Interim Results-Replacement
September 28 2001 - 1:29PM
UK Regulatory
RNS Number:8770K
C.H.E. Group PLC
28 September 2001
C.H.E. Group PLC
28 September 2001
Correction to announcement
At 7:04 a.m. today C.H.E. Group PLC announced its interim results for the
period ending 15 July 2001 (announcement reference RNS 7968K). An error was
made in the heading of the announcement as it referred to "Final Results". The
heading should have read "Interim Results".
The text of the announcement remains unchanged and is shown in full below.
C.H.E. GROUP PLC
28 SEPTEMBER 2001
INTERIM RESULTS FOR THE PERIOD ENDING 15 JULY 2001
CHAIRMAN'S STATEMENT
INTRODUCTION
This Interim Report advises our shareholders of the financial performance,
development and disposal activities and operating review of the Group for the
28 week period ending 15 July 2001. Since the commencement of the year
significant progress has been made in providing a firm foundation upon which
the Group can grow following the capital reorganization.
A major part of the plan for the future was the need to strengthen the senior
management team. In addition to Michael Finkleman, who joined the Board from
Queens Moat Houses, as Chief Executive in March, we were pleased to welcome
David Cook onto the Board on 6 August 2001 as Finance Director. He joined us
from Millennium & Copthorne Hotels plc where he had worked for 13 years being
their Group Finance Director since their flotation in April 1996.
Michael and David have very considerable experience in the hotel industry, and
we are extremely fortunate to have them on board.
EXCEPTIONAL AND NON-RECURRING ITEMS
A number of exceptional and non-recurring items were recorded in the period:-
All the Group's hotels were revalued at 19 December 2000 by specialist
external hotel valuers and the Fixed Asset Values adjusted accordingly. As
shareholders are aware, a number of our hotels are in the process of being
disposed of and there is a possibility that some specific properties may not
realize their full sale potential. As a precaution, the values of these
properties have been reduced by circa #4 million and this is recorded as an
exceptional charge in the Profit & Loss account.
#3.4 million of professional and banking costs have been provided for in the
period. At the time of the reconstruction in December 2000, costs directly
related to the reconstruction were estimated at approximately #3.3 million and
#1.5 million of this was charged in the 2000 Accounts. There was, in the
event, a substantial increase in these costs particularly due to the costs of
the various legal proceedings in early 2001 and the independent review of the
redemption of the company's preference shares in 1999. In addition, included
in this period's charge are significant banking and related costs for the
period.
The Board has taken the opportunity to assess, particularly in light of
current conditions, the Group's Balance Sheet, with regard to levels of
provisions and accruals. This has resulted in a "one-off" charge of circa #1.9
million in the Profit & Loss Account, which does not impact on the current
period's cashflow, and will not be an ongoing additional cost requirement.
A credit of #3.3 million has been recorded as an exceptional item following
the waiver received from Choice Hotels International in relation to the US$5
million that would have become due for payment over the next five years for
the acquisition of the European Master Franchise granted in 1998.
ACQUISITIONS, DISPOSALS AND BUSINESS DEVELOPMENT
This year to date nine non-core hotel properties have been sold and interest
has been expressed in a number of other properties that were identified as
suitable for disposal to reduce the debt burden upon the Group. The nine
properties disposed of were sold for a total sum of #13 million, five of which
have been retained within our franchise network. In March 2001, the businesses
holding ten loss making leased German hotels were closed as it was clear that
losses would have continued for the foreseeable future.
Whilst the Board has focused its attention on restructuring the Group by
disposing of non-core properties and strengthening Management, three new Sleep
Inns commenced operation, during the period under review. Sleep Inns are
limited service hotels, unique amongst the main limited service providers in
including air conditioning as a standard feature. The hotels, which are
located in Cambridge (82 rooms), Peterborough (82 rooms) and Baldock (62
rooms), have been well received in their local market places and should
provide a good profit stream following their steady growth in business levels
from a standing start and minimal promotion. There is little doubt that Sleep
Inn development will become an important part of the Group's future, with a
number of expansion opportunities already being considered. Our Franchise
network is also continuing to expand at a rate currently equating to one new
location per week.
OPERATING REVIEW
The disposal of properties throughout the period under review makes direct
comparison of the Group's operating result difficult. Turnover has reduced to
#47.1 million (2000 - #48.7 million) and taking into account the non-recurring
items, there is a loss before taxation and exceptional items of #2.9 million
(2000 - profit #0.8 million). Although we were encouraged by the directly
comparative results of the first quarter, our operational performance in the
second quarter, in common with many of our competitors, has been impacted by
the effects of the foot and mouth epidemic and to a lesser extent the more
difficult economic conditions.
