PRUDENT INVESTMENT REAPS REWARDS
FOR MACDONALD HOTELS

19th June 2009

Coinciding with announcing its acquisition of the business and assets of Aviemore Highland Resort, Macdonald Hotels today announces its results for the year ended 25 September 2008.

Over the past 5 years Macdonald Hotels has invested c £211m in its mainly 4/5 star UK hotel portfolio and in the last 2 years alone close to £70m, only part of the benefit of which is reflected in its results for the year ended September 2008. The full benefit of this investment is still to come. Despite growing difficulties in the sector turnover increased by 7% driven by a 5% rise in average room rate partially offset by a fall in occupancy of 4%. Like for like EBITDA (earnings before interest, tax, depreciation and amortisation) increased by 9% to £27m.

Executive Chairman, Donald Macdonald, said: "I am pleased with the progress that has been made so far across all aspects of our business and the resultant improvement in our trading performance which in turn is a great credit to the strength of our management team and staff. We are continuing to make our business more efficient and our aim is to improve our conversion of sales to operating profit by a further 5% in the coming 12 months. Our strategy of investing in our people, improving our core assets and service levels combined with prudent financial management will, I believe, stand us in good stead, in what is, in my experience a uniquely difficult market."

Profit before interest was £12.3m compared with £124.7m in 2007 which included the £123.4m gain over book value on the disposal of 24 hotels. The profit before interest is stated after the deduction of depreciation charges of £11.7m and a charge of £4.7m for the reduction in the value of 5 of its assets.

Major capital projects in the year included:-

• Completion in February 2008 of the 338 bedroom Macdonald Manchester Hotel.
• 49 new bedrooms, a new Leisure Club and Spa and the refurbishment of all existing bedrooms and public areas at the Macdonald Old England Hotel, Windermere in the Lake District.
• Bedroom refurbishments at the 5 star Macdonald Randolph Hotel, Oxford, the Macdonald Rusacks Hotel, St Andrews, the Macdonald Pittodrie House Hotel, near Aberdeen, the Macdonald Ansty Hall Hotel, near Coventry, the Macdonald Compleat Angler Hotel, Marlow and the Macdonald Inchyra Grange Hotel, near Falkirk.
• The development of a new Business Centre at the Macdonald Crutherland House Hotel, near Glasgow.
• New Leisure Club and Spa at the Macdonald Forest Hills Hotel, near Stirling.

Despite achieving an operating profit of £800k, Aviemore Highland Resort (AHR) which was one third owned by the Group, suffered a pre-tax loss of £4.1m after interest, depreciation and other charges. A third of this loss is included in the Group results. With the business now in the full ownership of the Group and with funding earmarked to complete the refurbishment of the 4 hotels on the Resort and to provide additional leisure based facilities, the prospects for the Macdonald Aviemore Highland Resort have never been better.

Chief Executive, David Guile said:

"I am encouraged by the results, achieved in difficult and very competitive trading conditions. Strong performances from key hotels such as the Marine, North Berwick and Rusacks, St Andrews in Scotland, Manchester in the North, the Berystede, Ascot Frimley Hall, Camberley and the Randolph, Oxford in the South underpinned the overall performance. Although the economic position continues to worsen, particularly in the conference and corporate markets, this has been partially offset by the strong trading of the hotels in which we have invested, such as the Old England in the Lake District and Manchester as well as those hotels which compete in the UK holiday and leisure markets.

"Although we are continually reviewing our cost base we are also focussing strongly on our sales and occupancy growth in a market place where competition for the reduced levels of business is intense." Commenting further on current trading David Guile added "for the 8 months to May 2009 our like for like sales were back 6% with the reduction in our operating profits restricted to 5% despite the impact of substantially increased energy costs".

Gordon Fraser, Deputy Chief Executive and Finance Director said:

"By continuing to invest in our core assets we have been able to drive increased average room rates and real profit growth. As trading conditions continue to get tougher we have continued to take cost out of our business both at unit level and at the centre but with our key objective to continue to provide our customers with superb value for money. Strong financial management and control remains paramount. We have plenty of opportunities to further develop and enhance our existing portfolio when investment conditions become easier. In the current market conditions we have curtailed our capital expenditure program however we will shortly be commencing the fit out of a luxury 4 star 120 bedroom hotel in Windsor, adjacent to the Castle Hotel which we sold in 2007."

For further details please contact:-
Alex Pagett on 07974 229 888
Or
Gordon Fraser on 01506 815245

• Macdonald Hotels & Resorts Limited Macdonald Hotels & Resorts Limited operates more than 40 hotels across the UK and ten resorts throughout the UK and Spain. The company employs over 4,000 staff and operates in excess of 3,900 hotel rooms.
• First established in 1990 by Donald Macdonald and colleagues, the company was floated in 1996 on the main London Stock Exchange. In 2003, it returned to private ownership and was one of Scotland's biggest public to private deals at a cost of £620m, which was wholly underwritten by the Bank of Scotland. The Bank now owns 50% of the equity with the remainder held by the management.