North East hospitality firm Cairn Group has paused all refurbishment plans for its hotel portfolio after warning of losses in the pandemic.
The Newcastle-headquartered group owns and runs hotels, bars and restaurants across the North East and beyond, including Newcastle鈥檚 Royal Station Hotel, Redworth Hall and Spa near Newton Aycliffe, and the Hilton Doubletree near Newcastle Airport.
The group has published accounts for Station Hotel (Newcastle) Ltd, which trades as the Cairn Group, for the year ended April 30 2020, in which turnover holds up well, only dipping slightly from 拢96.5m to 拢91.22m.
But fresh valuations of its assets triggered a 拢25m impairment charge which affected its bottom line.
Last year鈥檚 operating profit of 拢7.7m swung to a loss of 拢26.06m as a result, with the overall loss coming in at 拢33.5m compared to 2019鈥檚 拢2.02m.
During the year the group spent 拢23m on the development of its new and existing hotels, including investment into flagship assets including the St Georges Hotel in London, which was rebranded as the first Treehouse hotel. The firm鈥檚 EBITDA reduced by 63% and directors said the closure of St Georges Hotel during its makeover contributed 拢5.577m of the reduction.
In the accounts, the company said results for the year were impacted by the rebranding and total refurbishment of its largest hotels and the Covid-19 pandemic. It added 鈥済iven this, overall, the directors are satisfied with the results for the year and acknowledge the current challenges the leisure and hospitality sector is working in鈥.
The accounts detail how the pandemic impacted the last six weeks鈥 trade in the accounts year and how it 鈥渃ontinues to be a significant issue and challenge post year end鈥, leading to Cairn Group pausing refurbishments.
In a report accompanying the accounts, directors said: 鈥淟ooking forward to the year ending April 30 2021 and beyond, the group is trading in a very challenging and changing market due principally to the Covid-19 global pandemic and the government measures to try to control the virus.
鈥淭he portfolio of hotels and geographical spread has helped to marginally reduce the current inherent risk in the marketplace but significant changes do exist. The directors anticipate a further deterioration in trade in both group turnover and EBITDA in 2021 and have put on hold any further refurbishment plans.鈥
The group鈥檚 leisure property and development portfolio was valued at 拢334.3m in the period - down on a previous, third-party valuation report giving it a value of 拢374.3m, a figure which led to the impairment charge of 拢25.1m.
Since the year-end, 14 hotels have been valued for bank security, leading to valuations dropping 7% to 拢100.1m, caused by 鈥渢he positive impact of refurbishment works between valuations and uncertainty around future cash flows鈥, Directors have concluded that estimation uncertainty could continue because of the pandemic.
Accounts also reveal the firm made use of Government support, in the form of 拢2.187m from the job retention scheme in the financial year, and a further 拢8.477m in furlough and other grant assistance since the year end. It has also continued to apply for more assistance in the current year.
Following publication of the accounts, CFO Richard Warren said: 鈥淥ver a number of years the business has expanded and we鈥檝e been proud of buying and refurbishing leisure properties, creating jobs, training staff, and welcoming so many guests.
鈥淭hroughout the pandemic we have continued to keep the majority of our hotels open for key workers in a bid to assist where we can. We continue to welcome those guests and are pleased to have reopened our outdoor hospitality. We also continue to see large pick up in occupancy for the coming months, and our teams are excited to welcome our leisure guests back further.
鈥淢eanwhile, despite restrictions on us all, the business remains robust. As well as the negative impact of Covid, the reported results for April 2020 include the messages and impact of the refurbishment of two major hotels during that year. These refurbishments were completed at two of our largest properties, Treehouse Hotel London and DoubleTree by Hilton Harrogate Majestic.
鈥淥ur staff have been brilliant, before the pandemic and throughout, and I鈥檓 confident they will continue to be in the future.
鈥淲e would like to take this opportunity to thank everyone for all they have done during the pandemic. We鈥檙e pleased to be recruiting and creating jobs as we prepare to reopen our venues in full when restrictions allow. I believe that hospitality can and will become bigger and better than ever.鈥
