Interim Results

Peel Hotels PLC 09 October 2007 PEEL HOTELS PLC Interim Results --------------------- For the 28 weeks ended 26 August 2007 # Operating Profit up 11% to £1,378,888 (2006:£1,244,743) # Profit before tax up 45% to £755,226 (2006:£521,180) # Earnings per share Basic 4.4p + 46.6% (2006 : 3.0p) Diluted 4.1p + 41.4% (2006 : 2.9p) # Sale of Avon Gorge Hotel for £15,500,000 # Contracts exchanged for £2,000,000 for sale of Salem Street site, Bradford # Acquisition of the Head Lease and two small freeholds of the Bull Hotel in Peterborough for a consideration of £2,350,000 # Conditional Heads of Terms agreed for 25 year lease of the basement of the Midland Hotel, Bradford to Clermont Leisure (UK) Limited, who have successfully gained a gaming licence for the Hotel # Interim dividend of 2.0p per share (2006- Nil) Chairman Robert Peel said: 'We have shown encouraging progress in the period. The net effect of our asset sales and lease acquisition, apart from a significant capital gain from the former, will be to leave the Company totally debt free going forward.' Nominated Adviser KBC Peel Hunt Ltd - David Davies 020 7418 8900 CHAIRMAN'S STATEMENT RESULTS In the twenty eight weeks to 26 August 2007 turnover grew by 1% to £8,763,974 and operating profit increased by 11% to £1,378,888. Profit before tax increased by 45% to £755,226 reflecting better comparative energy costs in the period, less overall debt due to the sale of Aire House in Leeds in October 2006 for £2,050,000 and the benefit of the Cap on £7 million of our debt. The comparative sales increase from our Hotels was 2.2% and accommodation revenue per available room (revpar) increased by 4.2% with occupancy up 1.7% and average room rate up 2.3%. Gross profit on Hotels increased 9.3% with return on sales improving from 25.6% to 28.0% illustrating the benefit of cost savings in the period. All the Hotels performed well in the period with the exception of the Strathdon in Nottingham which made a gross loss of £108,928. Group overheads increased 10.7% (amounting to £43,944) and depreciation and amortisation increased 5.4% (amounting to £31,892). 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 4.4p compared with 3.0p in the comparative period on a weighted average 12,912,123 shares in issue. 55,000 employee share options were exercised in the period. POST BALANCE SHEET EVENTS On 30 August 2007 the Company announced that the Avon Gorge Hotel in Bristol together with the associated staff house at 10, Caledonia Place had been sold for an aggregate consideration of £15,500,000 in cash, paid on 3 September 2007. In view of the ongoing need for considerable reinvestment on the property and the attractive price offered, your Board felt they had no option other than to agree to sell the Hotel. The Company announced on the same day that it had reached agreement on 24 August 2007 to sell the freehold of three quarters of an acre of land with planning permission for 99 apartments, office space and associated car parking at its Salem Street site in Bradford for a consideration of £2,000,000 with completion on 26 November 2007. On 4 September 2007 the Company exchanged contracts to purchase the head lease and two small freeholds of the Bull Hotel in Peterborough for £2,350,000 thus saving the current rent payable of £211,540 per annum less £32,465 rent to the Landlord. On 14 September 2007 Clermont Leisure (UK) Limited gained council approval for a gaming licence at the Midland Hotel in Bradford. The Company has agreed conditional heads of terms, for a twenty five year lease to rent the basement of the property, whereby Clermont Leisure (UK) Limited will make a significant investment in the construction of the new Casino. The Company expect to report not less than £8,500,000 profit on disposal of property for the year ending 10 February 2008. FINANCE On 26 August net debt stood at £15,387,609 representing loans totalling £15,057,639 and an overdraft of £843,672 less £513,702 cash at bank. Gearing on shareholders' funds was 93.2% with interest covered 2.2 times. Net debt increased £118,426 compared with the previous year end. In simple terms, the net effect of the asset sales, apart from significant capital profit, will be to leave the Company totally debt free going forward. An orderly repayment of various loans is underway and we are currently reviewing options with regard to the unwinding of either one or two of our financial instruments or keeping a proportion of funds on deposit with a view to minimising borrowing costs. The Board has decided to pay an interim dividend of 2p amounting to £258,243 on 23 November 2007. We expect the total annual dividends to exceed 5p that was paid last year. CAPITAL EXPENDITURE £731,838 was spent in the period of which £216,292 was on the Avon Gorge Hotel mainly on renovating the outside of the building. Further external renovation works have been undertaken at the Midland Hotel in Bradford. We have