The Board of Directors of Suncrest Hotels plc met on 18th January 2006 and approved the financial statements for the year ended 31st October 2005. The audited financial statements will be submitted for the approval of the shareholders at the forthcoming Annual General Meeting on 29th March 2006.
October 2005 Full-Year Results
After a weak demand exhibited during the first six months of the financial year, turnover in the second half improved significantly for a total turnover during the financial year ended on 31 October 2005 to amount to Lm2.65 million, a slight improvement over 2004. The marginal increase in turnover emanated from the hospitality industry’s growth in occupancy and average room rates which mainly affected the four-star market. Suncrest Hotels plc registered an annual occupancy rate of 67% and a marginal increase in average room rates. Despite the company’s efforts to improve the second half results, Suncrest Hotels plc failed to maintain the average performance of the four star market.
During the year under review, operating costs originating from wages, salaries and overheads but excluding amortisation and depreciation increased by 8.5% to Lm2.4 million. Although this increase may appear significant it must be borne in mind that in October 2004 there was a one time management fee reversal of Lm101,069, which makes this year’s cost appear significantly higher. Excluding this one time reversal, operating costs for October 2004 increase to Lm2.3 million bringing this year’s rise to 3.7%.
As a result of higher operating costs, gross operating profit before amortisation and deprecation fell significantly from Lm423,708 to Lm279,000 inclusive of the reversal in the management fee described above. During the year to October 2005 Suncrest Hotels plc registered a loss before taxation amounting to Lm196,624 compared to a profit to a minimal profit of Lm1,229 in 2004. After accounting for taxation the loss of Lm132,000 translates into loss per share of 1c32.
As at 31st October 2005, total assets for Suncrest Hotels plc amounted to Lm8.4 million from Lm9.3 million in October 2004. This drop could be attributable to the reduction in the value of the principle asset in the financial statements. In this week’s company announcement it was stated that in the light of the poor operating results the value of the Hotel was reduced to Lm6.2 million. Shareholders’ funds of Lm3.4 million translate into a book value per share of 34c.
Developments and Outlook
In view of the underperformance exhibited by Suncrest Hotels plc during the year under review, the Directors are taking the necessary precautions to ensure that its operational performance and liquidity improve during 2006. In order for the Company to be able to secure higher occupancy levels and firmer room rates, the Board intends to start refurbishing the guest bedrooms in line with guest expectations and industry standards. These refurbishments will be carried out during 2006 and 2007. In order to reduce the operational cost base and eliminate certain loss making units, the Company intends to lease out food and beverage outlets to independent operators. In addition, since vacation ownership accommodation progressed well the Directors have agreed to convert a further 5 units. This project is deemed to be complete by early 2006.
The Directors of the company believe that Winter 2005/2006 will remain difficult for the four star hotels in the north of the Island as arrivals to the Hotel’s main markets are declining. On the other hand, the forward booking position for Summer 2006 shows a significant increase over 2005 and this ought to contribute towards achieving improved results for the next financial year. Finally, the Company stated that it has plans to refinance its bond, which will mature in March 2007.
It is important to note that the auditors of the Company drew attention that the financial statements of Suncrest Hotels plc have been prepared “on a going concern basis on the assumption that the company will improve its operational performance and cash generation to a level which will enable it to continue to meet its commitments as they fall due and that it will be successful in refinancing its remaining bond redemption commitments in 2007”.