Malmaison Hotel du Vin Holdings bullish despite £23.8 million pre-tax loss

UK: Malmaison Hotel du Vin Holdings says it is performing well despite a near £24 million pre-tax loss due to restructuring costs.

UK: Malmaison Hotel du Vin Holdings says it is performing well despite a near £24 million pre-tax loss due to restructuring costs.

Finance director Paul Roberts said the group, which operates 29 hotels across the UK, had delivered a solid performance in its first full year of trading since being bought by US private equity fund KSL Capital Partners in March 2013.

In the year to June 30, 2014, sales and EBITDA had grown in line with the UK economy, the company said. Turnover was up 5.1 per cent at £119.9 million, and gross profit was up 7.3 per cent at £69.4 million. However, an exceptional payment of £20.1 million for an impairment of tangible fixed assets and group restructuring costs resulted in an operating loss of £6.3 million and a pre-tax loss of £23.8 million.

“We continue to see our properties perform at the top of their respective competitive market groups, and to be recognised as the leading boutique hotels brand in the UK,” said Roberts. “Performance during the year was impacted positively by the upturn in the general UK economy, and the positive contribution from the full renovation at our Malmaison London property. Future performance will benefit from the extension and refurbishment of our Hotel du Vin property in St Andrews, the impact of the new Malmaison Dundee, and the continued improvement in our markets.”

During the year the group reassigned its £70 million debt facility and incurred administrative expense costs of £322,692 on behalf of its parent company MHDV Holdings (UK) Ltd.

Roberts said that the group’s external debt had been successfully refinanced, and a further option had been established to its facility to take advantage of growth opportunities. This enabled the group to look at development opportunities, and the refinancing process also saw an adjustment to the underlying valuation of the group’s properties after an external valuation.

The restructuring of the group “streamlined the corporate structure and allowed the business to react quickly to new opportunities”, added Roberts.

It is widely expected that KSL will sell Malmaison Hotel du Vin Holdings in the short to medium-term. In December 2014 it appointed UBS to conduct a review of strategic options for the group.

Editor’s Comment

With rumours of an imminent sale doing the rounds, Malmaison Hotel du Vin’s latest results have a definite air of putting the company’s affairs in order to make the group as saleable as possible, leaving no nasty surprises to be discovered during due diligence. Denver-based KSL Capital Partners bought the group for almost £200 million two years ago, and is reportedly looking for a sale price of around £350 million. Having very much spearheaded the growth of the UK boutique hotel category in the 90s, the brand suffered from growing competition and the recessionary years took its toll with a lack of reinvestment in the hotel portfolio. Discussions with its 75 per cent-owned subsidiary, MWB Business Exchange plc, over who is liable for intracompany loans and payments totalling £12.8 million contributed to a share price suspension in late 2012 with little value remaining for shareholders. Since the KSL purchase, the company has expanded to 29 properties after a £3 million conversion of a hotel in St Andrews to a Hotel du Vin, the opening of a Malmaison in Dundee, the near-£20 million purchase of Cannizaro House in Wimbledon and its £1 million relaunch under the Hotel du Vin brand, as well as implementing new IT systems. It is a respected and well-liked brand in the UK and the KSL cash has clearly helped, but the prime position it once held has been lost amongst fresher, nimbler and arguably more innovative boutique and lifestyle hotel brands.

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