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Elegant Hotels Group PLC   -  EHG   

Half Year Results Statement

Released 07:00 08-May-2019

RNS Number : 2947Y
Elegant Hotels Group PLC
08 May 2019
 

 

8 May 2019

 

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

 

Elegant Hotels Group plc - Half Year Results Statement

 

A solid performance in a competitive market, with good visibility of bookings for the remainder of the year

 

Elegant Hotels Group plc ("Elegant Hotels", the "Company" or the "Group"), the owner and operator of seven upscale freehold hotels and a beachfront restaurant on the island of Barbados, today announces its unaudited results for the six months ended 31 March 2019.

 

Unaudited highlights

·   Revenue* up 3% to $43.7m (H1 2018: $42.5m) primarily driven by encouraging performance at Treasure Beach, the Group's most recently acquired property

·    ADR* (average daily rates) down 1% to $532 (H1 2018: $539)

·    Occupancy increased to 68% (H1 2018: 67%)

·    RevPAR* (revenue per available room) up 1% at $364 (H1 2018: $362)

·    Adjusted EBITDA** up 7% to $16.4m (H1 2018: $15.4m)

·    Adjusted profit before tax up 5% to $12.0m (H1 2018: $11.4m)

·    Adjusted EPS (cents per share) up 27% to 13.3c (H1 2018: 10.5c)

·    Implied Net Asset Value (NAV) of 203 cents per share (156 pence per share)

·    Interim dividend declared at 1.33 pence per share (H1 2018: 1.33 pence per share)

·  Commitment received on debt refinancing to extend loans and facilities to 2024 on similar commercial terms 

·    Capital expenditure projects included a refurbished restaurant at Turtle Beach

 

Please note that due to rounding, numbers presented throughout this document may not add up precisely to the totals provided.  Percentage changes are calculated on unrounded figures.

 

* From 1 October 2018, the Group recognises service charge within revenue as a result of the implementation of IFRS 15. In addition, the Group has changed its classification of revenue, impacting the calculation of ADR and RevPAR. Prior period amounts have been restated in line with this change.  Please see the Reporting changes section and note 3 to the Interim financial statements for more detail.

 

** The Group uses adjusted EBITDA as a measure of performance as it better represents underlying performance. Adjusted EBITDA is earnings before interest, tax, depreciation, amortisation and one-off items that are outside the ordinary course of business. Adjusted profit and adjusted EPS reflect the adjusted EBITDA figure.

 

 based on an exchange rate of £1 : $1.30

 

Commenting on the results, Sunil Chatrani, CEO of Elegant Hotels, said:

"Elegant Hotels continues to perform well in the context of a competitive market and against a backdrop of ongoing uncertainty in its core visitor market of the UK. We are particularly pleased with the contribution during the period of our most recently acquired property, Treasure Beach, and are constantly assessing a range of opportunities for further expansion, whilst ensuring our balance sheet remains robust.

 

We continue to execute our strategy in a measured and consistent manner, and we have good visibility of bookings for the remainder of the financial year. As a result, we remain comfortable with the FY19 outlook versus market expectations and confident in the Group's longer-term prospects."

 

 

Analyst presentation

A presentation of the results for analysts and institutional investors will take place at 9.00am today at the London Stock Exchange, 10 Paternoster Square, London, EC4M 7LS.

For those unable to attend in person, the dial-in details are as follows:

International access

+44 (0) 20 3003 2666

UK Toll Free

0808 109 0700

Barbados Toll Free

1 877 562 2218

Password

Elegant

 

For further information:

Elegant Hotels Group plc

Sunil Chatrani, Chief Executive Officer                                                          +1 246 432 6500

Jeff Singleton, Chief Financial Officer           

 

Liberum Capital Limited (NOMAD and Broker)

Clayton Bush / Chris Clarke / William Hall                                                    +44 (0) 203 100 2222

 

Powerscourt

Rob Greening / Lisa Kavanagh / Jana Tsiligiannis                                         +44 (0) 207 250 1446

Email: eleganthotels@powerscourt-group.com     

           

Notes to Editors:

Elegant Hotels owns and operates seven luxury freehold hotels and a beachfront restaurant, Daphne's, on the island of Barbados. The Group's portfolio currently comprises 588 rooms, making it twice as large (by room number) as the closest competitor in the Barbados luxury hotel room market. Six of the seven properties are situated along the prestigious west coast of Barbados commonly known as the "Platinum Coast". The properties are all freehold, with a total aggregate plot size of approximately 23 acres and an aggregate beachfront of 2,600 feet.

