Puma Hotels plc - Final Results

18th May 2009 07:00



For Immediate Release  18 May 2009

Puma Hotels plc 

(Formerly Dawnay Shore Hotels plc)

Final results for the year ended 31 December 2008

Puma Hotels plc ("PHP" or "the Company") owner of the freehold property interest in 20 leading UK hotels, announces its final results for the year ended 31 December 2008.

	2008  (Audited)		2007*  (Audited)
Turnover	£28.5m		£77.0m
Operating Profit before exceptional items	£23.9m		£11.1m
Exceptional items - deficit on revaluation of properties	(£3.3m)		(£7.1m)
Operating Profit	£20.6m		£4.0m
Retained Loss for Period	(£8.8m)		(£18.4m)
* PHP operated the hotels until 6 September 2007 and its turnover in 2007 therefore included these hotel operations

Highlights

Agreement executed to extend the maturity of senior debt facility to 31 December 2012

Substantial increase in Operating Profit during 2008

Annual rent increased from £28m to £30m on 4 September 2008

Howard Shore, Chairman of Puma Hotels plc, said:

"In a challenging credit market, we are delighted to have entered into an agreement to extend the maturity of the Group's senior debt facility to 31 December 2012. Whist economic conditions continue to be difficult, the transition to a hotel property investment group has resulted in greater stability and has mitigated the Group's exposure to the cyclical nature of the hotel business. We look forward to unlocking the substantial development value within the Group's portfolio as the investment market recovers."

 

Press Enquiries:

Puma Hotels plc

Howard Shore 020 7468 7911

Peter Procopis  020 7468 7991

Notes to Editors

1. Puma Hotels plc acquired 13 Paramount branded hotels in July 2004. Following further acquisitions it now owns 20 four-star hotels across Scotland, Northern England, Central England, Southern England and Wales. See the table below for a full list of hotels. 

2. The hotels offer extensive banqueting, conference and leisure facilities and many of them have architectural and historical significance. The Group has 2,872 bedrooms and around 20,000 square metres of conference and meeting space and offers extensive facilities to both corporate and leisure guests.

3. From July 2004 until 6 September 2007, PHP owned and operated each of the 20 hotels. From 6 September 2007 PHP granted 45 year FRI leases for each hotel to Barceló Group, a leading Spanish operator with substantial global operations. From 1 January 2008 all 20 hotels have been rebranded and each hotel now carries the Barceló brand.

4. PHP's hotel locations are shown below:

CENTRAL ENGLAND				Bedrooms	No. of meeting rooms	Health & Leisure	Location
1			Barceló Billesley Manor Hotel, Nr. Stratford*	72	12	Y	Country
2			Barceló Cheltenham Park Hotel	152	11	Y	Country
3			Barceló Daventry Hotel	155	8	Y	Country
4			Barceló Hinckley Island Hotel	362	21	Y	Country
5			Barceló Oxford Hotel	168	25	Y	City
6			Barceló  Buxton Palace Hotel	122	9	Y	Country
7			Barceló Walton Hall Hotel & Spa, Warwickshire* +	202	20	Y	Country
8			Barceló The Lygon Arms, Cotswolds*	77	8	Y	Country
NORTHERN ENGLAND
9			Barceló  Blackpool Imperial Hotel	180	15	Y	Coast
10			Barceló  Harrogate Majestic Hotel	167	10	Y	City
11			Barceló Redworth Hall Hotel, Co. Durham*	143	10	Y	Country
12			Barceló Shrigley Hall Hotel, Cheshire*	148	12	Y	Country
SCOTLAND
13			Barceló  Edinburgh Carlton Hotel	189	10	Y	City
14			Barceló  Troon Marine Hotel*	89	4	Y	Coast
15			Barceló Stirling Highland Hotel	96	7	Y	City
SOUTHERN ENGLAND
16			Barceló Combe Grove Manor, Bath*	42	5	Y	Country
17			Barceló Basingstoke Country Hotel	100	10	Y	Country
18			Barceló  Torquay Imperial Hotel	152	7	Y	Coast
19			Barceló  Brighton Old Ship Hotel	154	11	N	Coast
WALES
20			Barceló  Cardiff Angel Hotel	102	7	N	City
			Total	2,872	222

*  Barceló Premium Hotels

+ Operationally, Barceló split this property into a Barceló Premium Hotel, Barceló Walton Hall  and a Barceló Hotel, Barceló Walton Hotel

  

Chairman's Statement 

Introduction

Following the granting of leases to Barceló Group ("Barceló") on 6 September 2007, the financial year which commenced 1 January 2008 represents the first full year of Puma Hotels plc ("PHP") trading solely as an owner of hotel property receiving income from property rents.

