• Dawnay Shore delivers thanks to valuation uplift

Dawnay Shore Hotels, the owner-operator set-up to give stock market investors the opportunity to access private equity type return via the listed vehicle the Hotel Corporation, has pushed like-for-like operating profits up 2.9% during 2005.

During the year the company bought seven hotels, increasing its room count from 1,800 to 2,700 across 20 properties.

Looking at the 16 longest held hotels (excludes the three Furlong properties and Walton Hall), revpar was modestly up at £101.36 compared to the previous year's £100.08, a rise of 1.3%.

Hotel operating profit, which is EBITDA excluding head office costs, was up £1m or 2.9% to £33.1m.

The AIM-listed Hotel Corporation owns 49.9% of DSH. This holding represents its principal asset. It reported a profit of £11.5m, including a revaluation gain. During the year it has paid, or is about to pay, a total of 5.8p in dividends.

The structure of the group, with debt accounting for four times the amount of equity, means that shareholders in the Hotel Corporation have a highly leveraged play. During the past year, this has worked to the benefit of shareholders and while hotel property prices remain robust, a strong return can be expected.

At the interims, DSH reported a revaluation by Colliers Robert Barry that put a figure of £314m on the chain. This translates to a 24.5% uplift in net assets per share at year end, if the four most recently acquired assets are booked in at cost.

As well as passively benefiting from an increase in value, DSH is seeking to drive further increases through development activity. It cites the example of the Paramount Redworth Hall where a forthcoming 39-room extension is set to yield a net £4m after accounting for construction and financing costs.

DSH said that rising energy prices were such that turnover needs to climb by between 2% and 3% to offset increased costs.

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