Elegant Hotels Group plc (LON:EHG), the owner and operator of five upscale freehold hotels and a beachfront restaurant on the island of Barbados, today announced its results for the year ended 30 September 2015.
· Revenue up 4.3% to $60.1million (2014: $57.6million)
· RevPAR (revenue per available room) up 4.9% to $255 (2014: $243)
· ADR (average daily rates) up 5.7% to $373 from $353
· Adjusted operating profit up 15.7% to $19.2 million (2014: $16.6 million)
· Adjusted EBITDA up 12.7% to $22.2million (2014: $19.7 million)
· Adjusted EPS up 15.7% to 14.7 cents per share (2014: 12.7 cents)
· Net debt down 61.2% to $40.8 million (2014: $105.1 million)
· Successful IPO to the London Stock Exchange’s AIM on 26 May 2015
· Proposed final dividend of 1.75 pence per share, resulting in a full year dividend of 3.5 pence per share covering the approximately five month period on AIM
Commenting on the results, Sunil Chatrani, CEO of Elegant Hotels Group Plc, said: “This has been a landmark year for Elegant Hotels. We achieved strong revenue and underlying profit growth, and demand for Barbados as a tourist destination remains buoyant, with arrivals and flight capacity both continuing to improve. The Group’s admission to AIM in May has provided us with a great foundation from which to grow and expand, both organically and through acquisitions in Barbados and the wider Caribbean. 2016 promises to be a year of further significant development, and we are excited about the future prospects for the business.”
Revenue and Demand
We are pleased to report a strong set of results for the financial year ended 30 September 2015.
Revenue for the year of $60.1 million represents an increase of 4.3% over the previous year (2014: $57.6 million). This reflects our strategic focus on driving rates while holding occupancy levels relatively stable. Average daily rates (ADR) have grown by 5.7% from $353 in 2014 to $373 in 2015, while occupancy has remained at circa 68% across both periods. Increases in ADR attract little incremental cost so conversion to profit tends to be stronger than that of revenue growth from higher occupancy.
Although the occupancy at our hotels has remained relatively stable, we have seen a strong period of growth in tourist arrivals to the island of Barbados. After a number of years of relatively stable visitor numbers, the total number of tourist arrivals for 2015 up to the end of October has grown by almost 14.7%. Arrivals from the UK and the United States, which are the key markets for customers in our hotels, have risen by 12.7% and 28.2% respectively. We believe this reflects the recovery in both of these economies, with a delay of around six months due to the lead time in booking long haul holidays to the Caribbean. There may also be demand shifting over from some competing winter-sun destinations in North Africa and the Middle East, due to the ongoing instability and uncertainty of some of those destinations.
This customer demand has been supported by increased airlift. The expected extra capacity that we outlined to prospective investors at the time of the IPO has all come on-stream: British Airways is up from 10 to 12 flights per week from the UK in the winter; extra capacity from the United States added over 33,000 additional seats this year, with Delta’s new routes from New York and Atlanta; JetBlue have recently introduced a new route from Boston as well as an enhanced “Mint” service (the equivalent of business class) from New York; and Thomas Cook also announced a new route from Glasgow operating from November to January, providing direct flights from the north of the UK.
Increased demand can drive Group profits even if there is little change in occupancy. Higher demand allows us to achieve better yield by increasing headline prices or by reducing discounts. Indeed, it is often in our busiest periods over Christmas and New Year that we feel the most pronounced lift in results from extra demand, even though most of the other hotels on the island are busy as well.
Elegant’s ability to manage yield is assisted by stronger negotiating positions with tour operators than most of its competitors. This is partly because we are the largest hotel operator on Barbados, with almost 25% of the quality leisure tourist room stock on the island, but also because we benefit from the expertise of our specialised revenue team based in Florida.
As these results demonstrate, the Elegant management team stayed focused on running and indeed growing the underlying business despite the potential distraction and workload of preparing the Group for an IPO. Group operating profit before exceptional items increased by 15.7% to $19.2 million (2014: $16.6 million). Adjusted EBITDA (before exceptionals and share based payments charges) increased by 12.7% to $22.2 million (2014: $19.7 million). Adjusted EBITDA margin was 36.9%, reflecting our continuing focus on cost discipline (2014: 34.1%).
Colony Club led the way, perhaps because it was refurbished most recently, with Turtle Beach trailing the pack due to suffering from noisy and disruptive works at a neighbouring hotel (concluded at the end of January 2015). The other properties – Tamarind, The House, Crystal Cove and Daphne’s restaurant – have all showed year on year improvement.
The fact that we have greater scale than most of our competitors helps us control costs, with centralised functions serving all of our properties. These functions include procurement (giving scale in purchasing), accounting (giving better cost control) and HR (giving improved training and personnel development).
