Interim Results

Peel Hotels PLC
07 October 2004



                                Peel Hotels PLC


                                INTERIM RESULTS

                  FOR THE 28 WEEK PERIOD ENDED 29 AUGUST 2004



   • Turnover up 4.7% to £6,794,715 (2003 - £6,488,887)

   • RevPar on owned hotels increased by 9.3%

   • Turnover for the six owned hotels increased 7.2% from £6,197,470 in 2003
     to £6,644,926 in the current period

   • As expected Management Contract income has decreased, from £291,417 in
     2003 to £149,789 in the current period

   • Operating Profit down 4.4% to £1,494,846 (2003 - £1,563,171)

   • Profit before tax decreased 14.1% to £776,467 (2003 - £903,956)

   • Earnings per share

     Basic     4.8p   (2003 - 5.6p)

     Diluted   4.7p   (2003 - 5.5p)

'The company exceeded its budget in the period and it is pleasing to report
total sales in the six owned hotels, excluding Management Contract income, grew
by 7.2% and accommodation revenue per available room increased 9.3%, with
average room rate up by 4.5% and occupancy up by 4.6%'.

For further information contact

Robert Peel
020 7266 1100

7 October 2004



                              CHAIRMAN'S STATEMENT


RESULTS

In the twenty eight weeks to 29 August 2004 turnover grew by 4.7% to £6,794,715
and operating profit decreased by 4.4% to £1,494,846. Earnings before interest,
tax, depreciation and amortisation were flat at £1,980,891.

Profit before tax decreased 14.1% to £776,467 as a result of an expected
diminution of Management Contract income to £149,789 (2003: £291,427), a rebate
on rates at the Midland Hotel, Bradford of £60,000 accounted for in group
overheads in the prior year and the continuing short term impact of the 'collar'
on £7 million of our debt.

Tax has been provided at 30% less the discount on the deferred tax liabilities
giving an effective rate of 25%. Basic earnings per share were 4.8p compared
with 5.6p in the comparative period on an unchanged 12,120,457 shares.

The company exceeded its budget in the period and it is pleasing to report that
total sales in the six owned hotels, excluding Management Contract income, grew
by 7.2% and accommodation revenue per available room increased 9.3%, with
average room rate up by 4.5% and occupancy up by 4.6%.

FINANCIAL CHARGES

Net debt in the period improved by £377,241 to a total of £16,207,184 including
a £1 million short term loan that we took out in April 2004. The LIBOR rate on
our 'cap and collar' on £7 million of our debt is due for fixing on 12 October
2004. If six month's LIBOR is over 4.99%, which it is currently, and continues
on or above that rate at the next anniversary on 12 April 2005, we will benefit
from 2% saving on £7 million, reducing our interest costs by an annualised
£140,000. Clearly this would be a significant improvement to the company's
affairs.

CAPITAL EXPENDITURE

£491,794 was spent in the period, the majority of which was for doubling the
size of the Billabong Bar at the Caledonian Hotel in Newcastle. Air conditioning
was installed in the main banqueting suite at the Bull Hotel in Peterborough.

Three bedrooms were redeveloped at the Midland Hotel in Bradford and a new
switchboard was purchased.

£150,094 was spent at the Avon Gorge Hotel in Bristol. New hot water boilers
were installed together with a property management system. Substantial work has
been completed, on improving and upgrading the large terrace adjoining the hotel
and overlooking the Clifton Suspension Bridge to cater for increased demand for
drinks and meals.


We were refused planning permission to build 24 new bedrooms and a leisure
complex at the Caledonian Hotel, Newcastle and are currently in the process of a
public appeal. Aire House, a building adjacent to the Golden Lion in Leeds, is
currently being actively marketed for sale. A detailed series of planning
objectives for the Avon Gorge Hotel, Bristol has been submitted to the council
in the form of a 'discussion' document and we currently await their views on our
proposals.

SHAREHOLDERS

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

THE FUTURE

The Management Contract of Grace Hotels is almost complete. Our ongoing business
is, in the main, performing well, and compensating for the loss of income from
the Management Contract is going to be less of a comparative burden to earnings
in the future. We are cautiously optimistic that earnings' growth is now in
prospect with the possibility of lesser 'paid' interest charges going forward
being an added bonus.





