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RNS Number:9032J
C.H.E. Group PLC
11 April 2003
C.H.E. Group PLC
Preliminary Results for the year to 31 December 2002
C.H.E. the European hotel operator, which trades under the Comfort, Sleep,
Quality and Clarion Brands, today announces its preliminary results for the year
ended 31 December 2002.
KEY STATISTICS
*Turnover for the year on a like for like basis #76.2 million (2001: #76.2
million).
*Turnover for the year #78.0 million (2001: #86.4 million).
*Profit on ordinary activities before taxation and exceptional items
improved to #0.3 million. (2001: loss of #4.2 million).
*Loss after exceptional items and tax improved to #1.6 million (2001: loss
of #9.7 million).
*UK room revenue per available room on a like for like basis, almost
unchanged at #24.10 (2001: #24.12).
*Shareholders funds of #32.0 million (2001: #33.7 million).
Highlights:
*New loan facility agreed with our bank (post balance sheet event)
providing funds for refurbishment and some development.
*Strengthened Board with addition of 2 Independent Non-Executive
Directors.
*Sale of 5 hotels for #18.2 million in 2002, making a total of 19 sold in
two years, significantly reducing debt. Two of the properties retained on a
sale and leaseback basis.
*Despite difficult trading conditions significant improvement in operating
performance.
Peter Catesby, Chairman, commented:
" A year of steady progress, against a background of difficult trading
conditions, is due to very hard work by the experienced Executive team with the
full support of all the staff. I believe the Group is now in a stronger position
to meet the business challenges facing our industry, remaining ever mindful of
the political and economic unrest around the world."
Enquiries: Michael Finkleman, Chief Executive or David Cook, Finance Director
Tel. 0208 233 2001
CHAIRMAN'S REPORT
*Considerable improvement in results over 2001.
*Board has been strengthened by addition of two Non-Executive Directors.
*Now in a position to commence developing the Group.
*The Group looks forward with cautious confidence whilst remaining mindful
of the political and economic unrest around the world.
Introduction:
I am pleased to tell shareholders that despite a very challenging year for the
hotel industry your Group's results show considerable improvement over 2001.
Revenue on a like for like basis was the same as 2001, but this was against the
backdrop of difficult trading conditions that prevailed throughout the year.
This was initially following the aftermath of September 11th 2001 and latterly
the economic uncertainty surrounding the Iraq crisis, which has carried over to
this year. The improvement in profit in 2002 is mainly the result of cost
control and restraint and interest saving on the reduced debt.
During the 24 months from January 2001 to 31st December 2002 the Group sold 19
hotels thus improving our debt position significantly. This culminated in a
complete repayment of the remaining outstanding debt that was replaced by a new
7 year term loan facility granted by one bank. This new facility took effect
from January 2003 and provides us with some working capital to carry out much
needed refurbishment and also some ring fenced funding for limited new
development.
The group achieved a profit on ordinary activities before exceptional items and
taxation of #0.3 million, an improvement of #4.5 million on the 2001 result
(2001: loss of #4.2 million). We recorded exceptional costs of #2.6 million
during the year on hotel disposals, final costs relating to the restructuring of
the Group and the discount provided on an accelerated payment from a long-term
debtor, details are provided in the Financial Review. The loss after exceptional
items and tax was #1.6 million, an improvement of #8.1 million on the 2001
result (2001: loss of #9.7 million).
Board Changes:
Following my appointment as Non-Executive Chairman in July 2002, I remained for
a time as the only Non-Executive Director on your Board. I was pleased to
announce on 14th November 2002 the appointment of David Hankinson and Michael
Prager as Non-Executives Directors. David has also been appointed as the Senior
Independent Non-Executive Director.
They both have considerable experience, David from a financial background in
several large UK listed Groups and Michael from a marketing and reservation
background in the hotel industry. They have added a good balance to your Board
and I believe we now have a strong team of Directors to take the Group forward.
Dividends
The Directors are not proposing the payment of a dividend.
