Half-yearly Report
25 Septembre 2007 - 9:00AM
UK Regulatory
25th September 2007 The Real Hotel Company plc
("the Company" or "RHC")
Interim Results for the six months to
30th June 2007
Branded hotel operator, The Real Hotel Company plc, announces its results for
the first half of 2007.
Highlights
* Revenue improvements to prior year across the hotel estate.
* Robust cost control taking place in all operations.
* All equity raised for refurbishment now invested.
* Sleep Inn growth progressing to plan.
* Rebranded as The Real Hotel Company plc to reflect our core values.
Key Statistics
* Turnover up 8% on the same period last year to �38.7 million (2006: �35.8
million).
* Operating loss on continuing activities of �0.6 million, an improvement of
�0.8 million (57%) on last year's loss (2006: Loss �1.4 million).
Chairman's Comment
Chairman Peter Catesby commented "I am very pleased to see the benefits of our
investment programme and management focus flowing through to operating results.
Our first half results are encouraging and the Board is confident that our
strategic direction as The Real Hotel Company plc is correct".
For further information please contact:
The Real Hotel Company plc
Michael Prager, Chief Executive 020 8233 2001
Paul Mitchell, Finance Director
Waughton
Robin Hepburn 020 7796 9999
KBC Peel Hunt
Jonathan Marren 020 7418 8900
Notes to Editors:
The Real Hotel Company plc (formerly CHE Hotel Group Plc)
The Real Hotel Company plc own, lease and manage 65 hotels throughout the UK
and France, Germany and Belgium. In addition it holds the Master Franchise for
Choice Hotels' brands in the UK and Northern Ireland, amounting to 74
franchises. It also operates London's New Connaught Rooms, one of the capital's
largest multi-function conference and banqueting venues.
Choice brands include Sleep Inn, Comfort Inn, Quality Hotel and Clarion Hotel.
In the year to June 2007 The Real Hotel Company opened three new Sleep Inns:
Doncaster, the City of London and Birmingham Star City. There are two more
hotels opening before the end of the year in Braintree and Glasgow.
The Real Hotel Company management team has considerable experience in the hotel
sector. Michael Prager was Managing Director of Utell International and held
senior positions at Intercontinental, Radisson and Sheraton hotel groups. Paul
Mitchell was formerly Vice President of Financial Planning and Control for
Europe, Middle East and Africa at Intercontinental Hotel Group in addition to
holding senior finance positions in Granada, Forte and Allied Lyons.
Chairman's Statement
I am very happy to present the first report you will have seen under the
auspices of The Real Hotel Company plc.
At the AGM earlier this year shareholders were asked to vote on a change of the
Company name from CHE Hotel Group Plc to The Real Hotel Company plc, a motion
that was, I'm happy to say, overwhelmingly approved. We subsequently became The
Real Hotel Company plc on 4th July 2007. Reaction from consumers and business
partners, has been nothing but positive for this development in the evolution
of our Company to the next phase of its life.
The changes in both the physical and human side of our business that I reported
to shareholders in the 2006 Annual Report are now beginning to work their way
through the business and we are seeing a number of positive and sustainable
changes across the estate.
We have now invested 100% of the equity raised last year for the refurbishment
of the existing hotels, the last major project being the refurbishment of the
Quality Hotel Welwyn which was completed in early September. Funds invested in
renovation are now showing returns in both occupancy and rate across the
estate.
Our revenues for the first six months of the year grew by over 8% and the
operating loss for the period reduced by 57%, reflecting improved trading and
more stringent cost control. It has taken us some time to work through existing
low rate contracts and into better higher yielding business as our hotels came
out of refurbishment. Now we are beginning to see strong performance, in many
cases ahead of the market, in a number of our newly renovated hotels and this
will serve as a good base for future growth.
On the development side we opened new Sleep Inns in Doncaster, The City of
London and Birmingham Star City in the first quarter of 2007 and these are all
trading satisfactorily and adding to the growing reputation of the Sleep
product. We will open two further hotels this year; one in Braintree, Essex
close to Stansted airport and one at Glasgow Braehead in the proximity of
Glasgow's main airport.
