Home » News » PLC News » Elegant Hotels Group plc A solid performance with good visibility for the remainder of the year
Elegant Hotels Group Plc

Elegant Hotels Group plc A solid performance with good visibility for the remainder of the year

Elegant Hotels Group plc (LON: EHG), the owner and operator of seven upscale freehold hotels and a beachfront restaurant on the island of Barbados, today announced 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.”


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 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.


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


30 Sep




Term loan (due 2020)



Revolving facility



Waves vendor loan



Total loans and borrowings



Bank overdraft



Cash and cash equivalents



Net debt



Implied total property value



Net asset value




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






Gross profit




Gross margin (%)




Adjusted EBITDA



Adjusted EBITDA margin (%)




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


Average Daily Rate (ADR)




Revenue per Available Room (RevPAR)





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.


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.


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.

Join us on our new LinkedIn page

Follow us on LinkedIn