De Vere shrugs off Guinness pressure

DE VERE Hotels, the group under major pressure for radical action by activist shareholder Guinness Peat, today moved to pacify investors with an upbeat assessment of the market.

New chief executive Carl Leaver, who joined from Whitbread's Travel Inn in September, said that recent booking patterns had been 'more encouraging' after a volatile year.

The past nine weeks had seen total group turnover jump 3.4% against a tough comparative period last year, with its Greens health clubs putting in growth of 8% while its upmarket De Vere Hotels had posted a 1.3% increase and the leisure-oriented Village Hotels' sales were up 1.2%.

On the industry standard performance measure of revenues per available room (revpar), the Village hotels increased 4.7% while the four-star and five-star chain improved just 0.5% - a significant slowdown on the previous 12 months.

Guinness Peat is keen for Leaver to spin off the De Vere Hotels arm to create shareholder value. The investor's UK executive director Blake Nixon claimed De Vere has earned a return of just 6% on its investment of £200m in buying new sites in the past four years.

Nixon would alternatively like to see the De Vere freeholds sold off with the cash used to roll out the 14 mid-market Village hotels.

Leaver today stressed that both hotel brands were currently outperforming the market. In the year to 28 September, DeVere's revpar of 2.4% compared with the market's 2% decline while Village notched up a 2.1% improvement.

Possibly in a reference to Nixon's agitation, Leaver said: 'One of my key responsibilities will be to ensure a rigorous approach to capital allocation, directing expansionary capital to the highest returning investments.'

Future investment is likely to be focused on the Villages, he said, adding that De Veres were capable of creating more shareholder value 'through less capital intensive routes'.

The Greens health clubs were suffering from tough trading conditions and would not be expanded until the existing operational performance had been improved.

Pre-tax profits before exceptional items were £39.7m against £37.7m a year earlier on turnover of £312.2m against £293.9m last time. Shareholders will receive a dividend of 11.7p, up 3.5% on last year.

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