The pipeline for our premium limited service product is building steadily;
Glasgow will be our eleventh Sleep Inn in the UK. Our strategy to focus on two
main sectors; premium limited service and mid market full service is reflected
in the improvement of the Quality estate and the growth of the Sleep estate.
Regarding the major changes in management that were announced in the 2006
Annual Report; the team is now stable and performing well against its various
objectives.
Our corporate overhead is flat compared to the same period last year despite
the fact that we have added three new hotels. The effect of the one time
non-recurring costs associated with the re-organisation mean that this
reduction in our cost base will not become apparent until the second half of
the year.
Negotiations are underway with Choice Hotels International regarding the future
of the UK Master Franchise Agreement and the shape that our relationship with
Choice should take in the years ahead. This, together with developing and
resourcing the strategy of the Company for the next five years, is your Board's
main preoccupation at present.
Our historical business profile means that we usually record losses in the
first half of the year. To the end of June 2007 we recorded a loss for the
period of �3.6 million, a 10% improvement over the same period in the prior
year on revenues of �38.7 million (8% up on prior year) and a gross profit of �
22.7 million (11.2% up on prior year). These results include non recurring
costs of �200,000 for pre-opening costs related to the opening of the three new
Sleep Inns noted above and �100,000 in reorganisation costs referred to
earlier.
As we enter the second half of the year your Board believes that we have taken
all of the appropriate actions to improve the trading performance of the
Company. This will enable us to compete in an economy in which financial
pressures are likely to increase for both consumers and businesses and in which
The Real Hotel Company plc will increasingly be seen to offer a sound, value
for money proposition.
Peter Catesby
Chairman
Operating Review
The measures that were put in place during the latter part of 2006 and
continuing into the current year are beginning to take effect.
Our continuing revenues for the first half of the year at �38.7 million were
8.1% up on the same period in 2006. This has come about from a steady growth in
market share in our core UK market throughout the year and a similar
performance in continental Europe.
In the UK, our major market, Revpar was 6.5% up on prior year at �25.26 on a
like for like basis and 8.5% up on an all hotels basis.
In Germany our total Revpar was 19.8% ahead of prior year driven by the strong
performance of our new hotels in Munich.
In France like for like Revpar was ahead of prior year at 13.6%.
The New Connaught Rooms conferencing and banqueting facility in London recorded
revenue static to prior year, but is now coming into its busiest period.
At the same time our like for like payroll was 1.7% lower than prior year in
the UK hotels, 7.8% better in Germany and 1% better in France.
As a consequence of this and other cost control measures across the business
our gross profit at the half year was �22.7m, a 7.8% improvement on 2006.
This blizzard of statistics is a quantitative way of saying that we are
producing more revenue from fewer people across the estate, to all of whom I
extend my thanks and congratulations for their hard work and the positive
result this has delivered so far.
As the Chairman has commented, the first half of the financial year is one in
which we traditionally record losses and 2007 is no different. The second half
of the year is very significant to our business and will largely determine the
full year outcome.
We were, along with all other hotel operators in the UK, affected by the
extreme weather conditions of late July and early August particularly when
compared to the very good weather that we experienced during the same time last
year. Nevertheless we continued through this period to improve against market
and our forecast through to November is encouraging.
We continue to monitor every aspect of our performance against a broad range of
Key Performance Indicators that reflect in detail our core objectives of
driving revenue, continually improving the guest experience, developing the
Sleep product line and improving our asset base.
As far as customer satisfaction is concerned the percent of guests staying at
our hotels that would recommend us to a friend or colleague hit an annual high
of 92.7% in August with only 7.3% saying that they would not do so. 92.6% of
guests sampled believed that we represented good value for money with 7.4%
saying the opposite and 92.8% of respondents said that they would stay with us
again when next they visited a location at which we had a hotel. 7.2% said they
would not stay with us again.
Reducing the number of dissatisfied customers, focusing on the aspects of our
product and service package that is causing dissatisfaction and commanding an
improved share and price premium for doing so remains the absolute focus of the
operating and sales and marketing teams.
