Final Results

Peel Hotels PLC
07 April 2004


                                PEEL HOTELS PLC
                            PRELIMINARY ANNOUNCEMENT
  Derived from the audited results for financial period ended 15 February 2004


HIGHLIGHTS


   • Turnover up by 9.7% to £12.1 million (2003 - £11.0 million)


   • Operating profit, excluding income from Management Contract, up by 12%
     to £2.3 million (2003 - £2.0 million)


   • Pre-Tax profits down 20% to £1.41 million (2003 - £1.76 million)


   • 'Revpar' (Accommodation revenue per available room) improved by 2%


   • Dividend increased by 5% to 4.2p per share (2003 - 4.0p per share)


PRESS ENQUIRIES TO ROBERT PEEL 020 7266 1100



CHAIRMAN'S STATEMENT

RESULTS

Turnover grew by 9.7% to £12,070,444 benefiting from a full year's contribution
from the Avon Gorge in Bristol and the George Hotel in Wallingford (2003 - 9
months). Operating profit was flat at £2,671,658 (2003: £2,708,779). Excluding
income from the Management Contract, operating profit was £2,253,063 (2003:
£2,012,416) an increase of 12%. Earnings before interest, tax, depreciation and
amortisation grew from £3,374,182 to £3,455,311, an increase of 2.4%.

The pre-tax result decreased 20% to £1,406,636 from £1,760,528. After a full tax
provision of 30% less allowances, earnings per share were 8.7p basic and 8.5p on
a diluted basis. A £316,771 net increase in financial charges was partly due to
the acquisition of the Avon Gorge and the George on 10 June 2002, and also due
to the effects of financial instruments coming into play on 11 April 2003 and 24
June 2003.

As at 15 February 2004 net debt stood at £16,584,425 representing loans
totalling £15,793,686 and an overdraft of £926,478 less £135,739 cash at bank.
Gearing on Shareholders' funds was 119% with interest covered 2.1 times. Net
debt decreased £162,384 compared to the previous year.

Total sales on the six owned hotels on a like for like basis grew by 3.6% and I
am pleased to report that 'Revpar' (accommodation revenue per available room)
increased 2% with occupancy up 1.1% and the average room rate up 0.8% in what
was perceived to have been a difficult market. This is the sixth consecutive
year that we have managed to increase our accommodation revenue per available
room.

I said in last year's Annual Report that Management Contract income would come
to an end in 2003/2004 - at the year-end we continued to manage five hotels on
behalf of Grace Hotels, but expect that will end imminently when the remaining
hotels are sold.

The performance of our six owned hotels was mixed in the financial year under
review. The Golden Lion in Leeds had a disappointing year due to intensive
competition and greatly increased hotel supply. Our hotels in Bristol, Bradford
and Newcastle showed good growth, whilst the results of the Bull in Peterborough
and the George in Wallingford were flat. Extreme diligence is necessary at all
times in managing a cost base whilst sales growth is tough to achieve.

Shareholders should note that the charge for depreciation increased to £783,653
some £118,250 or 17.8% more than the previous year, as a consequence of the
Board's strategy of continually upgrading its properties. In pursuit of
achieving high standards of maintenance in all our hotels a sum of £440,996
(2003: £289,479) was charged to profits for repairs and renewals of equipment
and soft furnishings.

FINANCIAL CHARGES

Our average cost of borrowing moved up to 6.32% plus margin 1.25% during the
year. In our half year statement I referred to two financial instruments. A 'cap
and collar agreement' on £7 million of our long term loans came into effect on
24 June 2003 moving our borrowing rate to 6.99% plus 1.25% margin and the
floating rate we enjoyed on the balance of our loans changed to a fixed rate on
11 April 2003 and is now set at 5.83% plus 1.25% margin. The effect of these two
instruments can be illustrated as follows. If a current floating rate of 4%
interest plus 1.25% margin was applied to our net debt as at the year end of
£16,584,425, the financial charges would have been £870,682 some £394,340 less
than we actually incurred. Although the collar agreement has and will penalise
the company short term, should interest rates rise over the next few years to
4.99% and over, the company will pay a lesser comparative financial charge.
Currently there is gentle upward pressure in the country on interest rates and
the Board believes both financial instruments will ultimately work in the
company's favour.

The Board has recommended increasing the dividend from 4.0p per share to 4.2p
per share amounting to £509,059, which, if approved by shareholders, will be
paid on 14 May 2004 to shareholders on the register at 20 April 2004.

CAPITAL EXPENDITURE

A total of £1,263,003 was spent in the period. A new passenger lift was
completed at the Midland in Bradford and bedroom upgrading is on-going. New
central heating and hot water boilers were installed at the Golden Lion in Leeds
and at the Caledonian Hotel in Newcastle.