renovated 15 of the 68 bedrooms at the Strathdon Hotel in Nottingham to a high standard. Bedroom improvements have continued at the Crown and Mitre Hotel in Carlisle and have started at the Caledonian Hotel in Newcastle. The Ballroom at the King Malcolm in Dunfermline has been totally refurbished. In line with our strategy of making all our Hotels more accessible for all, new bedrooms for the disabled have been constructed at the Caledonian in Newcastle, the Strathdon in Nottingham and the Golden Lion in Leeds. Improved wheelchair access to all our properties, together with first class bedrooms for the physically challenged, remains a top priority. NON-CORE ASSETS We have achieved our plan to dispose of Salem Street (subject to successful completion) and we are currently awaiting planning permission for five apartments in our staff house on Grosvenor Place in Jesmond, Newcastle which, when received, will enable us either to rent or sell this property. SHAREHOLDERS We urge all Shareholders to visit our Hotels and see for themselves the major improvements we are making to the portfolio each year and to take advantage of our Shareholders' discount scheme. All Shareholders are entitled to a 30% discount, using the special reservation number, 0207 266 1100 or e-mail info@peelhotel.com. Shareholders might like to visit our new website www.peelhotels.co.uk THE FUTURE The sale of the Avon Gorge Hotel, after the half year end, for £15,500,000 and Salem Street, for £2,000,000, has effectively left the Company with no debt, net of the acquisition of the head lease of the Bull Hotel in Peterborough. The Board believes that the Company is in a strong position going forward to consider the merits of expansion dependent upon beneficial market conditions. There is still considerable scope to improve the overall performance and market positioning of the eight Hotels in the Portfolio which will self-fund capital improvements and deliver to Shareholders a progressive dividend policy. Robert Peel 9 October 2007 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 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 Auditor Grant Thornton UK LLP No 1 Whitehall Riverside, Leeds, LS1 4BN Bankers Royal Bank of Scotland Plc 280 Bishopsgate, London EC2M 4RB Registrars Computershare Services Plc PO Box No. 82, The Pavilions, Bridgwater Road, Bristol BS99 7NH Solicitors Sabretooth Law Ltd 1 Berkeley Street, Mayfair, London W1J 8DJ Davidson Webber Solicitors Royal House, 110 Station Parade, Harrogate HG1 1EP Stockbrokers KBC Peel Hunt Ltd 4th Floor, 111 Old Broad Street, London EC2N 1PH PROFIT AND LOSS ACCOUNT For the period ended 26 August 2007 28 weeks 28 weeks Year ended ended ended 26/8/2007 27/8/2006 11/2/2007 Unaudited Unaudited Audited Note £ £ £ £ £ £ ----------------- ----- ------- -------- ------- -------- -------- -------- Turnover 8,763,974 8,687,161 15,919,976 Cost of Sales (6,307,610) (6,440,778) (12,049,329) ----------------- ----- ------- -------- ------- -------- -------- -------- Gross profit 2,456,364 2,246,383 3,870,647 ----------------- ----- ------- -------- ------- -------- -------- -------- Administrative expenses Depreciation (621,516) (589,624) (1,133,957) Other (455,960) (412,016) (742,857) (1,007,476) (1,001,640) (1,876,814) Operating profit 1,378,888 1,244,743 1,993,833 Profit on disposal of - - 850,000 property Interest payable (623,662) (723,563) (1,280,713) & similar charges ----------------- ----- ------- -------- ------- -------- -------- -------- Profit on ordinary activities before taxation 755,226 521,180 1,563,120 Taxation 2 (188,806) (130,295) (299,000) ----------------- ----- ------- -------- ------- -------- -------- -------- Profit on ordinary activities after taxation 566,420 390,885 1,264,120 ----------------- ----- ------- -------- ------- -------- -------- -------- Earnings per share 3 Basic 4.4p 3.0p 9.8p Diluted 4.1p 2.9p 9.3p ----------------- ----- ------- -------- ------- -------- -------- -------- 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 26 AUGUST 2007 26/8/2007 27/8/2006 11/2/2007 Unaudited Unaudited Audited Note £ £ £ -------------------- ------------- ------------- ------------- Fixed assets 34,858,166 36,030,457 34,747,844 Tangible assets -------------------- ------------- ------------- ------------- Current assets Stocks 123,773 126,416 116,581 Debtors 1,295,384 1,096,658 1,052,859 Cash at bank and in hand 513,702 237,720 158,530 -------------------- ------------- ------------- ------------- 1,932,859 1,460,794 1,327,970 Creditors (due within one year) (4,292,896) (3,967,387) (3,206,767) -------------------- ------------- ------------- ------------- Net current liabilities (2,360,037) (2,506,593) (1,878,797) -------------------- ------------- ------------- ------------- Total assets less current liabilities 32,498,129 33,523,864 32,869,047 Creditors (due after one year) (14,315,369) (16,268,427) (14,670,677) Provisions for liabilities and charges (1,664,102) (1,630,492) (1,664,102) -------------------- ------------- ------------- ------------- Total assets 16,518,658 15,624,945 16,534,268 -------------------- ------------- ------------- ------------- Capital and reserves Called up share capital 1,291,213 1,284,412 1,285,713 Share premium account 9,111,995 9,058,876 9,068,950 Profit and loss account 6,115,450 5,281,657 6,179,605 -------------------- ------------- ------------- ------------- Equity shareholders' funds 4 16,518,658 15,624,945 16,534,268 -------------------- ------------- ------------- ------------- CASH FLOW STATEMENT For the period ended 26 August 2007 28 weeks 28 weeks Year ended ended ended 26/8/2007 27/8/2006 11/2/2007 Unaudited Unaudited Audited Note £ £ £ £ £ £ ------------------ ------ -------- -------- -------- -------- -------- -------- Net cash inflow from operating 5 1,785,736 2,051,459 3,239,888 activities Returns on investments and servicing of finance Interest paid (562,186) (766,860) (1,319,704) -------- -------- -------- Net cash outflow from returns on investments and servicing of finance (562,186) (766,860) (1,319,704) Taxation UK corporation tax paid - - (107,482) -------- -------- Tax paid - - (107,482) Capital expenditure -------- -------- -------- Purchase of tangible (731,838) (1,099,612) (1,469,168) fixed assets Sale of tangible fixed assets - - 2,050,000 -------- -------- -------- Net cash outflow from capital expenditure (731,838) (1,099,612) 580,832 Equity dividends paid (642,856) (608,576) (608,576) -------- -------- -------- Net cash outflow before Financing (151,144) (423,589) 1,784,958 ------------------ ------ -------- -------- -------- -------- -------- -------- Financing 48,545 28,930 40,305 Issue of ordinary share capital New long term loans - 400,000 400,000 Less loan arrangement fees - - (4,000) Loan repayments - (125,000) (2,107,945) -------- -------- -------- Net cash inflow from financing 48,545 303,930 (1,671,640) ------------------ ------ -------- -------- -------- -------- -------- -------- (Decrease)/increase in cash 6 (102,599) (119,659) 113,318 ------------------ ------ -------- -------- -------- -------- -------- -------- Reconciliation of net debt (Decrease)/increase in cash in the period (102,599) (119,659) 113,318 Cash inflow from increase in debt - (275,000) 1,707,945 -------- -------- -------- Change in net debt resulting from cashflows (102,599) (394,659) 1,821,263 Non cash changes (15,827) (11,599) (25,659) -------- -------- -------- Increase in net debt (118,426) (406,258) 1,795,604 in the period Net debt at beginning of period (15,269,183) (17,064,787) (17,064,787) ------------------ ------ -------- -------- -------- -------- -------- -------- Net debt at end of period 6 (15,387,609) (17,471,045) (15,269,183) ------------------ ------ -------- -------- -------- -------- -------- -------- NOTES TO THE INTERIM ACCOUNTS For the period ended 26 August 2007 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 11 February 2007 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 auditor reported on those accounts and their report was unqualified. The interim financial statements have been reviewed by the company's auditor and a copy of the auditor's review report is attached to this interim report. 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 weighted average number of shares in issue during the period. ------------------------- --------- --------- -------- 28 weeks 28 weeks Year ended ended ended 11/2/2007 26/8/2007 27/8/2006 Audited Unaudited Unaudited ------------------------- --------- --------- -------- Average No. shares - Basic 12,863,271 12,828,035 12,831,222 - Diluted 13,667,016 13,431,446 13,512,236 ------------------------- --------- --------- -------- 4. Reconciliation of movements in shareholders' funds ------------------------- --------- --------- -------- 28 weeks 28 weeks Year ended ended ended 11/2/2007 26/8/2007 27/8/2006 Audited Unaudited Unaudited ------------------------- --------- --------- -------- Profit for the period 566,420 390,885 1,264,120 Dividends paid relating to previous year (642,856) (608,576) (608,576) Issue of shares less expenses 48,545 28,930 40,305 Recognition of equity-settled share based payments 12,281 - 24,713 ------------------------- --------- --------- -------- Net (decrease)/ increase in shareholders' funds (15,610) (188,761) 720,562 ----------- --------- Shareholders' funds at 11/02/07 16,534,268 15,813,706 15,813,706 ------------------------- --------- --------- -------- Shareholders' funds at 26/08/07 16,518,658 15,624,945 16,534,268 ------------------------- --------- --------- -------- 5.Reconciliation of operating profit to net cash inflow from operating activities ------------------------- --------- --------- -------- 28 weeks 28 weeks Year ended ended ended 11/2/2007 26/8/2007 27/8/2006 Audited Unaudited Unaudited £ & ------------------------- --------- --------- -------- Operating profit 1,378,888 1,244,743 