Business Development and Disposals:
During the year to 31st December 2002, 5 properties in Birmingham, Manchester,
Welwyn, Hull and Caen in France were sold for an aggregate value of #18.2
million. The Welwyn and Hull properties are retained on an operating leaseback
basis as they were sold to British Aerospace Pension Fund and CGNU Life
Assurance respectively, thus retaining the earning capabilities of these
properties. All of the proceeds from the sale of the 5 assets, net of costs,
were used to pay down debt. The sale of the Hull property in November 2002
provided the final amount necessary to meet the reduction in debt target that
had been set by the Banking Group at the outset of the financial restructuring
of the Group agreed in January 2001.
Your Board now looks forward to a period of consolidation and growth but I feel
it is worth reiterating what has happened to your Group in the last 2 years
which has resulted in us now being able to move forward. The main points are:
*In total since the commencement of the restructuring programme the Group
has sold 19 hotels, for an aggregate total of #36.1 million, almost all of
which was used to pay down debt.
*With the exception of one director, Peter Cashman, our Chief Operating
Officer, the entire Board has changed. The Group was effectively up for sale
for a period of 10 months before and after September 11th 2001. The
independent review of the redemption of the Company's preference shares in
1999 was carried out. The surrendering of shares by Choice Hotels
International in March 2002, which improved our net asset value per share so
considerably. The proposed option to offer part of the Group's assets to
Choice Hotels International was considered and rejected by shareholders at
the Extraordinary General Meeting on 30 July 2002.
All of the items were costly in terms of time and money and occurred during a
period of difficult trading activities, which with the Iraq situation continue
today. Despite all this we have strengthened as a Group and, in 2002, improved
our trading performance.
Our strategy is to now carry out much needed refurbishment to our remaining
portfolio, and to kick start our development of the Group, predominantly with
our successful Sleep Inn limited service product. We are currently in discussion
with a number of potential developers of this product. One location in
particular has a signed Heads of Terms, and another is in final discussions,
where it is proposed that we take leases on the hotels. We hope to complete the
legal documentation shortly and construction to commence. We hope to have, say,
6 properties under construction before the end of 2003.
We have recently signed a management agreement and are in final discussions on a
further two contracts. Once concluded two properties will operate under the
Quality brand, one in Wales and the other in London and a new Sleep Inn property
in the heart of Leeds. All should commence operation under our management this
Spring.
We have recently employed a new Director of Franchise Sales for Europe and we
expect our Franchise business to expand significantly throughout Europe.
In April 2003 we have taken an opportunity to dispose of 15,000 of our 25,000
shares in our Irish Joint Venture for #0.9 million net of Irish witholding tax,
the cash is being retained for working capital. To date, whilst we have
benefited from the profit from the Joint Venture, it was not cash generative
because of the funds required for development in Ireland.
All of these actions will assist our growth in the coming months and years.
Outlook:
With the strengthened Board and Management Team and having met the conditions
that were imposed by the Banking Group, followed by the new refinancing package,
I believe the Group is now in a stronger position to meet the business
challenges facing our industry. The trading position of the latter part of 2002,
which has continued into this year, reflects the worldwide economic uncertainty
that has been made worse by the Iraq crisis. As a result we have started the
year a little down in revenue performance against the corresponding period last
year. However, we believe, based on statistics provided to industry consultants
from peer group competitors, that our results continue to show that our
performance is broadly in line with or better than the majority of our
competitors in terms of performance against the corresponding period last year.
We are now well placed to benefit from any recovery in trading conditions,
assisted, as the year progresses, from our refurbishment programme, our growth
in Management Contracts and the Franchise part of our business. These factors
enable us to look forward with cautious confidence, remaining ever mindful of
the political and economic unrest around the world.
PETER CATESBY
Chairman
11 April 2003
CHIEF EXECUTIVE'S REVIEW
*Our UK properties achieved a yield per available room in line with last
year despite difficult trading conditions throughout 2002.
*We have obtained funding for much needed refurbishment.
*The number of Franchises has increased to 370, producing an 20% increase
in franchise income over the prior year.
*New Director of Franchise Sales employed to target franchise growth.
The disposal of properties during the last two years makes direct comparison of
our results difficult to evaluate. A more meaningful assessment of our
performance for the year to 31st December 2002 can be made from comparing only
those properties that were in constant use throughout 2001 and 2002.