In the year ended 30 September 2018, the Group reported revenue of $62.9 million and EBITDA before non-recurring items of $19.7 million.

Together, the Group's seven existing hotels - Colony Club, Tamarind, The House, Crystal Cove, Turtle Beach, Waves Hotel & Spa and Treasure Beach - offer styles encompassing classic and contemporary, family-friendly and adults-only. The Group also has a management contract for Hodges Bay Resort in Antigua and a sales and marketing contract for The Landings Resort & Spa in St. Lucia.

The Group's strategy is to leverage its position as a leading hotel operator in Barbados and to expand both on Barbados as well as further into the Caribbean.

Investor website: http://www.eleganthotelsgroup.com/ 

Commercial website:  http://www.eleganthotels.com/

 

 

BUSINESS REVIEW

 

Market overview

Arrivals to Barbados from the UK increased by 7% in the period versus H1 2018 according to the Barbados Tourism Marketing Inc.  This was partially due to England's cricket tour of the West Indies in February 2019.  The Group benefited from these arrivals, with UK guests increasing to 79% of the Group's room nights compared to 77% in the prior period. However, the USD/£ exchange rate remains under pressure due to the current political uncertainty in the UK. This has the effect of both increasing the cost of holidays to Barbados for UK guests and increasing the appeal of all-inclusive properties where the cost of the holiday is effectively "locked in" at the time of booking.

The pace of growth in North American arrivals to Barbados slowed in H1 2019 to a 2% period-on-period increase (H1 2018: 7%).  Partially as a result of the strong UK customer growth, the Group's percentage of North American room nights were stable at 19% and room revenue from direct bookings reduced from 22% in the prior period to 21%. 

There is increased competition in Barbados, particularly in the all-inclusive and value segments.  However, this is partly mitigated by reduced all-inclusive room stock on the island due to ongoing renovations.  The Group continues to invest in its properties in response to growing competition.  There has been specific focus on projects such as upgrading Wi-Fi infrastructure at the properties in order to enhance guest experience.

The Group continues to work with the Government of Barbados to ensure the tourism sector is fairly represented in changes to taxation and other matters.  During the period, the Government announced several changes to taxation that affect the Group. 

Firstly, in October 2018, the Government lowered the corporation tax rate from 30% to rates of between 1% and 5.5%.  This followed the increase of the corporation tax rate in June 2018 from 25% to 30%.  The change was required in order to align the applicable rates for the domestic and offshore sectors in order to meet Organisation for Economic Cooperation and Development (OECD) requirements.  This change significantly reduced the Group's corporation tax obligation for the period.

In March 2019, the Government announced that the previously announced proposed increase in VAT on all tourism services from 7.5% to 15% (effective from 1 January 2020) would be reduced to an increase from 7.5% to 10% on room revenue only.  This change reflects a substantial benefit to the Group as any increase in VAT affects either the prices charged to or margin retained from customers. 

While the reduction in the proposed increase in VAT is positive for the Group, the Government indicated that water charges and property taxes would increase by approximately 50% and 35% respectively.  

 

Revenue

Revenue for the first half of the year was $43.7 million, which was $1.2 million (3%) higher than H1 2018 ($42.5 million*).  This increase was driven primarily by Treasure Beach, which delivered a significantly improved performance and contributed a full period of results, having opened in mid-December 2017 following its acquisition in May 2017. 

The market trend towards all-inclusive properties was reflected in the Group's results, with strong performances from Crystal Cove, Waves and Turtle Beach offset by lower revenue from the European Plan hotels, with the exception of Treasure Beach. 

