International Hotel Investments plc - Interim Results Review

International Hotel Investments plc published its interim results to 30 June 2008 following a Board of Directors’ meeting held on 28 August. Similar to last year, no interim dividend was declared.

The key highlights are:
• Turnover climbs to €64.3 million;
• EBITDA of €22.1 million with a margin of 34%;
• Pre-tax profit of €6 million;
• Net asset value per share of €1.063.

Total revenue generated by the IHI Group during the half- year ended 30 June 2008 amounted to €64.31 million, 65% higher than last year’s turnover of €38.8 million. The Directors attributed this increased turnover mainly to the results of the Corinthia Bab Africa Hotel and Commercial Centre in Tripoli and the Corinthia Hotel in Prague, which have been included for the full six-month period. In the first half of last year they were only included for the month of June (May 2007 being the month of acquisition of these two hotels). The Directors also stated that all the hotels registered an increase in turnover over the same period last year except for the Corinthia Neviskij Palace Hotel in St Petersburg which is currently undergoing reconstruction works to upgrade the hotel and adjacent properties. The Corinthia Hotel in Lisbon achieved the highest growth in turnover at 28% following the recent completion of the full refurbishment of the hotel’s room stock. However, the Corinthia Bab Africa Hotel in Tripoli remained the Group’s highest revenue generator as it accounted for over 30% of total revenue during the first half of the year.

Direct costs increased to €39 million, resulting in a gross profit of €25.3 million (June 2007: €13.5 million) with other operating costs surging to €14.3 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) climbed to €22.1 million from €10.5 million in the same period in 2007 with the EBITDA margin improving to 34% (2007: 27.1%).

Net financing costs decreased by 14% to €5.1 million mainly reflecting the interest income being earned on funds from the increase in share capital in 2007 which were set aside for future acquisitions.  Financial expenses increased by €2 million over the first half of last year since for most of the period the hotels in Tripoli and Prague did not form part of the IHI Group and therefore the interest incurred on the bank loans of these two properties for that period were not included in the Group’s income statements.

The IHI Group registered a pre-tax profit of €6 million during the year under review compared to a loss of €1.6 million in the first half of 2007. After accounting for taxation and the profit attributable to minority interests, the Group’s profit for the period amounted to €2.2 million.

Total assets as at 30 June 2008 amounted to €991.3 million, 11.8% higher that the level in June 2007 but only marginally above the level as at the start of this year. Shareholders’ funds which increased to €587.9 million translate into a net asset value per share of €1.063.

During the first half of the year IHI issued 3 important announcements related to its acquisition programme and expansion drive:

(i) On 6 February 2008 IHI announced that in conjunction with its strategic partners Nakheel Hotels and LFICO they were awarded the tender for the acquisition of the Metropole Hotel and adjoining 10 Whitehall Place in London. A full planning application has been submitted for the redevelopment of the buildings into a 299 room luxury hotel and 13 up-market apartments which are due to be completed by the end of 2010. CHI Ltd. will be managing the new hotel under the Corinthia brand.

(ii) On 22 February 2008 IHI announced that it entered into a joint venture agreement with LFICO to develop a 360 room five-star deluxe hotel, office and residential complex on the waterfront in central Benghazi, Libya. The building permit and other ground work for this project are currently being finalized and on completion, which is expected in 2011, the hotel and other facilities will also be operated by CHI Ltd.

(iii) In May 2008, IHI announced that it had entered into an agreement with Intourist (the Russian tour operator and hotel company) to jointly create the largest hotel chain across the Russian Federation. In this respect IHI and Intourist are seeking acquisitions in various cities across Russia.

Furthermore, the Group’s hotel management arm, CHI Ltd, signed a number of new hotel management agreements with third-party owners for the future operation of their hotels in line with the company’s plans to operate further properties under the Corinthia, Wyndham and Ramada brands, in Europe, North Africa and the Middle East. In the coming years CHI Ltd will be extending its management services to hotels in Liverpool, Morocco, Dubai, Algiers, Abu Dhabi, Bucharest and Egypt.

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