Peel Hotels Regulatory News (PHO)

7 Apr 2006 07:00

Peel Hotels PLC07 April 2006 Peel Hotels Preliminary results for the year ended 12 February 2006 CHAIRMAN'S STATEMENT RESULTS Total turnover grew by 19.1% to £14,947,091 largely due to the acquisition ofthree leasehold hotels from Grace Hotels Ltd. on 16 May 2005. Operating profitwas £2,437,750 (2005:£2,482,999) a decrease of 1.8%; there was £221,093 lessManagement Contract income against a maiden contribution of £154,364 from ouracquisition. Depreciation was £107,854 more than the previous year. Earnings before interest, tax and depreciation were 1.9% more than the previousyear at £3,448,259 (2005:£3,385,654). The pre-tax result was almost the same as the previous year at £1,181,991 (2005:£1,181,107). After a full tax provision less discounting, earnings per sharewere 7.0p basic and 6.8p on a diluted basis (2005:7.5p basic and 7.3p diluted). At 12 February 2006 net debt stood at £17,064,787 representing loans totalling£16,724,098 and an overdraft of £500,311 less £159,622 cash at bank. Gearing onshareholder's funds was 108% with interest covered 1.9 times. Net debt increased£1,128,093 compared with the previous year. A new loan for £2,500,000 repayableover ten years was arranged on 16 May 2005 which, in addition to £600,000 raisedby placing 666,666 new shares successfully at 90p, funded the acquisition of theleaseholds of the Strathdon in Nottingham, the Crown and Mitre in Carlisle, andthe King Malcolm in Dunfermline. Turnover growth slowed dramatically in the final quarter especially in Januaryand February and this together with significant cost pressure, with energy forexample, increasing by an annualised 40% and the negative impact of ourpredominantly seasonal new acquisitions, changed what would have been a verysatisfactory year into a disappointing result. In view of the high operationalgearing nature of the hotel industry it is equally important to grow sales as itis to control costs and these sales have always been hard to come by in theweeks after Christmas as UK plc gradually gets back to work. It is pleasing to report that Revpar (accommodation revenue per availablebedroom) grew by 4.1% in the year with occupancy down by 2.8% and average roomrate up by 7.1%, justifying our continued investment in our properties.Individually the hotel results were mixed, with the Bull in Peterborough, theAvon Gorge in Bristol, the Crown and Mitre in Carlisle having excellent results.The Golden Lion in Leeds strongly improved its profits on the previous year andstill has substantial upside. The Caledonian in Newcastle had an extremely pooryear on year performance: management changes have been made and the hotel'sresults are now stable and comparative figures have begun to improve. We continue to keep our properties well maintained and in good repair, inaddition to increasing the minimum standard benchmarks each year. Expenditure onrepairs and renewals in our hotels increased 16.9% from £504,158 to £589,207. FINANCE On 12 February 2006 net debt was £17,064,787 including the additional £2.5million ten year loan drawn down to finance our recent acquisition. £1,113,405was repaid during the period under review. The LIBOR rate on our "cap andcollar" on £7 million of our debt went below 4.99% at the date of fixing on 11October 2005 and therefore prevented us from enjoying the benefit of a 2%annualised saving that we received in the period from 11 April 2005 to10 October2005. The Board has recommended increasing the dividend from 4.5p per share to 4.75pper share, amounting to £608,576, which, if approved by shareholders, will bepaid on 16 May 2006 to shareholders on the register at 5 May 2006. CAPITAL EXPENDITURE In addition to the acquisition of the 3 new hotels, a further £960,831 was spenton projects within the company which was £49,678 less than the depreciationcharge for the period. £405,660 was spent on the Avon Gorge Hotel, where we havelodged five separate planning applications in order to develop the site to itsfull potential, whilst respecting the views and needs of the local community inClifton. Shareholders will be aware that the location of this hotel is adjacentto the Clifton suspension bridge and the Avon Gorge, both of which are worldheritage sites and therefore attract huge local interest. Briefly the planslodged are for additional car parking, redevelopment of two houses, constructionof an orangery, ten new bedrooms, together with a health spa under the existingterrace and lastly a new glass pavilion constructed above the 4,400 square footballroom which would be restored. We have opened The Bridge Caf? at the Avon Gorge Hotel together with a newkitchen and bar facilities. Seating well over 100 people it has a unique "windand waterproof deck" together with infra red heating where diners can sitoutside