On 28 April, International Hotel Investments plc published its results for the financial year ended 31 December 2016.
During 2016, revenues increased by 17.8% to a record of €157.9 million (FY2015: €134.1 million) reflecting the growth in turnover across all of the Group’s hotels (especially those located in Malta) as well as the consolidation of the Island Hotels Group (“IHG”) results for a full twelve-month period as opposed to six months in 2015 and the inclusion of QP Management Limited which was acquired in July 2016.
Given the increased level of activity, direct costs also increased by 24.4% to €87.5 million (FY2015: €70.3 million). Nonetheless, given the larger increase in revenue, the Group’s gross profit increased by 10.4% to €70.4 million (FY2015: €63.7 million). However, the gross profit margin eased to 44.6% from 47.6% in the previous comparable period.
Administrative and marketing expenses also increased by 3.1% to €32.6 million (FY2015: €31.6 million) but earnings before interest, tax, depreciation and amortisation (“EBITDA”) still improved as it surged by 17.6% to €37.8 million (FY2015: €32.1 million). Taking into account the 50%-share of EBITDA generated by the two hotels held jointly with third parties (the Corinthia Hotel London and the Radisson Golden Sands Resort), the total EBITDA generated by IHI increased by 20.2% to €53 million (FY2015: €44.1 million).
Despite the above, the financial performance of IHI during the period under review was dented by a €19.7 million net charge in the fair value of investment property against a positive movement of €0.19 million in FY2015. Furthermore, IHI booked a much lower net reversal of impairment loss attributable to hotel properties of just €2.96 million against a positive net reversal of €11.6 million in the previous comparable period. As a result, after taking into consideration depreciation and amortisation charges amounting to €23.3 million (FY2015 €20.1 million) and a €1 million loss arising on property, plant and equipment (FY2015: nil), the IHI Group reported an operating loss of €3.53 million against an operating profit of €24.4 million in FY2015.
On the other hand, IHI benefitted from investment income of €1.22 million (FY2015: nil) as well as a notable drop in net finance costs to €6.12 million (FY2015: €22.2 million). The latter was mainly due to a €10.4 million gain made on favourable exchange differences on borrowings. Accordingly, after taking into account a €1.66 million share of net profit from associates and joint ventures (FY2015: net loss of €2.56 million), the IHI Group reported a loss before tax of €6.76 million compared to a pre-tax loss of €0.35 million in 2015. The tax charge for the year amounted to €0.9 million (FY2015: €3.4 million), which leads to a net loss for the year of €7.66 million (FY2015: net loss of €3.73 million).
The Statement of Financial Position shows a 5.2% increase in total assets to €1.22 billion (FY2015: €1.16 billion), largely reflecting the 8% increase in property, plant and equipment to €617.8 million. On the other hand, total liabilities grew by 4% to €0.57 billion (FY2015: €0.55 billion). While total outstanding bonds increased by €64.9 million to €211.6 million, bank borrowings decreased by €24.3 million to €188.9 million. Overall, total equity increased by 6.3% to €0.65 billion which translates into a net asset value per share of €1.082 (31 December 2015: €1.03).
Looking ahead, the Directors noted that the outlook for 2017 for all of the Group’s hotels excluding Libya remains positive and better than the results achieved in 2016. The Directors also made reference to the acquisition of a 50% share in a landmark property for redevelopment as a Corinthia hotel in Brussels in 2016 as well as the conclusion of further management agreements for three properties in Dubai – one of which is being built as a luxury Corinthia Hotel. In the early part of 2017, IHI also concluded another management agreement for an iconic Corinthia Hotel & Residences to be built by a strategic investor in Doha, Qatar.
The Directors also advised that after securing the right to nominate and appoint the majority of the Board of Directors of Corinthia Hotel London in the early part of 2017, IHI can now start consolidating the performance of this hotel in its financial statements rather than being shown as a separate line item as share of profits/(losses) from joint venture.
Bonus Share Issue
IHI also announced its intention to issue a 3 for 100 bonus share issue to all shareholders as at the close of trading on Tuesday 27 June 2017. The bonus share distribution is to be made out of capital reserves of the Company. Further details on the bonus issue will be announced in due course.