RNS Number:3706T
The Real Hotel Company PLC
29 April 2008
The Real Hotel Company plc
(the "Company", "Group" or "RHC")
Preliminary Results for year ended 31 December 2007
The Real Hotel Company plc announces its unaudited results for the year ended
31st December 2007
* Revenue #81.2 million (2006 #79.8 million)
* Operating loss #1.9 million (2006 loss #2.8 million)
* Loss after taxation #8.3 million (2006 loss #7.9 million)
Highlights
* The Purple HotelsTM brand was developed during 2007 and launched
successfully in 2008
* Agreed exit from the UK master franchise agreement in January 2008
* Four new Purple Hotels opened during the year
* Planned reduction in debt following conditional disposal of three London
hotels during 2008
Chairman's Comment
This has been a year of building a solid platform on which to execute our
declared strategy. Much of the work that has taken place has been below the
'line of sight' of the financial results. Our exit from franchising is a clear
milestone in the evolution of our business and fundamentally changes our
business model. The launch of our new Purple HotelsTM brand is an equally
important milestone for our Company. We now own our growth brand outright.
I have to report to shareholders that despite a stringent effort on business
performance, the Company still recorded an operating loss for the year of #1.9m
in the year before financial expenses.
The recently announced conditional disposal of our three London hotels will be
used to reduce debt and fund additional working capital. This disposal is
subject to the satisfaction of a number of conditions including shareholder
approval following the publication of a Class 1 Circular to be released in due
course.
I give shareholders my assurance that the management team and I will spare no
effort in addressing this situation and I strongly believe that the underlying
foundations we have now in place will transform the future of our Company.
For further information please contact
RHC plc: 020 8233 2001
Michael Prager, Chief Executive
Paul Mitchell, Chief Financial Officer
Adhoc PR 020 7483 0030
Deborah Parritt
Notes to Editors:
The Real Hotel Company plc (RHC)
The Real Hotel Company is more than just a name. It is a statement of the
Company's core values. To deliver the rich traditions of hotel keeping to a 21st
century market in a low cost environment. In short to be real hoteliers.
The Company is an owner, operator and developer of branded hotels in the UK and
Europe and operates 58 owned, leased or managed hotels in the UK, France,
Germany and Belgium. It also operates the New Connaught Rooms conference and
banqueting suite situated in London's Covent Garden.
The Company owns the Purple HotelsTM limited service brand - 'a real hotel for
the price of an inn' which differentiates itself by adding a touch of style and
cool to a sector that has, so far, defined itself only by price.
It also operates hotels under the franchise Choice brands of Quality, Comfort
and Clarion as well as six Stop Inn hotels.
The RHC management team has considerable experience in the hotel sector. Michael
Prager was Managing Director of Utell International and held senior positions in
Intercontinental and Radisson Hotel groups. Paul Mitchell was formerly Vice
President of Financial Planning and Control for Europe, Middle East and Africa
at Intercontinental Hotel Group in addition to holding senior finance positions
in Granada, Forte and Allied Lyons.
Chairman's Statement
Introduction
The process of the transformation of your Company isn't one single event; it is
a number of milestones, some important ones of which we have executed this past
year.
Strategy
The strategic direction of the Group which I communicated to shareholders last
year continues to refine itself. Our growth ambitions rest clearly on the
premium limited service sector. As a consequence we have been simplifying the
business of the Group to concentrate in this area, where we can build strong
asset values from our trading activity for future realisation.
The Board has been focusing the Group strategy by taking account of current
market trends against specific skill sets contained within the Group. The
traditional mid market is being squeezed by the extension of four star brands at
the higher end and the growth of the budget sector at the lower end to the
extent that the mid market is no longer an attractive sector in which to grow
the Group's business. At the same time, the Board recognises that the Group has
a significant competence based on the values of traditional hospitality that it
broadly defines as being 'real hoteliers' and that this is well aligned matched
to the emergence of the premium limited service sector. We believe that the
Group has developed a limited service product that has economics similar to the
budget sector but delivers a guest experience similar to that of the four star
sector. This comes together in the Group's branded Purple HotelsTM which is the
focus of our future growth. As a result the Board has determined that over time
the Group will exit from the traditional mid market sector to focus on the
premium limited service sector.
I am pleased to report to shareholders three significant developments in our
continuing strategic plan.
Firstly, after lengthy negotiations with Choice International we have exited the
UK Master Franchise. As with continental Europe the business of selling and then
servicing franchise agreements on behalf of Choice to third party hotels is no
longer economically viable. Although the agreement took effect as of 31st
January 2008 it was signed in December 2007 and required over six months of
management time to conclude. This business has therefore been described as a
discontinued operation within our financial statements. We are now Choice's
largest single franchisee in the UK with 25 hotels today. We look to them to add
value in excess of the fees we pay and to comparable market levels of
performance to those hotels that carry a Choice brand and we will judge them on
this basis. We have the right to exit all our Choice hotels from their brands in
October 2009. We'll make our decision on whether or not to do this closer to the
time but in the meantime we will work closely with them to optimise the
performance of the Choice estate and we look forward to their constructive and
value creative input to our business.
