The revaluation of Swallow Hotels, the first since 1988, reduces the book value of the hotel chain by one-third from pounds 348m to pounds 230m. The move means each room in Vaux's 34-strong chain is valued at pounds 61,000 against pounds 91,000 previously.
Overall group pre-tax profits for the year to 3 October dropped by 10 per cent from pounds 34.3m to pounds 30.9m.
Vaux said the decision was prompted 'as the recession has caused severe asset depreciation across many areas of UK property'. However, the reappraisal - the size of which took analysts by surprise - has had no impact on annual profits. The pain of the write-off is taken by the group's balance sheet, where the revaluation reserve now stands at pounds 105m, down from pounds 221m this time last year.
Trading in hotels, which account for 31 per cent of turnover, also continued to be poor. Profits rose 1 per cent to pounds 12.5m but occupancy levels and the rate Vaux managed to charge per room declined. Paul Nicholson, chairman, described the prospects for hotels as patchy.
Trading profit from brewing increased 27 per cent to pounds 19.5m, but largely because Vaux expanded its estate of pubs. Vaux, which brews Samson strong ale and supplies Labatt's Canadian lager under licence, has taken advantage of the Beer Order regulations, buying outlets as large brewers have been forced to reduce the size of their estates.
Vaux also owns 21 nursing homes and is building a further five. It raised profits from the division to pounds 4m from pounds 3.2m and widened profit margins from 28 to 31 per cent.
Trading profit across the group rose to pounds 39m. However, increased borrowings to fund the expansion in pubs and nursing homes pushed interest charges up to pounds 12.3m from pounds 7.6m. Earnings per share fell to 19p from 20.3p but the annual dividend was raised from 9.2p to 9.35p.
The stock market took the asset write-down in its stride. The exposure to hotels makes Vaux attractive to investors looking to capitalise on the early signs of economic recovery.
Shares in the group rose 6p to 216p.