UK Hotels and New Connaught Rooms
The UK Hotels and New Connaught Rooms in aggregate, on a like for like basis,
represented over 80% of the turnover for the Group for the year. The UK Hotels
achieved a bedroom occupancy 0.6 of a percentage point down on the prior year,
at 64.4% (2001: 65.0%), whereas the average room rate improved by 35 pence to
#37.43 (2001: #37.08). This resulted in a yield per available room only 2 pence
down on the prior year at #24.10 (2001: #24.12).
Total revenue on a like for like basis for the UK hotels operations dropped by
#0.9 million on the prior year, being down 1.6% to #57.3 million (2001: #58.2
million), the shortfall mainly coming from lower food and beverage revenues.
However, the gross operating profit earned, being the earnings before charges
that are outside of the control of individual property management, such as rent,
depreciation, property tax and insurance, on a like for like basis was only #0.2
million down at #20.1 million (2001: #20.3 million) marginally improving the
gross operating profit margin to 35.1% (2001: 35.0%). This profit conversion was
despite increased costs in agent's commissions.
The New Connaught Rooms, which is the conference and banqueting venue located
close to Covent Garden in London, following a review of its cost structure,
improved its gross operating profit by #0.4 million to #1.8 million (2001: #1.4
million), despite its turnover for the year falling short of the 2001 level by
#0.2 million to #5.6 million (2001: #5.8 million).
Both the UK division and the New Connaught Rooms we believe performed well
considering the impact on our business during 2002 from the economic uncertainty
and the aftermath of September 11th 2001.
With some funding available for much needed refurbishment, which will be carried
out during the course of this year, we believe our UK properties will be well
placed to benefit from any improvement in trading conditions.
Continental European Hotels:
Due to the disposal of 6 properties during the last two years, as well as the
closure of a business that held 10 leased properties in Germany in March 2001,
direct comparison of our results on the Continent is difficult. On a like for
like basis the French and Belgium properties performed reasonably well, when
taking into account the trading conditions that, as in the UK, affected the
sector throughout the period under review. Bedroom occupancy at 54.7% was down
only 1.6 percentage points on prior year (2001: 56.3%) and the average room rate
was down 51 pence to #29.80 (2001: #30.31), producing a yield per available room
of #16.31, down 77 pence on 2001 (2001: #17.08). Total revenue was down #0.1
million to #5.4 million (2001: #5.5 million) producing a gross operating profit
of #1.2 million, down #0.2 million on prior year (2001: #1.4 million).
Our remaining leasehold property in Germany also performed reasonably well with
revenue in line with last year. Bedroom occupancy was down 4.2 percentage points
to 49.9% (2001: 54.1%), but average room rate increased by #1.25 to #33.78
(2001: #32.53). Total revenue remained the same at #2.0 million (2001: #2.0
million) and the gross operating profit remained constant at #0.5 million.
Ireland:
Our Irish Joint Venture business, which comprises 22 owned, managed or
franchised hotels, generated a #0.2 million profit share (2001: #0.2 million).
Subsequent to the year under review, as referred to in the Chairman's Statement,
we have sold, in April 2003, 15,000 of our 25,000 shares in this Joint Venture.
The venture, which is managed by Frankie Whelehan, the Managing Director of
Choice Hotels Ireland, and his team, continues to perform well, but as our focus
needs to be on our owned and leased properties, together with the franchise
business expansion, it was felt that we should allow others to progress the
Irish business venture. We obviously still benefit from our remaining
shareholding and all the hotels operate under franchise.
Franchising:
Despite the uncertainty that existed for more than half of the year under
review, as to whether or not the Group would continue to operate the Continental
and UK and Ireland Master Franchise Agreements, 51 new franchisees were added.
We have also continued with our policy of terminating contracts where the brand
standard is not being met, thereby over time gradually improving the consistency
throughout our operating region. As at 31st December 2002, we had 370
properties, including our owned, leased and managed hotels, operating under
franchise within our operating regions. Revenue from franchisees grew by 20% to
#4.8 million (2001: #4.0 million).
We appointed a new Director of Franchise Sales in January 2003. Richard Arman
has rejoined the Group after nearly 3 years away from the hotel industry. His
knowledge of our requirements, brand standards and relationship with some of our
existing franchisees means that he has stepped back into the role seamlessly. We
now look forward to adding a significant number of new franchised properties to
our European portfolio.
