Interim Results

Peel Hotels PLC
08 October 2002


                                PEEL HOTELS PLC


                                INTERIM RESULTS
                 For the 28 week period ended 1 September 2002


HIGHLIGHTS

•    Turnover up 20.1% to £5,567,463 (2001 - £4,635,347)
     
•    Operating profit up 24.3% to £1,447,401 (2001 - £1,164,484)

•    Profits before tax up 35% to £989,590 (2001 - £734,028)

•    Earnings per share


Basic          6.1p      (2001 - 5.9p)
Diluted        6.0p      (2001 - 5.7p)



Further information

Robert Peel     020 7266 1100



CHAIRMAN'S STATEMENT


RESULTS

In the twenty-eight weeks to 1 September 2002, turnover grew 20.1% to £5,567,463
and operating profit grew by 24.3% to £1,447,401.  Earnings before interest,
tax, depreciation and amortisation grew by 25.5%.

The pre-tax result increased 34.8% to £989,590 and tax has been provided for at
30% less the discount on the deferred tax liabilities, giving an effective rate
of 25%.  Earnings per share were 6.1p compared with 5.9p in the comparative
period - on 12,120,457 shares and 8,666,666 shares respectively.  Shareholders
will recollect that on 3 December 2001 the company raised £3,004,798 by way of a
placing and open offer of  3,453,791 shares at 87p.

The results include trading from the recently acquired freeholds and businesses
of the Avon Gorge Hotel, Bristol and the George Hotel in Wallingford, from 10
June 2002.

Occupancy increased 1.8% and average room rate by 8.3%, whilst revenue per
available room (RevPar) increased 10.2% on a larger inventory of bedrooms than
the previous year.  Excluding the two new hotels like for like turnover grew
2.4% with RevPar up by 7.6%.

Management fee income was flat in the period but with ten hotels remaining
within the Grace Hotel portfolio on 1 September 2002 and eight at the time of
writing, income from this source will decrease in the second half.  Grace Hotels
have agreed to extend the Management Contract for a further six months from 5
September 2002.


EXPANSION

The Board were delighted to announce the acquisition from Grace Hotels, for a
cash consideration of £9.4 million plus expenses, the freeholds and businesses
of the Avon Gorge Hotel, Bristol and the George Hotel in Wallingford, together
with ancillary properties in June 2002.  The company took the opportunity of
re-organising its loan agreements and incorporating them into one loan of
£17,418,750 repayable in 23 biannual instalments and a lump sum of £6,096,540
payable on 11 April 2014.


CAPITAL EXPENDITURE

In addition to the purchase of the two hotels a sum of £485,365 was spent in the
period.  Nine bedrooms were rebuilt at the Bull Hotel in Peterborough, 17
bedrooms were refurbished and the Billabong Bar further extended at the
Caledonian Hotel, Newcastle.  Construction has commenced on a new lift shaft at
the Midland Hotel, Bradford.

We still await the outcome of our application for planning to demolish Aire
House, adjacent to the Golden Lion Hotel, Leeds and to build a fifty-bedroom
extension, with retail on the ground floor.  The Avon Gorge Hotel was bought
with planning permission in place for a further 10 bedrooms together with a
leisure club, including swimming pool.


SHAREHOLDERS

To encourage shareholders to visit the company's owned hotels and those it
manages, the company continues to offer a 20% discount on the listed tariff,
using a special reservations number 020 7266 1100.


THE FUTURE

Further progress has been achieved in improving the product, RevPar and
profitability in the first half-year.

The challenge is to continue this improvement both in our existing and our two
recently acquired hotels, thus compensating for the declining income from the
Management Contract with Grace Hotels and giving us sufficient profit to grow
earnings in the immediate future.

We believe that our strategy of owning a portfolio of well-located city centre
and town centre hotels has stood us and will stand us in good stead in what is
and has been a difficult time within the international and domestic hotel
market.


PROFIT AND LOSS ACCOUNT
For the period ended 1 September 2002

                                                 Note             28 weeks           28 weeks              Year
                                                                     ended              ended             ended
                                                        1/9/2002 Unaudited 2/9/2001 Unaudited 17/2/2002 Audited
                                                                                   (restated)
                                                                         £                  £                 £
Turnover
Continuing operations                                            4,748,850          4,635,347         8,875,183
Acquisitions                                                       818,613                  -                 -
Total turnover                                                   5,567,463          4,635,347         8,875,183

Cost of sales
Continuing operations                                          (2,874,881)        (2,805,138)       (5,341,380)
Acquisitions                                                     (515,087)
Total cost of sales                                            (3,389,968)

Gross profit
Continuing operations                                            1,873,969          1,830,209         3,533,803
Acquisitions                                                       303,526
Total gross profit                                               2,177,495