DIRECTORS AND ADVISORS

                               Directors

Robert Edmund Guy Peel                          Executive Chairman

Clement John Govett                             Non-executive director

Keith Peter Benham                              Non-executive director

Norbert Paul Gottfried Petersen                 Chief Operating Officer

John Perkins                                    Finance Director



Secretary
Sabretooth Law Ltd
1 Berkeley Street, Mayfair, London W1J 8DJ

Registered Office
4th Floor, 111 Old Broad Street, London EC2N 1PH

Company registration number 3473990


Auditors
Deloitte & Touche LLP
Leda House, Station Road, Cambridge CB1 2RN

Bankers
Royal Bank of Scotland Plc
280 Bishopsgate, London EC2M 4RB

Registrars
Computershare Services Plc
PO Box No. 82, The Pavillions, Bridgwater Road, Bristol BS99 7NH

Solicitors
Sabretooth Law Ltd
1 Berkeley Street, Mayfair, London W1J 8DJ

Stockbrokers
KBC Peel Hunt Ltd
4th Floor, 111 Old Broad Street, London EC2N 1PH





PROFIT AND LOSS ACCOUNT

For period ended 29 August 2004


                                   28 weeks                28 weeks                    Year
                                      ended                   ended                   ended
                                  29/8/2004               31/8/2003               15/2/2004
                                  Unaudited               Unaudited                 Audited
               Note          £            £          £            £          £            £
                       -------     --------    -------     --------   --------     --------
Turnover                          6,794,715               6,488,887              12,070,444

Cost of sales                    (4,490,075)             (4,224,964)             (8,020,119)
                      -------     --------    -------     --------   --------     --------

Gross Profit                      2,304,640               2,263,923               4,050,325
                       -------     --------    -------     --------   --------     --------
Administrative
expenses

Depreciation          (486,045)               (421,967)               (783,653)
Other                 (323,749)               (278,785)               (595,014)
                                   (806,794)               (700,752)             (1,378,667)
                       -------     --------    -------     --------   --------     --------
Operating profit                  1,494,846               1,563,171               2,671,658

Interest payable
& similar charges                  (718,379)               (659,215)             (1,265,022)
                       -------     --------    -------     --------   --------     --------
Profit on
ordinary
activities
before                              776,467                 903,956               1,406,636
taxation

Taxation          2                (194,117)               (225,989)               (351,659)
                       -------     --------    -------     --------   --------     --------
Profit on
ordinary
activities
after taxation                      582,350                 677,967               1,054,977

Dividend                                  -                       -                (509,059)
                       -------     --------    -------     --------   --------     --------
Profit retained                     582,350                 677,967                 545,918
                       -------     --------    -------     --------   --------     --------

Earnings per      3
share

Basic                                   4.8p                    5.6p                    8.7p
Diluted                                 4.7p                    5.5p                    8.5p
                       -------     --------    -------     --------   --------     --------



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.



BALANCE SHEET AS AT 29 AUGUST 2004



                                  29/8/2004        31/8/2003        15/2/2004
                                  Unaudited        Unaudited          Audited
                                          £                £                £
                                -------------    -------------    -------------
Fixed assets                     32,850,150       32,588,308       32,844,401
                                -------------    -------------    -------------
Current assets
Stocks                              102,374           89,664           81,519
Debtors                             974,479          919,427          991,809
Cash at bank and in hand            158,323          119,051          135,739
                                -------------    -------------    -------------
                                  1,235,176        1,128,142        1,209,067
Creditors (due within one year)  (3,516,253)      (3,355,863)      (4,080,962)
                                -------------    -------------    -------------
Net current liabilities          (2,281,077)      (2,227,721)      (2,871,895)
                                -------------    -------------    -------------
Total assets less current
liabilities                      30,569,073       30,360,587       29,972,506
Creditors (due after one year)  (14,823,363)     (15,301,422)     (14,809,146)
Provisions for liabilities and
charges                          (1,184,784)        (948,540)      (1,184,784)
                                -------------    -------------    -------------
Net assets                       14,560,926       14,110,625       13,978,576
                                -------------    -------------    -------------
Capital and reserves

Called up share capital           1,212,046        1,212,046        1,212,046
Share premium account             8,519,477        8,519,477        8,519,477
Profit and loss account           4,829,403        4,379,102        4,247,053
                                -------------    -------------    -------------
Equity shareholders' funds       14,560,926       14,110,625       13,978,576
                                -------------    -------------    -------------


CASH FLOW STATEMENT
For the period ended 29 August 2004


                                     28 weeks                 28 weeks                       Year
                                        ended                    ended                      ended
                                    29/8/2004                31/8/2003                  15/2/2004
                                    Unaudited                Unaudited                    Audited
               Note           £             £          £             £            £             £
                       --------      --------   --------      --------     --------      --------
Net cash flow
from operating    4                 2,064,039                1,723,410                  3,264,814
activities

Returns on
investments
and servicing
of finance

Interest paid          (671,728)                (361,320)                (1,136,284)
                       --------                 --------                   --------

Net cash
outflow from
returns on
investments
and servicing
of finance                           (671,728)                (361,320)                (1,136,284)


Taxation

UK corporation
tax paid                      -                        -                   (191,922)
                       --------                 --------                   --------

Tax paid                                    -                        -                   (191,922)

