Higher payroll and insurance costs coupled with the expense involved in defending a take-over battle have eaten into profits at the Gresham Hotel group.
In the 11 months to the end of December 2002, the group, which has hotels and property interests in Ireland, the UK and Europe, recorded a 46 per cent fall in operating profits to €4.2 million and is braced for a difficult 2003.
The battle for control of the company waged by its largest shareholder, the Israeli-based Red Sea, cost Gresham €1.1 million and resulted in an overhaul of the existing board of directors. This reduced its pre-tax profits to €3 million for the period, it said.
Announcing the figures yesterday, Gresham chief executive, Mr Patrick Coyle, referred to the expensive "debacle" of last year but suggested that boardroom tensions have now eased.
The new board will examine all of the options open to the group in the current year, including the possible sale of some of its hotel or property interests as well as taking it private. "We will be looking at the structure of the balance sheet and will be addressing issues in relation to our position as a small public company," Mr Coyle said.
Shareholders will be paid a final dividend of one cent per share on the back of the 2002 performance.
The group has announced that economist and AIB board member, Mr Jim O'Leary, will join the board while Mr Harvey Soning, a property adviser to the Red Sea group, will take over as non-executive chairman in May.
The €1.1 million exceptional charge included €637,000 in professional fees paid to advisers with a further €481,000 paid to directors who were forced to exit the board.
The group blamed a €550,000 increase in insurance costs and a €985,000 rise in labour costs for the drop in operating profits last year. It also suffered from a shortening in booking patterns and reduced volume of business from long-haul destinations.
The Gresham group invested in upgrading a number of its hotel properties during 2002, spending €2.1 million in the Republic and at its hotel in Brussels.
Its occupancy rates remained flat in the Republic with its hotels in Dublin and on the west coast, and particularly in Kerry, suffering due to a downturn in the number of US visitors.
The Belson hotel in Brussels was also adversely affected by the collapse of Sabena. Mr Coyle said that overnight the hotel lost €500,000 as a consequence of the airline's demise.
This year it will continue to invest in the redevelopment of its hotels and has plans to build luxury apartments and townhouses on sites attached to its properties in Limerick and Killarney.
