Final Results

Peel Hotels PLC
12 April 2001

PEEL HOTELS PLC

PRELIMINARY ANNOUNCEMENT

Derived from the audited results for financial year ended 18 February 2001

HIGHLIGHTS


* Turnover up by 17.2% to £8.6 million (2000 - £7.4 million)


* Operating profit up by 10.7% to £2.2 million (2000 - £2 million)


* Net cash inflow from operating activities £2.3 million (2000 - £2.2 million)


* Pre-tax profits fell by 9.5% to £1.3 million (2000 - £1.45 million)


* Basic earnings per share 11.6p (2000 - 14.6p). Diluted earnings per share
10.7p (2000 - 13.1p).
These are stated after full provision for corporation tax and deferred tax


* After capital expenditure of £1.4 million in the year net gearing on
shareholders' funds has still improved to 122.8% (2000 - 131.7%)


* Dividend increased by 50% to 3p per share (2000 - 2p per share)


* The cumulative impact of implementing FRS 19 is to increase distributable
reserves by £179,738, because full provision has always been made for
deferred tax


PRESS ENQUIRIES TO ROBERT PEEL 0207 2661100


CHAIRMAN'S STATEMENT


RESULTS


Turnover grew by 17.2% to £8,630,804 and operating profit grew 10.7% to
£2,226,869. However, we did not achieve the growth we targeted in the year
ending 18 February 2001. Earnings per share were 11.6p basic and 10.7p on a
diluted basis. Pre-tax profits fell by £138,234 to £1,314,521.


Apart from the Midland in Bradford, our owned hotels performed up to
expectation. The Midland improved its earnings before depreciation by 6.3%
but was well short of its targeted objective. We took substantial annualised
cost out of the operation in the year, which not only limited the 'damage' it
could have done to the company's results, but has operationally geared the
hotel to make a higher percentage on its sales.


For the year as a whole our hotels 'Revpar' (accommodation revenue per
available room) increased 3.5% on the previous year. Volume increasing +2.9%
and average room rate +0.6%.


Income from the Management Contract of Grace Hotels Ltd was down £251,000 on
the previous year, the hotels under management having fallen by 9 to 20 since
the start of the previous year.


In comparison with the previous year, the nightclub at the Midland (now
leased out at a profit) and the Hakuna Matata (now in profit), a bar opened
in the year under review, adjacent to the Golden Lion in Leeds collectively
lost £57,000 in comparison with a £31,000 profit last year.


Group overheads reflected increased full year pension cost of £31,248 and
non-recurring redundancy costs of £31,104. Depreciation rose significantly
during the year from £208,433 to £385,573.


As at 18 February 2001, net debt stood at £11,155,294 representing ten-year
loans totalling £10,892,095 and an overdraft of £382,264, less £119,065 cash
at bank. Net gearing on shareholders' funds was 122.8% with interest covered
2.4 times.


The Board has recommended increasing the dividend from 2p to 3p per share,
amounting to £260,000, which will be paid on 15 June 2001 to shareholders on
the register at 18 May 2001.


CAPITAL EXPENDITURE


A sum of £1,394,266 was spent in the year, including £151,209 expended on
stamp duty for the Golden Lion, Leeds, and the Caledonian, Newcastle, which
became due in the year under review.


The major project was the construction of an extension at the Bull Hotel in
Peterborough, where 15 luxury rooms were added at a cost of around £40,000
per room.


A new bar, called the Billabong, which was built in unused space and opened
at the Caledonian in Newcastle, has been a great success.


Shareholders will be aware that, when we bought the Golden Lion in Leeds, we
also bought Aire House, previously an office block, for £910,000; we planned
to expand the hotel by building 27 bedrooms on the upper floors of Aire House
and, having completed the project, let out the ground floor (currently
trading as Hakuna Matata). The cost involved would have been £1,450,000 and
was and still is under review. We now believe that we may be able to achieve
40/50 bedrooms, in addition to the ground floor, if we rebuild on a lesser
footprint of land giving us increased development options at the Golden Lion,
as well as costing less money per newly constructed room. Your Board is in
the process of considering costs and feasibility.


We intend to continue to incur significant capital expenditure improving the
quality of our portfolio to the standards expected of four star hotels.


FRS 19


The Board has decided to adopt early FRS 19 'Deferred Taxation'. Peel Hotels
have consistently provided in full for deferred taxation on timing
differences on capital expenditure due to the inherent uncertainty of capital
expenditure plans in the early years of trading.


The cumulative impact of implementing FRS 19 is, therefore, not detrimental,
and indeed increases distributable reserves by £179,738.


GRACE HOTELS MANAGEMENT CONTRACT


The company now manages 20 hotels on behalf of Grace Hotels Ltd.


The contract signed on 5 October 1998 is due to end 5 October 2001, unless
extended at the volition of the owners. If we cease to manage the Grace Hotel
portfolio, we would have to make significant cuts to our infrastructure to
compensate.


SHAREHOLDERS


We would urge Shareholders to take advantage of our Shareholder Discount
Scheme. All Shareholders are entitled to a 20% discount on listed tariff,
using a special reservations number 020 7266 1100. Shareholders can identify
the properties we own and manage using the directory at the back of the
Annual Report. We do hope you will visit our hotels.


