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De Vere suffers from dip in profit

30 November 2005

British hotel and leisure operator De Vere Group posted a 7.8% dip in full year pre-tax profits today, but remained "cautiously" upbeat for the coming year.

Chief executive Carl Leaver at a conference call after the results said: "Despite on-going cost pressures we are cautiously optimistic for the current year."

Pre-tax profit before exceptional items to 25 September was £42m, down from £45.6m the year before. Turnover was also down at £312m, a 3% fall on 2004.

Among exceptional items was the sale and manage-back deal for the group's flagship hotel, the De Vere Belfry in Warwickshire earlier this year. The hotel was sold to the Quinn Group for £186m.

A property revaluation of the group's entire portfolio, which includes 19 De Vere hotels, 14 Village hotels and Greens health and fitness clubs, put asset £102m above book value.

This boosted net asset per share to 786p, up from 519p previously.

Analysts predicted the revaluation would make the asset-rich hotelier a more attractive proposition for potential private equity groups.

Operational performance across the De Vere hotels showed a like-for-like increase in revenue per available room (revpar) up 5.2%, with occupancy also up 0.5 percentage points to 75.1% and average room rate improving by 4.6% to £ 87.45.

The Village hotels saw a decline in occupancy by 1.9 percentage points to 78.7%. Average room rate was up by 3.2% to £56.88 with revpar ahead by 0.7% across the year.

Chairman Peter Daresbury remarked that cost pressures from energy and business rates would continue to place pressure on margins into 2006.

"However, these increases will be partially offset by continued progress expected on operational efficiency initiatives," he said.

He also predicted continuing growth of the brand. "We continue to grow De Vere into new geographic markets through low capital intensive routes, evidenced by the agreement of a second management contract in Spain."

He added that the growth of the Village brand continued apace with three sites under construction, two having exchanged contracts subject to planning, and three more in the advanced stages of negotiation.

The new sites being built are in Bournemouth, Hull and Swansea. Two new Village hotels at Leeds and Elstree, likely to go ahead, subject to planning.

By James Garner

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