IHI posts interim loss of €2.81 million

Corinthia Group subsidiary International Hotel Investments plc has registered a loss after tax of €2.81 million for the six months to June 30, compared to a profit after tax of €2.31 million for the same period last year.

In a company announcement on the Malta Stock Exchange on Thursday, IHI said the adverse effects of the financial crisis that started to be felt in the second half of 2008 had spilled over into 2009. The hospitality industry suffered the effects of recession in its main feeder markets resulting in falling occupancies and increasing pressures on room rates.

The group registered a drop in turnover of 20 per cent when compared to the corresponding period last year. Thanks to the geographical spread of its properties, the group still managed to record an operating profit after depreciation of €4.18 million, even though it represented a drop of €6.82 million from last year.

Finance income - reflecting interest income earned on funds earmarked for future acquisitions - decreased when compared with the corresponding period last year. This follows the use of part of the funds for the acquisition of the group's stake in the Metropole Building and 10 Whitehall Place in London, the site for the chain's flagship Corinthia Hotel London. The hotel's opening is earmarked for October 10 next year.

The drop in interest rates further compounded matters. The group incurred lower finance costs as a result of ongoing capital repayments and the reduction in the euro base rate.

This reduction in the euro base rate triggered a fair value loss on the two interest rate swap arrangements currently in place. The group intends to retain these instruments and, as a result, this fair value loss will reverse on maturity.

Although the group is reporting a consolidated loss, a tax expense is still being recognised as a result of the profits being generated by Corinthia Hotel Tripoli.

Tangible fixed assets acquired during the period amounted to €26.36 million, mainly relating to the expenditure incurred on the development of the Corinthia Hotel St Petersburg and the adjoining Nevskij Plaza commercial centre.

IHI said that although there were indications that the recession may have bottomed out, it was still too early to determine when the international economy would show tangible signs of recovery.

"This uncertain economic climate may have a negative impact on the value of some of the group's properties at year-end. In order to counteract and mitigate these recessionary effects, the group is pursuing its strategy of seeking new markets, streamlining its operations and reducing costs without impinging on the quality of service provided by its properties," the company said.

IHI inaugurated the refurbished and extended Corinthia Hotel St Petersburg in May. Meanwhile, the strip-out of the London site was practically completed by the end of June. During this period, IHI also injected a further €16.7 million in equity in NLI Ltd, a joint venture with Istithmar Hotels of Dubai and LFICO of Libya. IHI has a 37 per cent stake in this company.

The company also said that the design works on the Corinthia Hotel Benghazi project in Libya are at an advanced stage. IHI has a 75 per cent stake in IHI Benghazi, the company running the project, with the remainder owned by LFICO.

In July, IHI issued a €35 million corporate bond for general funding purposes.