Management and Staff:
I would like to thank all of our staff for their dedication and hard work during
what has been a difficult time for the Group, not only from the worldwide
economic and political uncertainty, but also during the Group's 2 year
restructuring period. My particular thanks go to Peter Cashman, our Chief
Operating Officer, on whose shoulders a large part of the burden fell. He
continues to give the Group his total support in managing both the hotel
operations and franchise business.
MICHAEL FINKLEMAN
Chief Executive
11 April 2003
FINANCIAL REVIEW
*Financial restructuring process completed.
*Group met debt reduction target levels enabling a new financial package
to be put in place in January 2003.
*Some limited funding available for development.
Earnings
Adjusted basis profit per share (EPS) of 4.3p shows an improvement of 25.0p per
share when compared with the adjusted basic loss per share of 20.7p in 2001. The
number of shares in the EPS calculation in 2002 was 22.0 million (2001: 22.8
million) based on an adjusted profit of #0.9 million and an adjusted loss in
2001 of #4.7 million.
Exceptional Items:
A number of exceptional items were recorded during the period.
i. In administrative costs, #0.4 million refers to costs incurred for the
legal documentation in respect of the Option that was recommended to
shareholders regarding Choice Hotels International. This was presented to
shareholders at the Extraordinary General Meeting on 30 July 2002 for
approval. In the event, they voted against the granting of the Option. The
remaining #0.1 million in administrative costs refers to writing down the
asset value of a small hotel.
ii. The balance sheet was carrying a long term debt of #3.1 million due from
a Danish investment company that had bought 7 properties from the Group
during 1998 and 1999, which were all leased back to the Group. The debt was
the balance of the settlement due to the Group for the acquisition of these
properties and was due to be repaid over a period of some 10 years,
commencing in 2003 and was secured on a third mortgage. The Board
negotiated an accelerated payment of #1.8 million, received in September
2002, to clear this matter and provide funds to the Group immediately. The
writing down of the debt from #3.1 million to #1.8 million is in effect an
adjustment to the sale proceeds of fixed assets sold in 1998/1999 . It is
also considered to be an acceptable sum paid up front on a discounted basis
for a larger debt that was due to be repaid over a lengthy period.
iii. #0.7 million of professional and banking costs have been included as
Interest payable and similar charges in the year. These costs arise from
the Group's financial reconstruction process agreed with the Banking Group.
There will be no further costs relating to the financial reconstruction of
the Group as in January 2003 a new term loan was put in place completing
the reconstruction process.
The Group has incurred costs of #6.4 million, in relation to, or as a direct
result of, the reconstruction process that commenced at the end of 2000.
Debt and Gearing
At the year end net debt including the #14 million relating to the long term
debenture amounted to #34.7 million compared with #52.8 million in 2001. The
gearing ratio was 108% compared with 157% in 2001. Since the year end new loan
facilities amounting to #23.2 million have been arranged, part of which was used
to fully repay the remaining bank debt outstanding at the year end.
Net Asset Value
The net asset value per share (NAV) at 31 December 2001 on a diluted basis was
45p per share. However, following the surrender by Choice Hotels International,
in March 2002, of all their ordinary and preferred shares, the NAV based on the
31 December 2002 balance sheet has increased to #1.36. The ordinary share price
of 33p as at 9 April 2003 represents a discount of 76 % to the Group net asset
value at 31 December 2002.
Valuation of Fixed Assets
The net book value of the freehold and long leasehold properties at 31 December
2002 amounted to #52.7 million. All the properties were revalued in December
2002 by specialist external hotel valuers mainly for the purpose of refinancing
and supports the #75.6 million value of the assets in the balance sheet. In
relation to the cyclical valuations the Group's professional valuers will value
the properties on an open market basis at least every five years with an interim
valuation at least every three years.
Taxation
The Company has changed its accounting policy for deferred tax following the
adoption of FRS 19 'Deferred Tax' this year. The effect of this change in
accounting policy has been to increase the tax credit in the current year profit
and loss account by #0.7 million but the cumulative effect has been to reduce
shareholders' funds by #0.5 million.