protected from the elements whilst enjoying the fabulous view. Therestaurant at the Bull Hotel in Peterborough has been restyled and thebanqueting rooms have been upgraded with the addition of air conditioning. The redevelopment of the city centre of Bradford continues which augers well forthe Midland Hotel. We are shortly to submit an application to the planners for102 one bedroom and two bedroom apartments, together with retail space and carparking on our Salem Street site which is situated some 500 meters from thehotel. We would hope to dispose of this asset to a developer if and when weachieve planning consent. The company decided not to go to appeal with regard to the refusal by theNewcastle Council for the bedroom expansion of the Caledonian Hotel. We areinvestigating our various options in regard to Aire House which is a freeholdproperty that we own adjacent to the Golden Lion Hotel in Leeds. SHAREHOLDERS We are always delighted when shareholders take advantage of our Shareholders'discount scheme. All Shareholders will now be entitled to 30% discount off thelisted tariff, using the special reservation number, 020 7266 1100 or emailinfo@peelhotel.com Shareholders can identify our hotels using the directory atthe back of the Annual Report. We really do want Shareholders to visit and enjoyour hotels. STAFF The Board would like to thank all management and staff for their contribution tothe business of Peel Hotels and the welfare of its guests. The continualimprovement of the guest experience and the welfare and retention of ourmanagement and staff remains a top priority. I am delighted to report that inthe year under review we achieved record staff retention within the company. THE FUTURE In spite of continuing to improve REVPAR the comparative decline of managementcontract income has historically had the effect of preventing earnings per sharegrowth and decreasing ROS (return on sale). The Board believe that there isstill considerable scope to improve performance within the hotel portfolio andthis, together with the continual repayment of loans and disposal of non-coreassets, should enable the company to achieve earnings growth. Surplus cash fromthe disposal of these assets would be available to accelerate the repayment ofdebt as well as funding the company's ambitious development plans. Robert PeelChairman7 April 2006 REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF PEEL HOTELS PLC We have audited the financial statements of Peel Hotels plc for the year ended12 February 2006 which comprise the profit and loss account, the balance sheet,the cash flow statement and notes 1 to 25 These financial statements have beenprepared under the accounting policies set out therein. This report is made solely to the company's members, as a body, in accordancewith Section 235 of the Companies Act 1985. Our audit work has been undertakenso that we might state to the company's members those matters we are required tostate to them in an auditors' report and for no other purpose. To the fullestextent permitted by law, we do not accept or assume responsibility to anyoneother than the company and the company's members as a body, for our audit work,for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors The directors' responsibilities for preparing the Annual Report and thefinancial statements in accordance with United Kingdom law and AccountingStandards (United Kingdom Generally Accepted Accounting Practice) are set out inthe Statement of Directors' Responsibilities. Our responsibility is to audit the financial statements in accordance withrelevant legal and regulatory requirements and International Standards onAuditing (UK and Ireland). We report to you our opinion as to whether the financial statements give a trueand fair view and are properly prepared in accordance with the Companies Act1985. We also report to you if, in our opinion, the Directors' Report is notconsistent with the financial statements, if the company has not kept properaccounting records, if we have not received all the information and explanationswe require for our audit, or if information specified by law regardingdirectors' remuneration and other transactions is not disclosed. We read other information contained in the Annual Report and consider whether itis consistent with the audited financial statements. This other informationcomprises only the Chairman's Statement, the Directors' Report, the CorporateGovernance Statement and the Directors' Remuneration Report. We consider theimplications for our report if we become aware of any apparent misstatements ormaterial inconsistencies with the financial statements. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing(UK and Ireland) issued by the Auditing Practices Board. An audit includesexamination, on a test basis, of evidence relevant to the amounts anddisclosures in the financial statements. It also includes an assessment of thesignificant estimates and judgments made by the directors in the preparation ofthe financial statements, and of whether the accounting policies are appropriateto the company's circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information andexplanations which we considered necessary in order to provide us withsufficient evidence to give reasonable assurance that the financial statementsare free from material misstatement, whether caused by fraud or otherirregularity or error. In forming our opinion we also evaluated the overalladequacy of the presentation of information in the financial statements. Opinion In our opinion the financial statements: • give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the company's affairs as at 12 February 2006 and of the profit for the year then ended; and • have been properly prepared in accordance with the Companies Act 1985. GRANT THORNTON UK LLPREGISTERED AUDITORSCHARTERED ACCOUNTANTSLEEDS 7 April 2006 PROFIT AND LOSS ACCOUNT For the 52 weeks ended 12 February 2006 Note 12 February 2006 13 February 2005 -------- -------- --------- -------- £ £ £ £ Turnover 1Original group 12,400,841 12,268,058Discontinued business 63,608 284,701Acquisitions 2,482,642 -Total turnover 14,947,091 12,552,759 -------- -------- --------- --------Cost of sales (10,806,273) (8,519,697) -------- -------- --------- --------Gross profitOriginal group 3,709,512 3,748,361Discontinued business 63,608 284,701Acquisitions 367,698 -Total gross profit 4,140,818 4,033,062Administrative expensesDepreciation (1,010,509) (902,655)Other (692,559) (647,408) (1,703,068) (1,550,063) -------- -------- --------- --------Operating profitOriginal group 2,219,778 2,198,298Discontinued business 63,608 284,701Acquisitions 154,364 -Total operating profit 2,437,750 2,482,999Interest payable & similarcharges 2 (1,255,759) (1,301,892) -------- -------- --------- --------Profit on ordinary 3 1,181,991 1,181,107activities before taxationTaxation 4 (293,288) (272,094) -------- -------- --------- -------- Profit on ordinary 888,703 909,013activities after taxation -------- -------- --------- -------- Earnings per share 8Basic 7.0p 7.5pDiluted 6.8p 7.3p -------- -------- --------- -------- Movements on reserves are shown in note 17 to the accounts. There are no recognised gains and losses for the current financial year andpreceding financial year other than the profits shown above. The accompanying accounting policies and notes form an integral part of thesefinancial statements. BALANCE SHEET As at 12 February 2006 Note 12 February 13 February 2005 2006 restated £ £ --------- --------Fixed assetsTangible assets 9 35,520,467 32,657,793 --------- --------Current assetsStocks 10 116,997 93,729Debtors 11 965,574 1,045,243Cash at bank and in hand 159,622 147,137 --------- -------- 1,242,193 1,286,109Creditors (due within one year) 12 (3,336,634) (3,120,121) --------- --------Net current liabilities (2,094,441) (1,834,012) --------- --------Total assets less current liabilities 33,426,026 30,823,781 Creditors (due after one year) 13 a) (15,981,828) (14,589,414)Provision for liabilities & charges 15 (1,630,492) (1,346,778) --------- --------Total assets 15,813,706 14,887,589 --------- -------- Capital and reservesCalled up share capital 16 1,281,213 1,212,046Share premium account 17 9,033,145 8,519,477Profit and loss account 17 5,499,348 5,156,066 --------- --------Equity shareholders' funds 17 15,813,706 14,887,589 --------- -------- The accompanying accounting policies and notes form an integral part of thesefinancial statements. Approved by the board on 7 April 2006 Robert Peel, Director John Perkins, Director CASH FLOW STATEMENT For the 52 weeks ended 12 February 2006 Note £ 52 weeks to £ 52 weeks to 12 February 13 February 2006 2005 £ £Net cash inflow 19 3,957,772 3,314,153from operatingactivitiesReturns on investments& servicing of financeInterest paid (1,195,137) (1,294,185) Net cash outflow (1,195,137) (1,294,185)from returns oninvestments and servicing offinanceTaxationUK corporation (24,140) (120,728)tax paid ----- -------- --------- -------- --------Tax paid (24,140) (120,728) Capital expenditurePurchase of (3,873,183) (716,047)tangible fixedassets Net cash outflow (3,873,183) (716,047)from capitalexpenditure Equity dividend (545,421) (509,059)paid Net cash (1,680,109) 674,134(outflow)/ inflowbefore financing Financing 621,873 -Issue of ordinary (39,038) -share capitalLess share issuecostsNew long term 2,500,000 1,000,000loanLess loan (25,000) -arrangement feesLoan repayments (1,113,405) (1,488,405) ----- -------- --------- -------- --------Net cash inflow/(outflow) from 1,944,430 (488,405)financing ----- -------- --------- -------- --------Increase in cash 20 264,321 185,729 ----- -------- --------- -------- -------- Reconciliation of net debt Increase in cash 264,321 185,729 795,753)(Increase)/decrease in debt (1,361,595) 488,405 984,540(Increase)/reduction in net debt (1,097,274) 674,134 188,787resulting from cash flowsNon cash changes (30,819) (26,403) (26,403)(Increase)/reduction in net debtin the year (1,128,093) 647,731Net debt at beginning of year (15,936,694) (16,584,425) ---- -------- ------- --------Net debt at end of year 20 (17,064,787) (15,936,694) ---- -------- ------- -------- The accompanying accounting policies and notes form an integral part of thesefinancial statements. STATEMENT OF ACCOUNTING POLICIES 1. Basis of accounting The financial statements are prepared under the historical cost convention andin accordance with applicable United Kingdom accounting standards. The adoption of FRS 21 has resulted in a change in accounting policy in respectof proposed equity dividends. If the company declares dividends to the holdersof equity instruments after the balance sheet date, the company does notrecognise those dividends as a liability at the balance sheet date. Theaggregate amount of equity dividends proposed before approval of the financialstatements, which have not been shown as liabilities at the balance sheet date,are disclosed in the notes to the financial statements. Previously, proposedequity dividends were recorded as liabilities at the balance sheet date. This change in accounting policy has resulted in a prior year adjustment for thecompany. Shareholders' funds for the year ended 14 February 2004 have beenincreased by £509,059. For the year ended 13 February 2005, the change inaccounting policy has resulted in a net increase in retained profit for the yearof £545,421. The balance sheet at 13 February 2005 has been restated to reflectthe de-recognition of a liability for proposed equity dividends of £545,421. 2. Basis of preparation The financial year consists of the 52 weeks ended 12 February 2006. 3. Acquisitions On the acquisition of a business, fair values are attributable to the company'sshare of net separable assets. Where the cost of acquisition exceeds the fairvalues attributable to such net assets, the difference is treated as purchasedgoodwill and, following the implementation of FRS 10, is capitalised in thecompany balance sheet in the year of acquisition. The results and cash flows relating to a business are included in the profit andloss account and the cash flow statement from the date of acquisition. 4. Turnover Turnover represents amounts receivable from the provision of hotel servicesincluding room hire, bar and restaurant takings and are stated after deductionof value added tax. Also included are management contract fees and commissionreceivable for the management of other hotels not belonging to the company. 5. Stocks Stocks are stated at the lower of cost and net realisable value. 6. Leases Operating lease rentals are charged to profit and loss account as incurred. 7. Fixed assets and depreciation It is the company's policy to maintain its properties to a high standard inorder to protect its trade. Depreciation is charged on freehold and long leasehold properties, excludingfreehold land, at a rate calculated to write off the cost, less residual value,on a straight line basis, over 50 years. Short leasehold properties are written off over the remaining period of thelease. On other assets depreciation is charged to write off their costs by equal annualinstalments over their estimated useful lives, which are considered to be: Plant, fixtures and fittings, and equipment 10 yearsSoft furnishings 8 yearsOffice equipment 5 yearsComputer equipment 3 years STATEMENT OF ACCOUNTING POLICIES 8. Deferred taxation Deferred tax is provided in full on timing differences, which result in anobligation at the balance sheet date to pay more tax, or a right to pay lesstax, at a future date, at rates expected to apply when they crystallise based oncurrent tax rates and law. Timing differences arise from the inclusion of itemsof income and expenditure in taxation computations in periods different fromthose in which they are included in financial statements. Deferred tax assetsare recognised to the extent that it is regarded as more likely than not thatthey will be recovered. Deferred tax is measured on a discounted basis toreflect the time value of money over the period between the balance sheet dateand the dates on which it is estimated that the underlying timing differenceswill reverse. 9. Capital instruments Capital instruments are recorded at the fair value of the consideration receivedless issue costs in accordance with FRS4. The difference between the netproceeds of the issue and the total amounts of payments that the issuer may berequired to make is recorded as a finance cost of the instrument and written offover the life of the instrument. 