Gresham Hotel group continues to struggle with debt

The Gresham Hotel Group returned to operating profit in 2012 but is still struggling with excessive debt, accounts just filed by its holding company show.

Precinct Investments, owner of the group, has reported a pre-tax loss of €1.2 million, a huge improvement on the €26.2 million pre-tax loss reported for 2011.

The consolidated accounts show that turnover grew to €16.5 million in 2012, up from €15 million the previous year, with operating profits jumping to €4 million from the previous year’s operating loss of €20 million (the group booked a property impairment of €21 million in 2011).

Finance costs for 2012 were €5.3 million, down from the €6.2 million recorded in 2011. The group's loans are with the National Asset Management Agency and the accounts say the group is dependent on its continued support.

Asset dispoals form a key part of the group’s future plans, the accounts say. A request for a comment from the group met with no response.

“There is no guarantee that future funding will be available to the group on a commercially acceptable basis, or at all,” the group’s auditors, PwC, say in their report accompanying the accounts.

The directors, in their report, say 2012 saw an improvement in trade with the hotels continuing to perform ahead of their competitive set, and benefitting from the overall upturn in the hospital sector, particularly in Dublin.

The upturn in revenues occurred against a backdrop of continued cost containment, “which greatly benefitted profit conversion”.

The Gresham Group comprises the Gresham Hotel on O'Connell Street, Dublin, and the Gresham Metropole Hotel, MacCurtain Street, Cork. Precinct Investments is owned by the property developer Bryan Cullen. Precinct took the Gresham Hotel Group plc into private ownership in 2004 in a €117 million deal.

The accounts say the group has been suffering losses because of the high level of debt arising from the privatisation and the subsequent asset devaluations.

The consolidated balance sheet for Precinct shows accumulated losses at the end of 2012 of €110.8 million.

The accounts say the group’s €125 million bank debt is payable on demand. They say the directors have prepared financial projections which have been “reviewed” by Nama and that the directors do not believe Nama will, in the foreseeable future, call for the debt’s repayment and will limit interest payments to the amount which the group can generate.

“The group’s funding facilities will require to be successfully renegotiated in the future and the directors would highlight that asset disposals formed a central part of the strategic plan for the group”.

The group employed an average of 188 people during the year, up from 184 the previous year. Staff costs were €7.3 million, up from €6.9 million. Directors’ remuneration was €280,000. The group closed its employee defined benefit scheme during 2012.