27 Jul 2018 07:00
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PEEL HOTELS PLC
PRELIMINARY ANNOUNCEMENT
Derived from audited results for Financial Year Ended 28 January 2018.
HIGHLIGHTS
# Turnover decreased 4.1% to £16,097,313 (2017: £16,790,320)
# Operating Profit excluding the exceptional expenses decreased 29.6% to £893,115 (2017: £1,268,734). Operating loss after exceptional expense £268,126 (2017 - operating profit of £1,098,234) on a statutory basis.
# EBITDA excluding the exceptional expenses in the current and previous year decreased 18.5% to £1,833,611 (2017: £2,250,328).
# Net debt decreased £1,101,207
# Loss before tax, (including the exceptional expense of £1,161,241 due to impairment of the Net Book Values of two leasehold properties held within subsidiaries in the current year and the previous year's exceptional expense re the Strathdon Hotel) was £734,986 loss (2017: £575,387 profit).
# Basic and diluted loss per share of 6.0p (2017: earnings per share 3.1p)
'Demand has slowed in many of the provincial areas of the United Kingdom, and together with upwards pressure from increases in the living wage, business rates and energy costs this has created challenges to the profitability of the Company.
However it is not unreasonable to suppose that once the terms and conditions of Brexit are clear, that stability and growth will return.
In the mean time we remain focused on reducing debt and our overall cost base.'
Robert Peel
Chairman
0207 286 6823
Nominated adviser and Broker
Peel Hunt LLP / Capel Irwin
0207 418 8907
Review of the business
RESULTS
The key performance indicators for the Group are revenue, EBITDA, profit before tax, REVPAR and net debt levels.
The Financial Year ended 28 January 2018 has been a very challenging year for the Group with hotel revenues decreasing by 4.1% to £16,097,313 (2017: £16,790,320). Hotel gross profit before depreciation and Group administration expenses decreased 14.6% to £2,508,933 (2017: £2,938,211). EBITDA excluding the exceptional expenses in the current and previous year decreased 18.5% to £1,833,611 (2017: £2,250,328).
Loss before tax, (including the exceptional expense due to impairment of the Net Book Values of two leasehold properties in the current year and the previous year's exceptional expense re the Strathdon Hotel) was £734,986 (2017: Profit £575,387).
Shareholders are aware that there have been persistent problems in regard to the cost base of two of the Group's Subsidiary Companies, the Strathdon Hotel (Nottingham) Limited and the King Malcolm Hotel (Dunfermline) Limited. The Board have reviewed the carrying values of the two Hotels within those subsidiaries and determined that it is appropriate to write them down to zero. The impairment of the value of the two Hotels is provided for as an Exceptional Item of £1,161,241 in this year's accounts. The Board is considering its options in regard to the properties within the two Subsidiaries, including change of use, it is therefore possible that the impairment could be reversed if a more profitable future for the properties could be found.
REVPAR (accommodation revenue per available room) was down 3.5% with occupancy down 4.5% and average room rate up 1.0%
Administration expenses decreased 1.8%. Depreciation and amortisation decreased 4.2%.
FINANCE
As at 28 January 2018 net debt stood at £8,453,562 (2017: £9,554,769) representing loans totalling £8,453,562 (2017: £9,847,422) and an overdraft of £nil (2017: £nil) less £1,287,277 (2017: £292,653) cash at bank. Gearing on Shareholders' funds was 34.8% with interest covered 1.9 times, excluding exceptional expense. Net debt decreased by £1,101,207 compared with the previous year.
On 19 September 2017 the Company entered into a £9,900,000 five year term loan facility with Allied Irish Bank. This facility has been used to repay the Company's existing facilities with Royal Bank of Scotland as well as the remaining balances of the Director's Loan and Loan Notes. The revised financial structure will result in a significant reduction in financial charges going forward.
CAPITAL EXPENDITURE
£705,548 (2017: £710,701) was spent in the year mainly on the refurbishment of three suites and the public areas at the Norfolk Royale. We completed the refurbishment of the public areas and ballroom at the Crown and Mitre Hotel in Carlisle. We are currently refurbishing bedrooms and upgrading air conditioning systems at the Bull Hotel in Peterborough.
We continue to invest in our internet access throughout all our Hotels giving our Guests faster connection. This service is absolutely free to our Guests and is a vital component to them having a satisfactory stay with us.
In addition to Capital Expenditure £614,098 (2017: £661,317) was spent on repairs and renewals which help us ensure that we are constantly and consistently maintaining and improving our product. Proof of which is the continuing improvements in ratings of each Hotel assessed by the Automobile Association.
