Elegant hotels group plc a solid performance in a challenging trading environment –

Elegant Hotels Group plc (LON:EHG), the owner and operator of six upscale freehold hotels and a beachfront restaurant on the island of Barbados, today announced its half year results for the six months ended 31 March 2016.

* Based on: valuations of the Group’s properties, excluding Waves, as at 15 April 2015; the recent valuation of Waves; net debt as at 31 March 2016; and an exchange rate of £1.00:$1.42.

Commenting on the results, Sunil Chatrani, CEO of Elegant Hotels Group plc, said: “This has been a period of solid progress for Elegant Hotels and we were particularly pleased to complete our first acquisition since becoming a public company, in the form of Waves Hotel & Spa. Domestic currency definition The Group now owns around 29% of the quality leisure tourist room stock in Barbados and our objective remains to continue extending this position while also expanding further into the Caribbean region. Definition of currency devaluation Whilst there are currently a number of challenges that are impacting the trading performance of both Elegant Hotels and the wider luxury hotel market in Barbados, we continue to be confident in the Group’s long-term growth prospects.”

The period under review has been one of solid progress in an increasingly challenging market for Elegant Hotels. What is the definition of currency exchange Revenue for the first half of the year at $36.5 million was marginally higher than the same period last year (H1 2015: $36.4 million).

There was a small decline in occupancy to 69% from 71% last year, but this was compensated by an increase in ADR which was up 3.1% at $464. Currency trading insurance definition This was achieved despite the strength of the US dollar, which was on average up 5% against the pound and 7% against the euro versus the prior period, making holidays in Barbados more expensive for the European traveller. Functional currency definition RevPAR was flat for the Group.

Colony Club has again traded well during the period, with revenue and bookings showing the positive impact of the recently completed refurbishment.


What is the definition of currency RevPAR at Colony Club was up 8% for the period. Currency position definition Turtle Beach recovered from the disruption of the refurbishment works at the neighbouring hotel, which affected bookings last year. National currency definition However, now that the refurbished hotel has opened, its adults-only offer is providing more competition. Definition of depreciation of currency The House and Tamarind saw RevPAR falls of 7% and 6% respectively because of declines in occupancy. Euro currency market definition Both hotels will benefit from some targeted refurbishment expenditure next year. Currency exposure definition Crystal Cove continues to be popular with families and RevPAR was up 2%.

The Company was able to hold its rates during the peak winter trading months as demand for luxury holidays in Barbados remained solid. Currency economics definition When demand is high the Company is able to manage yields by increasing headline prices and reducing discounts.

However, while visitor numbers and airlift to the island have continued to increase, and there is good underlying growth in demand for Barbados, most of that growth has been in the villa rental segment and at the lower-cost end of the hotel market. Data currency definition Recent data from Barbados Tourism Marketing Inc. International reserve currency definition shows that, for the first quarter of calendar 2016, demand for luxury accommodation decreased by 3.7%, while overall arrivals increased by 7.4%.

Adjusted EBITDA of $16.7 million (H1 2015: $16.3 million) grew by 2.5%, reflecting increases at Colony Club, Turtle Beach and Crystal Cove. Local currency fare definition This was offset by modest decreases at The House, Tamarind and Daphne’s and by the additional costs of running a listed company.

Adjusted profit before tax increased in the six months to 31 March 2016 to $14.4 million (H1 2015: $12.8 million), up 12.5% on the previous year. Currency trading definition The majority of this increase was because of lower interest on reduced net debt levels following the IPO. The definition of currency On the same basis, adjusted EPS was up 9.3% to 12.9 cents per share (H1 2015: 11.8 cents per share).

The Group continues to focus closely on cost control, and the centralised functions that serve its properties – including procurement (giving scale in purchasing), accounting (giving better cost control) and HR (giving improved training and personnel development) – are constantly being refined and made more efficient. Definition of currency exchange The Group is also exploring other ways of reducing costs while not compromising in any way on the quality of its properties or customer service, such as lowering electricity bills by introducing more efficient air-conditioning units across its portfolio. Foreign currency exposure definition However, central costs have inevitably risen due to the additional costs associated with being a listed company.

Net debt was down $42.0 million to $54.8 million (H1 2015: $96.8 million) due to the use of the IPO proceeds, partially offset by increased borrowings of $20.5 million for Waves Hotel & Spa.

In March 2016, the Group announced that it had acquired Waves Hotel and Spa (“Waves”), its first acquisition since becoming a public company last year. Currency policy definition Waves has been independently valued at $22 million by Terra Caribbean. Single currency definition The difference of $4.2 million between the total consideration and the fair value of the assets is shown as a gain on acquisition in the profit and loss account.