Secondly, after more than a year in development we launched our own premium
limited service brand; purple hotels TM. On 1st February 2008 we subsequently
rebranded the nine former Sleep Inns to Purple Hotels.
Purple Hotels represents the future of our Company. The budget sector in the UK
is by far the fastest growing sector of the market and the space at the top of
the sector, premium limited service, is where our skill set matches current
demand and where all available evidence indicates the market is going.
On 8th April 2008 we announced, subject to shareholder approval, an agreement to
dispose of three London hotels to Premier Inn.
The Board considered whether exiting the London market and including one of the
Group's new purple branded hotels in the transaction was in its shareholders
best interests. The Board has come to the conclusion that the transaction was
not possible without it and that exiting the London market for a temporary
period at this time allows us to extract maximum value from this transaction
whilst concentrating on the regional strengths of its Purple branded hotels. The
transaction does not prevent the Group from re-entering the London market at any
future time.
Thirdly we have determined to exit those management agreements that do not meet
the Group's minimum rates of return.
As we stand today we are a hotel operating business and brand owner, we have
eliminated all of our peripheral activities. The Group now owns it's growth
brand, Purple Hotels, outright. We operate our mid market hotels under the
Quality, Comfort and Clarion brands under franchise from Choice international.
This allows us to minimise any further investment necessary developing already
mature brands whilst taking full advantage of the value we create in our growth
brand.
In addition, the organisation review I described at the beginning of 2007, has
resulted in overall annualised cost savings of #0.5 million, with non recurring
cost incurred during the year of #0.3million.
Investment
Our investment programme has been concentrated on opening new premium limited
service Sleep/purple hotels and maintaining existing hotels to the necessary
standard required by both the regulatory authorities and the competitive market
in which we operate.
We opened four new hotels in 2007;
No of rooms
The Sleep Inn Doncaster (now Purple Hotel) 75
The Sleep Inn City of London (now Purple Hotel) 163
The Sleep Inn Birmingham Star City (now Purple Hotel) 90
The Purple Hotel Braintree 76
As at the end of 2007 we had 972 rooms under the Purple limited services brand.
We are well on track to our stated goal of 4000 rooms by the end of 2011.
Disposals
We also made a number of disposals during the year, evidence of our
determination to exit low growth/non fit businesses and to release capital to
fund growth in the new purple estate.
In October 2007 we sold the Comfort Hotel Nottingham eliminating a hotel that
would have been a considerable call on capital and one that did not fit our
portfolio going forward, in a town that is currently oversupplied.
In December 2007 we surrendered the lease on the Quality Hotel Brighton. This
hotel required major refurbishment work to remain competitive in a market which
continues to see a substantial growth in new room stock.
As previously mentioned in April 2008 we announced the disposal, subject to
shareholder approval, of our London hotels to Premier Inn.
Trading
Trading over the year became very polarised between the mid market full service
and the limited service estates. Overall the revenue of the Group grew by 2%
overall and showed a 1% decline on a like for like basis over the prior year
although, due to stringent cost control activities, this translated to 32%
reduction in the operating loss of the Group. Nevertheless, taking into account
rising rent levels, the one off cost of the reorganisation and pre-opening costs
of new properties, this has resulted in another year of losses which is
disappointing.
As with others in the hotel and leisure sector the economic uncertainties that
arose in the second half of last year have had a negative effect on our
business. In many cases the business volumes that our clients had projected did
not occur because their business was itself down on forecast. We have by and
large maintained our rates in the second half of the year as we did not believe
the causes of this downturn to be sensitive to price. We did not maintain our
occupancy forecast despite significant efforts from all of the management team.
We know we have a great product and brand in Purple and will continue to develop
it to its full potential.
Staff
Through this time of change I would like to acknowledge and thank all of our
management and staff across the Group for their hard work and dedication.
Future
Major milestones have been achieved during the past year enabling the delivery
of the strategy that the Board have put in place. The trading results from the
purple hotels confirm the future direction for the business.
Whilst trading conditions continue to be disappointing and the economic climate
remains uncertain, I am enthusiastic about the future, in which proceeds from
the recently announced disposal of the three London hotels (when all the
conditions have been satisfied) will be used to reduce debt and fund further
working capital. In the economic conditions that prevail being much less heavily
borrowed is a highly desirable position. Moreover this deal underlies the sort
of value we can create within the Real Hotel Company and the goals to which we
will continue to strive. The Board will be considering whether the Company
should remain on the main market or move to the AIM in the near term.