Group Statement of Comprehensive Income
for the year ended 28 January 2018
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| 2018 |
| 2017 |
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| £ |
| £ |
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Revenue |
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| 16,097,313 |
| 16,790,320 |
Cost of sales |
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| (13,588,380) |
| (13,852,109) |
Gross profit |
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| 2,508,933 |
| 2,938,211 |
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Administration expenses |
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| (675,322) |
| (687,883) |
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Exceptional expense (note 4) |
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| (1,161,241) |
| (170,500) |
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Depreciation |
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| (940,496) |
| (981,594) |
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Total administration expenses |
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| (2,777,059) |
| (1,839,977) |
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Operating profit |
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| (268,126) |
| 1,098,234 |
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Finance expense |
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| (466,860) |
| (522,847) |
Profit before tax |
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| (734,986) |
| 575,387 | |
Income tax |
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| (109,286) |
| (140,665) |
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Profit and total comprehensive income for the period attributable to owners |
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| (844,272) |
| 434,722 | |
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(Loss) / Earnings per share |
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(note 3) |
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Basic & diluted (pence) |
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| (6.0) |
| 3.1 |
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Group statement of changes in equity
for the years ended 28 January 2018 and 29 January 2017
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Year ended 28 January 2018 | Share Capital | Share premium account | Profit and loss account | Total |
| £ | £ | £ | £ |
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Balance brought forward at 30 January 2017
| 1,401,213 | 9,743,495 | 12,775,387 | 23,920,095 |
Profit and total comprehensive income for the period | - | - | (844,272) | (844,272) |
Transactions with owners |
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Dividend | - | - | - | - |
Balance at 28 January 2018 | 1,401,213 | 9,743,495 | 11,931,115 | 23,075,823 |
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Year ended 29 January 2017 | Share Capital | Share premium account | Profit and loss account | Total |
| £ | £ | £ | £ |
Balance brought forward at 1 February 2016 |
1,401,213 |
9,743,495 | 12,620,907 | 23,765,615 |
Profit and total comprehensive income for the period |
- | - | 434,722 | 434,722 |
Transaction with owners |
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Dividend | - | - | (280,242) | (280,242) |
Balance at 29 January 2017 | 1,401,213 | 9,743,495 | 12,775,387 | 23,920,095 |
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Group Balance Sheet
at 28 January 2018
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| 2018 | 2017 |
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| £ | £ |
Assets |
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Non-current assets |
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Property, plant and equipment |
| 34,106,375 | 35,502,564 |
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Total non-current assets |
| 34,106,375 | 35,502,564 |
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Current assets |
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Inventories |
| 109,271 | 114,034 |
Trade and other receivables |
| 845,058 | 1,095,481 |
Cash and cash equivalents |
| 1,287,277 | 292,653 |
Total current assets |
| 2,241,606 | 1,502,168 |
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Total assets |
| 36,347,981 | 37,004,732 |
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Equity and liabilities |
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Equity attributable to owners of the parent |
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Share capital |
| 1,401,213 | 1,401,213 |
Share premium |
| 9,743,495 | 9,743,495 |
Retained earnings |
| 11,931,115 | 12,775,387 |
Total equity |
| 23,075,823 | 23,920,095 |
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Liabilities |
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Non-current |
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Borrowings |
| 9,240,839 | 1,030,000 |
Deferred tax liabilities |
| 824,009 | 861,330 |
Non-current liabilities |
| 10,064,848 | 1,891,330 |
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Current |
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Trade and other payables |
| 2,636,396 | 2,259,437 |
Borrowings |
| 500,000 | 8,817,422 |
Current tax liabilities |
| 70,914 | 116,448 |
Current Liabilities |
| 3,207,310 | 11,193,307 |
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Total liabilities and equity |
| 36,347,981 | 37,004,732 |
Group Cash Flow Statement
for the year ended 28 January 2018
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| 2018 | 2017 |
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| £ | £ |
Cash flows from operating activities |
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Profit for the year |
| (844,272) | 434,722 |
Adjustments for: |
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Financial income |
| - | - |
Financial expense |
| 466,860 | 522,847 |
Income tax |
| 109,286 | 140,665 |
Depreciation |
| 2,101,737 | 981,594 |