A more meaningful comparison of our results for the period under review can be
taken from our UK owned and leased hotels and banqueting operation, which
forms the major part of the Group. On a true like for like basis, excluding
the new properties and those sold during the period, bedroom occupancy
increased by 1.5 percentage points to 65.3% (2000 - 63.8%) and average room
rate fell marginally, down 10 pence to #35.92 (2000 - #36.02), producing a
growth in yield per available room of 2% to #23.46 (2000 - #22.98). The Gross
Operating Profit earned, being the earnings before charges that are outside of
the direct control of individual property management, such as rentals,
depreciation and property tax, remained at #11.8 million albeit that the Gross
Operating Profit margin deteriorated 0.5 of a percentage point to 33.9% (2000
- 34.4%) partly due to the increase in energy costs following the introduction
of the climate control levy. Costs outside of the direct control of individual
property management, on a true like for like basis, were up by 7% on the UK
owned and leased hotels and banqueting operation.
PROSPECTS
The trading outlook for the Group, before the impact of the terrorist attacks
in the USA on the 11 September, was one of encouraging growth in both turnover
and converted profit from continuing operations, despite the economic
uncertainty around the world. Whilst the Group derives the vast majority of
its turnover from domestic sources, the implications of the attacks, for the
remainder of this year, are still being assessed.
DIVIDEND
The Company has not declared an interim dividend. It is likely that the Board,
on the basis of the new strategic direction for the Group, which was
summarized in the 21 December 2000 circular to shareholders, will consider
that it is more appropriate in the foreseeable future to utilize free cashflow
in growing the business and de-gearing the balance sheet. The credit of #2.8
million recorded as Dividend reflects the conversion of outstanding amounts
due on the preferred shares into additional preferred shares as part of the
capital reconstruction.
NET ASSETS
Net Assets in this statement are #34.4 million. Subsequent to the Balance
Sheet date, the company has exercised its option to settle the Choice Hotels
International deferred consideration of US$4 million, as detailed in the
circular to shareholders dated 21 December 2000, by the issue of 2,404,013 new
convertible preferred shares. This increases the Net Asset Value of the Group
to #37.1 million.
CORPORATE DEVELOPMENTS
On 18 June 2001, it was announced that the Board had instructed its financial
advisers, Insinger English Trust, to examine whether approaches made to the
Company and to Choice Hotels International could lead to an offer being made
to all shareholders. Strong interest has been forthcoming and discussions are
currently at a detailed stage with a number of parties, which may or may not
lead to an offer being made for the Company.
ANDREW SPEAK
CHAIRMAN
28 September 2001
C.H.E. GROUP PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
for the 28 weeks ended 15th July 2001
2001 2000 2000
28 weeks 28 53
weeks weeks
# m # m # m
Turnover 47.1 48.7 95.2
Cost of Sales 21.1 21.8 42.8
Gross profit 26.0 26.9 52.4
Administrative costs
- Continuing Operations before exceptional items 26.2 23.5 47.7
- exceptional items 0.7 - 33.7
26.9 23.5 81.4
Operating (loss)/ profit
- before exceptional items (0.2) 3.4 4.7
- exceptional items (0.7) - (33.7)
(0.9) 3.4 (29.0)
Share of results and income from associated - 0.1 0.2
undertakings
Exceptional Items
Profit on sale of fixed assets - - 0.6
Restructuring costs (3.4) - (1.8)
Revision to disposal proceeds - - 1.0
(Loss)/profit on ordinary activities before interest (4.3) 3.5 (29.0)
Interest payable 2.7 2.7 5.1
(Loss)/profit on ordinary activities before taxation
- before exceptional items (2.9) 0.8 (0.2)
- exceptional items (4.1) - (33.9)
(7.0) 0.8 (34.1)
Taxation
- on trading activities - 0.1 -
-on profit on sale of fixed assets - - (0.5)
- 0.1 (0.5)
(Loss)/ profit for the financial period (7.0) 0.7 (33.6)
Dividends - preferred - - -
- prior year preferred dividends waived (2.8) - -
-ordinary - - -