I give shareholders my assurance that the management team and I will spare no
effort in addressing the lack of profitability and I strongly believe that the
underlying foundations we have now in place will transform the future of our
Company.
Business Review
Introduction
2007 was a year in which we executed further key milestones in our business
strategy in which respect it laid some very firm foundations for our future.
Throughout this report I will utilise information from the 31 KPI's, ranging
from customer satisfaction to the development pipeline, which we use to monitor
the performance of our business.
Our Business
We are now a hotel operating company, pure and simple. We no longer sell
franchises in either Europe or the UK. We continue to operate the New Connaught
Rooms, one of London's largest multi function conference and banqueting venues,
which is both a cash generative business and a close fit to our operating skill
set.
As at the year end our revenue profile was as follows:
2007 2006
60% UK mid market full service hotels 63%
12% UK limited service hotels 5%
9% UK NCR 9%
14% European hotels 14%
5% Franchising, managed and other 9%
100% Total 100%
From the above our focus on the limited service hotel sector and the scaling
down of low profit management contracts and franchise agreements are evident.
As the Chairman commented the broadly defined budget/limited sector is the most
vibrant part of the UK hotel industry and, I am pleased to report to
shareholders, Purple hotels are very well positioned to take advantage of this
market trend.
It makes great sense for our Company to own its growth brand outright and to buy
a franchise for the mature, mid market hotels - provided that franchise
performs, and that is where we are now.
The UK remains our home and primary market. Whilst the credit crunch has slowed
the growth of property values in the UK, at least for the time being we continue
to believe that well run businesses with sound assets underpinning them will
create superior values for shareholders over the next five to ten years.
We have not taken our eyes off continental Europe, in fact our business there
has performed very satisfactorily and we will look for opportunistic
developments in Europe where the demand for premium limited service is under
supplied and property values are at, or near, the bottom of their cycle.
All of our development is now focused on the Purple hotel product and brand.
Strategy and Objectives
We are now in the execution phase of the strategy I outlined to shareholders
last year; there have been no deviations from this plan.
Our business objectives remain:
* To drive higher levels of revenue
* To improve and maintain a high level of guest experience in all of our
hotels
* To grow the limited service hotels and related brand to plan
* To continually improve the quality of our asset base.
At the Annual General Meeting last year we announced the rebranding of the old
CHE Hotel Group plc to the Real Hotel Company plc. Our new corporate identity
not only draws a clear distinction between us and the franchise brand owner we
currently work with, it also paved the way for our exit from franchising and
speaks to our core values. We are real hoteliers and we seek to deliver a real
hotel experience to our guests in a low cost environment where most of our
competitors define themselves by price alone.
A brand is far more than just a name, it is a signal to consumers of what they
should expect from the product and we believe that the Real hotel Company plc
makes that statement to customers, employees, investors and communities clearly
and unambiguously.
Our sales team in the UK is now well established and has had some worthy
successes during the year in the business to business (b2b) sector. We, like
others, suffered during the final quarter as businesses reigned in expenditure
in uncertain economic times. In particular companies that had contracted
training rooms and associated bedrooms in the midmarket full service sector fell
short of expectations when they, themselves, put a freeze on new hires or
replacements. Nevertheless we have won significant business in the year from
companies such as Xerox, Rolls Royce, Toyota and Thomsonfly as well as being a
significant provider of accommodation to various branches of the Government.
Our business to consumer (b2c) marketing is now a major focus area for us in
both the Purple and Choice brands as school holidays occupy an ever larger
proportion of the calendar and domestic corporate travel patterns reflect this.
The pricing changes I wrote about last year are now in place across the estate.
This contributed to improvements in UK RevPAR of 7.4% (4% like for like) and a
reduction in fees and expenses to intermediaries of 7.5%, indicating a sensible
use of third parties to capture new business but not to keep booking repeat
business.
Operations continue to focus on:
* Improving the guest experience
* Profit conversion
* Maintaining property assets in good condition
I shall comment on these and all performance measurements below.
For the year ended 31st December 2007 our customer satisfaction ratings in the
UK were as follows:
2007 2006 Growth
Would you recommend us to a colleague/friend? 91.6% 89.1% +2.5% pts
Did we represent good value for money? 93.1% 89.6% +3.5% pts
Will you stay with us again when next you visit
our area? 92.3% 89.2% +3.1% pts
These 'perception' responses clearly indicate the constant focus and attention
that we have on customer satisfaction to ensure that our customers have a
positive experience when staying in our hotels and would like to return. I would
like to take this opportunity of thanking all our staff across the business for
their effort in delivering this level of guest approval.
Our exit from franchising in the UK and our growth in low cost operations will
require that we continually review our cost base to eliminate expense through a
mixture of technology, organisation structure and outsource and we have
initiatives in place in all of those spheres.
