International Hotel Investments plc - Full-Year Results
On 1 April, International Hotel Investments plc published its preliminary results for the financial year ended 31 December 2014.
Performance Overview
During 2014 the Group generated €116.4 million in revenue representing a 5.9% drop from last year’s comparable figure as the increased income from Group’s properties in Europe was offset by a €16.1 million decline in turnover from the hotel properties in Tripoli (Libya) and St. Petersburg (Russia). Direct and other operating costs also dropped by 1.4% to €87.5 million leading to an earnings before interest, tax, depreciation and amortisation (EBITDA) figure of €28.9 million compared to just under €35 million in 2013. (These figures do not include the Group’s 50% share in the London hotel which is not consolidated in the Group’s results.)
Depreciation and amortisation also declined by 22.6% to €18.4 million as no provision was required on certain assets that are already fully depreciated.
The Group’s performance was adversely impacted by a €13.3 million net impairment on its properties in contrast to the €5.6 million uplift recorded in 2013. This year’s charge is mainly a reflection of a €69.2 million reduction in the fair value of the Group’s hotels and commercial centres in Tripoli and St. Petersburg which were partially offset by a €44.9 million improvement in the other properties. As a result, the Group incurred a €24.3 million net impairment charge with €13.3 million accounted for in the Income Statement whilst the balance of €11 million directly through equity (as shown in the Statement of Comprehensive Income).
Despite the marginal improvement in the performance of the hotel in London in 2014 over 2013, the share of loss from equity accounted investments amounted to €14.5 million compared to €5.8 million in 2013. The widened losses reflect the one-off property costs resulting from the sale of the eleven London apartments.
Meanwhile, net interest costs dropped by 18.2% to just over €13 million given the prevailing low interest rate scenario and the further reduction in the Group’s debt in line with scheduled repayment of bank loans.
The Income Statement of IHI also shows a €1.5 million net fair value gain on interest rate swaps (2013: €1.8 million) as well as a €0.88 million (2013: €0.88 million)downward movement in reimbursement asset.
Overall, the Group reported a pre-tax loss of €29.8 million compared to the €4 million pre-tax loss incurred in 2013. After accounting for a tax credit of €13.5 million (2013: €4.3 million), the Group’s loss for the period under review amounted to €16.3 million compared to the break-even position reported in the previous financial year. This translates into a negative earnings per share of €0.029 (2013: €0.00).
The Statement of Financial Position shows a 7.4% drop in the value of total assets to €1,012 million mainly reflecting the drop in the value of the Group’s hotels and commercial centres in Tripoli and St. Petersburg. Similarly, total liabilities dropped by 10.5% to €417.2 million probably reflecting the further reduction in the Group’s borrowings. Overall, the Group’s equity base contracted by 5.1% to €594.2 million which translates into a net asset value per share of €1.073 (2013: €1.13).
Update on Corinthia Hotel Tripoli
Following the armed attack on the Corinthia Hotel Tripoli on 27 January, the Group is currently repairing the damages which are estimated to cost around €1 million. Although the management is committed to resume the operation of this hotel within the shortest time possible, it is likely that the situation of low occupancy at the Coritnhia Hotel Tripoli will persist throughout 2015. As such, the hotel management’s objective is to minimise losses on the operation of the hotel and to ensure that payroll and other operating costs are matched to operating income and contribute in some manner towards general overheads such as utilities, security and maintenance. In the meantime, the commercial centre adjoining the hotel remains in operation and generating around €6 million in rental income.
Acquisition of IHG shares
The results announcement also reiterated that IHI has entered into a preliminary conditional agreement with the majority shareholders in the Island Hotels Group Holdings plc with a view to consider making a voluntary offer for the purchase of 100% of the issued share capital of this Group. Such an eventual acquisition would be financed through additional funding.
Outlook
Looking ahead, IHI noted that its business as a developer and operator of hotels and real estate has evolved and its dependence on any single hotel is now marginal. The outlook for 2015 in all the Company’s hotels, excluding Libya, remains better than that of 2014.