There is no current tax charge on ordinary activities. There is still #3.1
million of surplus ACT to be utilised against future tax liabilities. The
non-payment of dividend due to the absence of distributable reserves will enable
the Company to utilise more surplus ACT against mainstream corporation tax in
the future than would otherwise have been possible, giving the Group an
effective tax rate of 10% for the foreseeable future.
Treasury
Group treasury matters are governed by policies and procedures approved by the
Board. The primary objectives of the treasury function are to provide
competitively priced funding for the activities of the Group and to identify and
manage financial risks, including exposures to movements in interest and foreign
exchange rates. Interest rate swaps and other financial instruments are used
when considered appropriate. The utilisation and availability of funding
facilities is monitored on an ongoing basis.
DAVID COOK
Finance Director
11 April 2003
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
For the year ended 31 December 2002 2002 2001
Restated*
Notes #m #m
Turnover - Group and share of joint venture 82.2 89.1
Less: share of joint venture 4.2 2.7
-------- --------
1 78.0 86.4
Cost of sales 33.9 38.4
-------- --------
Gross profit 44.1 48.0
Administrative costs
- Other 40.5 47.8
- Exceptional charges 2 0.5 1.3
-------- --------
41.0 49.1
Operating profit/(loss)
- Before exceptional charges 3.6 0.2
- Exceptional charges (0.5) (1.3)
-------- --------
3.1 (1.1)
Share of operating profit in joint venture 0.2 0.2
Loss on sale of fixed assets 2 (1.4) -
Restructuring costs and termination of operations 2 - (3.9)
-------- --------
Profit/(loss) on ordinary activities before interest 1.9 (4.8)
Interest payable and similar charges 3
- Before exceptional items 3.5 4.6
- Exceptional items 0.7 -
-------- --------
4.2 4.6
-------- --------
Profit/(loss) on ordinary activities before 4
taxation
- Before exceptional charges 0.3 (4.2)
- Exceptional charges 2 (2.6) (5.2)
-------- --------
(2.3) (9.4)
Taxation 5 (0.7) 0.3
-------- --------
Loss for the financial year after taxation (1.6) (9.7)
Dividends - preferred
Prior year preferred dividends waived - 2.8
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
For the year ended 31 December 2002 (continued)
2002 2001
Restated*
Notes #m #m
Finance cost in respect of non-equity interests - (0.3)
-------- --------
Loss for the financial year (1.6) (7.2)
======== ========
Loss per share 6
Basic (7.4)p (31.3)p
Diluted (7.4)p (31.3)p
Adjusted profit/(loss) per share 6
Basic 4.3p (20.7)p
All amounts relate to continuing activities.
* Restated for the adoption of FRS19 'Deferred Tax'.
GROUP UNAUDITED BALANCE SHEET
As at 31 December 2002
31 Dec 31 Dec
2002 2001
*Restated
Notes #m #m
Fixed Assets
Tangible Assets 7 75.6 93.3
Investment in joint venture
- share of gross assets 3.0 2.4
- share of gross liabilities (2.4) (2.0)
--------- --------
0.6 0.4
--------- --------
76.2 93.7
Current assets
Stocks 0.8 0.9
Debtors 8 9.9 11.6
Cash at bank and in hand 0.8 1.2
--------- --------
11.5 13.7
Creditors: amounts falling due within one year
Bank overdrafts and loans 19.0 24.2
Other creditors 9 20.7 19.5
--------- --------
39.7 43.7
Net current liabilities (28.2) (30.0)
--------- --------
Total assets less current liabilities 48.0 63.7
Creditors: amounts falling due after
more than one year
10 15.5 28.8
Provision for liabilities and charges 11 0.5 1.2
--------- --------
Net assets employed 32.0 33.7
========= ========
Capital and reserves 12
Called up share capital - equity 2.1 2.3
- non equity - 15.5
Share premium account 1.2 1.2
Revaluation reserve 18.1 20.1
Capital redemption reserve 15.7 -
Profit & loss account (5.1) (5.4)
--------- --------
Shareholders' funds 32.0 33.7
========= ========
There are no non-equity interests included in Shareholders' funds (2001 -
#16.7m).
* Restated for the adoption of FRS19 'Deferred Tax'.
