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
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