RNS No 9966h
SCOTTISH HIGHLAND HOTELS PLC
12th January 1999

                             
               Scottish Highland Hotels plc
                             
        Results for the year ended 31 October 1998
                             
Highlights

*    Turnover up 24% to #21.8 million
*    Operating profit  up 29% to #5.6 million
*    Profit before tax and exceptional credit up 29% to
     #4.5 million
*    Earnings per share up 11% to 13.4p
*    Dividends of 4.0p up 11%

Chairman, Hamish Grossart, commented:

"These  excellent results reflect the full year  impact  of
the  two additional hotels in Northern England acquired  in
October  1997.  The group is soundly financed  and  managed
and  we remain comfortable that our positioning, with  over
80% of rooms in the 4 star sector, has been well judged  to
withstand the more challenging trading conditions currently
being experienced."


               Scottish Highland Hotels plc
                             
 Extracts from the Chairmans Statement and Review of the
                           Year
                            
After an exciting first year as a listed company, the  year
to  31  October  1998 was one of strong  consolidation  and
profitable  growth for Scottish Highland Hotels.   The  two
hotels   in   England   acquired  in  October   1997   were
successfully  integrated;  the balance  sheet  was  further
strengthened by cash flow and by the disposal of our  least
profitable  3  star hotel;  the groups  weighting  in  the
target  4  star  market grew to over  80%;   and  turnover,
profits,  earnings  and dividends all  reached  new  record
levels.

Results

Turnover  rose  by 24% to #21.8 million with  the  increase
attributable  to  the  full  year  contribution  from   the
acquired  hotels.  The turnover of the Scottish hotels  was
at  a similar level to the previous year, with gains in the
first  half being offset by a weaker second half when  some
challenging  trading conditions subsisted, particularly  in
the  overseas  tourist sector.  Importantly  however,  cost
increases  across the group were held below  the  level  of
sales increases and consequently margins rose at both hotel
operating  level,  from 31.5% to 31.6%,  and  at  operating
profit level, from 24.8% to 25.8%.

Operating profit before exceptional credit at #5.6  million
was  29%  ahead  providing interest  cover  of  4.8  times.
Excluding the exceptional profit of #0.2 million  from  the
hotel  disposal, profit before tax rose 29% to #4.5 million
and earnings per share by 11% to 13.4p.

Financial position

At  the  last year end, following the acquisition  and  the
placing  and  open offer to shareholders, net  indebtedness
amounted  to #15.1 million and net assets #30.4 million,  a
gearing ratio of 50%.

Two  major  items  impacted cash flow in  the  year  to  31
October 1998.  Firstly, the disposal of the Pitlochry Hydro
Hotel  in  July 1998 realised net proceeds of #1.8 million.
Secondly,  on  29  October 1998, the redeemable  preference
shares  were  redeemed  in full at a  total  cost  of  #1.1
million.

Outwith these items, operating cash flow was a healthy #5.2
million and net free cash flow totalled #1.5 million.    As
a  result, overall net indebtedness at 31 October 1998  was
reduced  to  #12.9  million,  representing  balance   sheet
gearing  of  under  40% on year end  net  assets  of  #32.4
million.

Operating performance

In  the year to 31 October 1998 the principal trading focus
was  the  integration  into the group  of  the  two  hotels
acquired  in October 1997.  This was successfully  achieved
with  hotel operating profits increasing by 24.2%  to  #6.9
million  and operating margins reaching a new record  level
of   31.6%.   After  central  costs  of  #0.6  million  and
depreciation  of  #0.6  million,  group  operating   profit
increased by 28.7% to #5.6 million.

The  following table sets out the key operating  statistics
for the five financial years to 31 October 1998.