As noted at the year end, Daphne's restaurant, whilst a small contributor in terms of the Group's results, continues to struggle against the increased competition on the island.    

Overall occupancy grew by one percentage point to 68% (H1 2018: 67%), driven by Treasure Beach and the all-inclusive properties; Crystal Cove, Waves and Turtle Beach.  Targeted discounting drove higher occupancy at Treasure Beach and Turtle Beach.  Turtle Beach also benefited from the refurbishment of one of its restaurants during the period.  However, ADR declined 1% to $532 (H1 2018: $539*), due to reduced rates- at Turtle Beach and Treasure Beach offsetting modest rate increases at most of the other properties. 

RevPAR for the Group increased 1% to $364 from $362* in the prior period.

 

* Comparative figures have been restated as a result of IFRS 15 and revenue classification changes. See the Reporting changes section for more detail.

 

Profitability

After adjusting for one-off items, EBITDA was $16.4 million (H1 2018: $15.4 million), 7% higher than the prior period, while adjusted EBITDA margin increased one percentage point to 37.5% from 36.1% in the prior period*. This reflected a gross margin increase of three percentage points to 62.4%*.

During H1 2019, the Group increased the level of purchases through its centralised warehouse, which became fully operational at the end of H1 2018.  The cost savings from direct importation, combined with some positive impact from the repeal of the National Social Responsibility Levy in July 2018, offset the underlying revenue shift towards lower-margin all-inclusive properties and utility and other operational cost increases as a result of recently implemented Barbados Government policies.

The Group's depreciation and amortisation expense was consistent with the prior period.  There was an increase in finance costs of $0.5 million primarily resulting from movements in the US LIBOR rate (from an average of circa 155 basis points in H1 2018 to an average of circa 240 basis points in H1 2019) and from utilising the Group's overdraft facility.

As a result of the above, adjusted profit before tax increased 5% in the period to $12.0 million (H1 2018: $11.4 million). 

The lowering of the corporate tax rate from 30% to rates of between 1% and 5.5% has resulted in a significant decrease in the Group's corporation tax obligation.  Primarily as a result of restating the balances at the new tax rates, the Group's deferred tax assets and liabilities have reduced from $5.4 million and $5.6 million respectively to $0.4 million and $0.6 million respectively during the period.  As a result of the lowering of the corporate tax rate, the tax charge fell from $2.0 million in the six months ending 31 March 2018 to $0.2 million in H1 2019. 

Adjusted profit after tax increased to $11.8 million from $9.3m in the prior year, while adjusted basic and diluted EPS increased from 10.5 cents per share to 13.3 cents per share.

Reported profit after tax also increased to $11.8 million in H1 2019 from $8.8 million in the prior period. In H1 2019, reported profit did not include any one-off costs (H1 2018: acquisition and other one-off costs of $0.7 million, primarily reflecting Treasure Beach pre-opening costs and restructuring expenses). 

Reported basic and diluted EPS was 13.3 cents per share compared to 9.9 cents per share in H1 2018.

* Comparative figures have been restated as a result of the adoption of IFRS 15. See the Reporting changes section for more detail.

 

Net debt and net asset value

The Group's net debt position of $68.9 million is set out in the table below.  Based on adjusted EBITDA for the trailing 12 months, the Group has an adjusted EBITDA to net debt ratio of 3.3 times, reduced from 4.0 times at 31 March 2018.  This internal KPI is used by the Board to assess the Group's levels of debt.  The Group continues to comply with all covenants with comfortable headroom.

The Group has third party debt in the form of term loans of $59.3 million. In addition, the Group has an overdraft facility of $10 million, of which $6.1 million was drawn down at 31 March 2019, and a revolving credit facility of $5 million, which was fully drawn down at 31 March 2019.  The Group also has a vendor loan remaining in relation to the Waves acquisition of $0.5 million.

In October 2018, the Group syndicated a portion of its loans with The Bank of Nova Scotia (Scotiabank) to FirstCaribbean International Bank (Bahamas) Limited on the same terms and conditions existing with Scotiabank.  This syndication provides the Group with greater capacity in respect of future expansion activities.  