Finance costs in respect of non equity interests 0.1 0.7 1.4
Retained Loss (4.3) 0.0 (35.0)
Earnings per share
-Basic (18.7)p (0.2)p (153.0)p
-Diluted (18.7)p (0.2)p (153.0)p
Adjusted Earnings per share
-Basic (13.3)p (0.2)p (7.0)p
Continuing Adjusted Earnings per share
-Diluted (4.1)p 1.8p (0.5)p
Ordinary dividends per share 0.0p 0.0p 0.0p
C.H.E.GROUP PLC
GROUP UNAUDITED BALANCE SHEET
as at 15th JULY 2001
15 9 July 31 December
July
2001 2000 2000
# m # m # m
Fixed Assets
Tangible Assets 98.9 160.9 114.5
Investments 0.2 0.1 0.2
99.1 161.0 114.7
Current Assets
Stocks 1.0 1.1 1.1
Debtors (see note 4 ) 12.3 18.7 16.8
Cash at bank and in hand 0.7 1.5 1.3
14.0 21.3 19.2
Creditors: Amounts falling due within one year
Bank overdraft and Loans 23.9 10.3 19.9
Trade Creditors 20.8 24.5 28.3
44.7 34.8 48.2
Net current ( liabilities) / assets (30.7) (13.5) (29.0)
Total Assets less current liabilities 68.4 147.5 85.7
Creditors: Amounts falling due after more than one 34.0 * 55.6 46.8
year
Net Assets Employed 34.4 * 91.9 38.9
Capital And Reserves
Called up share capital -equity 2.3 2.3 2.3
-non equity 14.3 * 23.6 23.6
Share premium account - 23.5 23.5
Revaluation reserve 19.8 40.6 21.8
Capital redemption reserve - 18.9 18.9
Profit and loss account (2.0) (17.0) (51.2)
Shareholders Funds 34.4 * 91.9 38.9
Included in Shareholders funds is #14.3m (July 2000 - #25m) in respect of non
equity interests.
* Subsequent to the balance sheet date the Group exercised its option to
convert the fixed asset deferred consideration of #2.7m (US$4m) currently
included within 'Creditors: amounts falling due after one year' into variable
rate convertible preferred shares.
The effect of exercising this option was to increase the Shareholders Funds to
#37.1m.
C.H.E. GROUP PLC
Consolidated Cashflow Statement for the 28 weeks ended 15
July 2001
28 28 53
weeks weeks weeks
2001 2000 2000
# m # m # m # m # m # m
Net cash inflow from operating activities 1.3 1.3 8.4
Dividends received from joint venture - - 0.2
Returns on Investment and servicing of finance
Interest paid (3.8) (3.0) (4.4)
Taxation
U K Corporation tax and ACT paid (2.3) (0.2) (1.8)
Capital expenditure
Payments to acquire tangible fixed assets 1.9 3.1 8.8
Receipts from sale of fixed assets (12.4) (0.9) (0.8)
Net cash Inflow/(outflow) for capital 10.5 (2.2) (8.0)
expenditure
Acquisitions and Disposals
Disposal of subsidiary undertakings - - 0.8
Equity Dividends paid - (0.5) (0.5)
Net cash inflow before financing and use 5.7 (4.6) (5.3)
of liquid resources
Management of Liquid Resources
Decrease in restricted bank account 0.4 - 0.1
Financing
New long term bank loans - 5.5 5.5
Repayment of bank loans (7.3) (3.7) (3.9)
Net receipt/(repayment) of sale and (0.2) 0.5 1.4
leaseback arrangements
Payments to acquire Master Franchise - (0.6) (0.6)
Net cash (outflow)/inflow from financing (7.5) 1.7 2.4
Decrease in cash (1.4) (2.9) (2.8)
Reconciliation of Operating Profit to
net cash inflow from
operating activities
Operating (loss)/profit (0.9) 3.4 (29.0)
Exceptional charges 0.7 - 33.7
Restructuring costs and termination of (3.4) - (1.3)
operations
Depreciation and Amortisation charges 1.4 1.5 2.7
Decrease in stocks 0.1 0.2 0.1
Decrease/(increase) in debtors 4.5 (1.5) 0.1
( Decrease)/increase in creditors (1.1) (2.3) 2.1
Net cash inflow from operating activities 1.3 1.3 8.4
Notes.
1. The directors have recommended no interim dividend (2000 - nil).
2. The tax charge is based on the estimated effective rate of tax for the
year.
3. The comparative figures for the period to 31st December 2000 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.
4. Included in debtors is #3.1m ( June 2000- #3.1m ) that is due after more
than one year.
5. The exceptional items of #0.7m within administrative costs are the net of:
- a credit of #3.3m arising from Choice Hotels International Inc waiving their
rights to the remaining annual Master Franchise Agreement instalments;
- a provision for the impairment of tangible fixed assets of #4.0m.
6. Continuing Adjusted Earnings per share on a diluted basis assumes the full
conversion of the unlisted variable rate convertible preferred shares issued
at 15 July 2001.
END
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