EHG.L Regulatory News (EHG)

30 June 2015

Elegant Hotels Group plc

Interim Results for the 6 months ended 31 March 2015

Elegant Hotels Group plc ("Elegant Hotels", the "Company" or the "Group"), owner and operator of five upscale freehold beachfront hotels and a beachfront restaurant on the island of Barbados, is pleased to announce its unaudited results for the six months ended 31 March 2015.

All currency amounts are in US$ unless otherwise stated.

Highlights

· A solid performance with year-on-year growth in all key operating measures

· Total reported revenue increase of 7.6% to $36.4million (2014: $33.9million)

· RevPAR (Revenue Per Available Room) growth of 7.8% to $319 (2014: $296) reflecting strong average room rate performance and refurbishment programme

· Continued growth in occupancy to 71.0% (2014: 68.7%)

· Adjusted EBITDA before exceptional items $16.3million (2014: $14.6million) reflecting improvements in rates and control of costs

· Property asset value of $235.5million based on an independent valuation of the Group's real estate portfolio dated 15 April 2015

· Successfully completed £63.0million placing and admission to AIM

Sunil Chatrani, CEO of Elegant Hotels said:

"We are pleased with the continuing performance of Elegant Hotels in the past six months in what is our peak trading period. We benefitted from the refurbishment of Colony Club and the improvements we have made at our other hotels over the last few years, combined with efficient revenue management.

"With a solid first half year performance that was ahead of last year we are anticipating the summer months to be in line with expectations. Looking forward we will focus on delivering sustainable returns and generating value for our shareholders as we pursue further growth from the existing portfolio as well as expansion in the Caribbean."

 Operating Review

We are pleased to report the first set of results for Elegant Hotels as an AIM listed company, following the Company's successful £63.0million placing (raising £32.2million for the Company and £30.8million for selling shareholders) and Admission to AIM on 26 May 2015.

These interim results for the six months ended 31 March 2015 represent a period during which the business was under private equity ownership before its Admission to AIM and therefore reflect its capital structure at that time. Subsequent to the period end senior debt of approximately £27million has been repaid with proceeds of the placing and the Company's existing credit facilities were amended to provide for senior debt of up to approximately £33million going forward.

Our trading performance in the six months ended 31 March 2015 is consistent with the unaudited results for the 5 months ended 28 February 2015 that were disclosed in the Company's Admission Document. In the 6 months ended 31 March 2015 revenue has increased by 7.6% to $36.4million (2014: $33.9million). This is based on improvements in average room rate in the high season from December to February supported by the benefits from our refurbishment programme and the efficiencies of our revenue management processes.

Adjusted EBITDA of $16.3million (2014: $14.6million) has increased by 11.7% reflecting improvements at each of the hotels and at Daphne's Restaurant and control of overhead costs which were down 2.3%, as a percentage of sales, to $11.3million (2014: $11.2million).

Pre-tax profit increased in the 6 months to 31 March 2015 to $12.1million (2014: $10.6million), an increase of 14.5% on the previous year.

Colony Club has traded well during the period with revenue and bookings showing the impact of recent refurbishment. All rooms will have been refurbished by the end of this fiscal year. Turtle Beach suffered some disruption from the refurbishment works at the hotel next door which affected bookings but the work is now complete.

 Airlift to the island is increasing and there is good underlying growth in demand for Barbados. With the major part of this financial year behind us and current trading in line with expectations the Board views the outlook for the Group with confidence.

 Operational Measurements

Dividends and Share Capital Reduction plans

As stated at the time of the Company's Admission to AIM, it is the intention of the Board to implement a progressive dividend policy in line with the growth in future earnings.

In order to facilitate the payment of dividends for the current year it is necessary to create distributable reserves, so the Company is proposing to effect a court-approved share capital reduction. A circular will be posted to shareholders on the date of this announcement convening a general meeting at 10.00 a.m. on 23 July 2015 at the offices of Macfarlanes LLP, 20 Cursitor Street, London EC4A 1LT to reduce the Company's share premium account by £31.9million. The share capital reduction is subject to court approval.

For further information:

Consolidated Statement of Comprehensive Income

for the 6 month period ended 31 March 2015 (unaudited)

(expressed in thousands of United States dollars)

Consolidated balance sheet

as at 31 March 2015 (unaudited)

(expressed in thousands of United States dollars)

Consolidated Cashflow Statement

for the 6 month period ended 31 March 2015 (unaudited)

(expressed in thousands of United States dollars) 

Consolidated Statement of Changes in Equity

for the 6 month period ended 31 March 2015 (unaudited)

(expressed in thousands of United States dollars) 

Notes

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 restaurants on the island of Barbados.