Year to 31 October       1994     1995     1996    1997     1998

Average rooms available   523      524      525     531      650
Revenue per room       #29,163 #30,047  #31,626 #33,247  #33,612

Average occupancy        71.2%   73.4%    75.5%   75.5%    70.5%
Average room rate       #47.51  #47.78   #49.83  #52.89   #56.29

Operating costs
       per room        #22,476 #21,899  #22,081  #22,785 #23,001
Hotel profit per room   #6,687  #8,148   #9,545  #10,462 #10,611

Hotel operating margin   22.9%   27.1%    30.2%    31.5%   31.6%

Note:   Hotel  profit  and operating margin  are  based  on
profit before depreciation and central costs.

The  room  stock  fell  from 679 to  617  during  the  year
following the sale of the Pitlochry Hydro Hotel on  6  July
1998.   Room  occupancy  at  the five  continuing  Scottish
hotels  was  75.2%  (1997: 76.1%) and at the  two  acquired
English  hotels  58.9%, leaving scope at these  hotels  for
future growth.

The pattern of business at the two acquired hotels mirrored
the established trading mix of the group.  This resulted in
a  group  turnover split of 43% from rooms, 30% from  food,
13%  from liquor, 8% from leisure and 6% from sundry areas,
similar to previous years.

Properties

In   line  with  the  groups  policy  to  revalue   assets
regularly,  the carrying value of the hotel properties  was
reviewed  by  Christie & Co at 31 October 1998.   In  their
opinion, the current value of the seven hotels totals #55.7
million.   This  represents  an  average  of  approximately
#90,000  per  room and a multiple of 8.1  times  the  hotel
operating profit achieved by these hotels in the year to 31
October 1998.

This  revaluation produces a surplus of #7.4  million  over
the  book  value  of  the  assets.   Whilst  this  is  most
encouraging,  the Board has decided not to incorporate  the
surplus  in the balance sheet at this time in view  of  the
groups  development  plans  for  certain  hotels  and  the
current weaker economic conditions.

In  March 1998 we announced the sale of the Pitlochry Hydro
Hotel, the least profitable hotel in the group, for a  cash
consideration of #1.8 million, net of expenses.  The timing
of  the  handover, on 6 July 1998, meant that we  lost  the
main  trading season of the hotel but the resulting trading
shortfall  was  compensated by achieving a gain  over  book
value of #0.2 million.

Capital expenditure

Major  projects  are  now underway to develop  two  of  the
hotels.  At Hellaby Hall Hotel a leisure club and brasserie
is  being  added and the bedroom stock is being refurbished
at  a total cost of #2 million.  At Stirling Highland Hotel
16 bedrooms and new laundry facilities are being added at a
cost  of  #0.7  million.  We anticipate that both  projects
will  be  completed by mid-summer 1999 but it will  be  our
next  financial year before the enhanced facilities  impact
on trading.

We  shall continue to review the quality and scale  of  the
facilities  at  all  our hotels to  ensure  that  they  are
competitive  in the marketplace.  Our rolling programme  of
refurbishment capital expenditure continued in the year  to
31  October  1998  at  a cost of #1.1 million  and  we  are
planning a similar spend in the current financial year.

Year 2000 and EMU

Our  preparations to deal with the Year 2000 issue are well
advanced.   A  rolling  programme to replace  non-compliant
computer hardware has been underway for two years and  will
be  completed  in good time.  All computer software  issues
have  been addressed and solutions found.  A full inventory
of  all  relevant  equipment and  minor  systems  has  been
undertaken as well as a full supplier survey.  Whilst it is
difficult to ensure total compliance, we are confident that
we  will  not be faced by any business critical  issues  or
with  major unforeseen expenditure.  We estimate  that  the
cost  of  upgrading non compliant equipment will  be  under
#100,000.

We  have  reviewed  the implications of  the  Economic  and
Monetary  Union  and are developing our policy  on  related
marketing  issues.  Our financial systems will be  upgraded
as  a  matter of course within the likely timescale for  UK
entry.

Taxation

The  tax charge on profits for the year to 31 October  1998
was  #0.5  million, an effective rate of  10.6%  on  profit
before exceptional item and a slight reduction on the  1997
rate  of  13.1%.  In view of our development plans and  the
availability  of unrelieved losses we currently  anticipate
that the charge in the next two financial years will remain
below 15%.

