Forte plans surge in spending
Thursday 13 April 1995
Forte will spend an additional £500,000 a week this year on development and refurbishment to reinforce its dominant position in the UK hotel market, and take further advantage of the continuing recovery in the industry.
Capital expenditure of £147m in the year toJanuary, results for which were announced yesterday, will rise to £180m. About two-thirdswill be spent on refurbishment and up to £60m on development, largely opening more budget-priced TraveLodges.
Forte's results conformed to the general recovery and changing trends in the UK and US markets, and also showed that trading in northern Europe remains flat while hotels around the Mediterranean are performing much better.
Underlying group profits before tax improved from £77m to £127m, matching forecasts by most analysts, who areexpecting a result this year of between£185m and £200m.The dividend is being held at 7.5p, although analysts think that a small increase to 7.6p for 1995/96 is likely, with earnings per share predicted to improve from 10.1p to up to 15p.
Forte's share eased 5p to 235p, despite several hotel industry analysts underscoring buy recommendations for the stock. The fall was largely attributed toslightly cautious remarks by Forte on the strength of the recovery in spending by consumers in the UK.
The recently-knighted Sir Rocco Forte, chairman, said: "There was a good performance all round. London was particularly strong."
Increases in occupancy levels enabled Forte to push throughaggressive increases in room rates. Occupancy grew by 6 percentage points in London and international hotels, and by 5 points in the provinces.
Forte declined to break down the figures further. But Paul Slattery, analyst at Kleinwort Benson, reckons occupancies in London were about 83 per cent and the room rate had risen from £60.10p to £65 a night.
For the provincial hotels he put occupancies at 65.5 per cent, up from 61.2 per cent, and room rates at £41, up from £40. TraveLodge occupancy was, he added, about 79.5 per cent, down slightly from 80 per cent, but room rates improved from £27.20p to £28.
Sir Rocco said overseas hotels performed well, albeit from a low base. "There is significant room for improvement."
The recently-acquired Meridien chain had been integrated, withthe loss of only four management contracts in the US. "We have got Meridien under control. There were no surprises in the business."
Stripping costs out of Meridien is well under way, and the last remaining high-cost centre to be tackled is the company's former head office in Paris.Analysts believe that Forte has no need to call on shareholders to fund its developments.
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