Parts of our mid market hotel estate still fail to live up to customer
expectations on quality of the physical product and we do not compare as
favourably as we want to in a number of locations with the wide array of high
street casual dining options now available. Disappointingly our food and
beverage revenues have fallen by 8% on a like for like basis in our mid market
hotels. We will make investments or disposal decisions objectively upon all of
our demands on capital, based on the forecast return on shareholder funds. Where
underlying fixed expense makes investment unrealistic and the product demands
new funds we will seek an exit.
To address the need to improve our food and drink products we have hired a
Director of Food and Drink whose remit is to improve product quality, relevance
and drive sales across all of our food and drink operations. We piloted the
introduction of a premium Italian coffee outlet in our hotels in 2007 using
Lavazza coffee and equipment. The pilot has been successful and we will be
rolling this concept out across the estate in 2008.
As far as profit conversion is concerned our overall Gross Operating Profit (GOP
- revenue less cost of sales and direct wages) was 31%, an improvement of 2%
over 2006 with the limited service hotels, delivering a 46% GOP and the mid
market hotels a 29% GOP, both showing improvements over 2006 and indicating the
highly desirable operating economics of the premium limited service business.
These figures do not recognise the benefit of outstanding insurance claims
arising from the severe flooding in the summer of 2007.
We opened four new Sleep Inns/Purple Hotels during the year in:
No of Bedrooms
Doncaster (March) 75
City of London (April) 163
Birmingham Star City (May) 90
Braintree (November) 76
In February 2008 we opened the Purple Hotel Glasgow Airport (103 rooms) and we
have sites under construction or in the planning and legal process in:
No of Bedrooms
Sheffield 103
Ipswich 111
Chester 67
Tamworth 84
Our development pipeline stands at well over 2000 rooms under offer at present.
We successfully converted all of our Sleep Inn operations to Purple Hotels over
one weekend at the beginning of February 2008.
Risks and Uncertainties
Our risk profile has not greatly changed since last year and nor has our
response to this.
We still seek to be a fast follower rather than a pioneer - the development of
Purple out of Sleep being a good example, and we remain exposed to three classes
of risk:
* Financial
* Operational
* Environmental
Our financial risk is embodied in volatile interest rates and inflation linked
leases.
The Group endorses the internal control guidance for Directors in the combined
code and has established a system of internal financial controls to safeguard
the group's assets and ensure the proper accounting records exist.
The disposal of the London hotels will enable the Group to be less heavily
borrowed which is a highly desirable position in the current economic climate.
Operationally, along with all of our competitors we are exposed to the risk of
business downturns from the effects of global economic and security concerns. We
do not consider ourselves significantly exposed in this area as we are not
overly dependent on long haul international business. We are exposed to
downturns in the domestic economies in which we operate and cost pressures from
our corporate and consumer direct segments along with all others.
In that respect it is clear that current economic conditions will lead to a
degree of 'belt tightening' as the economy contracts which we will address with
internal cost elimination programmes and by making use of our positioning
against the first class/four star sector.
As far as leases are concerned we will continue to make strategic disposals of
sites that no longer provide adequate future returns to us.
Environmentally we are exposed to a range of health and safety issues as well as
the effect of changing government policy on matters such as employee legislation
and taxation.
We conduct health and safety, water quality, fire safety and food hygiene audits
via independent contractors at every hotel, three times a year with one of those
visits being unannounced. Where we identify problems we review our policies and
procedures to minimise future risk, in so doing continually reviewing our
insurance cover, which we carry to cover all areas of business, public &
employee liability, from which we cannot eliminate the associated risk.
We have implemented a companywide energy cost reduction programme under the
auspices of the Hospitable Climates initiative, launched in conjunction with the
British Hospitality Association and The Carbon Trust, in which we're seeking to
reduce energy use by 15% per annum across the business, without detriment to the
guest experience.
Performance and Measurement
As at the year end the hotels performance can be summarised as follows:
UK Hotels
Growth over 2006
Mid market Total Like for Like Total Like for Like
Occupancy 63.1% 63.8% (0.6)%pts (0.5)%pts
Average Room Rate #43.01 #41.34 +3.9% +3.7%
Limited Service
Growth over 2006
Total Like for Like Total Like for Like
Occupancy 58% 56.7% + 4.3%pts 3.0%pts
Average Room Rate #51.61 46.58 +15.9% 4.4%
The UK mid market hotels have seen overall revenue decline of 3% on a like for
like basis which is mainly influenced by an 8% decline in food and beverage
revenue. This situation, as already stated, is being addressed. The limited
service hotels saw revenue grow by 134% and 10% like for like. The combined
performance of the UK hotels saw operating losses reduce by #0.3 million to #1.8
million before impairment charges compared to 2006 .This highlights the fact
that our bottom line performance still remains unacceptable. From this we may
distil two fundamental issues:
* Revenue performance remains below acceptable levels.
