Thistle Hotels PLC - Final Results
March 03 1999 - 2:32AM
UK Regulatory
RNS No 4516b
THISTLE HOTELS PLC
3rd March 1999
Preliminary Announcement of Annual Results for the 52 weeks ended 27
December, 1998
"Thistle announces 9.2% increase in full year pre-tax profits"
* Profit before taxation and exceptional items up 9.2% to #86.6
million
* Like for like revenue per available room up 5.6% to #49.52
* Gearing at 31% on equity shareholders' funds of #1,226.8 million
* Final dividend of 3.0 pence per share
* Return of a further #92.4 million capital to shareholders
proposed for April 1999
Highlights 52 weeks % 52 weeks
ended change ended
27/12/98 28/12/97
Turnover (#m) 322.5 0.9% 319.7
Like for like turnover (#m) 296.7 4.6% 283.6
Operating profit before exceptional 120.3 6.9% 112.5
items (#m)
Profit before taxation and 86.6 9.2% 79.3
exceptional items (#m)
Profit after tax, before 72.1 (3.9%) 75.0
exceptional items (#m)
Exceptional items before taxation (39.8) 1.3
(#m)
Adjusted earnings per share (p) 11.9 (1.7 %) 12.1
Like for like revenue per available 49.52 5.6% 46.91
room (Revpar) (#)
Commenting on the results, Charles Mackay, Acting Chairman said
"Thistle has again achieved record profits in 1998, and has made good
progress in the first year of its three year programme to become a
focused, four-star brand with significantly higher levels of
performance"
CHAIRMAN'S STATEMENT
We achieved record profits before tax and exceptional items of #86.6
million for the year ended 27 December 1998, a 9.2% increase over the
previous year's results despite a slow down in general economic
growth, particularly in the fourth quarter.
Good progress was made during the year in establishing Thistle as a
strong full service, 4 star brand with hotels in key locations
throughout the UK. A number of initiatives were developed and are
being implemented to build a more consistent brand, to improve the
product and service quality of the hotels, to upgrade our information
technology systems and to reduce our cost base. These initiatives
were supported by capital expenditure of #55.7 million and we are
planning to spend up to #65 million in 1999 on hotel refurbishments
and on completing our information technology systems improvements.
Thirty four small regional hotels were sold during the year together
with the leasehold retail interest in the Thistle Marble Arch,
realising net proceeds of #74.5 million. Towards the year end, we
returned #92.6 million to shareholders by means of redeemable
preference shares, resulting in year-end debt of #381.4 million and
gearing of 31%. A further #92.4 million is intended to be distributed
to shareholders in April by way of a special dividend.
The management team is in place to take the company forward in 1999.
There have been a number of changes to the Board, which were
announced recently. The Board is currently seeking an outside non-
executive chairman and I hope to be in a position to make an
announcement within the next few weeks.
Outlook
We have seen modest like for like revenue growth in the first 8 weeks
of the new financial year reflecting somewhat less difficult trading
than in the fourth quarter of 1998. Provided that the general
economic situation does not deteriorate further and although the
market remains difficult to predict, we are cautiously optimistic
that we will improve our performance.
The Directors are recommending a final dividend of 3.0 pence per
share giving an aggregate dividend of 4.5 pence per share for the
full year, a 7.1% increase on 1997.
For further information, please contact:
Thistle Hotels Plc
Charles Mackay, Acting Chairman 0171 723 8383
Ian Burke, Chief Executive Officer 0171 723 8383
Hogarth Partnership Limited
Nick Denton 0171 357 9477
Rachel Hirst 0171 357 9477
NOTES TO EDITORS
1. Thistle is the largest hotel group in London with 24 hotels and
has hotels in key regional Cities of England, Scotland and
Wales.
2. There are 60 hotels in the group with a total of 10,995
bedrooms. In London, Thistle has 6,472 rooms in 24 hotels with
4,523 rooms in 36 hotels in the regions. The large majority of
hotels are rated four-star.
