At a meeting held on 26 April, the Board of Directors of International Hotel Investments plc discussed and approved the financial statements for the year ended 31 December 2005.
Total revenue generated by the IHI Group during the twelve months ended 31 December 2005 amounted to €54.5 million, a rise of 16.9% over the revenue in 2004. Direct costs increased by 15.8% to €36.6 million resulting in a 19.3% increase in the gross profit of just under €18 million. The gross profit margin edged up to 32.9%. After deducting other operating costs of €16.8 million, the IHI Group registered an operating profit of €1.1 million, compared to a loss of €1.3 million registered in 2004. The Directors attribute this turnaround to better operational results registered by all the hotels except for the Corinthia Alfa hotel in Lisbon which, in 2004, benefited from the lucrative business brought about by the UEFA European Football Finals.
These good performances also reflected themselves in the partial reversal of impairment charges, amounting to a total of €5.5 million, which had been recognised in previous years on the Corinthia Grand Hotel Royal and on the Corinthia San Gorg Hotel. This contrasts with a net impairment charge of €2.2 million taken in 2004. Another positive factor was the uplift in value attributable to the Group’s land adjacent to the Corinthia Nevskij Palace Hotel amounting to €2.4 million.
The Group’s operating profit before financing costs amounted to €9.3 million compared to a loss of €3.7 million in 2004. After accounting for net financing costs of €9.1 million and income from associates of €0.58 million (2004: €0.46 million), the IHI Group registered a profit before tax of €0.76 million compared to a loss of €11.3 million in 2004. The reversal of impairment charges on the hotel properties and the revaluation to fair value of the investment property triggered a tax charge for the year of € 1.51 million. On the other hand, in 2004, there was a positive reversal of a prior year tax charge of €2.69 million resulting from the reduction of the tax rate applicable on the revaluation of the investment property. The loss for the year thus narrowed to €0.7 million compared to €8.1 million in 2004.
Total assets as at the 2005 amounted to €374 million with shareholders’ funds at €154.6 million. At balance sheet date, the Directors accounted through reserves for the fair value uplift of €10.91 million on the Corinthia Nevskij Palace Hotel resulting from an open market valuation. This helped the net asset value per share rise to €1.11 implying that the equity is trading at a 19% discount to its book value.
With regards to the outlook, the Directors stated “during the course of 2006 the Group will have two of its four properties i.e. the Corinthia Nevskij Palace Hotel and the Corinthia San Gorg Hotel, going through periods of reduced activity as a result of refurbishment or construction works and, therefore, these properties are expected to register lower operating profits than those achieved in previous years. On the other hand both the Corinthia Grand Hotel Royal and the Corinthia Alfa Hotel are expected to register better results than those achieved in 2005 as they are moving closer to their maturity. The combined effect of these two factors is expected to result in an overall improvement in the Group’s operating performance”.