* Levels of fixed expenses, rent for the most part, in some of the hotels
has become problematic and needs to be resolved.
Action is already underway to address both of these shortcomings during 2008.
France/Belgium Growth over 2006
Total Like for Like Total Like for Like
Occupancy - 66% - 2%pts
Average Room Rate - #36.77 - +14%
Our 6 French and 1 Belgian hotels have grown revenue by 11% with operating
profit remaining at breakeven.
Germany
Growth over 2006
Total Like for Like Total Like for Like
Occupancy 59% 53.5% 5.8%pts (0.3)% pts
Average Room Rate #34.51 #29.30 - (1)%
The 5 German hotels have seen revenue grow 15% (14% decline like for like).
Operating losses have remained at #0.3 million. Further work focused on
operating performance will be undertaken during 2008.
The New Connaught Rooms has seen revenue grow by 6% year over year and operating
profit increase by 11%, confirming our earlier decision to invest and upgrade
this operation.
Organisation
Over the course of the year we have maintained the same functional structure as
I advised shareholders last year. Within that we have continually reduced
payroll by re-engineering the organisation to changing levels of demand so that
despite adding 404 new rooms in four new hotels in the UK and the impact of
minimum wage increases of 5.94% and 3.2% over the last two years our payroll is
flat to prior year. The like for like payroll is 4% better than prior year.
At the New Connaught Rooms we have a new General Manager in place who has set
about re-invigorating this business with gusto.
The overall trading results for the business, despite the operating profit being
32% better than last year, are still very disappointing. Far from being
dispirited your management team are even more determined to make the initiatives
I have listed above reflect in financial performance.
Financial Review
Trading Summary
Revenue for the Group was #81.2 million, an increase of #1.4 million (+2%) on
2006 (#79.8 million). On a like for like basis revenue grew by 1% over 2006.
Operating loss was #1.9 million, an improvement of #0.9 million (+32%) on the
2006 loss (#2.8 million), after charging #0.3m of reorganisation costs as a
result of the re-organisation of corporate overheads, #0.2m of pre-opening costs
as a result of opening four new hotels during the year but does not recognise
the benefit of outstanding insurance claims arising from the severe flooding in
the summer, of #0.1million as required under the IFRS accounting treatment.
The Group made a loss on the disposal of the two UK hotels in Brighton and
Nottingham of #0.5m which is contained within the above figures.
After careful consideration the Directors have reviewed the carrying values of
the Group's property against the current trading conditions. As a result four
hotels, out of the 57 properties in which the Group holds an interest, have
received a write down in value totalling #0.6 million.
Financial Expenses
The interest charge for the year was #7.8 million reflecting an increase of #2.7
million over 2006. This reflects an increase of #0.7million interest on external
bank debt and #2.0 million increase in interest resulting from capitalising on
to the balance sheet #19.9m of new property leases in 2007 and the full year
impact of #7.1m of property leases capitalised in 2006, both under the IFRS
accounting treatment.
Loss after Tax
The Group made a loss after tax of #8.3 million, an increase of #0.4 million
over 2006 (loss of #7.9 million).
Taxation
There is no current UK Corporation Tax charge. The non-payment of a dividend
will enable the Company to utilise more surplus ACT against mainstream
corporation tax in the future than would otherwise have been possible, giving
the Company an effective cash tax rate of 10% for the immediate future.
Given the increased level of trading losses incurred during the year this has
resulted in a decrease in the deferred tax liability. As a consequence #1.4
million of deferred tax has been released into the income statement while
overall maintaining a neutral deferred tax position. In addition the percentage
of ACT recognised has been reduced from 70% to 9%.
Earnings
Basic and diluted loss per share (EPS) of 9.5p shows a decline of 0.2p when
compared with the loss per share of 9.3p in 2006. The number of shares in the
EPS calculation in 2007 was 87.5 million, compared with 85.4 million in 2006.
Cashflow
Operating activities absorbed #1.2 million prior to capital expenditure of #4.0
million and disposal proceeds of #2.3 million. This compared to an outflow #9.9
million and #8.3 million of capital expenditure in 2006.
Disposal of three London Hotels.
On the 8th April 2008 the Company announced, subject to receiving shareholder
approval, it had entered into an agreement to dispose of three London hotels
during 2008. This transaction will generate an estimated profit of #13 million.
The Board intends that the estimated cash available to the Group obtained from
the sale of the hotels will be used to reduce Group indebtedness by #11m and
provide #7m for general working capital requirements of the Group. The combined
impact of this action will be to reduce future interest charges by #1.2m per
annum.
Treasury
Group treasury matters are governed by policies and procedures approved by the
Board. The primary objectives of the treasury function are to provide
competitively priced funding for the activities of the Group and to identify and
manage financial risks, including exposures to movements in interest and foreign
exchange rates. Interest rate swaps and other financial instruments are used
when considered appropriate. It is not however, the policy of the Company to
enter into speculative transactions. The utilisation and availability of funding
facilities is monitored on an ongoing basis.
