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Macdonald Hotels poised to sell four sites as it pays down more debt

24 October 2017 by

Macdonald Hotels has reduced its core net debt to a 14-year low and is poised to reduce it further if the sale of four sites to a residential developer goes through.

The news emerged as the company, which claims to be the UK's largest independent operator of four- and five-star hotels, unveiled its annual financial results. Like-for-like hotels and resorts turnover rose by 5% (£7.8m), while pre-tax profit was £5.6m.

The company said it had reduced its net core bank debt to £184m and has already agreed legal documentation to sign formal agreements with an unnamed UK housing developer to take on two hotels that have been closed for a number of years, and development land at two other hotels that are still operating. Macdonald declined to reveal where the sites that it aims to sell are.

Gordon Fraser, deputy chairman and group managing director (pictured), said: "The cash receipts from these deals and from other, non-hotel developments, which have been independently valued at over £100m, will help further reduce our debt and will be reinvested in our hotels and resorts to realise the board's strategy of achieving ‘red star' status at 10 of our hotels and ‘five star' status at 10 others. This will be in addition to the existing four-red-AA-star Macdonald Compleat Angler hotel, Marlow; the five-AA-star Macdonald Randolph hotel, Oxford; and the five-AA-star Macdonald Bath Spa hotel."

The company sold the Macdonald Swan's Nest hotel in Stratford-upon-Avon, Warwickshire in May 2016 to Asian-based investment fund CL Capital, following the previous year's sales of the Macdonald Old England hotel in Windermere, Cumbria and the Macdonald Marine hotel in North Berwick, East Lothian. The loss of trade from those three hotels has reduced overall group turnover by £8m to £154.2m and operating profits by £3m compared with 2015/16.

Fraser added: "Our best-performing hotels are those where we have committed significant investment, underlining that the key to our future growth is continued investment in our estate and in our people, and we've made a series of senior appointments which significantly strengthen our management team.

"These key, strategic appointments put us in a great position to capitalise on the major opportunities ahead of us, such as the fact that most of our hotels have significant scope for future hotel development and also for residential development."

The majority of sales growth in the results to March 2017 had come from the commercial and conference market, driving a 5% increase in average room rates, he said.

Commenting on current trading, he added: "A 30% growth in group business, much of which is from Japan, China and the US, helped by the weaker pound, has supported a 2% increase in both like-for-like hotel sales and profits.

"The current year has also seen some exceptional cost increases, in particular due to the national minimum and living wages, the apprenticeship levy, business rates and utilities, which have collectively added £2.4m to costs. These increases require the group to improve productivity and to continue to reduce energy consumption through the implementation of its new ‘Room 20' environmental strategy".

Macdonald Hotels has recently opened Bistro Deluxe by Paul Tamburrini at the Macdonald Holyrood hotel in Edinburgh, in a joint venture with the former executive chef of Edinburgh's the Honours and One Devonshire Gardens in Glasgow.

In addition, it has completed the refurbishment of 33 bedrooms and five suites at the Macdonald Forest Hills hotel near Aberfoyle and the refurbishment and upgrading of the meeting rooms at the Macdonald Inchyra hotel and spa near Polmont, Falkirk.

Future projects include: the refurbishment of 100 bedrooms at the Macdonald Manchester hotel; the refurbishment of 42 bedrooms, 21 suites and the leisure club at the Macdonald Bath Spa hotel; and the refurbishment and repositioning of the function suite, public areas and leisure club at the Macdonald Houstoun House hotel, Uphall, West Lothian.

The Macdonald Rusacks hotel in St Andrews also has planning permission for a 44-suite extension and a rooftop restaurant, bar and terrace, and the Macdonald Compleat Angler, Marlow, Buckinghamshire has planning permission for 29 river-facing suites, a business centre and an extension to the existing function suite. The group also plans to create a five-star quality hotel at its La Ermita resort in Mijas, Spain.

But Fraser revealed he had concerns about Brexit and was working with the British Hospitality Association (BHA) on the issue.

He said: "The entire UK hospitality industry is concerned that the flow of EU workers, upon which we all depend to some degree, might be severely curtailed. We've therefore increased investment in our graduate programmes and in our internal hospitality development schemes, improving staff retention. In addition, all of our general managers have been establishing closer links with their local universities and colleges and we have also started working with the Prince's Trust to provide valuable career opportunities in hospitality for a range of young people."

Donald Macdonald, executive chairman, added: "I would like to take this opportunity to thank every one of our staff for their continued contribution and dedication to the success of our business. We never lose sight of the fact that we can only provide great service to our guests through a talented and valued workforce and this is a central focus for our superb management team which is ideally placed to realise the enormous potential that exists within our business and to drive forward the board's quality strategy."

Macdonald Hotels reduces debts and achieves profit of £55m >>

Paul Tamburrini to launch Bistro Deluxe at Macdonald Holyrood hotel >>

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