Nine bedrooms were redeveloped at the Bull in Peterborough and twenty three
bedrooms were refurbished at the Caledonian in Newcastle.

New property management systems were purchased at the Midland in Bradford and
the Avon Gorge in Bristol as part of our ongoing plan to create a seamless
accounting system throughout the estate.

We temporarily closed the highly successful Billabong Bar in Newcastle after
Christmas and, at the time of writing, are in the process of doubling its size.
It is the second time we have doubled its size and we hope this will greatly
increase sales in the current year.

The Board has constantly reviewed its investment in Aire House, adjacent to the
Golden Lion in Leeds, and has decided to take advantage of an extremely strong
market for commercial property in this particular location by placing it on the
market. This process is currently underway and the Board expect to achieve a
satisfactory sale price. Aire House has planning permission for demolition and
the building of forty five hotel bedrooms, but in view of the intense
competition in Leeds and the frenzied construction of new hotels, we feel the
sale option is the right course of action.

NON STATUTORY INFORMATION

Throughout the commentary on the results a number of non statutory financial
numbers are quoted. These include:

   • Operating profit excluding income from the management contract. This is
     used to illustrate the ongoing, underlying performance of the company.
     Operating profit relating to the management contract for the financial year
     ended 15 February 2004 was £418,595 (2003 - £696,363).


   • Earnings before interest, tax, depreciation and amortisation. The
     information to reconcile this can be seen in the profit and loss account.


   • Movement on sales on a like for like basis. This is used to illustrate
     the underlying performance of the hotels.

                  52 Weeks Ended  52 Weeks Ended  52 Weeks Ended  52 Weeks Ended
                     15 February     16 February     16 February     16 February
                            2004            2003            2003            2003
                           Total            (pre           (post           Total
                                    acquisition)    acquisition)
                               £               £               £               £
Existing hotels        8,036,666             n/a             n/a       7,902,159
Acquired hotels        3,347,240         981,170       2,101,310       3,082,480


SHAREHOLDERS

We would encourage shareholders to take advantage of our shareholders' discount
scheme. All shareholders are entitled to a 25% discount off the listed tariff,
using a special reservations number, 020 7266 1100 or email [e-mail].
Shareholders can identify the hotels we own and manage using the directory at
the back of the Annual Report. We do hope you will visit our hotels and enjoy
them.

STAFF

The Board would like to express their appreciation and thanks to all management
and staff. In a competitive environment the key to increasing market share is
our people's ability to display, at all times, a positive, friendly and caring
attitude towards all our guests.

THE FUTURE

The continuing re-investment in our properties gives us confidence in being able
to continue the improvement in Revpar. Whilst there is still good scope to grow
our hotel profits organically, low inflation and a flat economy makes
substantial turnover growth difficult to achieve, necessitating continuing
efforts to contain our costs. We remain confident in the prospects of the hotels
we own and are actively seeking planning gains to expand the facilities, whilst
carefully reviewing acquisitions and management contract opportunities.


PROFIT AND LOSS ACCOUNT
For the 52 weeks ended 15 February 2004

                               Note      15 February 2004      16 February 2003
                                              £            £         £           £

Turnover                                          12,070,444            11,000,362
Cost of sales                                    (8,020,119)           (6,932,448)
Gross profit                                       4,050,325             4,067,914
Administrative expenses
Depreciation                           (783,653)             (665,403)
Other                                  (595,014)             (693,732)
                                                 (1,378,667)           (1,359,135)
Operating profit                                   2,671,658             2,708,779
Interest payable & similar                       (1,265,022)           (1,006,344)
charges
Other interest receivable                                  -                58,093
and similar income
Profit on ordinary                                 1,406,636             1,760,528
activities before taxation
Tax on profit on ordinary                          (351,659)             (440,133)
activities

Profit on ordinary activities                      1,054,977             1,320,395
after taxation
Dividends                           1              (509,059)             (484,818)

Profit retained                                      545,918               835,577

Earnings per share                  2
Basic                                                   8.7p                 10.9p
Diluted                                                 8.5p                 10.6p

All transactions derived from continuing activities.

Depreciation is no longer included within cost of sales, and is now shown
separately on the face of the profit and loss account, as the directors believe
this provides more meaningful information to the readers of financial
statements. Comparative figures have been restated for this change.

There are no recognised gains and losses for the current financial year and
preceding financial year other than the retained profit of £545,918 (2003 -
£835,577) shown above.