In the entering into these leases, PHP has become a property investment company specialising in hotels. Barceló is a leading Spanish hospitality group with substantial global hotel and other leisure related operations and, by leasing the properties, PHP has gained a secure and growing income stream from a blue chip tenant. The Board of PHP envisages that the Company's growth may in the medium term come not only from further development of the existing property portfolio, but also from acquiring additional hotel assets to which a similar approach can be applied. In the medium term, the Board believes that PHP's strategic alliance with Barceló will play an important part in the Company's growth. In the short-term, the guaranteed and escalating nature of the rental stream offered by Barceló brings greater stability to the Group.

As announced on 24 July 2008, following the events at Dawnay, Day the Company terminated the engagement of Dawnay, Day Hotels Limited ("DDHL") under the Portfolio Management Agreement and with effect from 23 July 2008 engaged Shore Capital Limited to provide the services previously supplied by DDHL to the Company on the same terms. Howard Shore was appointed chairman of the Company and Jonathan Paisner appointed to the board as a director. These new arrangements have proven to be very successful with significant progress made on key PHP relationships with our tenant, bankers and employees. The results of discussions with our lenders were announced on 14 May 2009 and are summarised later in this statement. 

Financial Performance

PHP's results for 2008 reflect the changes in its business.  As the transfer of the business became effective on 6 September 2007, the comparative numbers for 2007 up to this date represent results from when the Company traded as a hotel operator.

Turnover for 2008 of £28.5m comprises rent received from Barceló (2007: £77.0m being a combination of trading revenue from hotel operations and rent received from Barceló). Operating profit, before revaluation of properties, at £23.9m (2007: £11.1m) substantially increased, reflecting the benefit of the lease arrangements agreed with Barceló. This arises because PHP no longer bears the overhead of operating the hotel group. Moreover, PHP no longer needs to fund maintenance expenditure other than, as previously reported, that PHP has agreed, as part of the lease arrangements, to make a £10m contribution for capital works over the first 10 years of the lease. Of this, £2.9m has already been contributed in accordance with the agreement.  

As discussed below, PHP has had the leased properties professionally revalued as at 31 December 2008 and, as a result, is now carrying its entire portfolio at a total value of £483.5m (2007: £531m). The overall reduction is caused by changes in the world financial markets and the consequent impact on property values. It should be noted that the structure of the lease deal with Barceló and the associated guarantees offered by this blue chip tenant, have served to mitigate the decline in value. As part of the revaluation process, each individual property has been assigned a new value, in some cases eliminating the brought forward valuation surplus, hence leading to a charge to the profit and loss account of £3.3m (2007:£7.1m). This charge is a non-cash item which is shown as a "deficit on revaluation". The remainder of the revaluation amounts (a total deficit of £44.3m) have been taken against the valuation surplus in the balance sheet after which the 31 December 2008 balance of the revaluation reserve is £105.1m.

Net bank interest payable increased by £2.6m reflecting the aggregate increase in the total borrowings of the Company during 2008. Whilst during the first half of 2008, net bank interest increased year on year partly as a result of a rise in 3 month LIBOR, the execution of a SWAP on 16 September 2008 reduced the level of interest for the remainder of the year in comparison to the prior year. The result was that the average cost of bank debt during 2008 was the same as 2007 at 7.18%.

The combination of higher rental income from our tenant and lower interest costs from the SWAP agreements executed on 30 April 2009 (discussed in post balance sheet date events) will substantially improve the Company's financial position from now on.