Basic and diluted earnings per share were 7.2 cents (2014: 16.6 cents). On an adjusted basis, excluding IPO and listing expenses, share based payments and other one-off costs together with the associated tax impact, and reflecting the total shares in issue post-IPO, basic earnings per share were 14.7 cents (2014: 12.7 cents) and diluted earnings per share were 14.6 cents (2014: 12.7 cents).
Key Performance Drivers
Guest experience: We never lose sight of the fact that it is ultimately our guests who pay the hotels’ costs, all of our salaries and, of course, the Group’s dividend. Elegant’s philosophy remains one of continuous investment and improvement. In addition to day-to-day maintenance and regular refurbishment (what hoteliers tend to call “furniture, fixtures and equipment reserve” or “FF&E reserve”), there is a central fund that is allocated to larger projects each year. We believe that this, as well as the Group’s outstanding training and service programs, generate tangible improvements in the guests’ experience at our properties.
Rate and Occupancy: We believe the increase in demand (see arrivals data above) provides clear potential for us to continue to grow revenue in the short to medium term. Our strategy for the existing portfolio is to leverage this demand where possible to yield higher rates. While both high rate and high occupancy are obviously important for improving the Group’s revenue, we see the greatest potential in rate growth for 2016 and accordingly will be focusing our efforts in that area.
Cost control: In addition to the general cost benefits from our centralised administrative operations, we are continuing to develop our central procurement capability (in order to fully benefit from our scale and from recent changes in import duties) and we are focusing on reducing the Group’s energy costs (enhancing our hotel energy-saving policies and ensuring that all related equipment, such as modern air-conditioning, is more efficient).
Expansion: Long-term growth will also be driven by expanding the Group through acquisitions both on Barbados and further into the Caribbean. The admission to AIM allowed us to reduce debt, thereby freeing up capacity to carry out acquisitions. The team is working hard to develop a pipeline of potential targets and is actively considering a number of opportunities. While there can never be any certainty around such transactions, we would be disappointed not to acquire at least one hotel in 2016.
The Directors are pleased to announce that they are proposing a final dividend for the financial year ended 30 September 2015 of 1.75 pence per share. The final dividend is subject to the approval of the Company’s Shareholders at its Annual General Meeting. The final dividend will be paid on 8 February 2016 to shareholders on the register on 29 December and the Company’s ordinary shares will become ex-dividend on 24 December 2015. The total dividend for the five month period from listing on 26 May 2015 to 30 September 2015 amounts to 3.5 pence per share.
It is the Board’s intention to continue to implement a progressive dividend policy in line with the growth in future earnings. As always, this will be subject to the discretion of the Board and to the Company having sufficient distributable reserves.
People and Board
The success of Elegant Hotels is down to its people. The Group’s strong performance reflects the quality, hard work and loyalty of the team. Each member of staff in every property has played their part. Our on-island central services and accounting team has had an unusually challenging year given the extra work required to prepare for the IPO and the subsequent rigours of public company life. We also owe much to the efforts of the revenue management team in Florida and our sales teams in the UK and elsewhere, who help generate the demand on which everything is built.
In order to further strengthen the Group’s senior management team, we recently started the process of recruiting a Group Chief Financial Officer.
On behalf of the Board, we would like to thank all of our employees, customers, suppliers and business partners for their efforts in 2015. We would also like to welcome and thank our new shareholders for their trust in our Company and faith in our future.
Summary and Outlook
As we approach the busiest period of the year over the key winter months of December to February, we have good visibility, as always, into the strength of bookings. These are in line with management’s expectations at this stage of the year. We continue to pursue a strategy focussed on rate growth and on enhancing the Elegant Hotels’ experience for our customers.
The Board is also committed to an acquisition strategy that will increase the scale of the business both in Barbados and the wider Caribbean islands. We believe that this approach will underpin and drive profitable growth for the future and, with that in mind, look forward to the future with confidence.
Elegant Hotels Group Plc owns and operates five luxury hotels and a beachfront restaurant, Daphne’s, on the island of Barbados. The Group’s portfolio comprises 483 rooms, which represents almost 25% of Barbados’ quality leisure tourist room stock. Four of the five Group hotels 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 20 acres and an aggregate beachfront of 2,300 feet. The value attributed to Elegant’s portfolio as at 15 April 2015 was $235.5 million.
The Group has a strong market presence and is a profitable, cash generative and financially stable business that has enjoyed continuous growth in both revenue and EBITDA over the last three financial years. In the year to 30 September 2015, it achieved revenues of $60.1million and EBITDA before non-recurring items of $22.2 million. The Group’s shares were admitted to trading on the London Stock Exchange’s AIM in May 2015. Its objective now is to leverage its position as a leading hotel operator in Barbados and to expand both on Barbados and further into the Caribbean. Together, the Group’s five hotels – Colony Club, Tamarind, The House, Crystal Cove, and Turtle Beach – offer styles encompassing classic and contemporary, family-friendly and adults-only offerings.