Administrative expenses:
Depreciation                                                     (358,207)          (274,562)         (509,900)
Other                                                            (371,887)          (391,163)         (725,491)
                                                                 (730,094)          (665,725)       (1,235,391)

Operating profit                                                 1,447,401          1,164,484         2,298,412
Interest payable & similar charges                               (515,105)          (430,456)         (814,892)
Other interest receivable and similar income                        57,294                  -            32,438

Profit on ordinary activities before taxation                      989,590            734,028         1,515,958

Taxation                                                         (247,398)          (220,208)         (378,990)

Profit on ordinary activities after taxation                       742,192            513,820         1,136,968
Dividend                                                                 -                  -         (424,216)

Profit retained                                                    742,192            513,820           712,752

Earnings per share                                3
Basic                                                                 6.1p               5.9p             12.1p
Diluted                                                               6.0p               5.7p             11.6p



All transactions derive from continuing operations.

There are no recognised gains and losses other than stated above.

Accordingly, no statement of total recognised gains and losses is given.

Following the change in accounting policy adopted for the 17 February 2002
audited financial statements, depreciation is no longer included within cost of
sales. It is now shown separately within administrative expenses on the face of
the profit and loss account as the directors believe this is consistent with
industry practice and provides more meaningful information to readers of the
financial statements. Comparative figures have been restated for this change.

Operating profit has not been analysed between acquisitions and continuing
operations as required by Financial Reporting Standard 3. This is on the grounds
that the businesses have been fully integrated and, as a result, separate
records of administrative expenses are not maintained.


BALANCE SHEET AS AT 1 SEPTEMBER 2002

                                                       1/9/2002 Unaudited 2/9/2001 Unaudited 17/2/2002 Audited
                                                                        £                  £                 £

Fixed assets                                                   31,905,098         21,805,843        22,015,718

Current assets

Stocks                                                             76,815             51,462            56,211
Debtors                                                           913,909            804,669           753,696
Cash at bank and in hand                                          684,914             85,128         2,917,489

                                                                1,675,638            941,259         3,727,396

Creditors (due within one year)                               (3,306,225)        (2,604,580)       (2,778,516)

Net current (liabilities) assets                              (1,630,587)        (1,663,321)           948,880

Total assets less current liabilities                          30,274,511         20,142,522        22,964,598
Creditors (due after one year)                               (16,247,367)        (9,972,090)       (9,644,323)
Provision for liabilities and charges                           (687,871)          (573,109)         (687,871)


Net assets                                                     13,339,273          9,597,323        12,632,404

Capital and reserves
Called up share capital                                         1,212,046            866,667         1,212,046
Share premium account                                           8,519,477          6,064,030         8,554,800
Profit and loss account                                         3,607,750          2,666,626         2,865,558

Equity shareholders' funds                                     13,339,273          9,597,323        12,632,404



CASH FLOW STATEMENT
For the period ended 1 September 2002
                                                   28 weeks                 28 weeks                        Year
                                                      ended                    ended                       ended
                                                   1/9/2002                 2/9/2001                   17/2/2002
                                                  Unaudited                Unaudited                     Audited
                           Note             £             £           £            £             £             £

Net cash flow from         4                      2,018,186                1,799,470                   3,072,919
operating activities

Returns on investments and
servicing of finance
Interest received                      57,294                         -                          -
Interest paid                       (300,937)                 (415,514)                  (811,908)

Net cash flow from returns                       (243,643)                 (415,514)                   (811,908)
on investments and
servicing of finance
Taxation
UK corporation tax paid                     -                  (44,829)                  (241,287)

Tax paid                                                  -                 (44,829)                   (241,287)

Capital expenditure
Purchase of tangible fixed          (440,878)                 (793,661)                (1,238,874)
assets

Net cash outflow from                             (440,878)                (793,661)                 (1,238,874)
capital expenditure
Acquisitions of businesses                      (9,797,545)                        -                           -
net of cash acquired
Equity dividend paid                              (424,216)                (260,000)                   (260,000)

Net cash (outflow)/inflow                       (8,888,096)                  285,466                     520,850
before financing

Financing

Issue of ordinary share                     -                         -                  3,004,798
capital
Less: share issue cost               (44,487)                         -                  (168,649)
New long term loans                 7,150,000                         -                          -
Loan repayments                     (175,000)                 (296,875)                  (593,750)

Net cash inflow/(outflow)
From financing                                     6,930,513                (296,875)                   2,242,399

(Decrease)/increase in     5                     (1,957,583)                 (11,409)                   2,763,249
cash