1,993,833 Depreciation 621,516 589,624 1,133,957 Recognition of equity-settled share based payments 12,281 - 24,713 (Increase)/decrease in stocks (7,192) (9,419) 416 Increase in debtors (242,525) (131,089) (86,795) ----------- ---------- Increase in creditors 22,768 357,600 173,764 ------------------------- --------- --------- -------- Net cash inflow from operating activities 1,785,736 2,051,459 3,239,888 ------------------------- --------- --------- -------- NOTES TO THE INTERIM ACCOUNTS For the period ended 26 August 2007 6. Analysis of net debt At beginning At end of period Non cash of period 12/2/2007 Cash flow changes 26/8/2007 £ £ £ -------------- --------- --------- --------- ----------- Cash at bank and in hand 158,530 355,172 - 513,702 Bank overdraft (385,901) (457,771) - (843,672) -------------- --------- --------- --------- ----------- (227,371) (102,599) - (329,970) Debt due within one year (371,135) (371,135) - (742,270) Debt due after one year (14,670,677) 371,135 (15,827) (14,315,369) -------------- --------- --------- --------- ----------- Total (15,269,183) (102,599) (15,827) (15,387,609) -------------- --------- --------- --------- ----------- 7. Financing The original bank loan is repayable by semi-annual instalments plus a final payment on 11 April 2014. Interest is 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 of 1.25%. The minimum interest cost is 4.99% plus margin of 1.25%, up to 12 October 2009, except when LIBOR is below 4.99% between 24 June 2003 and 12 October 2009, in which case an additional 2% of interest is payable. The Company has entered into a GBP roller coaster callable interest rate swap agreement which commenced on 11 April 2003 and ends on 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 fixes its interest payments up to 11 April 2014 on outstanding loan balances which are not covered by the collar agreement. The fixed interest swap requires the company to pay 5.83% on these amounts and therefore effectively fixes its borrowing costs on this portion of its debt portfolio at 7.08% (after inclusion of the 1.25% margin). A loan of £2.5 million was taken to part fund the acquisition of the 3 hotels in the year ended 12 February 2006. This is repayable over 10 years by semi-annual instalments. Interest is charged at 1.25% over LIBOR. The loans and overdraft are secured by debentures dated 7 December 1998, 8 September 1999, 21 June 2002 and 17 May 2005 over all of the Company's freehold and long leasehold properties. A new loan of £400,000 was taken out last year to finance the redevelopment of the Princes Ballroom at the Midland Hotel, Bradford. Interest is charged at 1.25% over LIBOR. On 5 September 2007 the company repaid the £400,000 loan and the £2.0 million outstanding balance of the £2.5 million loan. On 5 September 2007 the company also settled future loan repayments on the original loan for the financial years 2007/08 and 2008/09, totalling £1,722,945. 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 26 August 2007 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 7. 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. Our responsibilities do not extend to any other information. This report is made solely to the Company's members, as a body, in accordance with guidance contained in APB Bulletin 1999/4 'Review of Interim Financial Information'. Our review work has been undertaken so that we might state to the Company's members those matters we are required to state to them in a 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 and the Company's members, as a body, 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. They are responsible for preparing the interim report and 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 'Review of Interim Financial Information' 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 International Standards on Auditing (UK and Ireland) 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 26 August 2007. Grant Thornton UK LLP Chartered Accountants Leeds 9 October 2007 HOTEL DIRECTORY PEEL HOTELS PLC 19 Warwick Avenue London W9 2PS Telephone: 020 7266 1100 FAX: 020 7289 5746 Location Hotel Rating Rooms Telephone Facsimile Bradford Midland Hotel **** 90 01274 735735 01274 720003 Carlisle Crown & Mitre Hotel **** 94 01228 525491 01228 514553 Dunfermline King Malcolm Hotel **** 48 01383 722611 01383 730865 Leeds Golden Lion Hotel **** 89 0113 243 6454 0113 242 9327 Newcastle Upon Tyne Caledonian Hotel **** 89 0191 281 7881 0191 281 6241 Nottingham Strathdon Hotel **** 68 0115 941 8501 0115 948 3725 Peterborough Bull Hotel **** 118 01733 561364 01733 557304 Wallingford George Hotel **** 39 01491 836665 01491 825359 635 For reservations at any Peel Hotel call 020 7266 1100 Or dial into our web site on www.peelhotels.co.uk e-mail - info@peelhotel.com This information is provided by RNS The company news service from the London Stock Exchange

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