The Group's current facilities (excluding the vendor loan) are due to expire in May 2020.  During the period, the Group renegotiated its loans and facilities with its finance partners.  A commitment has been received in this regard to extend the loans and facilities to 2024 at similar commercial terms to those currently in place.  However, the repayment term of the loans will be extended from 10 years currently remaining to 15 years. Completion of the refinancing is expected by the start of June.

The Group's property portfolio was valued by CBRE at $249.5 million as at 1 January 2018.  Based on net debt of $68.9 million as at 31 March 2019, this equates to an implied net asset value (NAV) of approximately $180.6 million (203 cents per share or 156 pence share at £1 : $1.30).

 

 

Reconciliation of net debt and net asset value

 

31 Mar

2019

30 Sep

2018

$m

$m

Term loan (due 2020)

(59.3)

(62.4)

Revolving facility

(5.0)

(5.0)

Waves vendor loan

(0.5)

(0.5)

Total loans and borrowings

(64.8)

(67.9)

Bank overdraft

(6.1)

(6.6)

Cash and cash equivalents

2.1

2.4

Net debt

(68.9)

(72.2)

Implied total property value

249.5

249.5

Net asset value

180.6

177.3

 

Cash flow

The Group's free cash flow (defined as cash flow from operations less capital expenditure) was $8.4 million in H1 2019 (H1 2018: $4.5 million).  The free cash flow movement reflects improved cash flow from operations ($10.1 million versus $8.6 million in H1 2018) and a reduction in capital expenditure to $1.7 million (H1 2018: $4.1 million, which included the refurbishment of Treasure Beach hotel). 

 

Reporting changes

The Group has applied IFRS 15 Revenue from Contracts with Customers from 1 October 2018.  As a result of adopting this standard, non-discretionary service charge collected from customers is now recognised within revenue.  Prior period amounts have been restated in line with this change as follows:

 

H1 2018

previously reported

IFRS 15 change

H1 2018

restated

Revenue

$38.8m

$3.7m

$42.5m

Gross profit

$25.1m

$0.3m

$25.4m

Gross margin (%)

64.7%

(4.9%)

59.8%

Adjusted EBITDA

$15.4m

-

$15.4m

Adjusted EBITDA margin (%)

39.6%

(3.5%)

36.1%


Further, in order to improve comparability with industry peers, the Group has adjusted how it classifies revenue. From 1 October 2018, the Group will classify revenue as either Package or Non-package revenue. Comparative figures have been represented. 

All Package revenue is now included in the calculation of both ADR and RevPAR. The changes to prior period ADR and RevPAR as a result of the implementation of IFRS 15 and the revenue classification adjustment are as follows:   

Key performance indicators

H1 2018

previously reported

Reporting changes

H1 2018

restated

Average Daily Rate (ADR)

433

106

539

Revenue per Available Room (RevPAR)

292

70

362

 

Delivering on the Group's strategy

Day-to-day operational excellence

The Group is constantly seeking to improve its day-to-day operational performance, and continues to receive positive feedback and guest satisfaction scores, which in turn lead to healthy levels of repeat business.  Key to the Group's strategy is its people.  The Group employs over 1,000 local people in its operations.  During the period, the Group successfully renegotiated its key union contract.  The renegotiation gave the majority of employees an increase in wages of 2% each year for three years, in line with expectations. 

Existing portfolio enhancement

The Group continues with its strategy of enhancing the portfolio by refurbishing, repositioning and repricing the hotels.  These steps interplay to find the best combination of physical structure (refurbish), guest experience (reposition) and yield management (reprice).  In addition to the regular capex spend of 3-4% of each hotel's revenue, the Group will spend approximately $1m on special projects.  During the period, two such projects have been completed - the Rum Vault at Colony and a refurbishment of one of the restaurants at Turtle Beach.

The Group sees an opportunity to enhance the profitability of several of its hotels through a selective refurbishment programme as some of the hotels were last refurbished up to eight years ago.  These refurbishments are expected to be funded from continued reinvestment of internally generated cash.  Historically, the Group has been able to achieve significant uplift in the performance of refurbished assets. 

