On 19 August, International Hotel Investments plc published its 2011 half-year results. The financial statements showed a 1.6% drop in turnover to €48.6 million as the €7 million decline in income from the hotel in Libya offset the €6.5 million increase in turnover from the other properties located in Europe and Eastern Europe. Direct costs rose by 5.3% to €26.6 million in line with the improved occupancy levels. On the other hand, other operating costs dropped by 7.2% to €12.3 million following the measures taken at the Corinthia Bab Africa Hotel in Tripoli and the non-recurrence of costs incurred in 2010. This resulted in a lower earnings before interest, tax, depreciation and amortisation (EBITDA) of €9.8 million compared to the EBITDA figure of €10.8 million registered in the previous corresponding period. The decline in EBITDA was also attributable to the significant reduction in business at the Libya hotel. Depreciation and amortisation was marginally unchanged at €12 million.
The IHI Group also incurred €5.4 million as the share of loss from the investment related to the London Hotel. The Directors explained that this figure includes three months of pre-operating activity together with the associated marketing costs and three months of the initial soft operational activity. The London Hotel was inaugurated in April 2011 and its room stock is being released gradually whilst the adjacent twelve luxury apartments located in Whitehall Place should be completed by the end of this year.
Finance costs increased by 16.1% to €8.4 million whilst finance income decreased from €0.4 million in the first six months of 2010 to €0.2 million during the period under review. This was due to the utilisation of bank balances and additional bank borrowings drawn by the Group to finance its investment in London and the 25% equity stake in the Medina Tower. This was offset by the €1.2 million uplift in the fair value of the Group’s interest rate swaps given the expectations of higher interest rates as at the half-year end.
Overall, the IHI Group reported a pre-tax loss for the period under review of €14.7 million compared to the pre-tax loss of €10.3 million reported in the previous comparable period. After accounting for a tax credit of €3.5 million, the Group’s loss attributable to shareholders for the first six months of 2011 amounted to €10.8 million, 20.9% higher than the loss reported in respect of the first six months of 2010.
The Directors noted that “Although it is evident that the value of the property in Libya has been impaired, the extremely fluid and volatile situation in the country does not allow a reliable quantification of the anticipated decrease.” Therefore the Directors have decided not to account for any loss of value in the financial statements with respect to the Tripoli hotel.
Looking ahead, the Directors stated that the political and economic challenges being faced by the countries in which it operates will probably adversely impact the value of some of the Group’s properties. Nonetheless, the Group continues to pursue growth in both occupancy levels and room rates whilst containing costs.
Download a copy of the 2011 Interim Results of International Hotel Investments plc.