Owner of three Liverpool hotels, including the Crowne Plaza, in ‘advanced talks’ with lender after auditors warn of ‘material uncertainty’ amid liabilities of £4.7m. Tony McDonough reports
Liverpool hotels group Centre Island Hotels is in “advanced talks” with an existing lender after its auditors said liabilities of £4.7m had created a “material uncertainty” about the future of the business.
Centre Island, which owns nine hotels including the Crowne Plaza, Holiday Inn and Holiday Inn Express in Liverpool city centre, admitted in its annual accounts, posted in July, that it was at risk of breaching its banking covenants.
However, managing director Mark Foster told LBN the company had recovered strongly following the COVID pandemic and was confident it would secure the financial support that would address this issue.
In July this year Centre Island posted its annual results on Companies House for the year to December 31, 2022. They showed a healthy recovery from the impact of the pandemic, which had decimated the hotels and hospitality sector.
Revenues for the year came in at just over £34m, almost identical to the last pre-COVID year in 2019. In 2020 and 2021 revenues plummeted to £11m and £20m respectively. Pre-tax profits for 2022 were more than £2.5m against a near £83,000 loss in 2021.
According to the accounts, property consultants at Cushman & Wakefield valued its hotels portfolio at £66.4m, a write down in value of £3.8m. Of the nine, only the Crowne Plaza Liverpool saw an increase in its value.
And, in the annual report, the directors said: “The group forecasts breaches of bank covenants within the next 12 months (from December 31, 2022) and the absence of a formal waiver being issued by the bank means that there is a material uncertainty relating to going concern.”
Jonathan Lowe, auditor at RSM, noted in the report that Centre Island had ended 2022 with net current liabilities of £4.7m.
He added: “These events or conditions, along with the other matters… indicate that a material uncertainty exists that may cast significant doubt on the group’s ability to continue as a going concern.”
In the last few days Mark Foster has told LBN: “External auditors are required to comment on potential covenant breaches and going concern matters arising mainly from revenues still picking up post-pandemic and secondly as a result of the general economic climate and significant interest rate rises.
“The company’s revenues to date in 2023 across all locations are back to pre-pandemic levels and, as noted under point 1 in the 2022 report, the company continues to have the ongoing support of both its shareholders and funders.
“The company is in advanced negotiations with its existing funder to refinance its current debt to re-align covenants and remedy any potential covenant breaches.”
The group is financed principally through a group bank facility of approximately £38m. The facility was renewed in April 2021 and it is next due for renewal on December 31, 2024.
Founded in 1995, Centre Island’s first hotel was the Holiday Inn Ellesmere Port. Liverpool’s waterfront Crowne Plaza, one of the most prominent hotels in the city, opened in 1998.
Its other seven hotels are the Holiday Inn Liverpool City Centre, Holiday Inn Express Liverpool Royal Albert Dock, Crowne Plaza Manchester, Holiday Inn Express Manchester, Crowne Plaza Birmingham, Holiday Inn Express Birmingham and Holiday Inn Preston.
In the annual report the company spoke about the recovery in business since the pandemic. In particular, there has been a strong return in bookings for business events and weddings.
It added: “With the removal of all COVID-related restrictions, a return of the large scale event segment, both corporate and leisure, boosted occupancy levels across all the key cities as events returned for the first time since early 2020.
READ MORE: Royal London to build huge Mersey industrial complex
READ MORE: Liverpool named as ‘one of world’s top 100 cities’
“Those hotels, which have traditionally operated with high volume corporate accounts, saw a steady increased in production across the year with return to pre-pandemic volumes from Q3 in 2022, as key corporate accounts returned to the office and business travel resumed.”
During 2022, Centre Island employed 444 people, up from 334 in 2021. Total directors’ remuneration, including salaries and pensions, was £384,629. The highest paid director received £219,856.
Ultimate parent company of Centre Island Hotels is Travan Services Ltd based in the Isle of Man. The report showed total dividends of £250,000 were paid out during 2022.