Consolidated Income Statement for the year ended 31 December 2007 (Unaudited)
Year ended Year ended
31 December 31 December
2007 2006
Continuing Discont- inued Total Continuing Discont- Total
operations operation operations inued
operation
Notes #m #m #m #m #m #m
Revenue 3,4 79.1 2.1 81.2 73.6 6.2 79.8
Cost of sales (33.0) - (33.0) (32.8) - (32.8)
-------- -------- ------- -------- ------- -------
Gross profit 46.1 2.1 48.2 40.8 6.2 47.0
Administrative
expenses
- Property
rentals (15.9) (0.1) (16.0) (14.8) (0.2) (15.0)
- Other (30.8) (3.3) (34.1) (25.4) (9.4) (34.8)
-------- -------- ------- -------- ------- -------
(46.7) (3.4) (50.1) (40.2) (9.6) (49.8)
-------- -------- ------- -------- ------- -------
Operating
(loss) /
profit 5 (0.6) (1.3) (1.9) 0.6 (3.4) (2.8)
Financial
expenses 6 (7.8) - (7.8) (5.1) - (5.1)
-------- -------- ------- -------- ------- -------
Loss before (8.4) (1.3) (9.7) (4.5) (3.4) (7.9)
tax
Income tax 7 1.4 - 1.4 - - -
-------- -------- ------- -------- ------- -------
--------
Loss for the
year
attributable
to the equity
holders of the
parent company (7.0) (1.3) (8.3) (4.5) (3.4) (7.9)
======== ======== ======= ======== ======= =======
Loss per share
Basic loss per
share 8 (8.0)p (1.5)p (9.5)p (5.3)p (4.0)p (9.3)p
Diluted loss
per share 8 (8.0)p (1.5)p (9.5)p (5.3)p (4.0)p (9.3)p
The directors have recommended no final dividend (2007-nil)
Consolidated Balance Sheet at 31 December 2007 (Unaudited)
December December
Notes 2007 2006
#m #m
Non current assets
Property, plant & equipment 9 115.7 98.6
Deferred tax assets 4.9 4.9
--------- -----------
120.6 103.5
Current Assets
Inventories 1.8 1.8
Trade and other receivables 10 18.1 15.0
Cash and cash equivalents 0.9 0.9
--------- -----------
20.8 17.7
--------- -----------
Total assets 141.4 121.2
Current liabilities
Financial liabilities (2.6) (4.7)
Trade and other payables 11 (20.4) (13.6)
Obligations under finance leases (5.3) (2.5)
Current tax payable (0.7) (0.7)
--------- -----------
(29.0) (21.5)
--------- -----------
Total assets less current liabilities 112.4 99.7
Non current liabilities
Financial liabilities (20.7) (16.0)
Debenture (14.0) (14.0)
Obligations under finance leases (43.4) (25.3)
Deferred tax liabilities (4.9) (6.3)
--------- -----------
(83.0) (61.6)
--------- -----------
Net Assets 29.4 38.1
--------- -----------
Capital and reserves 12
Issued share capital 8.8 8.8
Share premium 19.1 19.1
Retained earnings 1.5 10.2
--------- -----------
Equity attributable to the equity holders of the
parent company 29.4 38.1
--------- -----------
Consolidated Cashflow Statement for the year ended 31 December 2007 (Unaudited)
Year ended Year ended
31 December 31 December
2007 2006
#m #m #m #m
Cash flows from operating activities
Loss for the year (8.3) (7.9)
Adjustments for:
Interest charged 7.8 5.1
Decrease in deferred tax provision (1.4) -
Loss on disposal of fixed assets 0.5 -
Foreign exchange differences (0.4) -
Depreciation and amortisation charges 4.6 3.9
Increase in trade and other receivables (3.1) (0.8)
Increase/ (decrease) in trade payables 2.0 (6.2)
--------- -------
Cash generated by/ (absorbed by) operations 1.7 (5.9)
Interest paid (2.9) (4.0)
--------- -------
Net cash flow absorbed by operating
activities (1.2) (9.9)
Cash flows from investing activities
Acquisition of property, plant and (4.0) (8.3)
equipment
Receipts from disposal of fixed assets 2.3 -
Receipts from disposal of discontinued
business - 0.3
------- -------
Net cash used in investing activities (1.7) (8.0)
Cashflows from financing activities
Proceeds from issue of new ordinary shares - 20.0
less costs of issue of new ordinary shares - (1.4)
Increase in bank loans 3.3 -
Repayment of bank loans (1.6) (2.5)
Proceeds from new finance leases 1.1 0.7
Repayment of obligations under finance
leases (0.8) (0.4)
------- -------
Net cash from financing activities 2.0 16.4
--------- -------
Net decrease in cash and cash equivalents (0.9) (1.5)
Cash and cash equivalents at beginning of
year (0.8) 0.7
--------- -------
Cash and cash equivalents at end of year (1.7) (0.8)
========= =======
Cash and cash equivalents comprise:
Cash and cash equivalents in current assets 0.9 0.9
Bank overdraft (2.6) (1.7)
--------- -------
(1.7) (0.8)
========= =======
Consolidated statement of changes in equity (Unaudited)
Year ended Year ended
31 December 31 December
2007 2006
#m #m
Balance at beginning of year 38.1 27.2
Changes in equity
Movement in fair value of hedging derivatives in
year - 0.2
Exchange differences on translating foreign
operations (0.4) -
Issue of new shares net of issue costs - 18.6
----------- ---------
Net income recognised directly in equity (0.4) 18.8
Loss for the year (8.3) (7.9)
----------- ---------
Total recognised income and expense for the year (8.7) 10.9
----------- ---------
Balance at end of year attributable to the equity
holders of the parent 29.4 38.1
----------- ---------
Notes to the Unaudited Preliminary Announcement
For the year ended 31 December 2007
1 Basis of Preparation
The Group is preparing its financial statements in accordance with IFRS as
adopted by the European Union.