Waves is a 4-star, 70-bedroom all-inclusive resort located at Prospect Bay in the parish of St. Currency exchange rate wiki James in Barbados. Foreign currency exchange rate definition It has a prime beachfront location on the popular west coast, or “Platinum Coast”, of the island and is close to a number of popular tourist destinations including the areas of Holetown and Bridgetown. Definition of currency depreciation The hotel occupies approximately 1.8 acres of freehold land on a beachfront of 178 feet and its facilities include a restaurant, bar, gym and destination spa with 18 treatment rooms.

The process of refurbishing, repositioning and re-pricing Waves is underway and, as planned, it is expected to have a soft opening in the last quarter of FY 2016. Definition of devaluation of currency The Group expects the transaction to be earnings enhancing for the year ending 30 September 2017.

The Group continues to believe that such acquisitions, both on Barbados and further into the Caribbean, will be key to the long-term growth of Elegant Hotels and remains committed to this strategy.

As set out in the Admission Document at the time of IPO, the Board continues to anticipate the Company’s first full year dividend payment will be 7.0 pence per share (representing a 7% yield at the placing price on IPO of £1 per share) and is pleased to declare an interim dividend of 3.5 pence per share. Currency depreciation definition economics This is intended to be followed by a final dividend of 3.5 pence per share in Q1 2017 representing a total of 7.0 pence per ordinary share for the Company’s accounts period ending 30 September 2016.

The interim dividend for the period of 3.5 pence per share will be paid on 15 July 2016 to shareholders on the register on 24 June 2016, and the Company’s ordinary shares will become ex-dividend on 23 June 2016.

The Board has recently been significantly strengthened by the appointment in April of Richard Jones as Chief Financial Officer. Tradable currency definition Richard was previously the Chief Financial Officer of Cineworld Group plc and has considerable UK plc experience, as well as in-depth knowledge of the leisure sector which will be invaluable as the Group continues to pursue its long-term expansion plans.

Over the last few months the Group has experienced a variety of challenges. Common currency definition In common with the rest of the luxury hotel market in Barbados, the Group has seen an impact on customer demand as a result of wider issues that are largely beyond its control: the current political uncertainty in the UK has led to a reduction in consumer appetite for luxury holidays, and publicity around the Zika virus has resulted in room cancellations and in substantial competitor discounting, despite the relatively small number of reported cases in Barbados (with none in the Group’s hotels). Currency converter definition While such factors are clearly unpredictable, the Group is hopeful that their negative impact will be relatively short-term in nature.

Elegant Hotels continues to have firm competitive advantages over its peers. Currency future definition In particular, the Group has stronger negotiating positions with tour operators than others, partly because it is the largest hotel operator on Barbados but also because it benefits from having a specialist revenue team based in Florida. Definition of currency appreciation These factors increase the Group’s ability to manage yield effectively, meaning it is better equipped to cope with temporary down-turns or quieter periods. Currency valuation definition However, market competition has increased recently as other operators have been cutting rates and the number of lower-cost accommodation options has grown.

While bookings taken in January, a key period for future bookings, were up on the prior year, these factors have meant that Elegant Hotels has since experienced reduced bookings for the second half of FY 2016 compared with bookings at the same time last year for H2 2015. Denominated currency definition With the major booking period now over, the Board expects full year like for like sales to be slightly below FY 2015, and consequently adjusted EBITDA for the full year to 30 September 2016 is now expected to be between $20 million and $21 million.

The Group’s property, excluding Waves, was valued at $235.5 million by CBRE as at 15 April 2015 which is greater than its value in these financial statements. Economic definition of currency The Waves Hotel & Spa property was recently valued by Terra Caribbean at $22.0 million which is the fair value used in the accounts. What is currency exchange definition Using these valuations, the Group’s properties would be valued at $257.5 million. Currency exchange market definition Based on net debt of approximately $54.8 million as at 31 March 2016, this would equate to an implied net asset value (NAV) of approximately $202.7 million (228 cents per share and, based on an exchange rate of £1.00:$1.42, 161 pence share).

The Group remains committed to its strategy of refurbishing, repositioning and re-pricing its existing portfolio, and plans to invest approximately $1.5 million in the next financial year on making improvements to its hotels, which is over and above the usual 4% of Group revenue that is allocated for this purpose. Foreign currency transaction definition Considering its highly attractive asset base, resilient business model and firm commitment to a progressive dividend policy, the Group continues to have firm confidence in the long-term outlook for Elegant Hotels and its shareholders.

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