Total interest payable also includes payments to bondholders of the Company's deep discounted bonds of £4m (2007:£4m). In total, Interest Payable and Similar Charges for the year amounted to £29.5m (2007:£29.2m) reflecting the fact that amortisation of bank loan issue costs during the year were only £0.7m (2007:£2.9m).

New Leases and Property Revaluation

The leases granted to Barceló place full repairing and insuring obligations on the tenant and provide guaranteed rental growth over the first four years; this is inflation-indexed thereafter and can also increase if hotel EBITDA performs well.  The asset values on the balance sheet of PHP reflect these lease arrangements.

For the purpose of preparing its annual financial statements for 2008, PHP has had the property subject to these leases professionally valued by Colliers Robert Barry. This valuation of each property in the portfolio, which excludes land held for development and other assets not subject to the Barceló lease, is at £480m. The Board of PHP considers that the current value of the assets excluded from the lease is a further £3.5m.

This new valuation is a reduction of £47m (9%) from the 31 December 2007 valuation and a £76m (14%) reduction from the valuation of £556m given in August 2007 immediately after the leases were granted. Compared to the reduction in property yields across the UK hotel sector during this time, these reductions have been mitigated by:

The secure and growing rental income stream from the leases which included a £2m (7%) increase to £30m per annum from September 2008.

The contracted rental income uplift from £30m to £31m in September 2010

The strength of the Barceló covenant and the attractive inflation-linking features (inflation link commences from September 2011).

Anglo Irish Bank Debt Facility Extension

As announced on 14 May 2009, the Company has signed an agreement with Anglo Irish Bank Limited ("Anglo Irish") to extend the term of its senior debt facility. This facility was due for repayment on 31 December 2009 but will now mature on 31 December 2012.  In a volatile and difficult credit market, this extension by three years represents a key milestone in safeguarding the Company's financial position. The extension is subject to a reduction in the principal outstanding under the debt facility as outlined below: 

The facility is being reduced to £332.3m from its present ceiling of £350m (of which £347.5m is currently drawn). PHP expects to fund this reduction, together with associated costs, by raising an additional £20m in new equity from the Company's shareholders.  To allow time for the fund-raising, currently under-way, the agreement is expected to take effect by 14 July 2009.

Anglo Irish  have agreed that there will be no further loan to value covenant testing for the duration of the facility (i.e. up to and including 31 December 2012). This provides significant certainty to shareholders in the current market.

The margin on the facility will increase from 1.75% to 2.5% from the Effective Date (see below). The extension is also subject to an arrangement fee of £1m.

The maturity of the Company's outstanding shareholder bonds will be extended to 31 December 2012 to align it with the Bank facility, although approximately £2m of these bonds will, as previously scheduled, be redeemed on 30 June 2009. It is also intended to seek bond-holder approval to a listing of the outstanding bonds on the Channel Islands Stock Exchange and for the bonds thereafter to bear 12% interest, payable semi-annually. Irrevocable commitments to vote in favour of these proposals have already been received from 55% per cent of the bond-holders which is sufficient for approval to be passed.

All variations to the loan agreement will become effective on the date on which the principal repayment is made (the "Effective Date") which is expected to be achieved by 14 July 2009.

In preparing the statutory accounts, the Directors have considered the Group's cash flow forecasts for the period to the end of June 2010 and the Company's financial resources. After making enquiries, the Board is satisfied that the Group's forecasts and projections - taking account of the extension of the facility as above and associated fund-raising currently in progress - show that the Group will have adequate resources to continue its operations for the foreseeable future. For this reason the Group continues to adopt the going concern basis in preparing its financial statements.

Development Plans 

In the past, PHP has successfully exploited the potential for gains in value through developing the portfolio by adding extra rooms, conference and other facilities. This programme is expected to continue in the medium term and at present PHP has the potential to add over 800 rooms (over 25 per cent of the current estate) of which 370 rooms have already received the necessary planning or listed building consent. There are also schemes for 2,500 sq.m (over 60 per cent of which has planning consent) of additional meeting rooms and upgrades for several leisure clubs. The economics of adding these rooms can be highly attractive for both parties. The value of the development potential of the portfolio is not typically fully recognised in a professional valuation and PHP therefore believes that fulfilling the programme will add significantly to net asset value over time.