3. Thistle's London hotels include Thistle Tower; Thistle Marble
Arch; Thistle Kensington Gardens; Thistle Piccadilly and The
Royal Horseguards. Thistle has hotels in Aberdeen, Birmingham,
Bristol, Cardiff, Edinburgh, Glasgow, Liverpool, Manchester and
Newcastle among other regional centres as well as at airports
at Aberdeen, East Midlands, Gatwick, Heathrow, Luton and
Manchester.
4. In 1998, percentage of guests of Thistle's London hotels by
country of origin were as follows: UK (39%); North America
(18%); Germany (8%); Japan (7%); Australia (4%). Continental
European visitors make up 24% of total. In the regions
typically the large majority of guests are domestic travellers.
5. Recent awards included: the 1998 BITOA Hotel of the Year, the
Hotel Spec European Design and Development Award for Thistle
Marble Arch and Business Travel World "UK Business Hotel Group
of the Year" (1997 & 1998)
PRELIMINARY RESULTS ANNOUNCEMENT
On a like for like basis, hotel gross profit before exceptional items
improved by 10.7% to #131.3 million from #118.6 million. Turnover on
this basis increased by 4.6% driven by a 6.1% increase in average
room rates to #68.87 from #64.88, which was offset by a 0.4
percentage point fall in occupancy from 72.3% to 71.9%. Like for
like revenue per available room increased by 5.6% to #49.52.
Hotel profit margins increased by 2.5 percentage points on a like for
like basis from 41.8% to 44.3%, driven by increases in room yields
and in response to initiatives to reduce the hotel cost base. These
initiatives included the full year impact of the successful
outsourcing of the Group's food purchasing arrangements and
rationalisation of the supplier base to the hotels.
Total turnover for the year increased to #322.5 million, up 0.9% from
#319.7 million in 1997. Operating profit before exceptional items
increased by 6.9% to #120.3 million despite a #2.6 million increase
in administrative expenditure to #17.8 million from #15.2 million.
This was primarily attributable to non-recurring costs of #1.9
million, approximately #1.4 million of which were one-off legal and
professional fees relating to the proposed sale of the Company and
the subsequent return of capital to shareholders and #0.5 million of
which was incurred as a result of the closure of the Group's building
services division in December. Interest charges remained broadly
steady at #33.7 million. Profit before taxation and exceptional
items increased by 9.2% to #86.6 million from #79.3 million.
The exceptional items comprise;
* A profit of #9.8 million after attributable costs on the
leasehold restructuring and the sale of the retail interest of
the Thistle Marble Arch;
* A #27.5 million loss on disposal of 34 regional hotels;
* A #3.0 million provision to cover anticipated transaction costs
and book losses on the 4 remaining disposal hotels, and;
* In accordance with FRS 11, asset impairment provisions of #19.1
million which were made in relation to certain freehold and
leasehold interests.
Due to the expected increased taxation charge, up from an effective
rate of 5.3% in 1997 to 16.7% in 1998, and the dilutionary impact of
hotel disposals during the year, earnings per share (excluding
exceptional items) decreased by 1.7% to 11.9 pence from last year's
adjusted earnings per share of 12.1 pence, although this was
mitigated by the return of capital and share consolidation in
November.
Segmental Review
London
In the Group's 24 London hotels, which generated 65% of total hotel
gross profits, turnover increased by 3.3% from #182.1 million to
#188.1 million, and hotel gross profits increased by 7.1% from #84.2
million to #90.2 million. Gross profit margins improved by 1.8
percentage points to 48.0%.
Revenue per available room grew by 3.8% to #58.83 with average room
rate growth of 7.3% to #77.11 offset by a decrease of 2.6 percentage
points in occupancy to 76.3%. The decrease is attributable to the
loss of leisure group room nights from certain European markets
impacted by the strength of sterling. The positive shift in business
mix from leisure to corporate guests continued with corporate
customers generating 41.7% of total rooms sold versus 38.5% in 1997.
Regions
On a like for like basis, the Group's regional hotels performed
strongly in 1998 with 19.1% improvement to #41.1 million from #34.5
million. Like for like turnover grew by 7.0% to #108.6 million.