10. Pensions The company operates a money purchase pension scheme on behalf of individualemployees. Contributions to the scheme are charged against profits in the periodin which they arise. 11. Derivative financial instruments The company uses derivative financial instruments to reduce exposure to interestrate movements. The company does not hold or issue derivative financialinstruments for speculative purposes. For an interest rate swap to be treated as a hedge the instrument must berelated to actual assets or liabilities or a probable commitment and must changethe nature of the interest rate by converting a fixed rate to a variable rate orvice versa. Interest differentials under these swaps are recognised by adjustingnet interest payable over the period of the contracts. If an instrument ceases to be accounted for as a hedge, for example because theunderlying hedged position is eliminated, the instrument is marked to market andany resulting profit or loss recognised at that time. NOTES TO THE ACCOUNTS Financial year ended 12 February 2006 1. Turnover and profit Turnover represents amounts derived from the provision of goods and serviceswhich fall within the company's ordinary activities after deduction of valueadded tax. All of the turnover and profit on ordinary activities before taxationarises in the United Kingdom. All net assets are based in the United Kingdom. 2. Interest payable and similar charges -------- -------- 2006 2005 £ £ -------- --------Interest on long term bank loans 667,795 596,615Interest on bank overdraft 22,803 64,809Bank charges, fees and instrument costs 565,161 640,468 -------- -------- 1,255,759 1,301,892 -------- -------- 3. Profit on ordinary activities before taxation This is stated after charging:Depreciation 1,010,509 902,655Repairs and renewals-hotels 589,207 504,158Repairs and renewals-other 11,628 17,960Auditors' remuneration for audit services 33,800 28,000Auditors' remuneration for tax compliance services 4,700 4,500 -------- ------- 4. Tax on profit on ordinary activities a) Analysis of charge in year Current TaxCorporation tax charge for year 98,583 118,272Overprovision in respect of prior years (89,009) (8,172) -------- --------Total current tax 9,574 110,100 -------- --------Deferred TaxOrigination and reversal of timing differences 210,668 216,010Increase in discount (4,404) 29,695Adjustment in respect of prior years 77,450 7,538Adjustment in respect of prior years on discount - (91,249) -------- --------Total deferred tax 283,714 161,994 -------- --------Tax on profit on ordinary activities 293,288 272,094 -------- -------- b) Factors affecting tax charge for year The current tax is less than 30% of profit on ordinary activities, for thereasons set out in the following reconciliation: 2006 2005 £ £Profit on ordinary activities before tax 1,181,991 1,181,107 --------- --------Profit on ordinary activities multiplied by standard 354,597 354,332rate of corporation tax in the UK of 30% (2005 - 30%)Effects of: 14,161 7,599Disallowable expenditureCapital allowances for the period in excess ofdepreciation (240,668) (216,010)and short term timing differencesRate differences on current tax (29,507) (27,649)Adjustment in respect of prior year (89,009) (8,172) --------- --------Corporation tax charge for the year 9,574 110,100 --------- -------- c) Factors that may affect future tax charges Based on current capital investment plans, the company expects to continue to beable to claim capital allowances in excess of depreciation in future years. The company has discounted deferred tax timing differences to take into accountthe true value of money at the time when those timing differences are expectedto reverse. 5. Staff costs (excluding directors) Wages and salaries 4,601,397 3,669,058Employer's social security costs 334,772 258,305Pension costs 47,925 34,391 -------- -------- 4,984,094 3,961,754 Average number of people employed under Number Numbercontracts of service:Directors 5 5Other employees 443 353 -------- -------- 448 358 -------- -------- 6. Directors' Remuneration 2006 2005 £ £ Aggregate emoluments:Fees 26,924 20,000Salaries and benefits 170,030 157,687 -------- -------- 196,954 177,687 Company contributions to money 20,700 20,700purchase pension schemes -------- -------- Number Number Number of directors who are members of a money purchasepension scheme 3 3 -------- -------- -------- -------- Further details of directors' remuneration are contained in the Directors'remuneration report on page 12. 