On the development front, as well as opening new hotels in Doncaster,
Birmingham and London we have begun construction on new Sleep sites at
Braintree, Essex and Braehead, Glasgow as the Chairman commented. We are at the
planning and contractual stage for a 65 room Sleep Inn in Chester, a 103 room
Sleep Inn in Sheffield and an 84 room Sleep Inn in Tamworth. We have also
signed new deals in Ipswich and Basingstoke which are scheduled to open in 2008
and 2009 respectively. I fully expect to announce a number of further
developments prior to the year end on the continued Sleep rollout, which is
progressing according to plan.
Whilst nothing will distract the management team from the job of delivering
2007 results we are also engaged in creating the vision for the next five years
in a way that will benefit all of our various stakeholders; shareholders,
employees, customers and our local communities, the change of company name to
The Real Hotel Company plc being a small but important milestone on this
journey.
The name, The Real Hotel Company espouses our core values; that of real
hoteliers in a market that we believe is polarising inexorably into
aspirational destinations and low cost hotels. We have staked our claim firmly
in the low cost arena and we will continue to look at ways at which we can
eliminate cost from our business without diminishing the guest experience.
We believe that the Real Hotel Company explains in a very succinct way to our
existing and potential customers what we are all about. We are proud to be real
hoteliers with all of the traditions encompassed therein without being tied to
an archaic past. We are not retailers of blocks of bedrooms nor do we intend so
to become. We want to provide real hotel experiences in a low cost environment
to a customer base that will increasingly demand relevant quality at affordable
prices and we believe that this is a niche that we can dominate and exploit.
Michael Prager
Chief Executive
Consolidated Income Statement (Unaudited)
Six months ended Six months Year ended
ended
30 June 2007 30 June 2006 31 December 2006
Notes �m �m �m
Revenue 4 38.7 35.8 76.1
Cost of sales (16.0) (15.4) (32.8)
Gross profit 22.7 20.4 43.3
Administrative expenses
- Property rentals (7.7) (7.3) (14.9)
- Other (15.6) (14.5) (29.7)
(23.3) (21.8) (44.6)
Operating loss 4 (0.6) (1.4) (1.3)
Financial expenses (3.0) (2.2) (5.1)
Loss before tax (3.6) (3.6) (6.4)
Income tax - - -
Loss for the period from (3.6) (3.6) (6.4)
continuing operations
Loss for the period from - (0.4) (1.5)
discontinued operations 4
Loss for the period (3.6) (4.0) (7.9)
Loss per share
Basic loss per share 5 (4.1)p (4.8)p (9.3)p
Diluted loss per share 5 (4.1)p (4.8)p (9.3)p
The directors have recommended no interim dividend (2006 - nil)
Consolidated Balance Sheet at 30 June 2007(Unaudited)
June 2007 June 2006 December 2006
Notes �m �m �m
Non current assets
Property, plant and 115.1 94.0 98.6
equipment
Deferred tax assets 4.9 4.1 4.9
120.0 98.1 103.5
Current assets
Inventories 1.8 1.7 1.8
Trade and other 14.9 12.7 15.0
receivables
Cash and cash 0.8 2.0 0.9
equivalents
17.5 16.4 17.7
Total assets 137.5 114.5 121.2
Current liabilities
Financial liabilities (6.6) (0.8) (4.7)
Trade and other (13.9) (11.4) (13.6)
payables
Obligations under (5.1) (1.3) (2.5)
finance leases
Current tax payable (0.7) (0.7) (0.7)
(26.3) (14.2) (21.5)
Total assets less current 111.2 100.3 99.7
liabilities
Non current liabilities
Loans (17.2) (16.2) (16.0)
Debenture (14.0) (14.0) (14.0)
Obligations under (39.2) (22.6) (25.3)
finance leases
Deferred tax (6.3) (5.5) (6.3)