The unaudited preliminary announcement was approved by the Board on 25 April
2008.
The comparative figures for the financial year ended 31 December 2006 are not
the Company's statutory accounts for that financial year. Those accounts have
been reported on by the Company's auditors and delivered to the registrar of
companies. The report of the auditors was (i) unqualified, (ii) did not include
a reference to any matters to which the auditors drew attention by way of
emphasis without qualifying their report, and (iii) did not contain a statement
under section 237(2) or (3) of the Companies Act 1985.
The financial statements are prepared on a going concern basis which the
directors believe to be appropriate for the following reasons.
The Directors have prepared cashflow forecasts that have indicated the need for
additional funding in the forthcoming year. In order to address this situation
the Company has agreed terms for the disposal of three hotels for consideration
of #18.6m. However, this transaction is at this time subject to shareholder and
landlord approval. Whilst the directors are confident this transaction will be
completed and will provide the Group with the working capital it needs, they
have in addition, agreed additional banking facilities. The directors also
believe a further additional bank facility will be available to the Group if
needed, should the transaction not proceed. At this stage this has not been
contracted. Based on these reasons the directors believe that it remains
appropriate to prepare the financial statements on a going concern basis. The
Company will continue realising its non-core assets and discharging its
liabilities.
2 Accounting Policies
During the year, no new standards, amendments and interpretations have been
adopted by the Group.
3 Discontinued operation
In December 2007 the Group committed to dispose of its UK franchise agreement as
the continuation of the implementation of the strategic review of the business.
This sale completed in January 2008.
4 Segmental Information
Analysis by activity
Year ended 31 December 2007
Owned & leased Managed hotels Discontinued Total
hotels & & other operations1
banqueting
#m #m #m #m
Revenue 77.9 1.2 2.1 81.2
---------- ---------- ---------- ----------
Segment result 0.9 1.2 (1.3) 0.8
---------- ---------- ----------
Unallocated
administration
costs (2.7)
----------
Operating loss (1.9)
Financial
expenses (7.8)
----------
Loss before
taxation (9.7)
----------
Capital
additions 24.5 - - 24.5
Depreciation 4.6 - - 4.6
Segment Assets 128.4 1.8 1.2 131.4
Unallocated
corporate
assets 7.8
----------
Total assets 139.2
----------
Segment
liabilities (50.5) - - (50.5)
Unallocated
corporate
liabilities (59.7)
----------
Total
liabilities (110.2)
----------
1. The discontinued operation relates to the UK franchise business
4 Segmental Information (continued)
Analysis by activity
Year ended 31 December 2006
Owned & leased Managed hotels Discontinued Total
hotels & & other operations1
banqueting
#m #m #m #m
Revenue 72.0 1.6 6.2 79.8
---------- ---------- ---------- ----------
Segment result 1.8 1.6 (3.4) -
---------- ---------- ----------
Unallocated
administration
costs (2.8)
----------
Operating loss (2.8)
Financial
expenses (5.1)
----------
Loss before
taxation (7.9)
----------
Capital
additions 15.5 - - 15.5
Depreciation 3.9 - - 3.9
Segment Assets 113.4 1.5 0.9 115.8
Unallocated
corporate
assets 5.4
----------
Total assets 121.2
----------
Segment
liabilities (26.4) - - (26.4)
Unallocated
corporate
liabilities (56.7)
----------
Total
liabilities (83.1)
----------
1. The discontinued operation relates to the UK and European franchise
businesses
4 Segmental Information (continued)
Analysis by geographical location
Year ended 31 December 2007
U K France & Germany Discontinued Total
Belgium operation1
#m #m #m #m #m
Revenue 67.2 6.0 5.9 2.1 81.2
-------- -------- -------- --------- -------
Segment result 2.3 - (0.2) (1.3) 0.8
-------- -------- -------- ---------
Unallocated
administration
costs (2.7)
-------
Operating loss (1.9)
-------
Capital
additions 24.5 - - - 24.5
Depreciation 4.5 0.1 - - 4.6