Cash flows before changes in working capital and provisions |
| 1,833,611 | 2,079,828 |
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UK corporation tax paid |
| (192,142) | (228,168) |
Decrease in trade and other receivables |
| 383,811 | 149,237 |
Increase in trade and other payables |
| 437,903 | 112,381 |
Decrease/(Increase) in inventories |
| 4,763 | (1,449) |
Net cash from operating activities |
| 2,467,946 | 2,111,829 |
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Cash flows from investing activities |
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Acquisition of property, plant and equipment |
| (705,548) | (710,701) |
Net cash outflow from investing activities |
| (705,548) | (710,701) |
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Cash flows from financing activities |
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Interest paid New loan |
| (661,192) 9,740,840 | (480,223) - |
Loan repayments |
| (9,847,422) | (410,000) |
Equity dividends paid |
| - | (280,242) |
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Net cash outflow from financing activities |
| (767,774) | (1,170,465) |
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Net increase in cash and cash equivalents |
| 994,624 | 230,663 |
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Cash and cash equivalents at the beginning of the period |
| 292,653 | 61990 |
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Cash and cash equivalents at the end of the period |
| 1,287,277 | 292,653 |
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For the purposes of the cash flow statement, cash and cash equivalents comprise: |
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Cash and bank balances |
| 1,287,277 | 292,653 |
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Notes
(forming part of the financial statements)
1 Basis of preparation
The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 of the Companies Act 2006. It has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) adopted for use in the European Union, including IFRIC interpretations issued by the International Accounting Standards Board, and in accordance with the AIM rules and is not therefore in full compliance with IFRS. The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2017 annual report. The financial statements have been prepared under the historical cost convention and are presented in sterling.
On 19 September 2017 the Company entered into a £9,900,000 five year term loan facility with Allied Irish Bank. This facility has been used to repay the Company's existing facilities with Royal Bank of Scotland as well as the remaining balances of the Director's Loan and Loan Notes. The revised financial structure will result in a significant reduction in financial charges going forward.
After the Financial Year end, the Company breached its financial covenants, which breach resulted in the Company's Bank issuing a "Reservation of Rights" letter, reserving the Bank's position in relation to the breach of covenant, whilst also confirming the Bank's current intention not to exercise any of its rights in relation to the breach. Whilst your Directors recognise that the breach of covenant, combined with a challenging trading outlook, results in material uncertainty for the Company, and increases the possibility that the Company may be unable to continue realizing its assets and discharging its liabilities in the normal course of business which might impact upon the company's ability to continue as a going concern, they are confident that the Company has adequate resources to meet its commitments, for the reasons described below.
The Directors have prepared forecasts for more than 12 months from the date of signing these accounts, which fairly represent their best, prudent estimate of hotel trading and cash flows in the current economic environment, which forecasts show that: the Company will be able to meet its loan repayment and financing costs within the facility referred to above; meet its tax payments; and pay its creditors on normal terms in the 12 months from the date of signing these accounts. The Directors have considered contingency plans in the event of unforeseen deterioration beyond their prudent forecasts, including a return to support from Directors Loans, reduced capital expenditure, and the sale of assets, In reliance on their forecasts and contingency plans, your Directors are happy to continue to adopt the going concern basis of accounting in preparing the Company's annual financial statements.
2 Publication of non-statutory financial statements
The financial information for the period ended 28 January 2018 was approved by the Board on 26 July 2018 and has been extracted from the Group's financial statements upon which the auditor's opinion is unqualified, but is modified to include an emphasis of matter relating to the material uncertainty described in note 1. The auditor's opinion does not include a statement under section 498(2) or (3) of the Companies Act 2006. The statutory accounts for the period ended 28 January 2018 will, in due course, be delivered to the Registrar of Companies. The statutory accounts for the period ended 29 January 2017 have been delivered to the Registrar of Companies.
3 Loss / Earnings per share
Basic earnings per share
The calculation of basic earnings per share at 28 January 2018 was based on the loss attributable to ordinary shareholders of £844,272 (2017: Profit of £434,722) and a weighted average number of ordinary shares outstanding of 14,012,123 (2016: 14,012,123). No shares were issued in 2018 or 2017.
Diluted earnings per share
The potentially dilutive options in issue in 2018 and 2017 do not cause a difference between basic and diluted earnings per share.
4 Exceptional expense
The exceptional expense of £1,161,241 is due to impairment of the Net Book Values of two leasehold properties held within subsidiary Companies, which have been written down to zero in the current year.
The exceptional expense of £170,500 in the previous year's accounts was due to a charge for back rent re the Strathdon Hotel, Nottingham.