liabilities
(76.7) (58.3) (61.6)
Net assets 34.5 42.0 38.1
Equity
Issued share capital 8.8 8.8 8.8
Share premium 19.1 19.1 19.1
Retained earnings 6.6 14.1 10.2
34.5 42.0 38.1
Consolidated Cashflow Statement For The Six Months Ended 30 June 2007
(Unaudited)
Six months ended Six months Year ended
ended
30 June 2007 30 June 2006 31 December
2006
Notes �m �m �m �m �m �m
Cashflows from operating
activities
Loss for the period (3.6) (4.0) (7.9)
Adjustments for:
Interest charged 3.0 2.2 5.1
Depreciation and amortisation 2.0 1.9 3.9
charges
Decrease in inventories - 0.1 -
Decrease/ (Increase) in trade and 0.1 1.5 (0.8)
other receivables
Decrease in trade payables (0.4) (7.2) (6.2)
Cash generated from/ (absorbed by) 1.1 (5.5) (5.9)
operations
Interest paid (2.5) (1.5) (4.0)
Net cash absorbed by (1.4) (7.0) (9.9)
operating activities
Cash flows from investing
activities
Acquisition of property, 6 (1.9) (4.9) (8.3)
plant and equipment
Receipts from disposal of - - 0.3
discontinued business
Net cash used in investing (1.9) (4.9) (8.0)
activities
Cash flows from financing
activities
Proceeds from issue of new - 20.0 20.0
ordinary shares
Less costs of issue of new - (1.4) (1.4)
ordinary shares
Increase in bank loans 3.0 - -
Repayment of bank loans (1.6) (4.3) (2.5)
Proceeds from new finance 0.6 - 0.7
leases
Repayment of obligations under (0.5) (1.1) (0.4)
finance leases
Net cash from financing 1.5 13.2 16.4
activities
Net (decrease)/ increase in (1.8) 1.3 (1.5)
cash and cash equivalents
Cash and cash equivalents at (0.8) 0.7 0.7
beginning of period
Cash and cash equivalents at end of (2.6) 2.0 (0.8)
period
Cash and cash equivalents
comprise:
Cash and cash equivalents in 0.8 2.0 0.9
current assets
Bank overdraft (3.4) - (1.7)
(2.6) 2.0 (0.8)
Consolidated Statement Of Changes In Equity (Unaudited)
Six months ended Six months Year ended
ended
30 June 2007 30 June 2006 31 December
2006
�m �m �m
Balance at beginning of 38.1 27.2 27.2
period
Changes in equity
Movement in fair value of hedges - 0.2 0.2
derivatives in period
Net income/ (expense) recognised - 0.2 0.2
directly in equity
Loss for the period (3.6) (4.0) (7.9)
Total recognised income and (3.6) (3.8) (7.7)
expenses for the period
Issue of new shares net of - 18.6 18.6
issue costs
Balance at end of period 34.5 42.0 38.1
NOTES TO THE INTERIM FINANCIAL STATEMENTS
for the six months ended 30 June 2007
1 BASIS OF PREPARATION
This interim financial information has been prepared on the basis of the
recognition and measurement requirements of adopted IFRSs as at 30 June 2007.
The adopted IFRSs that will be effective (or available for early adoption) in
the annual financial statements for the year ending 31 December 2007 are still
subject to change and to additional interpretations and therefore cannot be
determined with certainty. Accordingly, the accounting policies for that annual
period will be determined finally only when the annual financial statements are
prepared for the year ending 31 December 2007.
2 STATEMENT OF COMPLIANCE
These condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standard (IFRS) IAS 34
Interim Financial Reporting. They do not include all of the information
required for full annual financial statements, and should be read in
conjunction with the consolidated financial statements of the Group as at and
for the year ended 31 December 2006.
The accounting policies applied by the Group in these condensed consolidated
financial statements are the same as those applied by the Group in its
consolidated financial statements as at and for the year ended 31 December
2006.