Segment Assets 134.6 2.7 2.9 1.2 141.4
Segment
liabilities (108.1) (3.1) (0.8) - (112.0)
1. The discontinued operation relates to the UK franchise business
Year ended 31 December 2006
U K France & Germany Discontinued Total
Belgium operation1
#m #m #m #m #m
Revenue 62.7 5.6 5.3 6.2 79.8
-------- -------- -------- --------- -------
Segment result 3.2 0.2 - (3.4) -
-------- -------- -------- ---------
Unallocated
administration
costs (2.8)
-------
Operating loss (2.8)
-------
Capital
additions 15.5 - - - 15.5
Depreciation 3.9 - - - 3.9
Segment Assets 114.1 4.2 2.0 0.9 121.2
Segment
liabilities (80.5) (1.9) (0.7) - (83.1)
1. The discontinued operation relates to the UK and European franchise
businesses
5 Operating loss
2007 2006
#m #m
This is arrived at after charging:
Depreciation 4.6 3.9
Amounts receivable by the auditors and their associates in respect of:
- Audit of financial statements of subsidiaries 0.2 0.2
- Other services relating to taxation 0.1 0.2
Property
Rentals 16.0 15.0
6 Financial expenses
2007 2006
#m #m
Debenture Interest (1.6) (1.6)
Bank Loans & Overdrafts (2.0) (1.3)
Finance Lease Interest (4.2) (2.2)
--------- -----------
(7.8) (5.1)
========= ===========
7 Income tax
2007 2006
#m #m
UK Corporation Tax - -
Overseas tax - -
Deferred tax 1.4 -
--------- -----------
1.4 -
========= ===========
The Group has unrecognised surplus ACT losses to carry forward of #2.6m (2006 -
#1.1m)..
8 Loss per share
The basic loss per share is based on a loss after tax of #8.3m (December 2006 -
#7.9m) and 87,522,000 shares (December 2006 - 85,143,000 shares) being the
average number of shares in issue during the year. There are no potentially
dilutive shares in issue.
9 Property, plant and equipment
Freehold & Furniture, Total
leasehold fixtures &
properties equipment &
motor vehicles
#m #m #m
Cost or valuation
At 1 January
2007 93.5 22.2 115.7
Additions 21.4 3.1 24.5
Disposals (2.8) (0.9) (3.7)
----------- ------------- ----------
At 31 December
2007 112.1 24.4 136.5
Depreciation
At 1 January 2007 9.8 7.3 17.1
Provided for the period 2.5 2.1 4.6
Eliminated on disposals (0.3) (0.6) (0.9)
----------- ------------- ----------
At 31 December 2007 12.0 8.8 20.8
Net Book Value
At 31 December 2007 100.1 15.6 115.7
=========== ============= ==========
At 31 December 2006 83.7 14.9 98.6
=========== ============= ==========
10 Trade and other receivables
2007 2006
#m #m
Trade receivables 9.5 8.8
Other receivables 4.0 2.6
Prepayments 4.6 3.6
--------- ----------
18.1 15.0
========= ==========
There are no debtors due after more than one year.
11 Trade and other payables
2007 2006
#m #m
Trade payables 9.3 7.3
Other payables 2.7 0.6
Tax and Social Security 1.6 1.0
Accruals 6.8 4.7
--------- ----------
20.4 13.6
========= ==========
12 Reserves
Share Share Retained Total
Capital Premium Earnings
#m #m #m #m
Balance at 31 December 2006 8.8 19.1 10.2 38.1
Exchange differences on translation of
foreign operations - - (0.4) (0.4)
Loss for the year - - (8.3) (8.3)
-------- -------- -------- --------
Balance at 31 December 2007 8.8 19.1 1.5 29.4
-------- -------- -------- --------
13 Use of estimates and future performance
The preparation of the financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Certain statements, which appear in a number of places throughout this document,
may constitute "forward-looking statements" which are all matters that are not
historical facts including anticipated financial and operational performance,
business prospects and similar matters. A variety of factors could cause the
Group's actual results and expectations to differ materially from the
anticipated results or other expectations expressed in the Group's
forward-looking statements. The statements, if any, are illustrative only and do
not amount to any representation that they will be achieved as they involve
risks and uncertainties and relate to events and depend upon circumstances,
which may, or may not, occur in the future and there can be no guarantee of
future performance.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BUGDSRUDGGIC
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