Page 19 - Stakis A Case Study

In the Summer of 1989 and completed in September what
was probably the first Stakis Corporate Plan. Under this

plan, over five years Stakis were to build around 30 Country

Court Hotels, build around 30 nursing homes and in a more

minor way extend other operations such as pubs and

property development. This development programme was

to be financed from profits, increased borrowings and the

prospective sale of £100 million worth of the existing hotels

portfolio. Although ambitious, it was thought by the board

to be achievable if the assumptions which underpinned it

were correct. One of the most important assumptions was

that the Country Courts would cost around £8.5 million
each and would produce £1.5 million profit in the third year

of operating.

Borrowing had doubled in 1989 to £99 million equivalent to

a gearing of 35 per cent. This Chisman considered low and

said he would not be unhappy with a gearing level between

40 and 60 per cent - reasonable for a company with so many

property assets, he thought.

He presented a clear view of the future direction of the

company. As well as borrowing to build new hotels and to
refurbish existing ones the company needed to sell off

those which did not fit in with its strategy. The aim was to

achieve market leadership. The casinos, on the other hand,

were seen as a useful source of cash flow and there were

no plans to move out of this area.