Northampton Group Inc.

Northampton Group Inc.

July 14, 2005 14:19 ET

Northampton Posts Growth In Revenue And Income

TORONTO, ONTARIO--(CCNMatthews - July 14, 2005) -

Revenues rise a modest 4% while income from operations rises 22% in fiscal '05

Northampton Group Inc., (TSX VENTURE:NHG)(TSX VENTURE:NHG.DB), an integrated Canadian hotelier, today reported results for the fourth quarter and year ended March 31, 2005. The quarter's results reflected the impact of increased hotel supply in the Greater Toronto Area (GTA) market as well as project-related, non-recurring expenses arising from advice and counsel on possible changes to Northampton's corporate structure and a non-cash charge for expensed stock options. Without these expenses, reported performance would have been significantly improved, since the year saw top-line growth for the majority of Northampton's properties.

Summary of the release:

- In the quarter, revenues fell 2.1% to $5.8 million, reflecting the traditional softness of the final quarter; for the 12-month period, revenues rose 3.8% to $28.8 million;

- Same-hotel sales approximated revenue change in both the quarter and the 12 months, since there have been no new acquisitions in the period. However, several 905-area hotels suffered from a significant increase in supply that was not offset by any increase in demand;

- Operating expenses increased by 4.7% in the quarter and increased 4.6% in the 12 months, primarily reflecting costs associated with a non-cash, stock-based expense related to stock options that replaced an earlier, expired issue, as well as increased legal and consulting costs relating to exploration of possible changes to Northampton's corporate structure;

- Net income fell 167.3% in the quarter and fell 9.4% in the 12 months, for earnings per share of ($0.03) and $0.05 respectively, reflecting both the traditionally slower fourth quarter and the option- and advisor-related costs referred to above;

- EBITDA (earnings before interest, depreciation, income taxes, and amortization) was off 54.8% in the quarter and up 1.8% in the 12-month period, reflecting both hotel performance and the option- and advisor-related costs in the fourth quarter;

- Cash flow decreased 103.7% in the quarter and decreased 8.6% in the 12 months, reflecting the non-recurring expenses and non-cash charges related to the fourth quarter as outlined above.

In summary, these results reflected an improvement in the hotel environment year-over-year, offset by a lower than expected third and fourth quarter, as well as the non-recurring charges in the fourth quarter related to consulting costs and non-cash stock-based expenses.

"While we are not completely satisfied with our results this year," said Vinod Patel, Northampton's president and CEO, "the margin squeeze we have experienced in the past three years is beginning to ease, which bodes well for the future. In addition, Northampton reduced its long-term debt by 5.8%, reduced its average cost of borrowing by almost 3%, increased capital replacement reserve funds by 9.7%, and increased retained earnings by 7.0%. This has been a year of considerable accomplishment, achieved despite significant non-recurring costs in the fourth quarter."

The industry:

Though the economy seems to have fully recovered, the hospitality industry continues somewhat slower, with new supply outpacing demand in certain locations where Northampton's properties lie. Corporate and leisure travel, particularly from the USA, continues to lag and has not yet recovered to expected levels. A return to the record 2002 levels has been seen in some markets, and according to industry consultants Pannell Kerr Forster, the industry is expected to outstrip those levels in 2006.

Northampton's fourth quarter, ending March 31, 2005:

The fourth quarter of fiscal 2005 benefited from a modest upturn in the hospitality industry that was offset by non-recurring expenses related to replacement stock options and corporate legal and consulting costs.

Northampton's board of directors is considering alternatives to enhance shareholder value by simplifying and refining the company's corporate structure. While the analysis is in its initial stages, and it is premature to comment on the feasibility, viability, or appropriateness of any specific alternative, the board has concluded that further study and consideration are warranted. There can be no assurance of any kind that modifications to the company's structure will actually be implemented.

System sales (the sum total of all income, including non-consolidated revenue) decreased by 6.0% in the quarter to $9,899,828 from $10,534,336 for the same period in fiscal 2004. The decrease resulted from the factors noted above.

Consolidated revenues for the fourth quarter of fiscal 2005 were $5,823,987, a decrease of 2.1% from $5,949,208 for the same period in fiscal 2004.

Operating expenses, at $5,515,808, increased 4.7% from $5,268,119 for the fourth quarter of fiscal 2004.