Expansion

Treasure Beach hotel was acquired in May 2017 and reopened in December 2017 following extensive renovations.  This hotel is now contributing a good return to the Group in its first period of full operation.  The reviews for the property and feedback from Tour Operators have been very positive. 

Hodges Bay Resort & Spa in Antigua opened to guests in December 2018.  While the hotel is open, the management agreement is not yet in operation due to some areas of the hotel remaining incomplete. Therefore, no management fee income has been earned in this period.  The hotel is expected to be completed in H2 2018/19 and, when finished, this hotel will be one of the best properties on the island of Antigua.

The Group's sales and marketing contract in St. Lucia continues to perform well.

There continue to be a number of compelling expansion opportunities in the Caribbean.  However, the strategy of the Board is to continue to strengthen the Group's balance sheet during 2019 before expanding further.  While further expansion in the Caribbean is key to the Group's strategy, the Group is mindful of the impact that macro-economic issues - such as change in the Barbados Government and Brexit in the UK - could have on the Group.

 

Dividend

The Board is pleased to report that an interim dividend of 1.33 pence per share has been declared.  This reflects the Board's dividend policy whereby the Company will be paying an interim dividend equal to one third of the full year dividend for the financial year ending 30 September 2019. 

The dividend will be paid on 28 June 2019 to shareholders on the register on 24 May 2019, and the Company's ordinary shares will be marked ex-dividend on 23 May 2019.

 

Board and advisers

The Board is currently undertaking a search for an additional Independent Non-Executive Director.  A search firm has been appointed and due regard is being taken to ensuring any new appointment contributes to the Board's skills, capabilities, experience and diversity.

Following the resignation of Jeff Singleton, Chief Financial Officer, on 14 January 2019, the Group initiated a search for a new Chief Financial Officer.  Led by an Executive Search firm, this search is at an advanced stage and the Board will announce an appointment in due course.  Jeff will continue to work with the Group in the near term to ensure a smooth transition with his successor.

The Board announces that Zeus Capital will step down as the Company's joint corporate broker with immediate effect.  Liberum will now be the Group's sole corporate broker. 

 

Current trading and outlook

Elegant Hotels has continued to trade in line with market expectations since the period end and has good visibility of its bookings pipeline for the remainder of the financial year.  As a result, the Group remains comfortable with the FY19 outlook versus market expectations and confident in the Group's longer-term prospects.

 

 

Consolidated Statement of Comprehensive Income

for the 6 month period ended 31 March 2019 (unaudited)

(expressed in thousands of United States dollars) 

 

Note

6 months to 31 March 2019
 

6 months to 31 March 2018
(restated*)

 

 

 

 

Revenue

 

43,728

42,488

Cost of sales

 

(16,440)

(17,090)

Gross profit

 

27,288

25,398

Selling, general and administrative expenses

 

 

 

-       Recurring

 

(13,603)

(12,685)

-       Acquisition and other one-off costs

5

-

(673)

 

 

(13,603)

(13,358)

Other operating income

 

489

369

Operating profit

 

14,174

12,409

 

 

 

 

Finance income

 

4

20

Finance expenses

 

(2,167)

(1,666)

Finance expenses - net

 

(2,163)

(1,646)

 

 

 

 

Profit before taxation

 

12,011

10,763

Taxation

 

(180)

(1,945)

Profit for the period attributable to equity holders of the Parent

 

11,831

8,818

 

 

 

 

Earnings per share

 

 

 

Basic earnings per share (cents)

6

13.3

9.9

Diluted earnings per share (cents)

 

6

13.3

9.9

 

 

                                     

                                     

 

 

 

 

EBITDA and Adjusted EBITDA

 

 

 

Operating profit

 

14,174

12,409

Depreciation and amortisation

 

2,185

2,203

Loss on disposal of fixed assets

 

18

66

EBITDA

 

16,377

14,678

Acquisition and other one-off costs

5

-

673

Adjusted EBITDA

 

16,377

15,351

 

 

 

 

Adjusted EBITDA margin

 

37.5%

36.1%

 

 

 

 

Adjusted earnings per share

 

 

 

Adjusted basic earnings per share (cents)

6, 8

13.3

10.5

Adjusted diluted earnings per share (cents)

6, 8

13.3

10.5

 

* Comparative figures have been restated as a result of the adoption of IFRS 15.

