International Hotel Investments plc - Interim Results

On 31 August, International Hotel Investments plc published its interim financial statements covering the six months ended 30 June 2016.

Performance Overview

During the period under review, the IHI Group registered a 27.8% increase in revenue to €70.76 million reflecting continued growth across the Group‘s owned assets as well as the consolidation of Island Hotels Group Holdings plc (IHG) which was acquired in the second half of 2015.

Similarly, direct costs increased by 40.6% to €39.65 million leading to a gross profit figure of €31.1 million, representing a 14.5% increase from the previous comparable period. However, given the larger increase in direct costs, the gross profit margin weakened to 44% from 49.1% during the first six months of 2015.

In view of the consolidation of the IHG results and the improved activity at the Group’s hotels, other operating costs also increased by 23.5% to €15.98 million. This resulted into an earnings before interest, tax, depreciation and amortisation (EBITDA) figure of €15.1 million, representing a 6.22% improvement over the previous corresponding period reflecting an improved EBITDA across the Group’s hotels whilst the catering business is in a loss-making position. However, the EBITDA margin weakened to 21.4% from 25.7% in the first half of 2015. The announcement indicates that the Group’s fully-owned hotels, excluding St. Petersburg and Tripoli, registered a relatively unchanged EBITDA of €10.4 million. The hotel in St. Petersburg registered a 65% improvement in EBITDA to €4.3 million as the local business more than offset the decline in international demand and the Russian Rouble partially rebounded. Meanwhile, the Group’s property in Tripoli yet again registered a marginally positive EBITDA figure as the income generated from the fully-occupied commercial centre offset the dismal performance of the hotel which continues to suffer from weak demand in view of the prevailing political situation in the country.

After accounting for depreciation of €10.9 million (H1 2015: €8.4 million), the IHI Group registered an operating profit of €4.09 million, representing a 29.2% decline from the previous comparable period.

Net finance costs dropped by 58.1% to €2.3 million as the 25.8% increase in finance costs to €8.2 million (following the inclusion of the IHG interest costs), were more than offset by the €5.9 million in finance income (H1 2015: €0.98 million) which largely represents an unrealised exchange gain of €5.6 million registered on the euro denominated loans funding the Group’s assets in St. Petersburg.

Income from associates amounted to just below €0.1 million compared to a share of loss of €2.3 million in the six months ended 30 June 2015. The announcement explained that the operational performance of the London hotel (denominated in Sterling) during the period under review was in line with that of the first six months of 2015. However, in euro terms, the result was negatively affected by the weakening of Sterling against euro. On the other hand, the Group’s results were boosted by the inclusion of the 50% of the results of the Golden Sands which forms part of the IHG Group.

Overall, the IHI Group registered a pre-tax profit of €1.86 million compared to a pre-tax loss of €2.1 million in the first half of 2015. After accounting for a marginal tax credit, the net profit for the period under review amounted to €1.93 million compared to a loss of €0.89 million in the first six months of 2015. This translates into an earnings per share of €0.0035 compared to a negative €0.1520 during the previous corresponding period.

The Statement of Financial Position as at 30 June 2016, compared to the corresponding figures as at 31 December 2015, shows marginal changes with total assets at €1,152.4 million, total liabilities at €546.1 million and total equity of €606.3 million. The latter translates into a net asset value per share of €1.014 (Dec 2015: €1.02).

Outlook

Looking ahead, the Directors noted that the general business outlook for IHI’s hotels remains positive with year-on-year growth forecasted both in turnover and operating profits. Nonetheless, the prevailing challenging conditions which have impacted the financial performance of the Group‘s properties in Tripoli and St. Petersburg are expected to persist. Notwithstanding this, the commercial centre in Tripoli remains fully-leased out thereby mitigating the hotel’s operational loss for an overall positive EBITDA. In Russia, the hotel is managing to compensate the loss of international business with additional local business.

The Directors further noted that the Group secured a €12 million bank loan during the period under review to partially finance the remaining settlement to the IHG shareholders which was settled on 10 August 2016. Furthermore, in July 2016, the IHI Group successfully issued a €55 million secured bond.

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International Hotel Investments plc – Interim results for the six months ended 30 June 2016.

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