The directors of Peel Hotels have voiced their confidence in the business despite the group's interim financial results highlighting "material uncertainty" for the company.
The group, which owns and operates nine properties, details a breach of covenant and challenging trading in its half-year results for the 28 weeks ended 12 August 2018. Peel Hotels is hoping a marketing agreement with Best Western Hotels announced earlier this month, where all properties are set to join the consortium's soft brands, will boost sales.
"If we can consistently achieve increases in sales, our profits will quickly return to growth," said chairman Robert Peel.
He added that, while the comparative shortfall in earnings in the first three periods of the year will be difficult to make up by the end of the financial year, sales have stabilised and for the "first time in many periods" increased in the current period (ended 7 October 2018).
The continuing slowdown in demand in provincial areas of the UK, combined with increases in living wages, business rates and energy have created challenges to the profitability of the group. Against this, the group has decreased its overall wage costs and group overheads, resulting in an overall saving of £72,737.
On 12 August 2018 the group's overall net debt stood at £8,859,610.
On 22 April 2018 the company breached its financial covenants, which was recognised by the bank. However, the report said that the bank - listed in the report as Allied Irish Bank - had confirmed "its current intention not to exercise any of its rights in relation to the breach".
The chairman's statement said while directors "recognise that the breach of covenant, combined with a challenging trading outlook, results in material uncertainty for the company, and increases the possibility that the company may be unable to continue realising its assets and discharging its liabilities in the normal course of business which might impact upon the company's ability to continue as a going concern, they are confident that the company has adequate resources to meet its commitments".
In the 28 weeks to 12 August 2018 profit before tax for Peel Hotels decreased from £319,293 during the same period in 2017 to £8,972, while sales decreased 6.4% to £8.1m.
Over the same period earnings before interest, tax and depreciation (EBITDA) decreased 42% to £649,534. Revenue per available room (revpar) decreased 3.1% with occupancy down 6.4% and average room rate up 3.5%.
Having spent £151,885 so far, Peel Hotels plans to spend a total of £500,000 in the current financial year on improving standards and maintaining the fabric of its buildings.
The company's properties include the Bull in Peterborough, the Midland in Bradford, the Cosmopolitan in Leeds, the Caledonian in Newcastle, the Crown & Mitre in Carlisle, the Strathdon in Nottingham, the George in Wallingford, the King Malcolm in Dunfermline and the Norfolk Royale in Bournemouth.