3 SEGMENTAL INFORMATION
Analysis by activity
Six months ended 30 June 2007
Owned & Managed Franchise Total Discontinued Total
leased hotels & operations continuing operation1
hotels & other operations
banqueting (UK)
�m �m �m �m �m �m
Revenue 37.1 0.6 1.0 38.7 - 38.7
Segment result 0.6 0.6 (0.5) 0.7 - 0.7
Unallocated (1.3)
administration
costs
Operating loss (0.6)
Financial expenses (3.0)
Loss before (3.6)
taxation
1 The discontinued operation relates to the European franchise business
Six months ended 30 June 2006
Owned & Managed Franchise Total Discontinued Total
leased hotels & operations continuing operation1
hotels & other operations
banqueting (UK)
�m �m �m �m �m �m
Revenue 33.7 1.1 0.9 35.8 1.8 37.6
Segment result (0.6) 1.1 (0.6) (0.1) (0.4) (0.5)
Unallocated (1.3)
administration
costs
Operating loss (1.8)
Financial expenses (2.2)
Loss before (4.0)
taxation
Analysis by geographical location
Six months ended 30 June 2007
U K France & Germany Total Discontinued Total
Belgium continuing operation1
operations
�m �m �m �m �m �m
Revenue 32.6 2.8 3.3 38.7 - 38.7
Segment result 0.7 - - 0.7 - 0.7
Unallocated (1.3)
administration
costs
Operating loss (0.6)
Six months ended 30 June 2006
U K France & Germany Total Discontinued Total
Belgium continuing operation1
operations
�m �m �m �m �m �m
Revenue 30.4 2.8 2.5 35.8 1.8 37.6
Segment result (0.1) - - (0.1) (0.4) (0.5)
Unallocated (1.3)
administration
costs
Operating loss (1.8)
4 DISCONTINUED OPERATION
In November 2006, the Group disposed of its entire European Franchise
Operation. The Group was committed to dispose of this operation following a
strategic review and as a result of the commencement of fees payable to Choice
International in 2006. No gain or loss arose on the measurement to fair value.
In November 2006, the operation was sold for �0.3m cash with no gain or loss.
There was no attributable tax on this transaction.
Profits attributable to the discontinued operation for the six months ended 30
June were as follows:
2006 2005
�m �m
Results of discontinued operation
Revenue - 1.8
Expenses - (2.2)
Results from operating activities - (0.4)
Income Tax - -
Loss for the period - (0.4)
5 LOSS PER SHARE
The basic loss per share is based on the loss divided by 87,552,405 (December
2006 - 85,143,000, June 2006 - 82,671,000) ordinary shares being the average
number of shares in issue during the period.
Six months ended Six months ended Year ended
30 June 2007 30 June 2006 31 December 2006
Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued Total
activities activities activities activities activities activities
�m �m �m �m �m �m �m �m �m
Loss after (3.6) - (3.6) (3.6) (0.4) (4.0) (6.4) (1.5) (7.9)
tax
p p p p p p p p p
Loss per (4.1) - (4.1) (4.3) (0.5) (4.8) (7.5) (1.8) (9.3)
share
The diluted loss per share is based on the loss divided by 87,552,405 (December
2006 - 85,143,000, June 2006 - 82,671,000) ordinary shares being the average
number of shares in issue during the period. There are no potentially dilutive
shares in issue.
Six months ended Six months ended Year ended
30 June 2007 30 June 2006 31 December 2006
Continuing Discontinued Total Continuing Discontinued Total Continuing Discontinued Total
activities activities activities activities activities activities
�m �m �m �m �m �m �m �m �m
Loss after (3.6) - (3.6) (3.6) (0.4) (4.0) (6.4) (1.5) (7.9)
tax
p p p p p p p p p
Loss per (4.1) - (4.1) (4.3) (0.5) (4.8) (7.5) (1.8) (9.3)
share
6 CAPITAL COMMITMENTS
At 30 June 2007, amounts contracted for but not provided in the financial
statements for expenditure on property, plant and equipment were �0.8m (2006: �
3.2m).
7 USE OF ESTIMATES AND FUTURE PERFORMANCE
The preparation of the financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Certain statements, which appear in a number of places throughout this
document, may constitute "forward-looking statements" which are all matters
that are not historical facts including anticipated financial and operational
performance, business prospects and similar matters. A variety of factors could
cause the Group's actual results and expectations to differ materially from the
anticipated results or other expectations expressed in the Group's
forward-looking statements. The statements, if any, are illustrative only and
do not amount to any representation that they will be achieved as they involve
risks and uncertainties and relate to events and depend upon circumstances,
which may, or may not, occur in the future and there can be no guarantee of
future performance.
8 EXCHANGE RATES
The results of the overseas operations have been translated into sterling at
the weighted average rates of exchange for the period. Foreign currency
denominated assets and liabilities have been translated into sterling at the
rates of exchange on the last day of the period.
END
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