Jarvis profits slashed by 42%

Jarvis Hotels has seen pre-tax profits slashed by a massive 42% in the wake of foot-and-mouth and 11 September.

In the year to 30 March pre-tax profit before exceptional items fell by 41.6% to £17m, compared with £29.1m in the previous financial year. This was on turnover down by 8.2% to £162.6m.

Chairman John Jarvis said: "The series of extraordinary events last year had a material impact on important parts of the business."

The huge fall in pre-tax profits was mainly caused by a drop in occupancy from 68.8% to 65.5%.

Average room rate was fractionally down at £53.34, against £53.38 in 2001. Jarvis said an "active marketing programme" had helped hold back the decline.

Revenue per available room was down by 5% at £34.91, compared with £36.74 a year earlier.

Hardest hit were the group's commercial markets, particularly in London and the Home Counties, with rooms turnover here down by 12.4%. Business from groups and tours, mainly from abroad, fell by 20.4%.

During the year, Jarvis rebranded 56 hotels under the Ramada International flag. It also set up a new management division to run hotels without owning them. This division signed deals to operate two new properties at Glasgow Airport, one under the Ramada flag and the second as the first UK franchise of the Travelodge brand, owned by Compass.

Major redevelopments were completed at the Ramada Guildford/Leatherhead and Ramada Chester hotels. Total capital expenditure during the year was £19.4m.

Five smaller hotels "that no longer fit the Jarvis brand" are being sold off. Two of them are under offer and one deal has completed.

Jarvis now runs 67 hotels in the UK, with some 6,900 bedrooms.

John Jarvis said: "Despite the difficult trading background, the board remains committed to its strategy to deliver shareholder value by evolving the company into a hospitality management services group, establishing links with major international hotel brands and reducing the emphasis on the ownership of hotel properties."

He added: "It remains the board's intention to market a portfolio of hotels for a sale-and-leaseback transaction as soon as conditions are appropriate."

In the 12 weeks to the end of May, weekly sales had been improving, the company said, although they were still below last year's levels.

It added: "We have taken strong action to control costs throughout the business, to limit all expenditure and capital programmes and to maximsie cash generation through carefully targeted marketing initiatives."

Payroll costs and other overheads have been cut to reflect the reduced turnover. Hotel management teams are to be re-organised to cut payroll costs further this year and directors and senior executives have agreed to a pay freeze.