International Hotel Investments plc - Interim Results

Friday, August 28th, 2015

On 28 August, International Hotel Investments plc published its interim results covering the six months ended 30 June 2015.

Performance Overview

During the period under review, the IHI Group registered a marginal 0.4% drop in revenue to €55.38 million. The Directors explained that the hotels in Malta, Prague, Budapest and Lisbon all registered double digit growth in revenue ranging from a high of 21% at the Marina hotel and 12% at the Corinthia St. George’s Bay. However, these improvements were offset by a continued decline in revenue from the Group’s properties in St. Petersburg (reflecting the devaluation of the Russian Rouble) and Tripoli (as the hotel was closed for most of the period under review and discounts were granted to the tenants of the commercial centre).

The IHI Group also reported an 8.9% drop in direct costs to €28.2 million leading to a gross profit figure of €27.18 million, representing a 10.5% increase over the previous corresponding period. Similarly, the gross profit margin improved to 49.1% during the period under review compared to 44.3% in the first six months of 2014.

On the other hand, other operating costs increased by 6% to €12.9 million leading to an earnings before interest, tax, depreciation and amortisation (EBITDA) figure of €14.25 million representing a 14.9% improvement over the previous corresponding period. The EBITDA margin also increased by 3.4 percentage points to 25.7%.

After accounting for a depreciation charge of €8.4 million (H1 2014: €9.2 million), the Group’s operating profit amounted to €5.88 million representing an 81.5% improvement over the previous corresponding period.

Finance costs dropped by 2% to €5.65 million reflecting the prevailing low interest rate scenario and the expiry of an interest rate swap.

The IHI Group also incurred a €2.4 million share of loss from associates which mainly relate to the Corinthia Hotel in London. The loss is significantly lower than that incurred during the first six months of 2014 at €11.2 million and it is also noteworthy to highlight that the hotel in London registered a 9% increase in revenue and a 27% uplift in EBITDA which was offset by the charges for depreciation, amortisation, interest costs and taxes.

Overall, the IHI Group reported a pre-tax loss of €2.1 million compared to the pre-tax loss of €13.7 million during the first half of 2014. After accounting for a tax credit of €1.2 million (H1 2014: €6 million), the IHI Group’s net loss for the period under review amounted to €0.9 million, significantly lower than the €7.7 million loss reported for the previous corresponding period. This translates into a negative earnings per share of €0.0016 (H1 2014: €0.0138).

The Statement of Financial Position as at 30 June 2015 shows a 1.6% increase in total assets to €1,028.4 million compared to the corresponding figure as at 31 December 2014 and a similar 1.7% in total liabilities to €424.4 million. Overall, the Group’s equity base grew by 1.5% to €603.9 million as the loss incurred during the period under review was offset by €10 million in unrealised gains on currency movements on its investment in London. This translates into a net asset value per share of €1.09 (Dec 14: €1.07).

Post-Reporting Date Events

The interim report also noted that on 1 July, the IHI Group launched a voluntary public bid for the acquisition of all the shares of Island Hotels Group Holdings plc. By the closing date, shareholders representing 99.68% of the share capital of Island Hotels Group Holdings plc accepted the offer and the transaction was completed on 10 August.  IHI already initiated the process to acquire the remaining shares and will subsequently delist the shares of Island Hotels Group Holdings plc from the Malta Stock Exchange.

The Directors also explained that following this acquisition, IHI intends to maximise the synergies in Malta by merging the operations of Island Hotels Group Holdings plc into its own operating structures. IHI also intends to enhance development opportunities on the adjoining sites in St. Julian’s Malta where it aims to fully redevelop the combine plots of land.

Outlook

Looking ahead the Directors noted that the general business outlook for IHI’s hotels in Malta, Prague, Budapest, Lisbon and London remains positive with year-on-year growth expected in both turnover and operating profits.

In Tripoli, a gradual reopening of the hotel is underway and commensurate with the prevailing demand whilst the adjacent commercial centre remains fully leased out. In Russia, the performance of the hotel is expected to be further adversely affected by the volatility of the Rouble and a decrease in  international demand for hotel services due to the sanctions imposed on the Kremlin. As a result, these conditions will negatively affected the financial performance of the hotels in Tripoli and St. Petersburg for the remainder of the year.

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International Hotel Investments plc – Interim report for the six months ended 30 June 2015.

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