On Friday, the Board of Directors of International Hotel Investments plc (IHI) released the financial statements for 2017 for the IHI Group, which posted a record profit after tax of €14.9 million, after having reported a loss for the last three consecutive years.
The group currently owns 12 hotels and manages nine additional hotels. Four of these hotels, which are located in Brussels, Dubai, Bucharest and Doha, are still at development stage and are expected to be opened between 2019 and 2020.
With regards to the Corinthia Hotel Brussels (owned by IHI at 50%), IHI issued a call for tenders for the redevelopment of the hotel, after having obtained the relevant development permits.The group has already secured a €45 million loan from ARES Bank of Spain to finance the development works.
The hotels will comprise 126 bedrooms and is expected for opening by 2020. In the hospitality arm, the group is moving from an own and-operate-model towards a model that would focus on the management of third party hotels, which is translating in an increasing number of management agreements.
The group is also expanding in the real estate business, whereby it offers both project management and development services. This strategy would reduce the capital commitment of the group and the exposure to the real estate market, which in the past years have significantly impacted the financial performance of the Group and made it extremely volatile due to the change in value of the properties.
The year 2017 represented a turning point for IHI also from an accounting point of view, since, following a change in the composition of the board of the company owning the Corinthia Hotel London, which enabled IHI to exercise control over this asset, the London subsidiary was consolidated for the first year in IHI financial statements.
In light of this, the 2017 financial statements are not comparable to previous years. However, the group provided illustrative results for 2016, which include the consolidation of the London subsidiary as from January 2016, that confirm the positive financial of the group in 2017. In this regard, revenue increased by 8% to €242 million, whilst earnings before interest, tax, depreciation and amortisation have increased by 15%, thanks to operational efficiencies observed in the majority of the hotels.
In Tripoli the Corinthia Hotel reopened its reservation system in August 2017, albeit bookings are still at a modest level reflecting the current business climate in the city.
However, during 2017 the group managed to lease out the remaining part of office space at the Commercial Centre in Tripoli, which is enabling the Libyan subsidiary to break-even before depreciation and amortisation charges.
In Malta IHI expects to start the works for the development in St George’s Bay during 2019. The project entails the addition of two floors to the Corinthia Hotel St George’s, which although reducing the number of rooms, will enable the Group to increase the size and achieve the status of first six-star hotel in Malta.
Furthermore, the group aims at developing two serviced residential blocks on the land between the Corinthia Hotel St George’s and the Radisson Blue Hotel. The Group also owns the Costa Coffee franchise in Malta and Spain, however, during 2017 an impairment of goodwill was registered primarily relating to the Costa Coffee operation in Spain which keep on posting negative results.
The group is significantly exposed to foreign exchange risk, especially with regards to the rouble and sterling, which weakening determined a €23 million combined currency conversion loss, which was only offset by the onetime release of all deferred tax recorded to date on the Corinthia Hotel London.
The group net performance was boosted by a tax income of €5 million mainly attributable to a movement in unrecognised deferred tax. Despite the positive financial results, the management announced that the company will not be able to distribute dividends to its shareholders for the financial year 2017 due to negative retained earnings reported at parent company level (the group posted retained earnings of €76 million).
However, the board of directors is considering the issue of an interim dividend during 2018 as soon as this process of rationalising the parent company balance sheet is completed.
According to management the group outlook for 2018 remains positive for all its business lines and hotel excluding Libya.
This article was issued by Elisabetta Gaudiano, Research Analyst at Calamatta Cuschieri.
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