Like for like revenue per available room increased by 10.3% to #35.81
with average room rate growth of 5.3% to #54.75. Occupancy was up by
2.9 percentage points from 62.5% to 65.4%. Particularly strong
performances were generated by hotels in Bristol, Birmingham,
Haydock, Liverpool, Luton and Glasgow. Gross profit margins on this
basis improved by 3.9 percentage points to 37.8%.
Brand Management
Detailed product and service standards for the Thistle brand were
developed in 1998 to meet guest needs. The product standards will be
implemented over the next 3 years progressively as the capital
investment programme continues. The service standards will be
implemented during 1999 through a customer service training programme
for management and staff.
Marketing programmes targeted to reach corporate customers were also
commenced during the year. Thistle became a preferred partner for
British Airways Executive Club.
A guest satisfaction tracking system was introduced during the year
and will be used to measure guest satisfaction with both product and
service.
Hotel Operational Management
Operational management was strengthened during the year with the
appointment of Andrew Bould, Chief Operating Officer and key
positions were filled in Human Resources, Sales and Marketing, Yield
Management and Food and Beverage development.
Initiatives have been taken to improve room revenue, which will also
benefit from the systems development.
All hotels are working towards achieving Investors in People and to
date 11 hotels have secured this standard.
Hotel Asset Management
During the year, capital expenditure totalled #55.7 million, of which
#37.2 million or 66.8% was spent on London hotels. Over 1,400 rooms
were upgraded during the year bringing the cumulative total of rooms
now upgraded to Thistle brand standard to approximately 5,700, which
is over half of our current portfolio and we intend to complete our
major refurbishments over the next three years. The largest project
undertaken in 1998 was the complete refurbishment of the Charing
Cross hotel which is scheduled to reopen as the Thistle Charing Cross
shortly. The Hospitality Inn Bayswater was completely refurbished
during the year and has been rebranded as the Thistle Kensington
Gardens. Elsewhere in London, significant room refurbishments have
been undertaken at the Thistle Tower, the Thistle Marble Arch, the
Royal Horseguards, The Kennedy and The Barbican. The impact upon
occupancy of the continuing refurbishment of our London hotels is not
inconsiderable. If these rooms were excluded from the occupancy
calculation, as is the case with a number of our competitors, the
reported occupancy for London in 1998 would have been 3.6 percentage
points higher at 79.9%
Outside London, substantial levels of capital expenditure were
incurred in upgrading room stock at the Thistle Brighton, the Thistle
Aberdeen, the Thistle Manchester, the Thistle Birmingham City, the
Thistle Glasgow and the Hospitality Inn, Irvine.
Historically, a significant number of capital projects were
undertaken by Thistle's in-house contractor division, Mount Charlotte
Building Services. This division and our in-house fitted furniture
making business were closed during the year and all projects in 1999
and beyond will be out-sourced to external contractors although
project planning and control will be delivered by an in-house
property team.
Asset impairment provisions of #19.1 million were established in
respect of certain freehold and leasehold interests. These include a
write-down of #6.0 million in respect of the Hospitality Inn,
Middlesbrough which was closed in July due to the need to undertake
structural repairs.
Information Technology
Progress was made on systems development, with investment in hotel
front office systems, reservations and management information
systems. 14 Fidelio Property Management Systems were successfully
installed during the year.
A Fidelio Central Reservations System will be implemented during 1999
and a new SAP management information system will be installed over
the next 12 months. Significant effort has been directed at ensuring
readiness for the year 2000 and with the introduction of the new
systems many year 2000 issues will be resolved.
Balance Sheet, Debt and Interest Charges
At 27 December 1998, the total capital employed by the Group of
#1,608.2 million was financed by net debt of #381.4 million and
equity shareholders' funds of #1,226.8 million. This resulted in a
gearing ratio of 31% (1997:28%)
In September, the Company announced its intention to return 30 pence
per share (#185 million) to shareholders. The return of capital was
to be delivered in two tranches: #92.6 million was distributed in
November by means of the issue and redemption of "B" preference
shares and it is the directors' intention to distribute the remaining
#92.4 million in April by way of a special dividend. It is intended
that this will be funded by additional debt facilities provided by
the Group's existing bankers. This will leave the Group with a more
efficient balance sheet structure thereby improving the return on the
funds invested in the business by our shareholders.
