Friendly held back by room rate pressure

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PRESSURE on room rates depressed earnings at Friendly Hotels, forcing profits down to pounds 2.5m before tax in 1992 against pounds 3.9m the previous year, writes John Murray.

Henry Edwards, chairman, said that occupancy levels had held up reasonably well, but that there was heavy pressure on pricing. But the company increased its final dividend to 3.5p - making 5.7p for the year against 5.5p - reflecting Mr Edwards' view that the worst of the recession was over. 'I'm cautious about predicting recovery after last year's false dawn, but I believe that there are signs that confidence is returning.'

He felt the group could advance in any event. 'We're profitable, we have low gearing, and we have disposed of the businesses that were peripheral.'

Friendly took a pounds 2.2m extraordinary charge against the sale of its quick service restaurants and Care Homes businesses, following a pounds 2.4m charge in 1991. Mr Edwards said he did not expect any further provisions.

Business had picked up since the beginning of the year and advance bookings looked healthier. 'We have been less affected by the recession than some other hotel groups because we are more concentrated in Scotland and the North of England,' he said. 'Scotland has held up quite well.'

A revaluation of Friendly's properties produced a small surplus on the book value, but the company has not included that in its accounts. Mr Edwards said that Friendly had always taken a very conservative line on values, which accounted for the surplus at a time when other concerns are making large write-downs.

Group turnover rose by just under pounds 1m to pounds 29.6m. Earnings almost halved from 16.3p to 8.9p. The shares closed unchanged at 156p.