Dividends

In view of the strong results and the healthy balance sheet
position,  the directors are recommending a final  dividend
of  2.6p per share.  When added to the interim dividend  of
1.4p per share paid in September 1998, total dividends  for
the  year will be 4.0p per ordinary share.  This represents
an increase of 11% on last years total.

Outlook

The   group  is  soundly  financed  and  managed,  and  our
concentration on 4 star properties will provide us  with  a
solid   base   of   business  through  differing   economic
conditions.  The 1998 results were very good although there
was some fall off in demand in the latter part of the year.

The  first  part of the current financial year has  seen  a
continuation of these weaker market conditions and turnover
for the 10 weeks to 7 January 1999 was some 4% down on last
year,  on  a  like  for like basis.  The  fog  over  future
economic   conditions  in  the  UK  makes  predictions   an
uncertain process, but we have been served well in the past
by  taking  the more prudent view.  We therefore  think  it
likely  that these tougher trading conditions will continue
for  the  remainder of this year, and that  those  industry
commentators  predicting  a  further  year  of  growth  are
probably wrong.

Looking  further  ahead, the group will benefit  from  this
years  capital expenditure on the leisure club development
at Hellaby Hall Hotel and the bedroom extension at Stirling
Highland Hotel.  We remain comfortable that the positioning
of  our  group has been well judged to withstand  the  more
challenging trading conditions currently being experienced.

Hamish Grossart
Chairman


               Group Profit and Loss Account
            for the year ended 31 October 1998

                              Notes     1998          1997
                                        #000          #000

Turnover                              21,848        17,654
Cost of sales                        (14,950)      (12,099)
                                       _____         _____
Hotel operating profit                 6,898         5,555
Administrative expenses                 (645)         (717)
Depreciation                            (627)         (466)
                                       _____         _____
Operating profit                       5,626         4,372
Exceptional item: 
  profit on disposal of hotel            204             -
                                      ______         _____  
Profit on ordinary activities
  before interest                      5,830         4,372
Interest                              (1,174)         (921)
                                       ______        ______                    
                                                     
Profit on ordinary activities
 before taxation                       4,656         3,451
Taxation                                (471)         (452)
                                       ______        ______ 
Profit on ordinary activities
 after taxation                        4,185         2,999
Dividends - equity                    (1,169)         (994)
          - non equity                   (55)          (55)
                                       ______        ______
Retained profit for the
 financial year                        2,961         1,950
                                       _____         ______

Earnings per ordinary share       1     14.1p         12.1p
                                       _____         _____

Earnings per ordinary share
 excluding exceptional item       1     13.4p         12.1p
                                       _____         _____


                    Group Balance Sheet
                   as at 31 October 1998

                                             1998    1997
                                             #000    #000
Fixed assets
Tangible assets                            48,413  49,388
                                           ______  ______ 

Current assets
Stocks                                        206     227
Debtors                                     1,461   1,032
Cash at bank and in hand                       69      24
                                           ______  ______
                                            1,736   1,283
Creditors:  amounts falling
  due within one year                      (6,623) (6,432)
                                           ______  ______
Net current liabilities                    (4,887) (5,149)
                                           ______  ______
 
Total  assets less current liabilities     43,526  44,239

Creditors:  amounts falling due
  after more than one year                (10,500)(13,000)
Provision for liabilities
  and charges                                (622)   (796)
                                           _______ _______
Net assets                                 32,404  30,443
                                           ======= =======

Capital and reserves
Called up share capital                     1,461   2,461
Share premium account                       6,365   6,365
Capital redemption reserve                  1,015      15
Revaluation reserve                        10,771  11,208
Special reserve                             7,370   7,370
Other reserves                                180     180
Profit and loss account                     5,242   2,844
                                           ______  ______
                                           32,404  30,443
                                           ======  ======
Shareholders funds                         32,404  29,443
Non-equity                                      -   1,000
                                           ______  ______  
                                           32,404  30,443
                                           ======  ======


