MACDONALD Hotels yesterday unveiled a refinancing package that will allow management to take full ownership of the firm.
Executives now own 100 per cent of the share capital of the Bathgate-based firm, after the 50 per cent stake owned by Lloyds Banking Group was swapped for £5.5 million in loan notes.
Lloyds is also providing a £299m banking facility, which is on a five-year basis and replaces a similar three-year deal.
Finance director Gordon Fraser said the deal marked “another significant milestone for Macdonald Hotels” providing greater financial stability and the firepower to invest in its 45-strong estate.
The group intends to reduce its debt over the period and has just completed a sale and leaseback deal for its Macdonald Randolph Hotel in Oxford.
The company has also been granted planning permission for 1,400 houses on a 200-acre site in Hampshire which is expected to net at least £55m, although the project is awaiting the outcome of a judicial review.
Fraser said: “Although it is our plan to reduce our debt further over the next few years, the new banking facilities allow for capital expenditure of over £70m over the five-year term.”
The firm has invested heavily to move its estate up market, and it said that those hotels already refurbished were behind a 7 per cent increase in operating profits to £14.9m for year ended 28 March 2013, up from £13.8m the year before.
After a number of exceptionalcharges, the firm’s bottom line showed a £6.1m loss.
Turnover was almost flat at £138.6m, and chief executive David Guile said the operating performance was driven by an increase in average room rates as well as cost efficiencies that bolstered the firm’s margin.
He added: “The increased operating profit has mainly been achieved from those hotels in which we have recently invested, such as the Macdonald Inchyra Hotel and Spa near Falkirk, as well as from the five-star Macdonald Randolph Hotel and the Macdonald Aviemore Resort, which is going from strengthto strength and which will be thesubject of a £5m investment programme in the year ahead.”
The firm invested £8.7m in refurbishments in 2012-13, and more than £13m in the financial year just ended. The package included spending on hotels in Aviemore, Edinburgh, North Berwick and Stirling.
Guile said Macdonald achieved sales and profit growth of 5 per cent and 7 per cent respectively in the year to March 2014, driven primarily by a 4 percentage point growth in occupancy.
He said the Scottish market had performed slightly better than that down south, with the firm’s hotels northof the Border averaging 6 per cent sales growth and 9 per cent ahead on profits.
Guile added that management has been running a long-term plan to maximise the benefits of the international events coming to Scotland thisyear, which it hopes will boost trade further.
Scotland’s hoteliers anticipate a busy year, with the Ryder Cup being held at Gleneagles and the Commonwealth Games in Glasgow, as well as the “year of homecoming” programme of events.