IHI Financial Statements 2020. Dire realities and confidence beyond immediate threats


On 30 April 2021 International Hotel Investments p.l.c. (IHI)  published its financial statements for 2020. The following is a very brief look at some salient points. Those who are interested in reading the full document are referred to the link: www.corinthiagroup.com/investors/financial-report/.

The  COVID-19 pandemic has left its bitter imprint on all aspects of life across the world. One of its invading tentacles has precipitated a global ravaging effect on the hotel industry which has also strongly dented IHI’s financials. As IHI Chairman, Mr Alfred Pisani, aptly put it : ‘The 2020 pandemic has devastated the hotel industry worldwide.’  But with his typical positive outlook even in adversity he was quick to add: ‘The Corinthia family and our unbending spirit remains as strong as ever.’

CEO Mr Simon Naudi is of like mind: ‘Clearly, our industry has been ravaged by the impact of the pandemic on global travel. Never in modern history have we witnessed such an abrupt and steep decline in demand for hotel services.’ But then adds: ‘The wounds inflicted have been very painful, but they are not fatal, or indeed incurable.’

In line with its unabating professional attitude, Corinthia was quick on the draw to react to the new threat with all its passion and determination. Within the first week of Government announcing the shutdown, Corinthia issued a number of instructions, mainly aimed at safeguarding its cashflow since it immediately understood that cashflow would be the determining factor of how long it could sustain a situation of little or no income. So the employment of all employees on probation was terminated. It also cancelled all arrangements with labour service providers and stopped all capital expenditure.  A number of hotels were closed whilst leaving a 24- hour security and a level of maintenance.

Furthermore. Corinthia negotiated with banks on a deferment of capital repayments and where possible also interest and made full use of every support provided by the various Governments in the countries where it operates. It negotiated agreements with some Governments for the rescheduling of VAT payments and other payroll contributions and immediately advised  its Middle and Senior Management that they had to take reductions in their take-home-pay as from April 2020, notwithstanding that they would remain working a five-day week. This was done with the promise that such salary cuts would be paid in the future. The 2019 payroll cost of €93.4 million was brought down to €47.3 million net cost to the Company in 2020.  Looking forward, the Company intends to retain as much savings as possible in the years ahead although acknowledging it would have to increase manning levels from where they stand today, in view of growing occupancies.

The cash reserves of the three main Corinthia companies were placed into one fund to be used as necessary by any of these operations, whilst concurrently entering into a formal loan agreement carrying a 3% interest rate for any movement of funds between the respective companies.

At all times, Corinthia scrupulously followed all the health protocols announced in each of the countries in which it operates.

The main points of the 2020 Financial Statements are:

*There is only a marginal EBITDA loss of €3.8 million in 2020 relative to the €69.8 million EBITDA profit reported in 2019. [EBTDA: Earnings before Interest, Tax, Depreciation and Amortisation]. Notwithstanding, significant savings in payroll and operating costs were achieved, resulting in a reduction in gross profit which was not as pronounced in % terms. In fact, gross profit reduced by some €103 million, from €140.5 million in 2019 to €37.9 million in 2020. In consequence of all the above movements,  IHI reported an EBITDA loss for 2020 of €3.8 million.

*Overall, revenues amounted to €91.9 million in 2020, derived from activity in the Company’s owned hotels, commercial rents and fees paid by third parties for services rendered by various companies in the IHI Group. This compares to €268.3 million in 2019.

This drop in revenue was however partly mitigated by extensive savings on payroll and operating costs resulting in the marginal negative EBITDA reported for 2020. Year on year revenue decreased by more than €176.4 million, from €268.3 million in 2019 to €91.9 million in 2020. 

*Throughout the year, IHI successfully raised €24.5 million in new loans whilst paying down other debt, meaning the net increase in the Group’s total indebtedness was a marginal €3.4 million, less than a 0.6% increase overall.

