Peel Hotels, which owns a network of nine hotels around the UK, had a shocker in the 12 months to February 5th as it failed to pass on the increasing costs of food and drink to customers.
In what the Chairman, Robert Peel, described as the toughest year in the firm's history, turnover fell 4% to £14.65m from £15.26m in the previous year.
The real problem though is "gearing" or the debt Peel has taken on to finance its hotel chain. When revenue drops, even by a small amount, it has a big impact on profits.
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Profit before interest payments fell 54% on the prior year to £0.598m from £1.3m, resulting in a loss before tax of £228,000.
Peel blames a cutback in government spending, as well as increased energy costs and the rise in VAT to 20%.
Since the end of the financial year the group, which owns the Cosmopolitan in Leeds and the King Malcolm Hotel in Dunfermline, says sales have grown 5.1% but inflationary pressures remain.
At 08:35AM the stock had fallen 18%.
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