International Hotel Investments plc - Full-Year Results
On 22 April, International Hotel Investments plc published its preliminary results for the financial year ended 31 December 2015.
Performance Overview
During 2015, total revenue increased by 15.2% to €134.1 million reflecting the growth in turnover across all of the Group’s European hotels (namely those located in Malta, Hungary, Czech Republic, and Portugal) as well as the inclusion of the Island Hotels Group Holdings plc revenues with effect from 1 July 2016. These offset the €9.7 million decline in revenue from the Group’s hotels in Tripoli and Russia which are facing challenging trading conditions.
Given the improved level of activity across most of the Group’s hotels as well as the inclusion of the IHG properties in the second half of 2016, direct costs also increased by 15% to €70.3 million. Nonetheless, given the larger increase in revenue, the Group’s gross profit grew by 15.4% to €63.7 million. However, the gross profit margin remained unchanged at the 47.5% level.
Administrative and marketing expenses also increased by 19.9% to €31.6 million reflecting the improved business activity and the consolidation of IHG results during the second half of the year as well as a one-time fee of €1.3 million representing professional fees incurred in relation to the launch of an international bond by the IHI Group which has since been aborted.
Overall, the Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 11.3% to €32.1 million as the improvements across the Group’s European hotels and the 6-month contribution from IHG’s properties offset the €2.4 million drop in the aggregate EBITDA figure of the Corinthia Hotels in Tripoli and St. Petersburg.
During the year under review, the Group also registered net property uplifts of €42.6 million again largely related to the improved trading performance of the Group’s hotels located in Europe in contrast to the net impairment charge of €24.3 million incurred in 2014. These uplifts are reflected as to €11.8 million through the income statement (2014: impairment of €13.3 million) with the balance of €30.8 million being recognised directly through reserves (2014: impairment of €11.0 million).
The 2015 income statement of IHI was adversely affected by the 70.3% increase in net finance costs to €22.2 million mainly reflecting the interest due on the debt of IHG.
Improvements were also registered in the Corinthia Hotel London (which is 50% owned by IHI) as the property registered record occupancies, rates and EBITDA earnings. The British property is the largest contributor to the income from associates figure which amounts to a loss of €2.6 million compared to a loss of €14.5 million in 2014. This figures also includes a contribution from the Radisson Blu Golden Sands Beach Resort which is 50% owned by the IHI Group.
Overall, IHI reported a marginal pre-tax loss of €0.35 million compared to a pre-tax loss of €29.8 million in 2014. After accounting for a tax charge of €3.4 million and a marginal loss attributable to minority interest, the Group’s post-tax loss for 2015 amounted to €3.7 million which represents an improvement compared to the net loss of €16.3 million incurred in 2014. This translates into a negative earnings per share of €0.007 [2014: €(0.029)].
The Statement of Financial Position shows a 14.6% increase in total assets to €1.2 billion. Total liabilities grew by 32.1% to €0.55 billion largely representing the consolidation of the IHG Group assets and liabilities. Overall, total equity increased by 2.3% to €0.6 billion which translates into a net asset value per share of €1.098 (2014: €1.073).
Outlook
Looking ahead, the Directors noted that they are following developments regarding the frail and uncertain political situation in Libya with cautious optimism. After remaining closed for most of 2015 after the January attacks on the Corinthia Hotel Tripoli, the Group has now re-opened this hotel and is maintaining it in a pristine condition with a number of outlets within the property already operational and with the ability to grow further once a resolution to the country’s political situation materialises. In the meantime, the adjacent commercial centre remains operational which is generating €5.5 million in rental income per annum.
IHI is awaiting the necessary planning approvals and is seeking funding for the St. George’s Bay redevelopment project which comprises the site over which the Group’s three hotels are currently situated.
Furthermore, the Group is pursuing other business opportunities for the development and management of new luxury Corinthia Hotels in Dubai, Rome, Brussels and Abuja. In some cases, negotiations are at an advanced stage with binding agreements expected to be signed in the first half of 2016.
Overall, the Directors envisage that in 2016 all of its hotel properties will register improved performances than in 2015.