Reconciliation of net
debt

(Decrease)/increase in                          (1,957,583)                  (11,409)                  2,763,249
cash in the period
Cash (inflow)/outflow                           (6,975,000)                  296,875                     593,750
from (increase)/decrease
in debt

Change in net debt                              (8,932,583)                   285,466                  3,356,999
resulting from cashflows                          
Non Cash changes                                     61,166                  (10,620)                   (19,728)
Reduction /(increase) in                        (8,871,417)                   274,846                 3,337,271
net debt in the year

Net debt at beginning of                        (7,818,023)              (11,155,294)               (11,155,294)
period

Net debt at end of period 5                    (16,689,440)             (10,880,448)                 (7,818,023)




NOTES TO THE INTERIM ACCOUNTS
For the period ended 1 September 2002


1.   Basis of accounting
     
     The interim financial information has been prepared on the basis of the
     accounting policies consistent with those applied in the last Annual 
     Report.

     The financial information for the year ended 17 February 2002 has been 
     extracted from the financial statements for that period. Those statements, 
     which contain an unqualified auditors' report, have been delivered to the 
     Registrar of Companies.

2.   Taxation     
     
     Tax has been provided at a rate of 25% which represents the expected 
     effective rate for the full year. This charge has been calculated in 
     accordance with FRS19 'Deferred Tax' which is consistent with the 
     accounting treatment adopted for the year ended 17 February 2002 and the 28 
     weeks ended 2 September 2001.

3.   Earnings per share
       
     Earnings per share are based on the profit after taxation, and on the 
     average number of shares in issue during the period.

                                                                      28 weeks        28 weeks             Year
                                                                         ended           ended            ended
                                                                      1/9/2002        2/9/2001        17/2/2002
                                                                     Unaudited       Unaudited          Audited
                                                                             £               £                £
Average No. shares
- basic                                                             12,120,457       8,666,666        9,397,276
- Diluted                                                           12,453,428       9,081,405        9,768,016



4.   Reconciliation of operating profit to net cash flow from operating 
     activities
                                                                      28 weeks        28 weeks             Year
                                                                         ended           ended            ended
                                                                      1/9/2002        2/9/2001        17/2/2002
                                                                     Unaudited       Unaudited          Audited
                                                                             £               £                £

Operating profit                                                     1,447,401       1,164,484        2,298,412
Depreciation and amortisation                                          358,207         274,562          509,900
(Increase)/decrease in stocks                                         (20,604)           9,490            4,741
(Increase)/decrease in debtors                                       (354,654)          44,049          123,385
Increase in creditors                                                  587,836         306,885          136,481

Net cash inflow from operating activities                            2,018,186       1,799,470        3,072,919



5.   Analysis of net debt
     
                                                  At beginning                                 
                                               Of period 17/2/                                 At end of period
                                                          2002                        non cash         1/9/2002 
                                                                     cash flow         changes
                                                             £               £               £                £

Cash at bank and in hand                             2,917,489     (2,232,575)               -          684,914
Bank overdraft                                       (417,439)         274,992               -        (142,447)

                                                     2,500,050     (1,957,583)               -          542,467

Debt due within one year                             (673,750)       (310,790)               -        (984,540)

Debt due after one year                            (9,644,323)     (6,664,210)          61,166     (16,247,367)

Total                                              (7,818,023)     (8,932,583)          61,166     (16,689,440)



6.   Acquisitions
     
     On 10 June 2002, Peel Hotels acquired the George Hotel, Wallingford and the 
     Avon Gorge, Bristol for a consideration of £9.4 million plus expenses of 
     £0.4 million.

7.   Financing
     
     The bank loans are repayable by 23 semi-annual instalments plus a final 
     payment on 11 April 2014. Interest is charged at 1.5% over LIBOR. The 
     company has entered into a collar agreement on £7 million which caps the 
     company interest cost at 6.99% plus margin. The minimum interest cost is 
     4.99% plus margin, up to 12 October 2009, except where LIBOR falls below 
     4.99% between 24 June 2003 and 12 October 2009; in which case an additional 
     2% of interest is payable. In addition, the company has entered into an 
     interest rate swap agreement commencing on 11 April 2003 to 11 April 2014 
     with an option for the Royal Bank of Scotland to terminate the agreement 
     from 11 October 2009. Under the terms of this agreement the company 
     receives interest at LIBOR plus 1.5% and pays interest at a fixed rate of 
     7.33%.

8.   The financial information set out above in respect of the year ended
     17 February 2002 does not constitute the company's statutory accounts for 
     that year but is derived from those accounts.  Statutory accounts for that 
     year have been delivered to the Registrar of Companies.  The auditors 
     reported on those accounts; their report was unqualified and did not 
     contain a statement under section 237 (2) or (3) of the Companies Act 1985.



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