Jarvis Hotels to spend more on health clubs

Jarvis Hotels, which paid pounds 16m for three hotels in January, is to undertake a pounds 30m capital expenditure programme over the next 18 months to extend its existing buildings and add more leisure clubs.

The chief executive, John Jarvis, said the group remained alert to acquisition opportunities, but organic growth offered higher returns.

The plans include the construction of four more Sebastian Coe branded health club complexes in the year, taking the total in the group to 21, he said.

The former Olympic athlete has been retained as technical director to the group for a further five years, Mr Jarvis said.

His comments came as the group, which floated at 175p a share a year ago, announced a 29 per cent jump in profits to pounds 24.1m for the year to March. Turnover grew 16 per cent to pounds 118m, while earnings per share were up from 10.7p to 13.7p.

The group is paying a final dividend of 2p, making a total of 3p for the nine-month period covered since the flotation or an annual total of 4p on a pro forma basis. Gearing fell from 177 per cent to 40 per cent over the 12 months. The company is in the process of further reducing borrowings by selling six of its smaller hotels, with one sale already completed since the year end.

Mr Jarvis said they had delivered exactly what they had undertook to do in the flotation prospectus - "increase turnover, improve margin, deliver substantially increased profits and, through acquisitions and capital investment, build an even stronger portfolio for the future."

Mr Jarvis said the health clubs were one factor in the improvement in group operating margins from 32 to 33.5 per cent last year. "Those margins are the best in the middle market sector and we are happy to retain that level," he added.

He remained optimistic about the outlook for the industry, countering any suggestion that the buoyant UK hotel market might be reaching the peak of a cycle.

"The current strength is totally to do with the strength of the UK economy. There is no such thing as a hotel cycle. It is due to the economy and as long as it remains strong so will our markets", he said.

Separately, Thistle Hotels announced it was raising pounds 60m of 77/8 per cent debenture stock maturing in 2022 to replace existing borrowings. The final redemption yield was set at 7.961 per cent after the price was set at pounds 99.075 per pounds 100 nominal of stock.