 

 

 

as at 31 March 2019 (unaudited)

(expressed in thousands of United States dollars) 

 

 

 

As at
31 March
2019

As at
30 September
2018

Non-current assets

 

 

 

 

Property, plant and equipment

 

 

183,987

184,666

Intangible assets

 

 

628

443

Deferred tax

 

 

420

5,350

Total non-current assets

 

 

185,035

190,459

 

 

 

                              

                              

Current assets

 

 

 

 

Inventories

 

 

3,167

3,133

Trade and other receivables

 

 

11,937

6,210

Short-term investments

 

 

33

33

Cash and cash equivalents

 

 

2,093

2,357

Total current assets

 

 

17,230

11,733

Total assets

 

 

202,265

202,192

 

 

 

                              

                              

 

 

 

 

 

Current liabilities

 

 

 

 

Loans and borrowings

 

 

(6,892)

(7,542)

Accounts payable and accrued liabilities

 

 

(6,073)

(6,256)

Provisions

Tax payable

 

 

(349)

(45)

(281)

(118)

Bank overdraft

 

 

(6,120)

(6,629)

Total current liabilities

 

 

(19,479)

(20,826)

 

 

 

                              

                              

Non-current liabilities

 

 

 

 

Loans and borrowings

 

 

(57,943)

(60,350)

Deferred tax

 

 

(594)

(5,646)

Total non-current liabilities

 

 

(58,537)

(65,996)

 

 

 

                              

                              

Total liabilities

 

 

(78,016)

(86,822)

Net assets

 

 

124,249

115,370

 

 

 

 

 

Equity attributable to equity holders of the Parent

 

 

 

 

Share capital

 

 

1,367

1,367

Merger reserve

 

 

43,497

43,497

Share based payments reserve

 

 

536

355

Retained earnings

 

 

78,849

70,151

Total equity

 

 

124,249

115,370

 

 

 

                      

                      

 

 

 

 

Consolidated Cashflow Statement

for the 6 month period ended 31 March 2019 (unaudited)

(expressed in thousands of United States dollars) 

 

6 months to
31 March
2019

6 months to
31 March
2018

Cash flows from operating activities

 

 

Profit after taxation

11,831

8,818

Depreciation and amortisation

2,185

2,203

Income tax expense

180

1,945

Interest expense

2,167

1,666

Share-based payments

181

-

Increase/(decrease) in provisions

68

(290)

Loss on disposal

18

66

Operating profit before working capital changes

16,630

14,408

 

 

 

Increase in inventories

(35)

(138)

Increase in trade and other receivables

(5,927)

(4,037)

Decrease in accounts payable and accrued liabilities

(198)

(598)

Taxation paid

(375)

(986)

Net cash generated from operating activities

10,095

8,649

 

 

 

Cash flows from investing activities

 

 

Purchase of property, plant and equipment

(1,489)

(3,880)

Purchase of intangible assets

(232)

(222)

Proceeds from disposal

12

48

Net cash used in investing activities

(1,709)

(4,054)

 

 

 

Cash flows from financing activities

 

 

Repayment of bank borrowings

(3,057)

(3,145)

Interest paid

(1,951)

(1,648)

Dividends paid

(3,133)

(2,157)

Net cash used in financing activities

(8,141)

(6,950)

 

 

 

Net increase/(decrease) in cash and cash equivalents

245

(2,355)

Net cash and cash equivalents at the beginning of the period

(4,272)

585

Net cash and cash equivalents at the end of the period

(4,027)

(1,770)

 

 

 

Bank overdraft

6,120

3,867

Cash and cash equivalents at the end of the period, excluding bank overdraft

2,093

2,097

 