STAFF


The Board would like to thank all our management and staff for their
contribution in the year under review. The quality and perception of our
hotels reflect as much the attitude and professionalism of our staff as the
cosmetic quality we achieve through capital expenditure.


FUTURE


The capital spent in 1999 and 2000, together with our expenditure in 2001
will give us a good platform for profit growth in the forthcoming year. The
Midland nightclub and Hakuna Matata are no longer a drag on progress.


Overall our Revpar is continuing to grow satisfactorily with opportunity to
grow further, notwithstanding flat demand and increasing supply provincially
in the United Kingdom. This is primarily due to the first class locations we
own within the cities in which we operate.


Mindful of the current background of business uncertainty, low inflation and
an abundance of hotel properties for sale, we are carefully reviewing
opportunities for expansion at a beneficial entry point.


PROFIT AND LOSS ACCOUNT

For the financial year ended 18 February 2001

                                                                              
                               Note        18 February 2001   20 February 2000
                                                          £        as restated
                                                                             £
 
  TURNOVER                                        8,630,804          7,364,987
  Cost of sales                                 (5,631,709)        (4,662,616)
  Gross profit                                    2,999,095          2,702,371
  Administrative expenses                         (772,226)          (689,992)
  OPERATING PROFIT                                2,226,869          2,012,379
  Interest payable and                            (912,348)          (559,624)
  similar charges                                                             
  PROFIT ON ORDINARY                              1,314,521          1,452,755
  ACTIVITIES BEFORE TAXATION                                                  
  Tax on profit on ordinary    5                  (311,063)          (359,243)
  activities                                                                  
  PROFIT ON ORDINARY                              1,003,458          1,093,512
  ACTIVITIES AFTER TAXATION                                                   
  Dividends                    1                  (260,000)          (173,333)
  Retained profit for the                           743,458            920,179
  financial year                                                              
  EARNINGS PER SHARE           2                                              
  Basic                                               11.6p              14.6p
  Diluted                                             10.7p              13.1p


All transactions derived from continuing activities.



STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
For the financial year ended 18 February 2001

                                                                              
                                           18 February 2001   20 February 2000
                                                          £        as restated
                                                                             £
  Total recognised gains and losses                 743,458            920,179
  related to the year                                                         
  Prior period adjustment as explained              102,767                   
  in note 5                                                                   
  Total gains and losses since last                 846,225                   
  annual report                                                               


BALANCE SHEET
As at 18 February 2001

                                                                              
                                   Note    18 February 2001   20 February 2000
                                                          £        as restated
                                                                             £
  FIXED ASSETS                                                                
  Tangible assets                                21,286,744         20,278,051
  CURRENT ASSETS                                                              
  Stocks                                             60,952             69,481
  Debtors                                           848,724            751,649
  Cash at bank and in hand                          119,065             82,520
                                                  1,028,741            903,650

  CREDITORS: amounts falling due                (2,360,528)        (2,735,484)
       within one year                                                        
 
  NET CURRENT LIABILITIES                       (1,331,787)        (1,831,834)
  TOTAL ASSETS LESS CURRENT                      19,954,957         18,446,217
  LIABILITIES                                                                 
  CREDITORS: amounts falling due               (10,298,345)        (9,812,361)
  after more than one year                                                    
  PROVISION FOR LIABILITIES AND    5              (573,109)          (293,811)
  CHARGES                                                                     
  NET ASSETS                                      9,083,503          8,340,045
  CAPITAL AND RESERVES                                                        
  Called up share capital                           866,667            866,667
  Share premium account                           6,064,030          6,064,030
  Profit and loss account                         2,152,806          1,409,348
  EQUITY SHAREHOLDERS' FUNDS                      9,083,503          8,340,045
 


CASH FLOW STATEMENT
For the financial year ended 18 February 2001

                                                                              
                Note                  18 February                  20 February
                                             2001                         2000
                                  £             £             £              £
 
  Net cash      3                       2,296,687                    2,246,027
  inflow from                                                                 
  operating                                                                   
  activities                                                                  
  Returns on                                                                  
  investments and                                                             
  servicing of                                                                
  finance                                                                     
  Interest                (882,406)                   (605,590)               
  paid                                                                        
  Net cash                              (882,406)                    (605,590)
  outflow                                                                     
  from                                                                        
  returns on                                                                  
  investments                                                                 
  and                                                                         
  servicing                                                                   
  of finance                                                                  
  Taxation                                                                    
  UK                              -                    (25,559)               
  corporation                                                                 
  tax paid                                                                    
  Tax paid                                      -                     (25,559)
  Capital expenditure                                                         
  Purchase of           (1,394,266)                 (2,897,121)               
  tangible                                                                    
  fixed assets                                                                
  Net cash                            (1,394,266)                  (2,897,121)
  outflow                                                                     
  from                                                                        
  capital                                                                     
  expenditure                                                                 
  Acquisitions                                  -                  (8,750,000)
  and                                                                         
  disposals                                                                   
  Equity                                (173,333)                     (65,000)
  dividend                                                                    
  paid                                                                        
  Net cash                              (153,318)                 (10,097,243)
  outflow                                                                     
  before                                                                      
  financing                                                                   
  Financing                                                                   
  Issue of                        -                   3,770,163               
  ordinary                                                                    
  share                                                                       
  capital                                                                     
  New long                1,060,000                   5,590,000               
  term loans                                                                  
  New short                       -                     350,000               
  term loans                                                                  
  Loan                    (593,750)                   (243,750)               
  repayments                                                                  
  Net cash                                466,250                    9,466,413
  inflow from                                                                 
  financing                                                                   
  Increase      4                         312,932                    (630,830)
  /(decrease)                                                                 
  in cash                                                                     