                 Group Cash Flow Statement
            for the year ended 31 October 1998
                                               1998   1997
                                               #000   #000

Cash  inflow from operating activities        5,190  4,979
                                              _____  _____
Returns on investments
             and servicing of finance
Interest paid                                (1,163)  (869)
Non equity dividend paid                        (55)   (55)
                                             ______  ______
Net cash outflow from returns on investments
and servicing of finance                     (1,218)  (924)
                                             ______  ______

Taxation paid                                  (337)  (110)
                                             ______  ______
Capital expenditure
Purchase of tangible fixed assets            (1,016)  (826)
Sale of tangible fixed assets                     -     38
                                             ______  ______

Net  cash outflow for capital expenditure    (1,016)  (788)
                                             ______  ______
Acquisitions and disposals
Purchase of businesses                           -  (13,119)
Disposal of hotel                             1,771     -
                                             ______  ______
Net cash inflow/(outflow) from
 acquisitions and disposals                   1,771 (13,119)
                                             ______ _______

Equity dividends paid                        (1,111)   (414)
                                             ______  ______

Cash inflow/(outflow) before financing        3,279 (10,376)

Financing
(Redemption)/issue of share capital          (1,100) 15,687
Expenses paid in connection with
 share issues                                    -     (618)
Debt due beyond one year:
  Repayment of secured loan                  (2,000) (8,000)
  New secured loan                                -   5,000
                                             ______  _______
Net cash (outflow)/inflow from financing     (3,100) 12,069
                                             ______  ______
Increase in cash in the year                    179   1,693
                                             ______  ______

___________________________________________________________
Reconciliation of net cash flow to movement in net debt
                                             1998     1997
                                             #000     #000

Increase in cash in the year                  179    1,693
Cash outflow from decrease in debt          2,000    3,000
                                           ______   ______
Movement in net debt in the year            2,179    4,693
Net debt at 1 November 1997               (15,110) (19,803)
                                           ______   ______
Net debt at 31 October 1998               (12,931) (15,110)
                                           ______   ______
Notes

1 Earnings per ordinary share

  The  calculation of earnings per share is based upon  the
  group   profit   after  taxation  of  #4,185,000   (1997:
  #2,999,000)  less preference share dividends  of  #55,000
  (1997:  #55,000), divided by the weighted average  number
  of  ordinary  shares  of 5p in issue during  the  period,
  being   29,228,736  shares  (1997:  24,333,328   shares).
  Earnings  per share excluding exceptional item  is  based
  on  29,228,736  shares  (1997: 24,333,328)  and  adjusted
  earnings  of  #3,926,000  (1997:  #2,944,000).   In   the
  opinion  of  the directors this measure of  earnings  per
  share  provides  a  better basis for  comparison  of  the
  financial  performance  of  the  group.   Fully   diluted
  earnings  per share are not stated as the dilution  would
  relate only to share options and would not be material.

2 Dividends

  If  approved by shareholders, the proposed final dividend
  of  2.6 pence per ordinary share will be paid on 6  April
  1999 to shareholders on the register at 19 March 1999.

3 Financial information

  The   financial  information  set  out  above  does   not
  constitute  the  companys  statutory  accounts  for  the
  years  ended 31 October 1998 and 31 October 1997  but  is
  derived  from  those  accounts.  Statutory  accounts  for
  1997  have  been delivered to the Registrar of Companies,
  and  those  for  1998  will  be delivered  following  the
  companys  Annual  General Meeting.   The  auditors  have
  reported   on   those   accounts,  their   reports   were
  unqualified and did not contain statements under  section
  237(2) or (3) of the Companies Act 1985.

Contacts

Scottish Highland Hotels plc

Hamish    Grossart                           0468    025209
Alasdair Cameron (Deputy Chairman)           0141 331  6620
                                             or 0468 385564
Paul  Murray-Smith (Managing Director)       0141 331 6620
                                             or 0468 317000
Buchanan Communications
Zena Bates/Isabel Petre                      0171 466 5000


END

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