 

 

 

Consolidated Statement of Changes in Equity

for the 6 month period ended 31 March 2019 (unaudited)
(expressed in thousands of United States dollars) 

 

Share

capital

Merger

reserve

Share based payments

Retained

earnings

Total

equity

6 months to 31 March 2019

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 October 2018

1,367

43,497

355

70,151

115,370

 

 

 

 

 

 

Profit for the period

-

-

-

11,831

11,831

Total comprehensive income for the period

-

-

-

11,831

11,831

 

                                              

                                              

                                              

                                              

                                              

Dividends paid

-

-

-

(3,133)

(3,133)

Share-based payments

-

-

181

-

181

Total contributions by and distributions to owners of the parent

-

-

181

(3,133)

(2,952)

 

 

 

 

 

 

Balance at 31 March 2019

1,367

43,497

536

78,849

124,249

 

                   

                   

                   

                   

                   

 

 

 

 

 

 

6 months to 31 March 2018

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 October 2017

1,367

43,497

556

64,362

109,782

 

 

 

 

 

 

Profit for the period

-

-

-

8,818

8,818

Total comprehensive income for the period

-

-

-

8,818

8,818

 

                                              

                                              

                                              

                                              

                                              

Dividends paid

-

-

-

(2,157)

(2,157)

 

 

 

 

 

 

Total contributions by and distributions to owners of the parent

-

-

-

(2,157)

(2,157)

 

 

 

 

 

 

Balance at 31 March 2018

1,367

43,497

556

71,023

116,443

 

                   

                   

                   

                   

                   

 

Notes to the interim financial statements

1.   General information

Elegant Hotels Group plc ("Elegant Hotels" or the "Company") is a public limited company incorporated in the United Kingdom.  The address of the registered office is 10 Norwich Street, London, EC4A 1BD.  The principal activity of the Company and its subsidiaries (collectively the "Group") is the ownership and operation of hotels and a restaurant on the island of Barbados.

2.   Basis of preparation

The interim financial information set out above does not constitute statutory accounts within the meaning of the Companies Act 2006.  It has been prepared on a going concern basis in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union.  Statutory financial statements for the year ended 30 September 2018 were approved by the Board of Directors on 14 January 2019 and delivered to the Registrar of Companies. The report of the auditors on those financial statements was unqualified.

The interim financial information for the six months ended 31 March 2019 has not been reviewed or audited. The interim financial report has been approved by the Board on 7 May 2019.

Going concern

Notwithstanding net current liabilities of $2.2 million as at 31 March 2019, the financial statements have been prepared on a going concern basis, which the Directors consider appropriate for the following reasons.

The Group meets its day-to-day working capital requirements with the assistance of its bank facilities which include term loans, revolving credit facilities and an overdraft facility. These facilities were renewed on 26 May 2015 and expire in May 2020.  During the period, the Group renegotiated its loans and facilities with its finance partners.  A commitment has been received in this regard to extend the loans and facilities to 2024 at similar commercial terms to those currently in place.  However, the repayment term of the loans will be extended from 10 years currently remaining to 15 years. Completion of the refinancing is expected by the start of June.

In confirming the appropriateness of the going concern basis, the Group prepares forecasts and projections which take account of possible changes in trading performance, cost of debt and exchange rates.  The Group continuously monitors liquidity and actively manages working capital, capital expenditure and debt servicing requirements to provide sufficient headroom in available facilities.

The Group regularly forecasts short, medium and long-term cash flows in order to ensure the Group can continue as a going concern. These forecasts are sensitised for possible changes in trading performance, cost of debt and exchange rates. Were the performance of the Group to fall below expectations, the Group is able to manage the working capital and reduce expenditure on capital items and dividends.

These projections demonstrate that, subject to any significant changes to the Group's business or economic environment, the Group should be able to operate within the level of its current facilities, meet future debt repayments and continue to comply with its banking covenants for at least the foreseeable future. As such, the Directors consider it appropriate to adopt the going concern basis in preparing the Group financial statements.

