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’s 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 £96.5m to £91.22m.
But fresh valuations of its assets triggered a £25m impairment charge which affected its bottom line.
Last year’s operating profit of £7.7m swung to a loss of £26.06m as a result, with the overall loss coming in at £33.5m compared to 2019’s £2.02m.
During the year the group spent £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’s EBITDA reduced by 63% and directors said the closure of St Georges Hotel during its makeover contributed £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 “given 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”.
The accounts detail how the pandemic impacted the last six weeks’ trade in the accounts year and how it “continues to be a significant issue and challenge post year end”, leading to Cairn Group pausing refurbishments.
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In a report accompanying the accounts, directors said: “Looking 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.
“The 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.”
The group’s leisure property and development portfolio was valued at £334.3m in the period - down on a previous, third-party valuation report giving it a value of £374.3m, a figure which led to the impairment charge of £25.1m.
Since the year-end, 14 hotels have been valued for bank security, leading to valuations dropping 7% to £100.1m, caused by “the positive impact of refurbishment works between valuations and uncertainty around future cash flows”, 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 £2.187m from the job retention scheme in the financial year, and a further £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: “Over a number of years the business has expanded and we’ve been proud of buying and refurbishing leisure properties, creating jobs, training staff, and welcoming so many guests.
“Throughout 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.
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“Meanwhile, 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.
“Our staff have been brilliant, before the pandemic and throughout, and I’m confident they will continue to be in the future.
“We would like to take this opportunity to thank everyone for all they have done during the pandemic. We’re 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.”