7. Dividends 2006 2005 £ £ Paid during the year equity dividends on ordinary shares 545,421 509,059Proposed after the year end (not recognised as aliability) 608,576 545,421--------------------------- -------- -------- 8. Earnings per share BasicCalculated on the average number of shares in 12,625,196 12,120,457issue during the year and on profit after taxation £888,703 £909,013 DilutedCalculated on average of number of shares 13,109,618 12,451,151available during year and on the profit aftertaxation £888,703 £909,013 -------- -------- In calculating the diluted earnings per share, the weighted average number ofshares is adjusted for the dilutive effect of the share options by 484,422 (2005- 330,694), giving an adjusted number of shares of 13,109,618 (2005 -12,451,151). 9. Tangible fixed assets Land and Plant and Furniture, Total buildings machinery furnishings and equipment £ £ £ £CostAt beginningof year 27,513,409 3,507,799 5,156,392 36,177,600Additions 2,936,330 108,691 828,162 3,873,183 -------- -------- -------- --------At end of year 30,449,739 3,616,490 5,984,554 40,050,783 -------- -------- -------- --------DepreciationAt beginningof year 170,300 1,147,185 2,202,322 3,519,807Provision forthe year 73,012 316,932 620,565 1,010,509 -------- -------- -------- --------At end of year 243,312 1,464,117 2,822,887 4,530,316 -------- -------- -------- --------Net book valueAt beginningof year 27,343,109 2,360,614 2,954,070 32,657,793At end of year 30,206,427 2,152,373 3,161,667 35,520,467 -------- -------- -------- -------- 2006 2005 £ £Analysis of the net book value ofland and buildings -------- -------- -------- --------Freehold 23,599,925 18,741,551Long leasehold 4,084,588 8,598,924Short leasehold 2,521,914 2,634 -------- -------- -------- -------- 30,206,427 27,343,109 -------- -------- -------- -------- 10. Stocks Stocks comprise food and liquor. 11. Debtors 2006 2005 £ £ Trade debtors 506,986 665,724Prepayments 458,588 379,519 -------- -------- 965,574 1,045,243 -------- -------- 12. Creditors due within one year -------- -------- 2006 2005 £ restated £ -------- -------- Bank loans and overdraft 1,242,581 1,494,417Trade creditors 601,213 297,544Tax and social security 512,004 464,791Corporation tax 100,092 114,658Other creditors 169,886 133,228Accruals and deferred income 710,858 615,483 -------- -------- 3,336,634 3,120,121 -------- -------- Bank loans and overdraft includes an amount for bank overdraft of £500,311 (2005- £752,147). The overdraft facility of £1,000,000 is due for review on 19September 2006. 13. a) Creditors due after one year -------- --------Bank loan (secured) 16,097,860 14,711,265Less loan arrangement fees prepaid (116,032) (121,851) -------- -------- 15,981,828 14,589,414 -------- -------- The original bank loan is repayable by 15 semi-annual instalments plus a finalpayment on 11 April 2014. Interest is charged at 1.25% over LIBOR. The companyhas entered into a collar agreement on £7 million which caps the companyinterest 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% ofinterest is payable. The company has entered into a GBP roller coaster callable interest rate swapagreement which commenced on 11 April 2003 and ends on 11 April 2014 with anoption for the Royal Bank of Scotland to terminate the agreement from 11 October2009. Under the terms of this agreement the company fixes its interest paymentsup to 11 April 2014 on outstanding loan balances which are not covered by thecollar agreement. The fixed interest swap requires the company to pay 5.83% onthese amounts and therefore effectively fixes its borrowing costs on thisportion of its debt portfolio at 7.08% (after inclusion of the 1.25% margin). A new loan of £2.5 million was taken to part fund the acquisition of the 3 newhotels. This is repayable over 10 years by semi-annual instalments. Interest ischarged at 1.25% over LIBOR. The loans and overdraft are secured by debentures dated 7 December 1998, 8September 1999, 21 June 2002 and 17 May 2005 over all of the company's freeholdand long leasehold properties. Instalments due after more than one year are as follows: 2006 2005 £ £ Between 1 and 2 years 1,234,540 738,405Between 2 and 5 years 3,704,620 2,953,620Over 5 years 11,158,700 11,019,240 -------- -------- 16,097,860 14,711,265Less loan arrangement fees (116,032) (121,851) -------- -------- 15,981,828 14,589,414 -------- -------- 13. b) Total borrowings -------- -------- 2006 2005 £ £ -------- --------Between 1 and 2 years 1,234,540 738,405Between 2 and 5 years 3,704,620 2,953,620Over 5 years 11,158,700 11,019,240 -------- -------- 16,097,860 14,711,265Less loan arrangement fees (116,032) (121,851) -------- -------- 15,981,828 14,589,414On demand and less than one year 1,242,581 1,494,417 -------- --------Total borrowings 17,224,409 16,083,831 ======== ======== 14. Financial instruments The company has defined financial assets and liabilities as those assets andliabilities of a financial nature, namely cash and borrowings. Short termdebtors/creditors, taxation and prepayments and accruals have been excluded.Financial assets and liabilities are all