Accounting estimates

The preparation of consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

Unless otherwise stated, the financial information is presented in United States dollars. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

3.   Significant accounting policies

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30 September 2018, as described in those annual financial statements, with the following exception.

IFRS 15 Revenue from Contracts with Customers has been applied from 1 October 2018, using the full retrospective method which involves restating prior period comparatives.

Management has reviewed IFRS 15 and has considered specifically the treatment of service charge in accordance with the revised standard.  Previously, non-discretionary service charge collected from customers and paid to employees was not recorded as revenue.   

After analysing the treatment of service charge in accordance with IFRS 15, the Group has concluded that amounts related to non-discretionary service charge should be recognised as revenue because non-discretionary service charge is an integral component of the relevant performance obligations provided by the Group to its customers.  

Full disclosures required under IFRS 15 will be provided in the 2018/19 financial statements.

The adoption of IFRS 15 had the following effect on the prior period Consolidated Statement of Comprehensive Income:

 

Six months to 31 March 2018
$'000

IFRS 15 adjustment $'000

Six months to 31 March 2018 adjusted
$'000

Revenue

38,785

3,703

42,488

Cost of sales

(13,687)

(3,403)

(17,090)

Gross profit

25,098

300

25,398

Selling, general and administrative expenses - recurring

(12,464)

(221)

(12,685)

Selling, general and administrative expenses - acquisition and one-off costs

(673)

-

(673)

 

(13,137)

(221)

(13,359)

Other operating income

448

(79)

(369)

Operating profit

12,409

-

12,409

 

4.   Segmental analysis

Based on the information presented to and reviewed by the entity's Chief Operating Decision Maker, the entire operations of the Elegant Hotels Group are considered as one operating segment, being the operation of hotels and a restaurant.  All of the Group's material operational activities are currently located on the island of Barbados.

5.   Acquisition and one-off costs

One-off costs incurred in the prior interim period were principally related to the acquisition of Treasure Beach hotel and restructuring costs. 

6.   Earnings per share

Earnings per share (EPS) is the amount of profit after tax attributable to each share.

Basic EPS is calculated on the Group profit for the period attributable to equity shareholders of $11.8 million (H1 2018 - $8.8 million) divided by 88,815,789 (H1 2018  - 88,815,789) being the weighted average number of shares in issue during the year.

Diluted EPS takes into account the dilutive effect of all potentially issuable shares. The Company has 2,483,791 potentially issuable shares all of which relate to share options issued to Directors and key management personnel of the Company. The dilutive number of issuable shares is 82,280 for the purposes of calculating the dilutive earnings per share.

Adjusted EPS reflects adjustments for one-off items in order to more accurately show the business performance of the Group in a consistent manner and reflect how the business is managed and measured on a day-to-day basis. Earnings used in adjusted basic and diluted EPS were $11.8m (H1 2018 - $9.3m).

7.   Subsequent events

The Group did not have any subsequent events that require disclosure.

 

8.   Reconciliation of non-GAAP measures

 

6 months to
31 March
2019

 

6 months to
31 March
2018 (restated*)

 

$'000

$'000

EBITDA and Adjusted EBITDA

 

 

 

 

 

Operating profit

14,174

12,409

Depreciation and amortisation

2,185

2,203

Loss on disposal of fixed assets

18

66

EBITDA

16,377

14,678

Acquisition and other one-off costs

-

673

Adjusted EBITDA

16,377

15,351

 

                                     

                                     

Adjusted EBITDA margin

37.5%

36.1%

 

 

 

 

 

 

Adjusted operating profit

 

 

 

 

 

Operating profit

14,174

12,409

Acquisition and other one-off costs

-

673

Adjusted operating profit

14,174

13,082

 

 

 

 

 

 

Adjusted profit before tax

 

 

 

                                     

                                     

Profit before tax

12,011

10,763

Acquisition and other one-off costs

-

673

Adjusted profit before tax

12,011

11,436

Adjusted tax

(180)

(2,113)

Adjusted profit after tax

11,831

9,323

 

* Comparative figures have been restated as a result of the adoption of IFRS 15.

 


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