In order to realise these development plans PHP continues to monitor and protect planning permissions already granted. 

Strategy and Plans

Having concluded the leases with Barceló, PHP has transformed its financial position. The effect is to increase PHP's net cashflow before interest as PHP no longer bears the overhead costs of operating the hotel group nor (other than the agreed contribution) funds maintenance expenditures. Cashflow will grow further in subsequent years according to the leases' formula and is supported by Barceló's strong covenant rather than being dependent on the potential cyclicality of the hotel business.

This new operating structure has meant that the Group is better able to withstand the effects of the economic downturn brought about by the deterioration in the global financial markets. Whilst the value of the Group's assets reflects some of the reduction in investment yields, cashflow has increased. The signing of the agreement with Anglo Irish to extend the maturity date of the senior debt to 31 December 2012 represents a significant milestone for the Group.

In the medium term, there is also the opportunity to unlock significant value by executing the Group's development plans and consider selective asset disposals as and when the investment market recovers. The Board considers that once the investment market recovers, the Group's assets should once again prove highly attractive because of the longevity of the leases and the associated indexation. The extended maturity of the senior debt provides the flexibility to optimise the potential returns to shareholders with the intention of liquidating assets and returning capital to investors prior to the new maturity of the senior debt and shareholder bonds.  The asset management contract with Shore Capital has also been extended to 31 December 2012 to coincide with the investment programme.

Post balance sheet date events

As announced on 14 May 2009, and summarised earlier in this statement, the Group has signed an agreement with Anglo Irish  to extend the maturity date of the senior debt facility in place from Anglo Irish to 31 December 2012.

The Company executed three interest rate SWAP agreements on 30 April 2009. These SWAP agreements relate to a principal amount of £182.3m and commence on 31 December 2009 when the current SWAP arrangement relating to this amount expires. The profile of these SWAPS is as follows:

31 December 2009 to 31 December 2010: 2.230%

31 December 2010 to 31 December 2011: 3.330%

31 December 2011 to 31 December 2012: 3.945%

The remaining £150 million of the facility is already subject to an interest rate SWAP agreement at a rate of 5.145%.

Prospects

The Company is well-placed to protect and grow value for shareholders. It has an attractive portfolio of assets which are let to a progressive tenant with a strong covenant. Cashflow will progressively improve and the Company is well placed to exploit any recovery in investment values and pick-up in inflation. 

Howard Shore

Chairman

18 May 2009

  Puma Hotels plc

Consolidated Profit and Loss Account

Year ended 31 December 2008

				Year  ended 31  December 2008 £'000	Period ended 31 December 2007 £'000
TURNOVER				28,455	76,991
Cost of sales				-	(8,028)
GROSS PROFIT				28,455	68,963
Other administrative expenses				(4,540)	(57,896)
Administrative expenses - exceptional				(3,283)	(7,077)
(Deficit on revaluation of properties)
Total administrative expenses				(7,823)	(64,973)
OPERATING PROFIT				20,632	3,990
Loss on sale of fixed assets				-	(116)
				20,632	3,874
Interest receivable and similar income				71	140
Interest payable and similar charges				(29,482)	(29,160)
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION				(8,779)	(25,146)
Tax on loss on ordinary activities				3	8,018
LOSS FOR THE FINANCIAL PERIOD				(8,776)	(17,128)
Equity dividend paid				-	(1,260)
RETAINED LOSS FOR THE FINANCIAL PERIOD				(8,776)	(18,388)