Capital
expenditure

Purchase of
tangible               (491,794)                (645,223)                (1,263,003)
fixed assets           --------                 --------                   --------

Net cash
outflow from
capital
expenditure                          (491,794)                (645,223)                (1,263,003)

Equity                               (509,059)                (484,818)                  (484,818)
dividend paid                        --------                 --------                   --------

Net cash
inflow before
financing                             391,458                  232,049                    188,787

Financing

New loans             1,000,000                        -                          -

Loan                   (492,270)                (492,270)                  (984,540)
repayments             --------                 --------                   --------

Net cash
inflow/(outflow)
from financing                        507,730                 (492,270)                  (984,540)
                       --------      --------   --------      --------     --------      --------
Increase/
(decrease)        5                   899,188                 (260,221)                  (795,753)
in cash                --------      --------   --------      --------     --------      --------


Reconciliation
of net debt

Increase/
(decrease)
in cash in the                        899,188                 (260,221)                  (795,753)
period

Cash (inflow)/
outflow from
(increase)/
decrease                             (507,730)                 492,270                    984,540
in debt                              --------                 --------                   --------

Change in net
debt resulting 
from cashflows                        391,458                  232,049                    188,787

Non cash changes                      (14,217)                 (26,409)                   (26,403)
                                     --------                 --------                   --------
Reduction in
net debt                              377,241                  205,640                    162,384
in the period          --------      --------   --------      --------     --------      --------

Net debt at
beginning of                      (16,584,425)             (16,746,809)               (16,746,809)
period                 --------      --------   --------      --------     --------      --------

Net debt at
end of period     5               (16,207,184)             (16,541,169)               (16,584,425)
                       --------      --------   --------      --------     --------      --------




NOTES TO THE INTERIM ACCOUNTS

For the period ended 29 August 2004

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 set out in respect of the year ended 15 February 2004
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.

2.  Taxation

Tax has been provided at a rate of 25% which represents the expected effective
rate for the full year. The company has continued to discount its deferred tax
liability.

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 ended       28 weeks ended        Year ended
                              29/8/2004            31/8/2003         15/2/2004
                              Unaudited            Unaudited           Audited

Average No. shares
- Basic                      12,120,457           12,120,457        12,120,457
- Diluted                    12,441,851           12,381,007        12,436,057
                            -----------          -----------        ----------

4. Reconciliation of operating profit to net cash flow from operating activities

                     28 weeks ended          28 weeks ended         Year ended
                          29/8/2004               31/8/2003          15/2/2004
                          Unaudited               Unaudited            Audited                
                                  £                       £                  £                
              
Operating profit          1,494,846               1,563,171          2,671,658

Depreciation
and amortisation            486,045                 421,967            783,653

Increase in stocks          (20,855)                (12,992)            (4,847)

Decrease/(increase) in
debtors                      17,330                (187,266)          (150,106)

Increase/(decrease) in
creditors                    86,673                 (61,470)           (35,544)
                          -----------             -----------         ----------

Net cash inflow from
operating activities      2,064,039               1,723,410          3,264,814
                          -----------             -----------         ----------



NOTES TO THE INTERIM ACCOUNTS
For the period ended 29 August 2004

5.  Analysis of net debt

                           At beginning                                 At end
                              of period                Non cash      of period
                              15/2/2004    Cash flow    changes      29/8/2004
                                      £            £                         £
                              ---------    ---------  ---------    -----------
Cash at bank and in hand        135,739       22,584          -        158,323
Bank overdraft                 (926,478)     876,604          -        (49,874)
                              ---------    ---------  ---------    -----------
                               (790,739)     899,188          -        108,449

Debt due within one year       (984,540)    (507,730)         -     (1,492,270)
Debt due after one year     (14,809,146)           -    (14,217)   (14,823,363)
                              ---------    ---------  ---------    -----------
                  Total     (16,584,425)     391,458    (14,217)   (16,207,184)
                              ---------    ---------  ---------    -----------

6.  Financing

The bank loans are repayable by semi-annual instalments plus a final payment on
11 April 2014. Interest is currently charged at 1.25% 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 on the outstanding loan balances which are not covered by the collar
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 1.25%
and pays interest at a fixed rate of 7.08%.



INDEPENDENT REVIEW REPORT TO
PEEL HOTELS PLC


Introduction

We have been instructed by the company to review the financial information for
the 28 weeks ended 29 August 2004 which comprises the profit and loss account,
the balance sheet, the cash flow statement, the reconciliation of net debt and
the related notes 1 to 6. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.

This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company for our review work, for this report, or for the conclusions we have
formed.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
also responsible for ensuring that the accounting policies and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of management and applying analytical
procedures to the financial information and underlying financial data and based
thereon assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly, we do not express an audit
opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the 28 weeks ended
29 August 2004.

Deloitte & Touche LLP
Chartered Accountants
Cambridge

6 October 2004




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