Continued like-for-like profit growth for Macdonald hotels

Macdonald hotels group board accelerates its drive to achieve luxury status at more than 20 hotels in the UK and Europe

Macdonald Hotels, which is believed to be the UK’s largest 4 and 5-star independent hotel group, has achieved a profit of £4m in the last financial year and reduced net core debt to a 14-year low, it revealed yesterday (Tuesday, October 24th).
Reporting continued, strong trading performance, the group, which has 53 hotels and resorts in the UK, Ireland, Spain and Portugal, published its annual results for the year to 30 March 2017.
The results show:
  • Like-for-like hotels and resorts turnover up 5% (£7.8m)
  • Like-for-like hotels and resorts operating profit up 8% (£3.2m)
  • Profit before tax of £5.6m.
  • Bank net core debt reduced to £184m
  • Net assets of £98m
Gordon Fraser
Announcing the further improvement in like-for-like trading and the continued debt reduction, Gordon Fraser, Deputy Chairman and Group Managing Director said: “Our continuing strong performance and the income from a string of forthcoming joint venture deals will enable us to accelerate our plans to achieve ‘4 Red Star’ and ‘5 Star’ status at more than 20 of our hotels.
“We’ve already agreed legal documentation and are about to sign formal agreements with a major UK housing developer for four of our  sites.
“The cash receipts from these deals and from other, non-hotel developments, which have been independently valued at over £100m, will help further reduce our debt and will be reinvested in our hotels and resorts to realise the board’s strategy of achieving ‘Red Star’ status at 10 of our hotels and ‘5 Star’ status at ten others.
“This will be in addition to the existing 4-Red Star Macdonald Compleat Angler Hotel, Marlow, the 5-Star Macdonald Randolph Hotel, Oxford and the 5-Star Macdonald Bath Spa Hotel.”
The group has reduced debts to historically low levels, having sold the Macdonald Swan’s Nest Hotel in Stratford in May 2016 following the previous year’s sales of the Macdonald Old England Hotel and the Macdonald Marine Hotel which are controlled by Macdonald Family companies and managed by Macdonald Hotels Limited. The loss of trade from those three hotels has reduced overall group turnover by £8m to £154.2m and operating profits by £3m compared with 2015/16.
Last year’s figures included exceptional items, specifically the profit from the sale of land at Botley Park golf course of £51.8m and a one-off management fee of £4.7m which is included in both the turnover and operating profit for that year.
During the year, the group generated £15.3m operating cash flow after interest and invested £8m in its properties, including completing the refurbishments of 150 bedrooms at the Macdonald Randolph Hotel in Oxford, 42 bedrooms at the Macdonald Houstoun House Hotel in Uphall and the remaining 65 bedrooms at the Macdonald Holyrood Hotel in Edinburgh.
Fraser said: “Our best-performing hotels are those where we have committed significant investment, underlining that the key to our future growth is continued investment in our estate and in our people, and we’ve made a series of senior appointments which significantly strengthen our management team.
“These key, strategic appointments put us in a great position to capitalise on the major opportunities ahead of us, such as the fact that most of our hotels have significant scope for future hotel development and also for residential development.”
Fraser revealed the majority of sales growth in the results to March 2017 had come from the commercial and conference market, driving a 5% increase in average room rates.
Commenting on current trading, he said: “A 30% growth in group business, much of which is from Japan, China and the US, helped by the weaker pound, has supported a 2% increase in both like-for-like hotel sales and profits.
“The current year has also seen some exceptional cost increases, in particular due to the national minimum and living wages, the apprenticeship levy, business rates and utilities, which have collectively added £2.4m to costs.
“These increases require the group to improve productivity and to continue to reduce energy consumption through the implementation of its new ‘Room 20’ environmental strategy”.
In the current trading year, Macdonald Hotel Group has invested £3m in its assets in the year to date with another £10m in the pipeline.
Current projects include the creation of a newly-opened ‘Bistro Deluxe by Paul Tamburrini’ at the Macdonald Holyrood Hotel in Edinburgh, in a joint venture with the former executive chef at Edinburgh’s ‘The Honours’ and ‘One Devonshire Gardens’ in Glasgow.
Bistro Deluxe by Paul Tamburrini
The group has also completed the refurbishment of 33 bedrooms and five suites at the Macdonald Forest Hills Hotel near Aberfoyle and the refurbishment and upgrading of the meeting rooms at the Macdonald Inchyra Hotel & Spa near Polmont.
Future projects include:
  • Refurbishment of 100 bedrooms at the Macdonald Manchester Hotel.
  • Refurbishment of 42 bedrooms, 21 suites and the leisure club at the Macdonald Bath Spa Hotel
  • Refurbishment and repositioning of the function suite, public areas and leisure club at the Macdonald Houstoun House Hotel, Uphall
The Macdonald Rusacks Hotel in St Andrews has planning permission for a 44-suite extension and a rooftop restaurant, bar and terrace and the Macdonald Compleat Angler, Marlow has planning permission for 29 river-facing suites, a business centre and an extension to the existing function suite. The group also plans to create a 5-star quality hotel at its La Ermita resort in Mijas, Spain.
Fraser said that the group was keeping a watchful eye on Brexit negotiations and was working closely with the British Hospitality Association including participation in a Government Advisory Group.
He said: “The entire UK hospitality industry is concerned that the flow of EU workers, upon which we all depend to some degree, might be severely curtailed. We’ve therefore increased investment in our graduate programmes and in our internal hospitality development schemes, improving staff retention.
“In addition, all of our general managers have been establishing closer links with their local universities and colleges and we have also started working with The Prince’s Trust to provide valuable career opportunities in hospitality for a range of young people.”
Donald Macdonald, Executive Chairman, said: “I would like to take this opportunity to thank every one of our staff for their continued contribution and dedication to the success of our business.
“We never lose sight of the fact that we can only provide great service to our guests through a talented and valued workforce and this is a central focus for our superb management team which is ideally placed to realise the enormous potential that exists within our business and to drive forward the board’s quality strategy.”
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