The proforma preliminary consolidated interim financial statements of the Group for the 6 month period ended 31 March 2015 comprises the Company and the subsidiaries that were acquired by the Company shortly before the listing of the Company's shares on the AIM market of the London Stock Exchange on 26 May 2015. The basis of preparation of the consolidated interim financial statements is set out in note 2 below.

The financial information for the 6 months ended 31 March 2015 is unaudited. It does not constitute statutory financial statements within the meaning of Section 434 of the Companies Act 2006. The company was incorporated on 10 April 2015 and has not previously prepared consolidated financial statements. The proforma preliminary consolidated interim financial statements should be read in conjunction with the combined annual financial information for the period to 30 September 2014 that is presented in the Company's Admission Document dated 26 May 2015, which has been prepared in accordance with IFRSs as adopted by the European Union except for detailed disclosure of share capital and reserves within Shareholders' Equity and earnings per share. The report of the auditors on those combined financial statements was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 434 of the Companies Act 2006.

The financial information of the Group for the 12 months to 30 September 2014 has been prepared on the basis described below to provide preliminary proforma information about the comparatives that are expected to be included in the group's first full set of financial statements in full compliance with EU-IFRS which are expected to be those for its September 2015 year end.

This report was approved by the directors on 29 June 2015.

2. Basis of preparation

Elegant Hotels Group plc was incorporated on 10 April 2015 and acquired the businesses of the Elegant Hotels Group on 11 May 2015. The proforma preliminary interim financial statement for the 6 month period to 31 March 2015 and the comparatives for the 6 month period to 31 March 2014 and the 12 month period to 30 September 2014 have been prepared on a proforma basis as if the Group was in existence at throughout these periods.

The Group has not previously prepared financial statements in accordance with EU-IFRS but the intention is to transition to EU-IFRS in the Group's consolidated financial statements for the period to 30 September 2015. The Group intends to present its 30 September 2015 financial statements as a continuation of the existing Elegant Hotels business and to account for its acquisition by and insertion of the holding company Elegant Hotels PLC using the principles of reverse acquisition accounting in IFRS 3. In doing so, the Group intends to restate its comparatives as if the Group had always existed in its current form.

The proforma preliminary consolidated interim financial statements have been presented as of 31 March 2015 and 30 September 2014 and for the periods then ended to provide a preliminary indication of the comparative information that will be included in the Group's consolidated financial statements and interim financial statements for the periods ended 30 September 2015 and 31 March 2016 assuming that the Group adopts EU-IFRS with a date of transition of 1 October 2013. The preliminary proforma consolidated interim financial statements for 31 March 2014 have been presented to provide comparative information for the 31 March 2015 financial information and are prepared on the same basis. The preliminary financial information has been prepared based on EU-IFRS that is expected to exist at the date at which the Group prepares its 30 September 2015 financial statements. To the extent that EU-IFRS at 30 September 2015 does not reflect the assumptions made in preparing the proforma preliminary financial statements, those financial statements may be subject to change.

Financial information has never been presented previously for the Elegant Hotels Group in accordance with EU-IFRS and the principles of IFRS 1 have been applied in preparing the proforma preliminary consolidated interim financial statements, notwithstanding that no statement of compliance with Adopted IFRSs is included. The first financial statements expected to include a statement of compliance with Adopted IFRS are those of Elegant Hotels Group plc for the period to 30 September 2015.

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

3. First time adoption of IFRSs

As described in the basis of preparation, the Group has not yet adopted EU-IFRS, however, it has applied the principles of IFRS 1 in preparing these proforma preliminary consolidated interim financial statements with a transition date of 1 October 2013. The financial statements are presented as a continuation of the Elegant Hotels Business. The subsidiaries that make up the Elegant Hotels Business have previously prepared their own financial statements in accordance with EU-IFRS. The Group has, therefore, measured the assets and liabilities of those subsidiaries in these preliminary consolidated interim financial statements using the carrying amounts that were recorded in the financial statements of those subsidiaries' own accounts after adjusting for consolidation adjustments and the effect of the business combination in which the Elegant Hotels Group acquired the individual subsidiaries. Since no consolidated financial statements were previously prepared for the Elegant Hotels Business, no reconciliations to previous GAAP have been presented.

4. Going concern

The Group meets its day-to-day working capital requirements with the assistance of its bank facilities which were renewed on 26 May 2015. The Group's forecasts and projections take account of reasonably possible changes in trading performance and show that the Group should be able to operate within the level of its current facilities, meet future debt repayments and will continue to comply with its banking covenants for at least the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its consolidated interim financial statements.