*The year-end results show total assets of the IHI Group valued independently at €1.544 billion. Total assets, in view of the loss incurred in 2020, reduced to €1.5 billion against a corresponding figure at the end of 2019 of €1.69 billion. IHI reiterated that total assets as stated in its financial statements reflect a conservative approach to valuation, as indeed has been reported over the years.

*Cash and equivalents stood at €46.1 million.

In spite of the current gargantuan problems, Corinthia’s unique multi-faceted functions as developers, investors, hotel operators and project managers have helped it continue to operate in certain areas. Its multi-function strategy proves its worth particularly in circumstances which affect some functions of our industry whilst leaving the others to operate more or less freely. This can be seen in the hereunder mentioned ongoing development projects.

CEO Mr Simon Naudi framed these ongoing projects in a context of consolidation:  ‘These projects, once opened in the next couple of years, will further elevate Corinthia onto a global footprint, with a recognised brand and bespoke style of operation that will consolidate our place as a significant player in the global hotel industry. Indeed, this is very much a transformative phase for Corinthia, ever building on our solid 60-year history and foundations.’

Mr Naudi shared the following ongoing developments:

In Brussels, a main contractor has been selected and work has started on transforming the landmark Grand Hotel Astoria into a 126-key luxury Corinthia hotel. IHI owns 50% of this hotel, and all of our companies CDI, QP and Corinthia Hotels are engaged by this joint venture as developers, project managers and operators. The project is self-financed as joint venture.

In Rome, Corinthia is acting as the project developers and lessees of the 60-key Corinthia Hotel being built by way of a transformation of the former Bank of Italy’s headquarters. Works have started here too. The Rome investment is being made by the Reuben Brothers, who are globally recognized property investors.

In Doha, a strategic relationship has been formed with UDC, master developers of the Pearl, a luxury offshore extension to the city built on reclaimed land. Corinthia Hotels has entered into contractual arrangements to provide technical services and manage a luxury 110-key hotel, 18 residential serviced villas, a beach club and an iconic yacht club on one island forming part of the Pearl. Design work is completed, and construction has commenced.

In Dubai, works were stalled in 2020 on the 360-unit hotel and residential 55-storey development being pursued by local investors but are expected to restart in 2021. Corinthia Hotels has been supporting the owners in design and project development and will manage the hotel and residences under the Corinthia flag when this luxury property opens its doors in 2022/2023.

IHI had also acquired a 10% share in a development in Moscow in 2018, alongside HNW Russian investors. The site is on the city’s main boulevard, a stone’s throw from the Kremlin. Now that design work and permits are in hand, works have started on this project, which features a 56-key luxury Corinthia Hotel and 100 residences for sale.

In Bucharest, Corinthia are operators of a luxury 35-key hotel being refurbished at the former Grand Hotel du Boulevard, a landmark in the city centre. An investment company from Romania acquired the site some years ago and entered into an agreement with Corinthia to manage the hotel.

At a site owned by the Company known as Ħal Ferħ on the spectacular northern shores of  Malta, the Company has completed the rezoning of the area to permit 25 low-rise luxury villas alongside a 162-key resort. Architectural designs are largely completed in keeping with our aim to create a luxury resort that is sensitive to Malta’s materials and rural landscape. This soft- touch development will be heavily landscaped and not higher than two floors. Permits will be applied for imminently.

Mr Simon Naudi’s determination and fervour shine in his concluding remark: ‘The fact of having stuck around, as one family, gives us the courage not only to shrug off the pandemic’s hits, but look forward with determination and enthusiasm for the exciting years ahead.’

In an atmosphere of strains and pains, it is indeed refreshing, heartening and greatly beneficial to read the words of Mr Alfred Pisani who rallies courage and resilience with his hallmark of positivity: ‘It has always been my character to remain positive when facing adversity. I have always maintained that difficult situations can often be converted into positive outcomes. My innate optimism and determination looks beyond the immediate threats.’

The 2020 IHI Financial Statements look squarely at the dire realities of the time but build confidence beyond the immediate threats.