International Hotel Investments plc - Business and Strategic Update

Thursday, December 11th, 2014

On 11 December, International Hotel Investments plc issued an announcement to update the market on its performance and its strategic initiatives in view of the operational challenges in Libya and Russia.

The detailed review revealed that given the balanced geographic spread in the Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) contribution, the decline in performances in the properties located in Tripoli and St. Petersburg during 2014 were partially mitigated by record EBITDA results in the Group’s properties in Malta, Budapest, Lisbon and London as well as the improving profits in the hotel in Prague. As a result, the Group is forecasting an EBITDA of €33.8 million for 2014 (based on actual data up to November and a forecast for December) which although represents a 19.5% drop from 2013, it is marginally higher than that achieved in 2009 (€33.3 million) – the first year of the international financial crises.

The success in the diversification strategy is evident from the reduced dependence on any single property. In fact, in 2009, 66% of Group EBITDA was generated from the Tripoli hotel and commercial centre and in 2014 none of the properties contributed more than 17% of overall EBITDA.

The Group’s projections for 2015 assume no growth in Libya and marginal growth in St. Petersburg (largely through a rebound in the value of the Ruble). Furthermore, the hotels in Malta, London, Lisbon, Prague and Budapest are anticipated to register further improvements in 2015 with the expectation that these same hotels will lead the Group to regain its record EBITDA of €42 million (first reached in 2013) by 2016.

Looking ahead, the announcement explained that IHI is confident that its business can thrive notwithstanding the challenges in Libya. Apart from the potential upside from the property in Libya as and when the country reverts to stability, IHI is also looking into other areas where it sees particular potential for growth.

In Malta, the Group is evaluating the possibility of developing a six-star hotel and maximising the use of the remaining area currently occupied by the two hotels in St. George’s Bay.

In Budapest, the hotel is now targeting suite business from the USA given the Group’s success in its London property.

In Prague and Lisbon, the Group will continue to focus on the aggressive revenue management strategy currently in place to maximise room rates.

The Group’s management company is also expected to grow especially through the management of third party properties.

IHI also revealed that it is also branching out into development services to secure opportunities for third parties to lead development projects from land acquisition through to financing, design, construction and delivery in return for development fees. These properties would then be managed by CHI. In this respect, IHI confirmed that it is currently in discussions of such a nature on properties in Rome and also the US.

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International Hotel Investments plc – Business & Strategic Update 11 December 2014  

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