Land sale boosts Macdonald profits
Sterling fall has led to upsurge in hotel bookings from China, Japan and US
MACDONALD Hotels has revealed a land sale lifted profits to £55 million in its last financial year, as it signalled the collapse in sterling since the Brexit vote has sparked an “avalanche” of bookings from China, Japan and the US.
Bathgate-based Macdonald, which has 55 hotels and resorts in the UK, Ireland, Spain and Portugal, said profits jumped last year thanks to the sale of land at Macdonald Botley Park in Southampton.
The sale, which Macdonald managing director Gordon Fraser described as the “equivalent of a corporate lottery win”, saw Macdonald offload its land at Botley Park Golf Course to three developers.
Macdonald said it was the single biggest contributor to a £57.2m gain on the sale of assets, and would make further inroads into its debt pile, which the company said had dropped below £200m having soared above £700m in 2003.
And the company, chaired by founder Donald Macdonald, flagged it was close to concluding deals on two joint ventures which would see it realise value on other land it holds throughout the UK. It said the deals, one worth £50m and the other £40m, would unlock funds to reduce its debt further and invest in its properties. Current projects under way at Macdonald include the bedroom refurbishment at the Macdonald Holyrood in Edinburgh and the “remodelling” of the Macdonald Hopetoun House, in West Lothian, and Macdonald Forest Hills near Aberfoyle.
Mr Fraser noted Macdonald had walked away from offers worth £30m to sell the land in question last year in favour of the joint ventures it is pursuing now.
He said: “We’ve entered into head of terms [on] both sites with partners which will give us a share of the development profit. That is the best way forward for us.
“We have got £50m and another £40m to come, and potentially more beyond that. If we can invest half of that in the business, [and] reduce the debt with the other half, that’s a solid business model for us.”
Mr Fraser added: “We are quite unique, I believe, in our sector, that we have got assets of that development land potential. But we are a not a property company, we are hoteliers, therefore we will leave the development to the specialists.”
The latest accounts for Macdonald show that it booked an operating profit up by five per cent to £17.7m, in the year ended March 31, on turnover up five per cent to £163.4m.
Mr Fraser signalled his satisfaction with the progress against the prior year, when the hotel industry was boosted by events such as the Commonwealth Games and Ryder Cup. That year the company saw turnover grow by seven per cent to £155.7m, with operating profit rising by 11 per cent to £16.9m.
However he was more bullish about Macdonald’s current prospects, stating that the collapse in the value of the pound versus the dollar has led to a flurry of bookings from the US, China and Japan.
Noting that the weaker pound has also boosted “staycations” at Macdonald hotels, he said: “Our booking systems now allow us to look quite far ahead at our forward bookings. We have been looking at bookings from April ’17 through to March ’18 from our group business, which is the in-bound travel from China, Japan [and] the USA, and it is an avalanche of bookings.
“It is really significant [and] it is actual bookings – this isn’t inquiries. These are the markets that are coming to us. They already do, it is just the growth in these markets [and] it has to be currency related.”
Asked whether Macdonald has faced any headwinds as a result of the Brexit vote, he highlighted the impact of higher costs from suppliers, including on food, which the company was working to manage.
On the pressure household budgets are expected to come under a result of rising inflation, Mr Fraser said it had still to have an effect, adding that it was “something we will keep a close watch on”. He noted: “We do believe we give excellent value for money and that will continue.”
The hotel boss flagged that the move towards the living wage presented a pressure on costs but said it was something the company was “100 per cent behind”.
Asked whether the company had set a timetable for all 4,000 staff to be put on the living wage, he said: “It is going to be driven by the financial health of the business and our ability to invest. That is most definitely the stated aim of the chairman, the board and myself.”