  Puma Hotels plc

Consolidated and Company Balance Sheet

Year ended 31 December 2008

		Group	Company	Group	Company
		As at 31 December  2008 £'000	As at 31 December £'000	As at 31 December  2007 £'000	As at 31 December 2007 £'000
FIXED ASSETS
Intangible assets - goodwill		8,481	-	9,002	-
Tangible assets		483,520	-	531,060	-
Investments		-	469,668	-	469,668
		492,001	469,668	540,062	469,668
CURRENT ASSETS
Debtors		2,387	479,376	819	150,444
Cash at bank and in hand		8,748	8,748	6,979	6,535
		11,135	488,124	7,798	156,979
CREDITORS: amounts falling due within one year		(361,846)	(625,872)	(24,129)	(1,054)
NET CURRENT (LIABILITIES)/ASSETS		(350,711)	(137,748)	(16,331)	155,925
TOTAL ASSETS LESS CURRENT LIABILITIES		141,290	331,920	523,731	625,593
CREDITORS: amounts falling due after more than one year		(33,155)	-	(362,496)	(288,952)
PROVISION FOR LIABILITIES		-	-	(3)	-
NET ASSETS		108,135	331,920	161,232	336,641
CAPITAL AND RESERVES
Called up share capital		1,658	1,658	1,658	1,658
Share premium account		32,137	32,137	32,137	32,137
Revaluation reserve		105,104	-	149,425	-
Profit and loss account		(30,764)	298,125	(21,988)	302,846
EQUITY SHAREHOLDERS' FUNDS		108,135	331,920	161,232	336,641

  Puma Hotels plc

Consolidated Statement of Total Recognised Gains and Losses

Year ended 31 December 2008

		Year ended 31 December 2008 £'000	Period ended 31 December 2007 £'000
Loss for the financial period		(8,776)	(17,128)
Unrealised (deficit)/surplus on revaluation of properties		(44,321)	(18,360)
Total recognised losses relating to the period		(53,097)	(35,488)

NOTE OF CONSOLIDATED HISTORICAL COST PROFITS AND LOSSES 

Year ended 31 December 2008

		Year ended 31 December 2008 £'000	Period ended 31 December 2007 £'000
Reported loss on ordinary activities before taxation		(8,779)	(25,146)
Difference between historical cost depreciation charge and actual depreciation charge for the year calculated on the revalued amount		-	258
Historical cost loss on ordinary activities before taxation		(8,779)	(24,888)
Historical cost loss for the year retained after taxation and dividends		(8,776)	(18,130)

  

Puma Hotels plc

Consolidated Cashflow statement

Year ended 31 December 2008

		Year ended 31  December 2008 £'000		Period ended 31 December 2007 £'000
Net cash inflow from operating activities			18,621	23,947
Returns on investments and servicing of finance
Interest received			71	140
Interest paid			(26,480)	(18,059)
Interest paid on finance leases			(12)	(36)
Dividends paid			-	(1,260)
Net cash outflow from returns on investments and servicing of finance			(26,421)	(19,215)
Taxation
Corporation tax paid			-	-
Capital expenditure
Purchase of tangible fixed assets			(1,564)	(35,485)
Sale of tangible fixed assets			-	226
Net cash outflow from capital expenditure and financial investment			(1,564)	(35,259)
Net cash outflow before financing			(9,364)	(30,527)
Financing
New term loans raised			13,929	105,626
Term loans repaid			-	(63,033)
Bonds repaid			(2,448)	(2,751)
Loan notes repaid			-	(3,709)
New term loan issue costs			(195)	(663)
Repayment of principal under finance leases			(153)	(371)
Net cash inflow from financing			11,133	35,099
Increase in cash			1,769	4,572

  Note The accounting policies used in arriving at these figures are consistent with those which will be published with the full financial statements. There are no changes in accounting policies from those used in the prior period. The audit report on the statutory accounts for the year ended 31 December 2008, which is unqualified, does include reference to the existence of a material uncertainty which may cast doubt on the ability of the Company to continue as a going concern.

The financial information in this announcement has been prepared under the historical cost convention, adjusted for the revaluation of tangible assets in accordance with the accounting policies set out in the Company's Report and Accounts for the prior period. Such information does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985 for the year ended 31 December 2008 and period ended 31 December 2007. The financial information for the prior period ended 31 December 2007 is derived from the statutory accounts for that period which have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under s237(2) or (3) of the Companies Act 1985. 

The preliminary announcement has been prepared on the basis of the financial information presented by the directors in the statutory accounts for the year ended 31 December 2008 which will be delivered to the Register of Companies following the company's annual general meeting.

ENDFR ARMJTMMMBTML

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