The Group's #355 million of loans have an average maturity of
approximately 13 years and, at present, some 75% of the total loan
facilities are on a fixed rate basis. In 1998, interest charges
totalled #33.7 million (1997: #33.2 million). Interest cover
increased from 3.39 times in 1997 to 3.57 times (pre exceptional
items) in 1998. Since August 1996 the company has been paying
interest on the #200 million debentures due 2014 at a floating rate
of Libor plus 2.4% by virtue of a 10 year interest rate swap. In
1998, the effective rate of interest on the debentures was 10.2%
(1997: 9.2%). On 20 December 1998 the counterparty to the swap
exercised its option to terminate this transaction. This will have
the effect going forward of the company reverting to paying the fixed
10.75% coupon on the debentures.
Cash Flow
The cash flow from operating activities in the year increased by
#10.6 million or 8.5% to #134.6 million. #55.7 million was invested
in the ongoing refurbishment of the Group's hotels, and #68.4 million
was paid in interest, dividends and corporation tax. Proceeds
generated from the disposal of 34 hotels and the restructuring of the
Thistle Marble Arch lease amounting to #74.5 million. The net cash
inflow of #85 million was applied towards the repayment of #20.0
million of debt and the redemption of #92.6 million of share capital.
Taxation
The Group's effective tax rate (pre exceptional items) in 1998 was
16.7% (1997: 5.3%). The effective tax rate has increased as a
substantial proportion of tax losses brought forward have been fully
utilised. In addition, a provision has been established to cover the
adverse tax impact arising on the disposal of hotels.
Dividends
In addition to the special dividend detailed above, the directors
intend to pay a final dividend of 3.0 pence per share on 20 May 1999
to shareholders on the register on 16 April 1999, subject to approval
at the Annual General Meeting, giving a total of 4.5 pence per share
for the year, an increase of 7.1% on 1997.
THISTLE HOTELS Plc
PRELIMINARY ANNOUNCEMENT
GROUP PROFIT & LOSS ACCOUNT
for the financial year ended 27 December 1998
Before
Except- Except-
ional ional
items items Total Total
1998 1998 1998 1997
Note #'m #'m #'m #'m
Turnover 1 322.5 - 322.5 319.7
Cost of sales 4 (184.4) (19.1) (203.5) (192.0)
------ ------ ------ ------
Gross profit 1 138.1 (19.1) 119.0 127.7
Administrative expenses (17.8) - (17.8) (15.2)
------ ------ ------ ------
Operating profit 120.3 (19.1) 101.2 112.5
(Loss) / Profit on sale of
tangible fixed assets 2 - (17.7) (17.7) 1.3
Provision for loss on sale
of tangible fixed assets 6 - (3.0) (3.0) -
Interest payable 3 (33.7) - (33.7) (33.2)
------ ------ ------ ------
Profit before taxation 4 86.6 (39.8) 46.8 80.6
Taxation 5 (14.5) (1.8) (16.3) (4.3)
------ ------ ------ ------
Profit after taxation 72.1 (41.6) 30.5 76.3
Dividends (25.5) - (25.5) (25.9)
------ ------ ------ ------
Profit for the year retained 46.6 (41.6) 5.0 50.4
====== ====== ====== ======
Earnings per share 5.0 p 12.4 p
Adjusted earnings per share 11.9 p 12.1 p
Diluted earnings per share 5.0 p 12.4 p
Adjusted earnings per share is based on the group's profit after
taxation for the period but before exceptional items and on the
average number of shares in issue.
