnings per Share 4 26.8p 29.4p Balance SheetAs at 30 June 2005 Unaudited Audited As at As at 30 June 2005 31 December 2004Assets Notes £'000 £'000 Non current assetsInvestments 3 47,489 37,740 Current assetsTrade & other receivables 14 12Cash & cash equivalents 2,326 3,320 2,340 3,332 Total assets 49,829 41,072 Equity & liabilities Capital & reservesShare capital 1,731 1,731Share premium account 33,308 33,308Retained earnings 14,735 5,998 49,774 41,037 Current liabilitiesTrade & other payables 55 35 Total equity & liabilities 49,829 41,072 Net asset value per share 144p 119p Statement of Changes in EquityFor the six months ended 30 June 2005 Unaudited Audited Period from Period from 1 January 2005 7 June to 30 June 2005 31 December 2004 £'000 £'000 Balance at start of period 41,037 - Profit for the period 9,287 5,998 Dividend paid (550) - Issue of share capital - 35,039 Balance c/f 49,774 41,037 Cashflow StatementFor the six months ended 30 June 2005 Unaudited Audited Period from Period from 1 January 2005 to 7 June to 30 June 2005 31 December 2004 Notes £'000 £'000 Net cashflow from operating activities 5 (106) (72) Investing activities Interest received 34 7Purchase of investments (1,365) (32,305)Proceeds received on maturity of investments 993 651 Net cash used in investing activities (338) (31,647) Financing activities Payment of dividend (550) -Issue of share capital - 35,039 Net cash (used in)/generated from financing (550) 35,039activities Net (decrease)/increase in cash and cash (994) 3,320equivalents Notes to the AccountsFor the six months ended 30 June 2005 1. Basis of accounting The financial information in this announcement has been prepared in accordancewith International Financial Reporting Standards (IFRS). Certain information anddisclosures normally required to be included in the notes to the annualfinancial statements have been omitted or condensed in accordance with IAS34 "Interim Financial Reporting". These interim financial statements should be readin conjunction with the financial statements and the notes thereto in theCompany's Annual Report for the period from 7 June 2004 to 31 December 2004. Theaccounting policies applied are consistent with those as set out in theCompany's annual financial statements for the period from 7 June 2004 to 31December 2004. 2. General Information The information for the period from 7 June 2004 to 31 December 2004 does notconstitute statutory accounts within the meaning of the Isle of Man CompaniesActs 1931 - 2004. A copy of the statutory accounts for that period has beendelivered to the registrar of companies. The auditors' report was unqualified. 3. Investments Period from Period from 1 January 2005 to 7 June to 30 June 2005 31 December 2004 £'000 £'000 Equity investments b/f 21,840 - Purchased in the period 715 16,405 Revaluation 8,384 5,435 Equity investments c/f 30,939 21,840 Held to maturity investments b/f 15,900 - Purchased in the period 650 15,900 Redeemed in the period (993) (651) Amortisation of discount 993 651 Held to maturity investments c/f 16,550 15,900 Total 47,489 37,740 Equity 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. 4. Earnings per Share The calculation of basic earnings per share is based on the following data: Period from Period from 1 January 2005 to 7 June to 30 June 2005 31 December 2004Earnings £'000 £'000 Profit for the period 9,287 5,998 Number of sharesWeighted average number of ordinary shares 34,619,050 20,388,742for the purpose of basic earnings per share Basic and diluted earnings per share 3 26.8p 29.4p This comprises: Basic & diluted earnings per share from 2.6p 2.8poperations and bank interestBasic & diluted earnings per share from 24.2p 26.6pinvestment gains 5. Notes to the Cashflow Statement Reconciliation of Profit from Operations to Net Cash flow from operatingactivities. Period from Period from 1 January 2005 to 30 7 June to June 2005 31 December 2004 £'000 £'000 Profit from operations 869 556 Increase in trade and other receivables (2) (12) Increase in trade & other payables 20 35 Amortisation of discount on purchase of investments (993) (651) (106) (72) 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 3 July 2005 Unaudited Audited 26 weeks ended 25 weeks ended 3 July 2005 2 January 2005 £'000 £'000 Turnover 40,424 36,395 Cost of Sales (4,951) (4,984) Gross profit 35,473 31,411 Administrative Expenses (29,355) (23,466) Operating Profit 6,118 7,945Loss on sale of fixed assets 0 (7) 6,118 7,938 Interest receivable and similar income 186 217Interest payable and similar charges (10,172) (8,134) Profit on ordinary activities before taxation (3,868) 21 Tax on profit on ordinary activities 0 29 Retained (loss)/profit for the financial period (3,868) 50 Dawnay Shore Hotels plcConsolidated Balance SheetAs at 3 July 2005 Unaudited Audited As at As at 3 Jul 2005 2 January 2005 £000 £000 Fixed assetsIntangible assets - Goodwill 7,505 7,685Tangible assets 333,217 237,281Investments 0 0 340,722 244,966 Current AssetsStocks 729 713Debtors 8,020 7,582Cash at Bank and in hand 4,618 23,926 13,367 32,221 Creditors amounts falling due within 1 year (23,485) (23,525) Net current assets (10,118) 8,696 Total assets less current liabilities 330,604 253,662 Creditors amounts falling due after more than 1 year (257,968) (199,127)Provision for liabilities and charges (10,635) (10,650) Net assets 62,002 43,885 Capital and reservesCalled up share capital 1,658 1,598Share premium account 32,137 30,877Revaluation reserve 32,026 11,360Profit and loss account (3,819) 50 Equity shareholders' funds 62,002 43,885 Dawnay Shore Hotels plcStatement of Cashflow26 Weeks Ended 3 July 2005 Unaudited Audited 26 weeks ended 25 weeks ended 3 July 2005 2 January 2005 £'000 £'000 Net cash inflow from operating activities 13,958 9,906 Returns on investments and servicing of financeInterest received 186 217Interest paid (10,980) (3,464)Interest paid on finance leases (40) (47) Net cash outflow from returns on investments and servicing of finance (10,834) (3,294) TaxationCorporation tax paid 0 0 Capital expenditurePurchase of tangible fixed assets (2,383) (1,684)Sale of tangible fixed assets 0 73 Net cash outflow from capital expenditure and financial investment (2,383) (1,611) AcquisitionsPurchase of subsidiary undertakings 0 (89,213)Cash balances less overdraft acquired with subsidiary undertakings 0 4,024Purchase of Hotels (76,807) 0 Net cash outflow from acquisitions (76,807) (85,189) Net cash outflow before financing (76,066) (80,188) FinancingIssue of share capital 1,320 32,475New term loans raised 58,400 177,000New bonds issued 1,200 30,425Bank loans repaid (652) (85,822)Bonds repaid (2 January 2005: Loan stock repaid) (1,788) (46,949)Term loan issue costs (1,503) (2,693)Repayment of principal under finance leases (220) (322)Net cash inflow from financing 56,757 104,114 (Decrease)/increase in cash (19,309) 23,926 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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