On 21 January Island Hotels Group Holdings plc announced that it expects its full-year results to 31 October 2010 to show an operating profit but an overall net loss before tax (after deducting depreciation and finance costs). The Group explained that the main challenge it faced during its financial year was a decline in the vacation ownership due to the economic conditions in the core market of this segment, including the significant tightening of consumer credit provisions.
The Group stated that its prudent approach of taking to profit only the incremental value of certain vacation ownership accommodation packages being sold on a trade-in-system also had an impact on the net result of the Group. Sales during the financial year were on the higher value packages which will be reflected as a profit in future years once they are resold.
IHG confirmed that the hotel side of the business performed better than projected, both in terms of the increased number of arrivals as well as rates generated. However, IHG stated that this improvement in revenue was significantly eroded by increased costs in areas where management could not exercise immediate control – mainly the effect of increased energy rates. Moreover, the finance costs of the Group increased as expected, due to the higher leveraged position of the Group.
The Group explained that the event catering business was the star performer of the year as it generated strong financial results. The highlight of the year was the exclusive catering for over 4,200 guests during a conference of unprecedented size for Malta. 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.
Additionally, the IHG Group stated that plans to develop Hal-Ferh into a fractional ownership resort of the highest quality are now at permit stage and progressing well. The Directors believe that this development will provide the Group with profitable occupancy in the years ahead.
Meanwhile, the Directors remain confident that the Group is on the right path and will continue with its drive towards efficiency in all segments of its business and to pursue opportunities for growth even in these challenging times.