THISTLE HOTELS Plc
PRELIMINARY ANNOUNCEMENT
GROUP BALANCE SHEET
at 27 December 1998
1998 1997
Note #'m #'m
Fixed assets
Tangible assets 1,646.4 1,716.0
-------- --------
Current assets
Stocks 1.6 2.0
Debtors 36.1 44.8
Investments 0.1 0.1
Cash at bank and in hand 3.0 6.1
-------- --------
40.8 53.0
Creditors (due within one year) (107.1) (84.9)
-------- --------
Net current liabilities (66.3) (31.9)
-------- --------
Total assets less current
liabilities 1,580.1 1,684.1
Creditors (due after one year) (349.8) (369.8)
Provisions for liabilities
and charges 6 (3.5) -
-------- --------
Net assets 1,226.8 1,314.3
======== ========
Equity capital & reserves
Called up share capital 123.5 123.5
Share premium account 397.8 490.3
Revaluation reserve 446.0 456.2
Other reserves 50.8 50.8
Profit and loss account 208.7 193.5
-------- --------
Total equity shareholders' funds 1,226.8 1,314.3
======== ========
THISTLE HOTELS Plc
PRELIMINARY ANNOUNCEMENT
GROUP CASHFLOW STATEMENT
for the financial year ended 1998 1997
27 December 1998 Note #'m #'m
Cash flow from operating
activities 7 134.6 124.0
Returns on investments &
servicing of finance
Interest paid (34.6) (32.7)
------ ------
Net cash flow for returns on
investments & servicing of finance (34.6) (32.7)
Tax paid (7.3) (10.1)
Capital expenditure
Purchase of tangible fixed assets (55.7) (50.0)
Sale of tangible fixed assets 74.5 6.2
------ ------
Net cash inflow / (outflow)
for capital expenditure 18.8 (43.8)
Equity dividends paid (26.5) (21.0)
------ ------
Cash inflow before financing 85.0 16.4
Financing
Issue of share capital 0.1 -
Redemption of share capital (92.6) -
New loans - 59.2
Loans repaid (20.0) (70.0)
------ ------
Net cash outflow from financing (112.5) (10.8)
------ ------
(Decrease) / increase in cash (27.5) 5.6
====== ======
Reconciliation of net debt
(Decrease) / increase in cash
in the year (27.5) 5.6
Cash flow from decrease in debt 20.0 10.8
------ ------
Change in net debt resulting
from cash flows (7.5) 16.4
Provision for finance costs on
debenture stock - (0.1)
------ ------
Movement in net debt in the year (7.5) 16.3
Net debt at beginning of year (373.9) (390.2)
------ ------
Net debt at end of year (381.4) (373.9)
====== ======
THISTLE HOTELS Plc
PRELIMINARY ANNOUNCEMENT
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
The group had no recognised gains or losses other than the profit
disclosed in the profit and loss account.
NOTE OF HISTORICAL COST PROFITS AND LOSSES
1998 1997
#'m #'m
Profit before taxation as reported 46.8 80.6
Realisation of property revaluation
gains of previous periods 10.2 0.3
----- ----
Historical cost profit before taxation 57.0 80.9
===== ====
Historical cost profit retained after
taxation and dividends 15.2 50.7
===== ====
RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
1998 1997
#'m #'m
Profit for financial year 30.5 76.3
Dividends (25.5) (25.9)
Issue of share capital 0.1 -
Redemption of share capital (92.6) -
-------- -------
Net change in the year (87.5) 50.4
Opening equity shareholders' funds 1,314.3 1,263.9
-------- -------
Closing equity shareholders' funds 1,226.8 1,314.3
======== =======
THISTLE HOTELS Plc
PRELIMINARY ANNOUNCEMENT
The foregoing statements do not constitute the group's statutory
accounts. The group's 1998 statutory accounts, on which the company's
auditors, PricewaterhouseCoopers, have given an unqualified opinion
in accordance with section 235 of the Companies Act 1985, are to be
delivered to the Registrar of Companies. The group's 1997 statutory
accounts have been filed with the Registrar of Companies.
BASIS OF ACCOUNTING
The accounts have been prepared under the historical cost convention
as modified by the revaluation of certain properties and in
accordance with applicable accounting standards.
