Ongoing turmoil and violence in Libya and Ukraine have taken a toll on the profit levels of the Malta Stock Exchange-listed International Hotels Investments (IHI), with interim profits having dropped to €12.4 million from the €16.3 million registered in the corresponding period last year.
The group registered a loss after tax of €7.7 million compared to the loss of €4.4 million reported in the same period last year.
In its interim report published this week, IHI said that “…external and unforeseen political events in Russia and Libya have significantly impacted demand for hotel accommodation in St Petersburg and Tripoli”.
The group explains, “Libya is a major concern. The current conflict in and around the Tripoli airport area has severely curtailed international demand for hotel accommodation in the city. Nevertheless, in spite of the prevailing challenges, IHI continues to operate its hotel with a core nucleus of staff after having implemented a significant down-sizing of both local and expatriate personnel. Likewise, all other operating costs have been thoroughly reviewed and reduced as necessary.
“Given the downturn in business, the value of the group’s property in Libya would normally need to be tested for impairment as at 30 June 2014. Such an exercise is based on projected cash flows discounted to present day value. In view of the unpredictable situation in Libya, such a test would necessarily need to take into account a number of differing scenarios which would render the exercise unreliable.”
On its hotel property in Russia, IHI said, “In Russia, the performance of the Corinthia Hotel St Petersburg has been adversely affected by the developments in Ukraine resulting in a volatile rouble, weakened international demand for hotel services in the country, and the cancellation of a number of major events and conferences planned to be held in the city earlier in the year. In order to mitigate the resultant impact of these conditions, management has been directing its efforts towards replacing the lost foreign business with other business generated from within the Russian Federation. Furthermore, these events might have an impact on the value of the property at year end.”
It warned, “The above events that have negatively affected the financial performance of Corinthia Hotel Tripoli and Corinthia Hotel St Petersburg are expected to impact further the results of the group for 2014.”
Elsewhere, and conversely, revenues and operating profits in the group’s hotels in Malta, Prague, Budapest, Lisbon and London continued to increase year on year, in line with previous projections, and reflecting a stronger capability to achieve a fair market share in their respective markets. In particular, the Corinthia Hotel St George’s Bay and Marina Hotel in Malta registered an improvement in revenue of 15 per cent.
Furthermore, the Corinthia Hotel London continued to consolidate its position as one of the leading luxury hotels in the British capital with an improvement of six per cent in revenue relative to the same period last year.
IHI also pointed out that year-on-year depreciation and amortisation reduced by €2.7 million mainly resulting from the fact that items of furniture, plant and equipment at the Corinthia Hotel Tripoli installed at the time of the hotel’s opening 10 years ago are now fully depreciated.
As far as the London Hotel is concerned, for the period under review, the hotel registered an EBITDA of €4.3 million. This result is not consolidated in the group’s financial statements but reported under equity accounted investments in view of IHI’s 50 per cent share.
The general business outlook for IHI’s hotels in Budapest, Lisbon, London, Malta and Prague remains positive with year-on-year growth being registered in both turnover and operating profits.