CONSOLIDATED CASHFLOW STATEMENT (UNAUDITED)
For the year ended 31 December 2002
2002 2001
#m #m #m #m
Net cash inflow from operating activities 7.4 3.9
Returns on investment and servicing of finance
Interest paid (3.9) (5.3)
Finance lease interest (0.3) (0.4)
------- -------
Net cash outflow from returns on Investment and servicing of (4.2) (5.7)
finance
Taxation
UK corporation tax paid - (2.4)
Capital Expenditure
Payments to acquire tangible fixed assets (2.8) (4.3)
Receipts from sale of fixed assets 17.8 16.8
------- -------
Net cash inflow from capital expenditure 15.0 12.5
------- -------
Net cash inflow before financing and use of liquid 18.2 8.3
resources
Management of liquid resources
Decrease in restricted bank account - 0.2
Financing
Repayment of bank loans (16.0) (11.2)
Net repayment of finance lease arrangements (0.9) (0.4)
Net cash outflow from financing (16.9) (11.6)
------- -------
Increase/(decrease) in cash 1.3 (3.1)
======= =======
CONSOLIDATED CASHFLOW STATEMENT (UNAUDITED) - continued
For the year ended 31 December 2002
2002 2001
#m #m
Reconciliation of operating profit/(loss) to net cash inflow
from operating activities
Operating profit/(loss) 3.1 (1.1)
Exceptional charges 0.1 1.3
Adjustment to sale proceeds (1.4) -
Restructuring costs (1.4) (2.2)
Depreciation and amortisation charges 2.6 2.8
Decrease in stocks 0.1 0.3
Decrease in debtors 1.7 6.2
Increase/(decrease) in creditors 2.7 (3.4)
Foreign exchange movement (0.1) -
-------- --------
Net cash inflow from operating activities 7.4 3.9
======== ========
The #1.4m restructuring costs outflow shown above relates to the prior year
exceptional item of reconstruction costs and termination of operations.
Reconciliation of net cash flow to movement in net debt(UNAUDITED)
For the year ended 31 December 2002
2002 2001
#m #m
Increase/(decrease) in cash 1.3 (3.1)
Repayment of bank loans 16.0 11.2
Net repayment of finance leases 0.9 0.4
Cash inflow from restricted bank account - (0.2)
-------- --------
Change in net debt from resulting cashflows 18.2 8.3
Net debt at beginning of year (52.8) (61.1)
-------- --------
Net debt at end of year (34.6) (52.8)
======== ========
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES (UNAUDITED)
For the year ended 31 December 2002
2002 2001
*Restated
#m #m
Loss for the financial year (1.6) (9.7)
Unrealised surplus on revaluation of properties - 0.3
Foreign exchange movement (0.1) -
-------- --------
Total recognised losses for the year (1.7) (9.4)
========
Prior year adjustment (1.2)
--------
Total recognised losses since last financial statements (2.9)
========
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS (UNAUDITED)
For the year ended 31 December 2002
2002 2001
*Restated
#m #m
Loss for the financial year (1.6) (9.7)
Dividends waived - 2.8
Finance cost in respect of non-equity interests - (0.3)
-------- --------
(1.6) (7.2)
Other (losses)/gains relating to the year (see above) (0.1) 0.3
Issue of preferred shares - 2.4
Finance cost in respect of non-equity interests - 0.3
-------- --------
Net reduction to shareholders' funds (1.7) (4.2)
Opening shareholders' funds as previously stated 34.9 38.9
Prior year adjustment (1.2) (1.0)
-------- --------
Opening shareholders' funds as restated 33.7 37.9
-------- --------
Closing shareholders' funds 32.0 33.7
-------- --------
* Restated for the adoption of FRS19 'Deferred Tax'.
NOTE OF HISTORICAL COST PROFITS AND LOSSES (UNAUDITED)
For the year ended 31 December 2002
2002 2001
*Restated
#m #m
Loss for the financial year before taxation (2.3) (9.4)
Realisation of prior year revaluation surpluses 1.7 1.4
Difference between historical cost depreciation charge and the actual
depreciation charge calculated on revalued amount 0.3 0.6
-------- --------
Historical cost losses for the year (0.3) (7.4)
-------- --------
Historical cost profit/(loss) after taxation and dividends 0.4 (5.1)
======== ========
* Restated for the adoption of FRS19 'Deferred Tax'.