BASIS OF PREPARATION
The group accounts comprise a consolidation of the accounts of the
holding company and its subsidiaries all of which are prepared up to
the same date as the holding company. Uniform accounting policies
are adopted by all companies in the group. Results of subsidiaries
acquired or disposed of during the year are included for the period
during which they are within the group.
NOTES
1. Segment analysis 1998 1997
#'m #'m
Turnover by UK region
London 188.1 182.1
Regions 134.4 137.6
------ ------
Total group turnover 322.5 319.7
====== ======
Gross profit by UK region
London 90.2 84.2
Regions 47.9 43.8
------ ------
Total hotels gross profit 138.1 128.0
Other operating expenses - (0.3)
------ ------
Total group gross profit 138.1 127.7
====== ======
The figures above are stated before exceptional items.
In previous years, the group's performance was segmentally analysed
between London, England & Wales and Scotland. Following the disposal
of 34 regional hotels in the year, this analysis has been revised to
focus on London and regional performance as shown above. Prior year
figures have been restated accordingly.
THISTLE HOTELS Plc
PRELIMINARY ANNOUNCEMENT
NOTES
2. (Loss) / Profit on sale of
fixed assets 1998 1997
#'m #'m
Profit on sale of tangible
fixed assets 9.8 1.3
Loss on sale of tangible
fixed assets (see note 6) (27.5) -
------ ----
(17.7) 1.3
====== ====
During the year, the group disposed of its retail interests in the
Thistle Marble Arch property for a net aggregate consideration of
#9.8 million. In addition, the group incurred a loss of #27.5 million
on the disposal of 34 regional hotels.
1998 1997
3. Interest payable and similar charges #'m #'m
Interest on long term loans 28.8 26.8
Interest on bank overdrafts and loans
repayable within 5 years 4.3 5.8
Bank charges 0.6 0.6
------ -----
33.7 33.2
====== =====
1998 1997
4. Profit before taxation #'m #'m
This is stated after charging :-
Depreciation and amortisation 14.5 14.6
Repairs and renewals 10.3 10.7
Cost of sales is stated after charging asset impairment provisions
amounting to #19.1 million which were made in relation to certain of
the group's freehold and leasehold interests in accordance with FRS
11. These write-downs have been disclosed as exceptional items on the
face of the profit and loss account.
1998 1997
5. Taxation #'m #'m
Corporation tax at 31% (1997 - 31.5%) 21.1 3.5
ACT written back (4.8) -
ACT written off - 0.8
----- ----
16.3 4.3
===== ====
The corporation tax charge based on
the profit for the year has benefited
from capital allowances and relief for
losses brought forward of approximately 6.0 23.0
===== ====
Losses available for relief against
future profits 0.3 6.0
===== ====
The directors estimate that the corporation tax liability which would
arise if all hotels included in fixed assets were sold at valuation
would not exceed #140 million.
THISTLE HOTELS Plc
PRELIMINARY ANNOUNCEMENT
NOTES
6. Provisions for liabilities and charges
Loss on sale Closure of
of tangible building
fixed assets services
division Total
#'m #'m #'m
At beginning of year - - -
Charged to profit and
loss account 31.0 0.5 31.5
Utilised in year (see note 2) (27.5) - (27.5)
Released to profit and
loss account (0.5) - (0.5)
------ ---- -----
At end of year 3.0 0.5 3.5
====== ==== =====
The provision for loss on sale of tangible fixed assets of #3.0
million covers expected losses on the disposal of four non-core
regional hotels. A provision of #0.5 million has been established in
respect of redundancies and stock write-downs arising on the closure
of the group's building services division which was publicly
announced in November.
7. Reconciliation of operating profit to
net cash inflow from operating activities 1998 1997
#'m #'m
Operating profit before exceptional items 120.3 112.5
Depreciation 14.5 14.6
Decrease / (increase) in stocks 0.4 (0.1)
Decrease / (increase) in debtors 2.2 (3.3)
(Decrease) / increase in creditors (2.8) 0.3
------ ------
Net cash inflow from operating activities 134.6 124.0
====== ======
END
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