BALANCE SHEET
As at 15 February 2004

                                                   15 February      16 February
                                                          2004             2003
                                                             £                £
Fixed assets
Tangible assets                                     32,844,401       32,365,051

Current assets
Stocks                                                  81,519           76,672
Debtors                                                991,809          870,436
Cash at bank and in hand                               135,739          134,363

                                                     1,209,067        1,081,471
Creditors (due within one year)                    (4,080,962)      (3,298,041)

Net current liabilities                            (2,871,895)      (2,216,570)

Total assets less current liabilities               29,972,506       30,148,481

Creditors (due after one year)                    (14,809,146)     (15,767,283)
Provision for liabilities & charges                (1,184,784)        (948,540)

Total assets                                        13,978,576       13,432,658

Capital and reserves
Called up share capital                              1,212,046        1,212,046
Share premium account                                8,519,477        8,519,477
Profit and loss account                              4,247,053        3,701,135

Equity shareholders' funds                          13,978,576       13,432,658



Approved by the board on 6 April 2004

Robert Peel, Director

John Perkins, Director



CASH FLOW STATEMENT
For the 52 weeks ended 15 February 2004

                            Note             52 weeks to             52 weeks to
                                             15 February             16 February
                                                    2004                    2003

                                           £           £           £           £

Net cash inflow from           3               3,264,814               3,635,528
operating activities
Returns on investments &
servicing of finance
Interest paid                    (1,136,284)               (768,714)

Net cash outflow from                        (1,136,284)               (768,714)
returns on investments
and servicing of finance

Taxation
UK corporation tax paid            (191,922)               (272,345)

Tax paid                                       (191,922)               (272,345)

Capital expenditure
Purchase of tangible fixed       (1,263,003)             (1,239,852)
assets

Net cash outflow from                        (1,263,003)             (1,239,852)
capital expenditure
Acquisition of businesses                              -             (9,774,884)

Equity dividend paid                           (484,818)               (424,216)

Net cash inflow/(outflow)                        188,787             (8,844,483)
before financing

Financing
Share issue cost                           -              * (35,323)
New long term loans                        -               7,150,000
Less: loan arrangement fees                -                (97,960)
Loan repayments                    (984,540)               (667,270)

Net cash (outflow)/inflow                      (984,540)               6,349,447
from financing

Decrease in cash                               (795,753)             (2,495,036)

* These costs relate to the equity issue in the 52 weeks ended 17 February 2002.



Reconciliation of net debt

(Decrease) in cash                               (795,753)           (2,495,036)
(Decrease)/increase in debt                        984,540           (6,384,770)

Reduction/(increase) in net debt                   188,787           (8,879,806)
resulting from cash flows
Non cash changes                                  (26,403)              (48,980)
Reduction/(increase)in net debt                    162,384           (8,928,786)
in the year                                   (16,746,809)           (7,818,023)
Net debt at beginning of year

Net debt at end of year                4      (16,584,425)          (16,746,809)



NOTES TO THE ACCOUNTS
For the 52 weeks ended 15 February 2004


1. Dividends

Final proposed dividend of 4.2p per share (2003 - 4p)          509,059   484,818

2. Earnings per share

Basic
Calculated on the average number of shares in issue       12,120,457  12,120,457
during the year and on profit after taxation              £1,054,977  £1,320,395

Diluted
Calculated on average of number of shares                 12,445,067  12,436,057
available during year and on the profit after taxation    £1,054,977  £1,320,395

In calculating the diluted earnings per share, the weighted average number of
shares is adjusted for the dilutive effect of the share options by 324,610 (2003
- 315,600), giving an adjusted number of shares of 12,445,067 (2003 -
12,436,057).


3. Reconciliation of operating profit to net cash inflow from operating
activities
                                                              2004          2003
                                                                 £             £

Operating profit                                         2,671,658     2,708,779
Depreciation charges                                       783,653       665,403
Increase in stocks                                         (4,847)      (20,461)
Increase in debtors                                      (150,106)      (87,124)
(Decrease)/increase in creditors                          (35,544)       368,931

Net cash inflow from operating activities                3,264,814     3,635,528


4. Analysis of net debt

                         At beginning of        Cash       Non         At end of 
                                    year        flow      cash              year 
                                                       changes
                                       £           £         £                 £

Cash at bank and in hand         134,363       1,376         -           135,739
Bank overdrafts                (129,349)   (797,129)         -         (926,478)

                                   5,014   (795,753)         -         (790,739)
Debt due within one year       (984,540)           -         -         (984,540)
Debt due after one year     (15,767,283)     984,540  (26,403)      (14,809,146)

Total                       (16,746,809)     188,787  (26,403)      (16,584,425)



5.           The financial information set out above does not constitute the
company's statutory accounts for periods ended 15 February 2004 and 16 February
2003 but is derived from those accounts. Statutory accounts for 2003 have been
delivered to the Registrar of Companies and those for 2004 will be delivered
following the company's annual general meeting.
The auditors reported on those accounts; their reports were unqualified and did
not contain statements under section 237 (2) or (3) of the Companies Act 1985.



6.         The annual report for the period ended 15 February 2004 will be
posted to shareholders by 20 April 2004.




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