International Hotel Investments plc - Full-Year Results
On 4 April, International Hotel Investments plc (IHI) published its preliminary profit statement with respect to the financial year ended 31 December 2012.
Performance Overview
During 2012 the IHI Group reported a 13.8% increase in revenue to €118.6 million reflecting the consolidation of the financial results of the Marina Hotel (which was acquired in early 2012) as well as the improved performances across all of the Group’s properties with the exception of the Corinthia Hotel Lisbon. The preliminary profit statement also indicated that the best performer was the Corinthia Hotel and Commercial Centre in St. Petersburg whilst the Corinthia Hotel in Tripoli continues to be affected by the instability in Libya.
On the expenditure side, direct costs increased by 18% to €63.6 million reflecting the consolidation of the Marina Hotel expenses for the first time as well as the increased costs associated with the higher occupancy levels achieved by the Group’s properties especially in Tripoli. Meanwhile, other operating costs dropped by 2.5% to €27.3 million in spite of the incidence of €1 million in one-time costs related to the acquisition of the Marina Hotel.
As a result, the IHI Group registered a 23.9% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to €27.7 million with the EBITDA margin similarly improving from 21.5% in 2011 to 23.4% in 2012. Since IHI has a 50% equity stake in the Corinthia Hotel and Residences in London, this investment is treated as an associate and the results are not consolidated in the overall Group revenue and EBITDA figures.
Depreciation and amortisation was relatively unchanged a €24.2 million. However, the IHI Group incurred a €7.8 million (2011: €2.5 million) net impairment on its properties comprising an €11.3 million impairment on the properties in Portugal and Hungary which was only partially offset by the €3.5 million uplift in the value of the Corinthia Hotel in Prague. On the other hand, the Group’s financials were positively impacted by a revaluation of investment property of €4.2 million (2011: €5.4 million) reflecting the increase in the value of the commercial centre in St. Petersburg.
As a result, the IHI Group reported an operating loss of €0.13 million compared to the €0.9 million operating profit registered in the previous year.
Net interest payable increased by 20.7% to €16.8 million following the new €50 million loan drawn down during the year.
Share of profits from associates amounted to €4.97 million (2011: €1.15 million) relating to the Group’s 50% stake in the Corinthia Hotel and Residences in London and the results of Medina Towers and QPM Ltd. The improved contribution reflects the significant improvement in EBITDA at the Corinthia Hotel London to €5.6 million (2011: negative EBITDA of €14.5 million) as well as the €31.9 million uplift in the value of the Residences (2011: €37.6 million) which also helped to offset the higher depreciation and finance charges of €21.3 million.
Overall, IHI registered a pre-tax loss of €11.4 million compared to the 2011 pre-tax loss of €11.8 million. After accounting for a tax credit and minority interest, the Group reported a €10.26 million net loss – similar to that incurred in 2011.
The balance sheet as at 31 December 2012 shows that total assets increased by 1.9% to €1.09 billion largely reflecting the inclusion of the Marina Hotel. Shareholders’ funds dropped marginally to €600.3 million as the €10.26 million loss for the year was mostly offset by the €8.3 million fair value adjustments passed directly through equity. The adjustments comprised a €15 million uplift to the value of the Corinthia Hotel London against a €8.7 million impairment in the value of the Corinthia Hotel St. Petersburg.
The Preliminary Profit Statement also revealed that the Group’s working capital as at the end of 31 December 2012 shows a deficiency of €18.6 million which will be addressed through the projected improvements in operating performance and through the anticipated disposal of the London residences.
Outlook
The Directors noted that the overall global economic situation for 2013 remains challenging but there are signs of recovery which should positively impact the Group’s performance. As such, the Directors expect an improvement in the Group’s results during the financial year ending 31 December 2013. The projections published by IHI in the Prospectus published on 16 November 2012 indicate a forecast EBITDA of €41.1 million.
Strategic Developments
The Directors explained that the Board remains firmly committed to dispose of the Residences in London. In this respect, the Directors stated that negotiations are still ongoing with interest bidders with the ultimate objective of maximising shareholder returns.
Furthermore, the Directors explained that the Group is still in active discussions with sovereign wealth funds and large institutions with the aim of raising fresh capital to enable the Group to move ahead in its overall vision including property acquisitions in Europe, North America and Asia in order to expand the Corinthia brand. The Directors noted that further progress on the sale of the Residences and the capital raising exercise will be reported in due course once there are firm commitments in hand.
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