Also in the quarter, EBITDA (earnings before interest, income taxes, and amortization) decreased 54.8% to $308,179 from $681,089 in the corresponding quarter of the previous year.

Income from operations for the fourth quarter in fiscal 2005 decreased 28.6% to ($957,301) from ($744,172) for the same period in fiscal 2004.

Net income decreased 167.3% to ($664,889), or ($0.032) per common share outstanding, from ($248,770), or ($0.012) per common share outstanding, for the same period in the previous fiscal year.

Cash flow decreased 103.7% in the quarter to ($20,378) from $555,138 in the same quarter of fiscal 2004.

Northampton's twelve-month period ending March 31, 2005:

Overall, management's strategy has allowed the company to post an increase in revenues, but the year has not yet returned to the 35% margins Northampton traditionally experiences.

System revenues reached $52,669,365 in the 12 months, up 3.6% from $50,856,378 for fiscal 2004. The increase results from stronger sales in the period.

For the 12 months ended March 31, 2005, consolidated revenues increased 3.8 % to $28,778,169 from 27,721,869 the year before.

Operating expenses in the 12 months increased 4.6% to $21,020,206 from $20,101,589 for the previous year. Ongoing operational efficiencies minimized the impact of the fourth quarter costs outlined above.

Also in the 12 months, operating profit or EBITA increased 1.8% to $7,757,963 from $7,620,280 in fiscal 2004.

Income from operations in the 12 months ending March 31, 2005 was $2,614,489, up 22.1% from $2,141,355 in fiscal 2004.

Net income decreased 9.4% to $1,047,537 or $0.05 per common share from $1,156,453 or $0.056 per common share in the previous year.

Cash flow decreased 8.6% in the 12 months to $3,409,439 or $0.16 per share from $3,731,479 or $0.18 per share in fiscal 2004, reflecting the improving industry environment, offset by the one-time expenses outlined above.

Highlights of the Year:

- Unprecedented second consecutive receipt in 2004 of the "Tops in Hospitality" Award by Hotelier Magazine, for the hotel company with the highest percentage increase in revenues.

- Country Inn & Suites Kanata: Gold Standards Award 2004 from Country Inns; Housekeeping and Maintenance Award from Country Inns -- awarded to only one hotel in the world each year.

- Quality Inn Airport West: Choice Hotel International Gold Hospitality Award 2004 (following a Silver Award in the previous year); Choice Hotels Canada "2005 Canadian Hotel of the Year Finalist".

- Country Inn Oakville: Gold Standards Award 2004, Sales Growth Award 2004, 100% Stay Again Rating, all by Country Inns.

- The Best Western Cambridge Hotel: third consecutive Directors' Award from the Best Western Board of Directors.

- Holiday Inn Express Whitby: Excellent Quality Performer by InterContinental.

- Quality Inn Airport West: Gold Award.

- Vinod Patel: Appreciation Award from Choice Hotels Franchise Advisory Board.

About Northampton

Northampton Group Inc. is an integrated Canadian hotelier with ownership and management interests in 2058 rooms in 16 hotels. Focused on creating the best return for all stakeholders, Northampton's market-sensitive strategy is to acquire or build hotels that provide superior accommodation in the mid-price market. Northampton has demonstrated that it excels in this sector, offering services that exceed expectations while still posting industry-leading margins, as evidenced by Hotelier Magazine's Top Growth awards for Northampton's fiscal 2003 and 2004.

The following is a tabulated summary of Northampton's results:
Three months ended Twelve months ended
March 31 March 31
% %
2005 2004 change 2005 2004 change
Revenues 5,823,987 5,949,208 -2.1 28,778,169 27,721,869 3.8
income (664,889) (248,770) -167.3 1,047,537 1,156,453 -9.4
EBITDA 308,179 681,089 -54.8 7,757,963 7,620,280 1.8
Cash flow (20,378) 555,138 -103.7 3,409,439 3,731,479 -8.6
per share ($0.032) ($0.012) -166.7 $0.050 $0.056 -10.7
Cash flow
per share $ - $0.03 -100.0 $0.16 $0.18 -11.1

Shares Outstanding: 20,890,919

The Canadian Venture Exchange has neither approved nor disapproved the contents of this press release.

Contact Information

  • Northampton Group Inc.
    Vinod Patel
    President & CEO
    (905) 629-9992
    (905) 629-9636 (FAX)