STRANRAER-based McMillan Hotels has booked a pre-tax loss of more than £5 million after wiping £4.76m from the value of its freehold properties.

The losses came as the firm declared it had reached a key stage in its long-term restructuring programme.

The firm, whose hotels include Glenapp Castle in Ayrshire and the North West Castle in Stranraer, saw turnover edge up by 2% to £9.85m last year, led by a 6.6% rise in visitor numbers.

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However, operating profits narrowed by 18.7% to £74,503, accounts show for the year ended May 31 show.

The directors note in their report that a 4.4% fall in spend per customer had led to gross margin falling back by 0.4% compared with the year before, but highlighted that the growth in customer numbers had "produced an impressive 2.7% increase in the occupancy rate".

The directors said: "The continued recovery in customer numbers remains crucial to the future. The real challenge is to secure growth without significantly eroding margin."

McMillan, which has been trading for more than 50 years, cut £154,000 from its debt pile during the period, leaving net debt standing at £6.46m by the end of the year.

And the directors flagged that significant progress has been made since year-end to reduce debt further by selling the Peebles Hydro Hotel to Crieff Hydro in February, as previously reported in The Herald.

The same month also saw it offload the Kirroughtree House Hotel in Newton Stewart after holding the lease for two years, and enter into a sale and leaseback arrangement at its Fernhill Hotel in Portpatrick.

The latter deal was funded by family members in a move said to reflect its continued commitment to the business.

The directors revealed the combination of those asset sales had allowed the company to secure new long-term banking facilities with Lloyds Banking Group in March.

Noting the business was now focused on four hotels in south-west Scotland -the Cally Palace, North West Castle, Fernill and Glenapp Castle - managing director Douglas McMillan said: "We pride ourselves on providing personal service and excellent value for money and our future plans will be underpinned by these core beliefs.

"The changes recently announced will lead to a renewed focus and further investment in facilities at our four exceptional hotels in the south west of Scotland."

McMillan's accounts show the firm employed an average of 300 staff over the period, down from 334 in 2012.

Staff costs were broadly unchanged at £4.28m, and directors' remuneration was booked at £242,631, down from £245,498. The highest-paid director received £89,958 compared with £92,126 in 2012.