Stakis bounces back into black
STAKIS, the Glasgow-based hotel and casino group which was on its knees three years ago, surviving by the grace of its banks, has turned a loss of £47.4m in 1992 into pre-tax profit of £10.4m in the year to 3 October 1993.
Chairman Sir Lewis Robertson said: "Nearly three years ago I was brought in as chairman when things were looking very different for Stakis. Nearly two years ago I found David Michels and persuaded him to join me as chief executive.
"Now I take great pleasure in presenting accounts which show a company well on its way into a period of sustained and stable growth - a company which is in every way under control."
Sir Lewis said the improved performance owed little to the market and virtually everything to the group's own endeavours. The performance, which was at the high end of City expectations, reflected a restructuring and simplification of banking arrangements and the disposal of the Healthcare division.
"The other factor was the solid and increasing effect of the application of purposeful and pragmatic management under David Michels, building on the service-orientated values embodied in Stakis's staff," said Sir Lewis.
Stakis's finances are well balanced and under control. Borrowings, down from £197m to £117m, are less than half of shareholders' funds, and the group's key banks are supportive and want to be part of its growing enterprise.
In the past financial year Stakis was able to purchase a hotel in York and three more casinos. The acquisition was funded from a rights issue and share placement totalling £37.5m.
The valuation of hotels has been a prominent issue since the suspension of Queens Moat Houses almost a year ago, so the revaluation of Stakis's hotel stock was keenly awaited. The group's hotels and casinos were revalued at the end of September at £41m below the last valuation three years earlier.
Under the independent valuation, the group's 3,795 hotel bedrooms have an average value of £77,000, or £69,000 excluding its one London property. They were previously valued at £82,000 per room. The controversial 1993 hotel valuation at Queens Moat Houses showed an average of £40,000 per room.
Sir Lewis said: "Actual earnings are an important factor in valuing hotel property, and the new valuations reflect those earnings because our hotels are performing well in the market."
However, valuing the entire property portfolio in one lump every three years can have a drastic negative effect or, as in the late 1980s, a positive effect on the balance sheet. From now on Stakis, in line with other hotel groups such as Forte, will re-value one third of its assets every year starting in September this year.
Mr Michels said the division of 31 hotels performed reasonably well in what was and still is a difficult market. He was relatively happy with the annual occupancy of 68.5%, which was four points ahead of the previous year, but achieved room rate had slipped by 60p to £39.74.
However, measured against other similar three- and four-star UK hotel chains such as Swallow, Stakis had performed creditably.
The hotel division managed to increase its operating profit from £15.9m in 1992 to £19.6m in the 53 weeks to 3 October 1993. Turnover grew from £83.2m to £86m. The increase in operating profit was a combination of extra hotel sales and improved margins, which were up four points to 26% after rent.
Mr Michels told Caterer that the increase in hotel business came mainly from the UK leisure market, although he had seen signs since September of a slight increase in corporate business. Of future trading, Mr Michels said he was "gently hopeful".