5. Accounting estimates

The preparation of proforma preliminary 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. In preparing these proforma preliminary consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the 12 months ended 30 September 2014 that were reported in the Admission Document.

6. Significant Accounting Policies

The accounting policies set out below have been applied consistently to all periods presented.

(a) Basis of consolidation

The financial information has been prepared by consolidating the assets, liabilities, income and expenses of the Elegant Hotels Group using the relevant principles underlying the consolidation procedures of IFRS 10, Consolidated Financial Statements. All transactions and balances between entities included within the consolidated financial information have been eliminated.

(b) Revenue recognition

Revenue arising from the provision of hotel accommodation, restaurant and bar services and activities is recognized when the service is provided and the products are delivered to the customer.

(c) Cost of sales

Cost of sales includes the direct costs in relation to the provision of accommodation, food and beverage and other services.

(d) Foreign currency transactions and balances

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to United States dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognized in the statement of profit or loss and other comprehensive income. Non-monetary assets and liabilities that are measured in terms of historical cost in foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to United States dollars at foreign exchange rates ruling at the dates the fair value was determined.

(e) Property, plant and equipment

(i) Recognition and measurement

Land and buildings are stated at cost less depreciation and any provision for impairment. All other property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment loss.

Cost includes expenditure that is directly attributable to the acquisition of the asset.

Under the transition provisions of IFRS 1, land and buildings which were previously revalued were measured on the basis of their deemed cost, being their Barbados GAAP carrying value, including revaluations, as at October 1, 2005 being the effective date of the Elegant Hotels subsidiary companies' conversion of IFRS.

(ii) Subsequent expenditure

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred.

(iii) Depreciation

Depreciation is recognized in the statement of profit or loss and other comprehensive income on a straight-line basis over the estimated useful lives of each item in property and equipment. Land is not depreciated.

i. Buildings

Depreciation of buildings is made on cost less residual value on a straight line basis at a rate of 2% per annum.

Construction in progress represents buildings which are not yet completed at the reporting date. Upon completion, the buildings are transferred to land and buildings.

ii. Furniture, Fittings and Equipment

Depreciation of furniture, fittings and equipment is made on a straight-line basis at a rate of 15% per annum.

iii. Vehicles

Depreciation of vehicles is made on a straight-line basis at a rate of 15% per annum.

Depreciation methods, useful lives and residual values are reassessed at each reporting date.

(iv) Revaluation surplus

Any revaluation surplus is credited to the asset revaluation reserve included in the equity section of the statement of financial position, except to the extent that it reverses a revaluation decrease of the same asset previously recognized in the profit and loss, in which case the increase is recognized in other comprehensive income.

(v) Gains and losses

Any gain or loss on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognized in profit or loss.

(f) Inventories

Inventories are valued at the lower of cost and net realizable value on a first in, first out basis. The cost is determined on a weighted average basis. Net realizable value is the estimated selling price in the normal course of business less the estimated costs necessary to make the sale.

(g) Taxation

Income tax on the profit or loss for the period comprises current and deferred tax. Income tax is recognized in the statement of profit or loss except to the extent that it relates to items recognized directly into equity, in which case it is recognized into equity.

The Group follows the liability method of accounting for corporation tax, whereby the future tax asset (when it is probable that taxable profits will be available against which the deferred tax asset can be utilized) or liability resulting from temporary difference is accounted for at the expected corporation tax rate.

Current tax for this interim period is the expected tax payable on the taxable income for the period, using the best estimate of the weighted average annual income tax rate expected for the full financial year.

Current tax assets and liabilities are offset only if certain criteria are met.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets or liabilities, using the tax rates enacted or substantially enacted at the reporting date.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilized. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax benefits will be realized.

Deferred tax assets and liabilities are offset only if certain criteria are met.

(h) Acquisition from entities under common control

Business combinations arising from transactions of interests in entities that are under common control of the shareholder that controls the Elegant Hotels Group are accounted for at the date that common control was established. The assets and liabilities acquired are recognized at book value.

(i) Finance cost

 Finance cost is recognised as it accrues in profit or loss, using the effective interest method.

(j) Financial instruments

Financial Assets

The Elegant Hotels Group classify non-derivative financial assets into the following categories: cash and cash equivalents, accounts receivable, financial assets at fair value through profit or loss, and held-to-maturity investments. The classification depends on the purpose for which the assets are held.

Management determines the classification of its financial assets at initial recognition and re-evaluates this designation at every reporting date for financial assets other than those held at fair value through profit or loss.