NOTES TO THE ACCOUNTS
This announcement does not constitute the full statutory financial statements of
the group for the year ending 31 December 2002 within the meaning of Section 240
of the Companies Act 1985. The auditors have not yet reported on the full
accounts for the said year but expect to issue an unqualified report. Once
finalised, the accounts will be delivered to the Registrar of Companies.
Basis of Accounting and Preparation
There have been no changes to the accounting policies applied in the current
year with the exception that the group has adopted Financial Reporting Standard
19 'Deferred Taxation'. The effect of the adoption of FRS 19 on the prior year's
results has been to increase the tax charge and increase the loss after tax by
#0.2m. Had the accounting policy not been changed, the taxation credit and the
profit after tax in the current year would have decreased by #0.7m.
The comparative figures for the year to 31 December 2001 represent an abridged
version of the full accounts which have been filed with the Registrar of
Companies and on which the auditors gave an unqualified report pursuant to
Section 235 of the Companies Act 1985 and which does not contain a statement
made under sub-section (2) or (3) of Section 237 of that Act.
1. Segmental analysis
2002 2001
#m #m
Turnover
-UK 65.3 71.2
-Continental Europe 12.7 15.2
-------- --------
78.0 86.4
======== ========
Loss on ordinary activities before taxation
-UK (1.4) (7.0)
-Continental Europe (0.9) (2.4)
-------- --------
(2.3) (9.4)
======== ========
2. Exceptional charges
2002 2001
#m #m
Exceptional items included within operating profit
Costs arising from option agreement circular (0.4) -
Provision for impairment of tangible fixed assets (0.1) (4.9)
Waiver of master franchise agreement liability - 3.3
Gain arising from conversion of deferred consideration into
preferred shares - 0.3
-------- --------
(0.5) (1.3)
Exceptional items not included within operating profit
Loss on sale of fixed assets (1.4) -
Restructuring costs and termination of operations - (3.9)
-------- --------
Professional and banking costs arising from the financial restructuring
process (0.7) -
-------- --------
(2.6) (5.2)
======== ========
3. Interest payable and similar charges
2002 2001
#m #m
Debenture interest 1.6 1.6
Bank loans & overdraft interest 1.6 2.7
Finance lease Interest 0.3 0.3
-------- --------
3.5 4.6
-------- --------
Professional and banking costs arising from the financial restructuring
process 0.7 -
-------- --------
4.2 4.6
======== ========
4. Profit/(loss) on ordinary activities before taxation
2002 2001
#m #m
This is arrived at after charging:
Depreciation 2.6 2.8
Auditors remuneration - audit services 0.2 0.2
- non audit services 0.2 0.2
Property rentals 12.9 12.7
5. Taxation
2002 2001
Restated
#m #m
UK Corporation Tax - trading - 0.1
Deferred Tax (0.7) 0.2
-------- --------
(0.7) 0.3
======== ========
The group has unrecognised taxable losses to carry forward of #4.2 million and
the hotel disposals resulted in an overall capital loss of #7.9 million.
6. Loss per share
Loss per ordinary share is based upon a loss of #1,625,000 (2001 - loss of
#7,157,000) and 21,967,000 (2001 - 22,839,000) ordinary shares, being the
weighted average number of ordinary shares in issue during the year.
The reconciliation of the loss per share (as per FRS 14) to the adjusted profit/
(loss) per share is given below:
2002 2001
Restated
Loss per share - basic (7.4)p (31.3)p
Adjustments in respect of:
- option agreement costs 1.8p -
- impairment of fixed assets 0.5p 21.6p
- waiver of master franchise agreement liability - (14.6)p
- gain from conversion of deferred consideration - (1.2)p
- loss on sale of fixed assets 6.1p 0.1p
- write off of restructuring and development costs - 17.1p
- professional and banking fees in respect of the refinancing process 3.3p -
- dividend waiver - (12.4)p
-------- --------
Adjusted profit/(loss) per share - basic 4.3p (20.7)p
-------- --------
6. Loss per share (continued)
The adjusted profit/(loss) per ordinary share is based upon a profit of #942,000
(2001 - loss of #4,728,000) and 21,967,000 (2001 - 22,839,000) ordinary shares,
being the weighted average number of ordinary shares in issue during the year.
