On 1 April 2011, International Hotel Investments plc announced its 2010 full-year results. The Preliminary Profit Statement shows a 1.4% drop in turnover to €101.8 million mainly due to the performance of the Group’s hotel in Tripoli which was negatively affected by visa restrictions over a 6-week period in the first half of 2010. Moreover the hotel in Tripoli also suffered from increased competition and a general slowdown in business which resulted in a drop of €8.5 million in revenue. On the other hand, the IHI Group explained that the hotel in Lisbon is now regaining lost ground whilst that in St. Petersburg is benefitting from a higher room stock following the recent refurbishment project in 2009 together with the general economic recovery in Russia. In fact, IHI registered an increased revenue of €3.5 million from the property in Lisbon and €3.9 million from the hotel in St. Petersburg.
Direct costs increased to €52.5 million with other operating costs also rising to €26.5 million due to the higher expenses incurred in Portugal and Russia. The charge for deprecation remained unchanged at €24.7 million. The IHI Group registered a 15.6% decline in EBITDA to €47.6 million (2009: €56.4 million).
The improved economic performance of the Russian economy helped IHI recognise an uplift to the fair value of investment properties by €2.7 million attributable to the commercial centre beside the hotel in St. Petersburg.
The improvement in results and the business outlook attributable to the hotel in Lisbon enabled the Group to recognize a reversal of an impairment charge of €2.4 million taken on this property in previous years. In 2009, IHI’s financial statements had reflected impairment charges amounting to €22.3 million attributable to the properties in Prague (€13.7 million) and Budapest (€7.9 million).
Net finance costs increased by 33.3% to €14.6 million as a result of higher Euribor rates, as well as the increased borrowings related to the €35 million bond issue in April 2010 and a new re-financing loan.
In the Profit Statement the Group also registered a loss from ‘equity accounted investments’ which reflects the marketing costs incurred by the Corinthia Hotel in London in preparation for its opening this year. The Directors explained that whilst it incurred a loss on the interest rate swap arrangement amounting to €5.5 million, this was offset by a revaluation uplift of €5.3 million on the London apartments. The Directors stated that this hotel is now nearing full completion and is expected to significantly raise the profile of the Group’s brand and portfolio following the its opening.
The Group incurred a pre-tax loss of €11.4 million compared to a pre-tax loss of €1.6 million recorded in 2009. The loss after tax of the IHI Group amounted to €13.1 million. Similar to previous years the Directors did not recommend the payment of a dividend.
In the Profit Statement, the Directors explained that during 2010 the Group benefitted from a slow but steady recovery in business and this trend is expected to continue during 2011. With regards to the current unrest in Libya, the Directors explained that they are monitoring the situation very carefully. Although the hotel in Tripoli remains operational (albeit with a reduced level of activity and staff), IHI’s Directors are of the opinion that it is premature to provide estimates of the consequences of these events that are unfolding. However, the Group believes that the events in Libya will affect the Company’s current year performance and may also adversely affect its future performance and financial position. In fact IHI recognised an impairment charge of €20.3 million on the book value of the Tripoli hotel as at 31 December 2010, resulting from the expected reduction in its future profitability. On the other hand, however, the Group registered a significant gain of €38.4 million through an uplift in the value of the London hotel property.
Download a copy of International Hotel Investments plc 2010 Preliminary Profit Statement.