(i) Cash and cash equivalents

Cash and cash equivalents comprise of cash balances and fixed deposits with original maturity dates of 90 days or less. The carrying value of cash and cash equivalents in the statement of financial position is considered to be fair value.

(ii) Accounts receivable

These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost. Accounts receivable are presented in current assets in the statement of financial position, except for those with maturities greater than one year after the reporting date.

(iii) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets that are either held for trading or those designated upon initial recognition. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term or if so designated by management. These financial assets are recognised initially at fair value. Subsequent changes in fair value are recognised through profit or loss.

(iv) Held to maturity investments

These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost.

(k) Financial liabilities

The Elegant Hotels Group classify non-derivative financial liabilities into the following categories: accounts payable and accrued liabilities; advanced deposits and long-term loan. Management determines the classification of its financial liabilities at initial recognition and re-evaluates this designation at every reporting date for financial liabilities other than those held at fair value.

(i) Accounts payable and accrued liabilities

These are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost. Accounts payable and accrued liabilities are presented in current liabilities in the statement of financial position, except for those which are due more than one year after the reporting date.

(ii) Long term loan

All loans are initially recognized at cost, being the fair value of the considerations received, net of attributable transaction costs associated with the loan.

After initial recognition, interest bearing loans are subsequently measured at amortized cost using the effective interest rate method.

(iii) Advanced deposits

These are initially recognised at cost. Subsequent to initial recognition, they are measured at amortised cost. Advanced deposits are presented in current liabilities in the statement of financial position, except for those which are due more than one year after the reporting date.

(l) Impairment (excluding inventories and deferred tax asset)

(i) Financial assets

The Elegant Hotels Group assess at each reporting date whether there is objective evidence that a financial asset not carried at fair value through profit or loss or a group of those financial assets is impaired.

An impairment allowance is established for trade receivables when there is objective evidence that the Elegant Hotels Group will not be able to collect all amounts due according to the original terms of the receivables.

(ii) Non-financial assets

Assets that have indefinite useful lives are not subject to amortisation and are tested annually for impairment. All other non-current assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).

The Elegant Hotels Group determine any impairment by comparing the carrying values of each of the Elegant Hotels Group assets (or the cash-generating unit to which it belongs) to their recoverable amounts, which is the higher of the asset's fair value less costs to sell and its value in use. Fair value represents market value in an active market. Value in use is determined by discounting future cash flows arising from the asset. Future cash flows are determined with reference to the Elegant Hotels Group's own projections using pre-tax discount rates.

(o) Employee benefits

Short-term employee benefits:

Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Elegant Hotels Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(p) Related parties

A party is related to the Elegant Hotels Group, if:

(i) directly, or indirectly through one or more intermediaries, the party:

· is controlled by, or is under common control with, the Elegant Hotels Group (this includes parents, subsidiaries and fellow subsidiaries);

· has a direct or indirect interest in the Elegant Hotels Group that gives it significant influence; or

· has joint control over the Elegant Hotels Group

(ii) the party is an associate of the Elegant Hotels Group;

(iii) the party is a joint venture or a partnership in which the Elegant Hotels Group is a venturer or a partner;

(iv) the party is a member of the key management personnel of the Elegant Hotels Group or their parent entities;

(v) the party is a close member of the family of any individual referred to in (i) or (iv);

(vi) the party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (iv) or (v); or

(vii) the party is a post-employment benefit plan for the benefit of employees of the Elegant Hotels Group, or any entity that is a related party of the entity.

A related party transaction is a transfer of resources, services or obligations between related parties, regardless of whether a price is charged.

The Elegant Hotels Group has a related party relationship with its directors, related companies, other group companies and affiliated parties controlled by its directors, senior officers, executives and significant shareholders of the parent company. "Key management personnel" represents certain senior officers of the Elegant Hotels Group.

(q) Segment reporting

An operating segment is a component of the Elegant Hotels Group that engages in business activities from which it may earn revenues and incur expenses; whose operating results are regularly reviewed by the entity's Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance; and for which discrete financial information is available.

Based on the information presented to and reviewed by the CODM, the entire operations of the Elegant Hotels Group are considered as one operating segment.

7. Earnings per share

Basic and diluted earnings per share for each period is calculated by dividing the earnings attributable to ordinary shareholders by the number of ordinary shares in issue as if the group had been in existence on 31 March 2015, which was 56,281,433.

8. Analysis of EBITDA

\* The exceptional one-off costs relate to refinancing, one-off professional charges and restructuring.

9. Segmental reporting

The Group operates in one segment being the operation of hotels and restaurants. All of the Group's operational activities are located on the island of Barbados.