The basic adjusted profit/(loss) per ordinary share is calculated using the post
tax result before exceptional items available for ordinary shareholders divided
by the number of ordinary shares and has been given as it is considered more
representative of the ongoing operational earnings.
7. Fixed assets - tangible assets
Freehold & Furniture Total
leasehold fixtures &
properties equipment &
motor vehicles
#m #m #m
Cost or valuation
At 1 January 2002 82.8 13.2 96.0
Additions 0.7 2.1 2.8
Disposals (17.1) (1.1) (18.2)
Impairments (0.1) - (0.1)
--------- --------- --------
At 31 December 2002 66.3 14.2 80.5
Depreciation
At 1 January 2002 1.1 1.6 2.7
Provided for the year 1.0 1.6 2.6
Eliminated on disposals (0.2) (0.2) (0.4)
--------- --------- --------
At 31 December 2002 1.9 3.0 4.9
Net book value
At 31 December 2002 64.4 11.2 75.6
========= ========= ========
At 31 December 2001 81.7 11.6 93.3
========= ========= ========
8. Debtors
2002 2001
#m #m
Trade debtors 6.1 4.9
Other debtors 0.8 4.7
Prepayments 3.0 2.0
--------- --------
9.9 11.6
========= ========
There are no debtors due after more than one year (2001-#3.1m). As noted in the
Financial Review an agreement was reached for early settlement with this prior
year debtor.
9. Creditors: amounts falling due within one year
Other creditors
2002 2001
#m #m
Trade creditors 5.3 5.2
Other creditors 3.7 3.3
Tax and social security 3.2 1.6
Corporation tax 1.0 1.0
Obligations under finance leases 0.9 1.1
Accruals 6.6 7.3
--------- --------
20.7 19.5
========= ========
10. Creditors: amounts falling due after more than one year
2002 2001
#m #m
Debenture (secured) 14.0 14.0
Bank loans (secured) - 12.6
Obligations under finance leases 1.5 2.2
--------- --------
15.5 28.8
========= ========
11. Provision for liabilities and charges
Deferred
Taxation
2002
#m
At 1 January 2002 as previously stated -
Prior year adjustment 1.2
--------
At 1 January 2002 as restated 1.2
Credited to profit and loss account 0.7
--------
At 31 December 2002 0.5
========
12. Capital and reserves
Share Special Share Revaluation Capital Profit and
Capital Reserve Premium Reserve Redemption Loss
Account on Reserve Account
#m #m #m #m #m #m
Balance at beginning of
year as previously stated 17.8 - 1.2 20.1 - (4.2)
Prior year adjustment - - - - - (1.2)
-------- -------- -------- --------- -------- --------
Balance at beginning of
year as restated 17.8 - 1.2 20.1 - (5.4)
*Cancellation of shares
surrendered by Choice
Hotels International Inc
(see below) (15.7) - - - 15.7 -
Loss for the period - - - - - (1.6)
Realised revaluation
surpluses - - - (1.7) - 1.7
Transfer of depreciation
charge on revalued
amount - - - (0.3) - 0.3
-------- -------- -------- --------- -------- --------
Foreign exchange
movement - - - - - (0.1)
-------- -------- -------- --------- -------- --------
Balance at end of year 2.1 - 1.2 18.1 15.7 (5.1)
======== ======== ======== ========= ======== ========
*Cancellation of shares surrendered by choice hotels international inc.
On 20 March 2002 the company received notification from Choice Hotels
International that it had surrendered its interest in its entire holdings of
31,097,906 unlisted convertible preferred shares and 1,227,639 listed ordinary
shares in the company. On 17 April 2002 and 21 May 2002 the Board cancelled
these shares. This cancellation will have no impact on the number of shares held
by the other non-Choice Hotels International ordinary shareholders but such
shareholders will in aggregate, as a result, hold 100 per cent of the fully
diluted share capital of the company.
13. Post balance sheet events
On 24 January 2003 a new seven year term loan facility was signed (see
Chairman's Report for further details).
In April the company sold 15,000 of its 25,000 shares in an Irish joint venture
for #0.9m net of Irish withholding tax, the cash is being retained for working
capital.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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