RECONCILIATION OF NET DEBT

                                                                              
  Increase/(decrease) in cash              312,932                   (630,830)
  Increase in debt                        (466,250)                (5,574,236)
  Change in net debt resulting from cash  (153,318)                (6,205,066)
  flows                                                                       
  Non cash changes                         (19,734)                      -
  Movement in net debt in the year        (173,052)                (6,205,066)
  Net debt at beginning of year        (10,982,242)                (4,777,176)
  Net debt at end of year         4    (11,155,294)               (10,982,242)


NOTES

For the financial year ended 18 February 2001

1.     DIVIDENDS

                                                                            
                                                              2001      2000
                                                                 £         £

    Final proposed dividend of 3p per share (2000 - 2p)    260,000   173,333


2.     EARNINGS PER SHARE

                                                                              
                                                             2001         2000
                                                                £            £
  Basic                                                                       
  Calculated on the average number of shares in         8,666,666    7,494,047
  issue                                                                       
  during the year and on profit after taxation         £1,003,458   £1,093,512

  Diluted                                                                     
  Calculated on average of number of shares             9,381,731    8,347,311
  available during year and on the profit after        £1,003,458   £1,093,512
  taxation                                                                    


In calculating the diluted earnings per share, the weighted average number of
shares is adjusted for the dilutive effect of the share options by 627,153
(2000 - 701,230), and the warrants by 87,912 (2000 - 152,034) giving an
adjusted number of shares of 9,381,731.


3.     RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES


                                                                         
                                                         2001        2000
                                                            £           £
       Operating profit                             2,226,869   2,012,379
       Depreciation charges                           385,573     208,433
       Decrease in stocks                               8,529         848
       Increase in debtors                           (97,075)   (287,427)
       (Decrease) increase in creditors             (227,209)     311,794
       Net cash inflow from operating activities    2,296,687   2,246,027


4.     ANALYSIS OF NET DEBT

                                                                              
                  21 February 2000        Cash      Non cash  18 February 2001
                                 £        flow       changes                  
                                             £             £                  
 
  Cash at bank              82,520      36,545             -           119,065
  and in hand                                                                 
  Bank                   (658,651)     276,387             -         (382,264)
  overdrafts                                                                  
                         (576,131)     312,932             -         (263,199)
  Debt due               (593,750)           -             -         (593,750)
  within one                                                                  
  year                                                                        
  Debt due             (9,812,361)   (466,250)      (19,734)      (10,298,345)
  after one year                                                              
  Total               (10,982,242)   (153,318)      (19,734)      (11,155,294)


5.     PRIOR YEAR ADJUSTMENT


The directors have adopted early the provisions of FRS 19 'Deferred
Taxation'. Under FRS 19, deferred tax liabilities have been discounted using
discount rates equal to the post-tax yield to maturity that could be obtained
at the balance sheet date on government bonds with maturity dates and
currencies similar to those of the deferred tax balances.


The effect on the profit and loss tax charge in the current year and the
deferred tax provision on the balance sheet is as follows:


                                                                              
                            Tax      Deferred tax        Tax      Deferred tax
                         charge         provision     charge         provision
                           2001              2001       2000              2000
                              £                 £          £                 £
 
  Under SSAP 15         388,034           752,847    435,856           396,578
  Effect of change     (76,971)         (179,738)   (76,613)         (102,767)
  in accounting                                                               
  policy                                                                      
  Under FRS 19          311,063           573,109    359,243           293,811


6.     FRS 15


The accounts reflect the adoption of Financial Reporting Standard 15,
'Tangible fixed assets' (FRS 15). The effect of this policy change is that
the historic cost of freehold and long leasehold properties are depreciated
to their estimated residual values over periods up to 50 years. During this
52 week period to 18 February 2001 there is a depreciation charge of £20,573.
This is in accordance with FRS 15 which states that revisions to economic
lives recognised on adoption of FRS 15 are not a change in accounting policy
(para 106) and should be accounted for prospectively (para 95).


7.     The financial information set out above does not constitute the
company's statutory accounts for the periods ended 18 February 2001 and 20
February 2000 but is derived from those accounts. Statutory accounts for 2000
have been delivered to the Registrar of Companies and those for 2001 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.


8.     The annual report for the period ended 18 February 2001 will be posted
to shareholders by 19 April 2001.