in sterling and are linked to theLondon Interbank Offer Rate, before consideration of the effect of the collararrangement as described in note 13. The interest rate swap agreement, whichconverts part of the floating rate borrowing to a fixed rate, became effectiveon 11 April 2003. Total gross financial assets at 12 February 2006 were £159,622 (2005 - £147,137)and total gross financial liabilities were £17,224,409 (2005 - £16,083,831). TREASURY POLICY The company finances its activities by a combination of long and short term bankfacilities. It is, and has been throughout the period under review, the company's policy notto trade in financial instruments. LIQUIDITY RISK The only financial asset held by the company is that of cash at bank and inhand. The company has an overdraft and this balance is due on demand. The maturity profile of the company's overdraft and long term borrowings isincluded in note 13 b). The company produces cash flow forecasts in order to ensure that liabilities aremet as they fall due. INTEREST RATE EXPOSURE The company is financed by a mixture of cash flow, short-term and long-termborrowings and overdraft facilities. Interest on long-term borrowings isdetermined with reference to LIBOR plus 1.25%. Long-term borrowings of£7,000,000 (2005 - £7,000,000) have been capped at an interest rate of 8.24%,with a floor rate of 6.24% as detailed in note 13. In addition (as set out innote 13), the company has a GBP roller coaster callable interest rate swapagreement. These arrangements have been put in place to address the interestrate risk of the business. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES The directors believe that there is no material difference between the bookvalue and the fair value of all financial assets and liabilities as at thebalance sheet date, except as noted below. The directors have reviewed the fair value of the collar agreement described innote 13. The estimated value of this financial instrument is a liability of£530,514 (2005 - £100,740). The company entered into a GBP roller coastercallable interest rate swap which came into effect on 11 April 2003 (as set outin note 13). The estimated value of this financial instrument is a liability of£648,973 (2005 - £576,381). The fair value of all financial liabilities has beenreached using the net present value of the expected cash flows from thetransactions and based on the assumption of no unusual market conditions orforced liquidation. CURRENCY RISK The company has no material currency risk exposure due to the absence of anyassets or liabilities denominated in foreign currencies. 15. Provision for liabilities and charges -------- -------- 2006 2005 £ £ -------- -------- Accelerated capital allowances 1,997,021 1,708,771Short term timing differences 53,490 53,622 -------- --------Undiscounted provision for deferred tax 2,050,511 1,762,393Discount (420,019) (415,615) -------- --------Discounted provision for deferred tax 1,630,492 1,346,778Provision at start of year 1,346,778 1,184,784Adjustment in respect of prior years 77,450 7,538Adjustment in respect of prior years on discount - (91,249)Profit and loss account charge 206,264 245,705 -------- --------Provision at end of year 1,630,492 1,346,778 -------- -------- As at the end of the year there is no unprovided deferred tax (2005 - nil) 16. Called up share capital -------- --------- Number Amount £ -------- ---------AuthorisedOrdinary shares of 10p eachAt beginning and end of year 25,000,000 2,500,000 -------- ---------Allotted and fully paidOrdinary shares of 10p each -------- ---------At beginning and end of year 12,120,457 1,212,046Issued during year 691,666 69,167 -------- ---------At end of year 12,812,123 1,281,213 -------- --------- During the year 666,666 ordinary shares of 10p each were issued at 90p, to partfund the acquisition of the 3 new hotels. 25,000 share options were exercised at 87.5p. 17. Combined statement of the movement in shareholders' funds and statement of movement on reserves Called up share Share premium Profit and loss 2006 2005 capital account account Total Total £ £ £ £ £ --------- --------- --------- --------- ---------Opening 1,212,046 8,519,477 4,610,645 14,342,168 13,978,576balanceRestatementre - - 545,421 545,421 509,059FRS 21 --------- --------- --------- --------- ---------Openingbalance asrestated 1,212,046 8,519,477 5,156,066 14,887,589 14,487,635Profitattributedto - - 888,703 888,703 909,013membersof thecompany --------- --------- --------- --------- ---------Dividend - - (545,421) (545,421) (509,059)Issue ofshare 69,167 513,668 - 582,835 -capital --------- --------- --------- --------- ---------Closing 1,281,213 9,033,145 5,499,348 15,813,706 14,887,589balance --------- --------- --------- --------- --------- 18. Capital commitments -------- -------- 2006 2005 £ £ -------- -------- Contracted for but not provided in the accounts 350,000 106,783 -------- -------- 19. Reconciliation of operating profit to net cash inflow from operating activities ------- --------Operating profit 2,437,750 2,482,999Depreciation 1,010,509 902,655Increase in stocks (23,268) (12,210)Decrease/(increase) in debtors 82,169 (53,434)Increase/(decrease) in creditors 450,612 (5,857) ------- --------Net cash inflow from operating activities 3,957,772 3,314,153 ------- -------- 20. Analysis of net debt -------- -------- --------- -------- At beginning of Cash Non At end of year year flow cash £ £ £ changes £ -------- -------- --------- -------- Cash at bank and in hand 147,137 12,485 - 159,622Bank overdrafts (752,147) 251,836 - (500,311) -------- -------- --------- -------- (605,010) 264,321 - (340,689)Debt due within one year (742,270) - (742,270)Debt due after one year (14,589,414) (1,361,595) (30,819) (15,981,828) -------- -------- --------- --------Total (15,936,694) (1,097,274) (30,819) (17,064,787) -------- -------- --------- -------- Financial year ended 12 February 2006 21. Leases -------- -------- 2006 2005 £ £ -------- -------- Operating lease rentals charged to profit and lossaccount:Land and buildings 525,198 206,180Hire of plant and machinery 133,547 95,054 -------- -------- 658,745 301,234 -------- --------Commitments under operating leases to pay rentals duringthe next year:Land and buildingsExpiring after 5 years 515,981 206,180 -------- --------Plant and machinery 133,547 95,054Expiring in more than 2 years but lessthan 5 years -------- -------- 22. Related party transactions During the year premiums of £3,170 (2005 - £346,251) were paid to T L Dallas &Co Limited in which Robert Peel is a shareholder. There was an outstandingamount at the balance sheet date of £168,574 (2005 - nil). There were no other significant transactions between these parties during theyear. 23. Controlling interests Robert Peel is the largest shareholder. Together with his brother Charles Peel,by reason of their interest they are deemed to control the company. 24. Directors' interests ------------- ------------- 12 February 13 February 2006 2005 10p ordinary 10p ordinary shares shares ------------- ------------- Shares Number Options Number Shares Number Options Number -------- -------- -------- -------- Robert Peel 4,496,900 1,000,000 4,262,451 1,000,000NorbertPetersen 41,830 150,000 41,830 150,000John Perkins 10,000 65,000 10,000 65,000John Govett 350,000 - 300,000 -Keith Benham 168,801 - 160,000 - -------- -------- -------- -------- Total 4,833,082 1,215,000 4,774,281 1,215,000 -------- -------- -------- -------- Keith Benham's interest includes 42,200 (2005 - 40,000) shares owned by hiswife. Details of the options granted to the directors can be found on page 12. No director was materially interested, either at the year end or during the yearin any contract of significance to the company except for the related partytransactions as disclosed in note 22. NOTES TO ACCOUNTS Financial year ended 12 February 2006 25. Share options During the year 25,000 share options were exercised (2005 - nil). As at 13 February 2005, the total number of share options was 1,455,000. Duringthe year 223,000 options were granted, 25,000 were exercised and 38,000 lapsed,giving a total at 12 February 2006 of 1,615,000. Details of directors' shareoptions can be found in the Directors Remuneration Report on page 12. Details ofshare options for non-directors at 12 February 2006 are as follows: ------------ ----------- ----------- ------------ ------------ Date of grant Number of Exercise price Earliest Expiry options per share exercise date (pence) date ------------ ----------- ----------- ------------ ------------ 19.12.2000 13,000 118.5 19.12.2003 18.12.2010 16.05.2002 60,000 87.5 16.05.2005 15.05.2012 ------------ ----------- ----------- ------------ ------------ 14.04.2004 108,000 88.5 14.04.2007 13.04.2014 31.05.2005 219,000 1.02 31.05.2008 30.05.2015 ------------ ----------- ----------- ------------ ------------ Total 400,000 ------------ ----------- ----------- ------------ ------------ The market price of the shares at 12 February 2006 was 119.5 pence and the rangein the year was 102.5 pence to 119.5 pence. SHAREHOLDER INFORMATION Financial calendarResults announcedInterim October 2006Final April 2007 Dividends paidFinal paid 16 May 2006To shareholders on the register at 5 May 2006 Annual General Meeting At 12 noon on Friday 12 May 2006:Avon Gorge HotelSion HillCliftonBristol BS6 4LD Registrar Enquiries concerning holdings of the company's shares and notification of aholder's change of address should be addressed to: Computershare Services PLCPO Box No 82The PavilionsBridgewater RoadBristol BS99 7NH This information is provided by RNS The company news service from the London Stock Exchange