On 21 February 2011, Island Hotels Group Holdings plc issued the preliminary profit statement for the year ended 31 October 2010. The Group did not recommend the payment of a final dividend while in the previous year it had distributed a net dividend of €0.012 per share.
Island Hotels Group generated total revenue of €28.8 million during the 12 months ended 31 October 2010. The financial performance is not easily comparable to the previous year due to the Group restructuring exercise in the latter part of 2009.
The Group explained that the main challenge it faced during the past financial year was a decline in vacation ownership sales due to the economic conditions within its core market, including the significant tightening of consumer credit provisions. The IHG Group focused its attention on the sale of higher-end products in the vacation ownership business primarily involving a trade-in-system with existing clients. Although volumes of turnover emanating from this business are considered to be satisfactory by the Directors, the Group only accounted for the incremental value of concluded sales. IHG explained that the benefit of this process is that it allowed the Group to substantially increase its availability of unsold weeks which should translate into higher profitability levels in future years when these weeks are eventually sold.
On the other hand, the event catering business was the star performer of the year as it generated strong financial results in part due to the exclusive event during a conference of unprecedented size for Malta when the Group was contracted to cater for over 4,200 guests. Moreover, the hotel side of the business reportedly performed better than projected, both in terms of the increased number of arrivals as well as rates generated.
However the improved revenue figures from hotels and event catering was significantly eroded by increased costs in areas where the management could not exercise immediate control, most notably the hike in energy tariffs. After deducting these costs including depreciation of €3.2 million, the Group’s operating profit amounted to €2.3 million. The results were also negatively impacted by the expected increase in finance costs to €3 million reflecting the higher leveraged position of the Group following the restructuring exercise in 2009. This led to a loss for the year of €0.65 million.
With regards to the outlook for the current financial year to 31 October 2011, the Island Hotel Group stated that prospects and business conditions remain volatile and dependent on the continued recovery and improvement of the tourism industry. The Group stated that it will continue with its drive towards operational efficiency and will pursue opportunities for growth even in these challenging times. Meanwhile, the Group’s focus will remain on sales of its vacation ownership together with its plans to develop the 83,000 sqm Hal-Ferh site into an exclusive resort of the highest quality. The Directors believe that the event catering business offers the IHG Group serious growth prospects helped by the new exclusive venues signed up during 2010 as well as the new management team that has left a positive impact on this part of the business.
A copy of the Full-Year results is available here.