TIDMEHG
RNS Number : 2992U
Elegant Hotels Group PLC
17 January 2017
17 January 2017
This announcement contains inside information
Elegant Hotels Group plc
Full Year Results Statement
A solid performance against a backdrop of challenging market
conditions
Elegant Hotels Group plc ("Elegant Hotels" or the "Company" or
the "Group"), the owner and operator of six upscale freehold hotels
and a beachfront restaurant on the island of Barbados, today
announces its results for the year ended 30 September 2016.
Highlights
-- Revenue down 5.2% to $57.0 million (2015: $60.1 million)
-- RevPAR down 6.7% to $238 (2015: $255)
-- ADR (average daily rates) up 1.3% to $378 (2015: $373)
-- Adjusted EBITDA: down 11.6% to $19.6 million (2015: $22.2 million)
-- Adjusted operating profit: down 14.5% to $16.3 million (2015: $19.1 million)
-- Adjusted EPS of 13.1 cents per share (2015: 14.7 cents per share)
-- Successful acquisition, refurbishment and reopening of Waves Hotel & Spa in Barbados
-- Signed management contract in November for Hodges Bay Resort
& Spa in Antigua, the Group's first property outside
Barbados
-- Year-end net debt of $61.8 million (2015: $40.8 million)
-- Proposed final dividend of 3.5 pence per share, resulting in
a full year dividend of 7.0 pence per share
Commenting on the results, Sunil Chatrani, CEO of Elegant
Hotels, said:
"Against a backdrop of challenging market conditions, the Group
has delivered a solid performance and made good progress in key
areas during the year. We have significantly expanded our business,
both through the acquisition of Waves Hotel & Spa in Barbados
and the management contract that we recently signed on a property
in Antigua. Despite the current challenges that the Group and the
wider Barbados luxury hotel market are facing, we continue to be
confident in our long term growth prospects and remain committed to
our expansion strategy in both Barbados and across other parts of
the Caribbean."
Analyst Conference call
A conference call for analysts with the Company's management
team will take place at 9.00am (GMT) today, the details of which
are as follows:
+44 (0) 20 3003
International access 2666
UK Toll Free 0808 109 0700
Barbados Toll Free 1 877 562 2218
Password Elegant
For further information
Elegant Hotels Group plc
Sunil Chatrani, Chief Executive
Officer +1 246 432 6500
+44 (0) 161 831
Zeus Capital Limited 1512
Dan Bate / Andrew Jones (NOMAD) +44 (0) 203 829
John Goold (Broker) 5000
Powerscourt
Rob Greening / Lisa Kavanagh +44 (0) 207 250
Email: eleganthotels@powerscourt-group.com 1446
NOTES TO EDITORS:
Elegant Hotels owns and operates six luxury hotels and a
beachfront restaurant, Daphne's, on the island of Barbados. The
Group's portfolio comprises 553 rooms, making it twice as large (by
room number) as the closest competitor in the Barbados luxury hotel
room market. Five of the six properties 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 22 acres and an aggregate beachfront of
2,500 feet. In the year ended 30 September 2016, the Group achieved
revenues of $57.0 million and EBITDA before non-recurring items of
$19.6 million.
Together, the Group's six existing hotels - Colony Club,
Tamarind, The House, Crystal Cove, Turtle Beach and Waves Hotel
& Spa - offer styles encompassing classic and contemporary,
family-friendly and adults-only.
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, as exemplified by its
recent signing of a management contract with Hodges Bay Resort
& Spa in Antigua.
Investor website: http://www.eleganthotelsgroup.com
Commercial website: http://www.eleganthotels.com
BUSINESS REVIEW
Revenue and demand
Revenue of $57.0 million for the financial year ended 30
September 2016 represents a decrease of 5.2% over the previous year
(2015: $60.1 million). Our first half of the financial year
performance was encouraging. Our strategy of driving rates, while
holding occupancy levels relatively stable, worked well. However,
we experienced a decline in demand in the second half of the year
(March to September 2016) which the Board believes is a result of
the recent weakening of sterling and the fact that our holidays are
priced in US dollars.
For the financial year as a whole, Average Daily Rates (ADR)
have grown by 1.3% from $373 in 2015 to $378 in 2016, with
occupancy falling by 5.5 percentage points to 62.9% and Revenue per
Available Room (RevPar) falling by 6.7% to $238.
When demand is high the Group has managed yields by maintaining
headline prices and reducing discounts. The Group was able to hold
its rates during the peak winter trading months as demand for
luxury holidays in Barbados held up well.
The Group took steps to mitigate the decline in demand in the
second half of the year through promotional activity and
appropriate special offers in addition to expanding the sales team
in the US and the UK.
Colony Club delivered a record year with RevPAR up 3%, providing
further evidence that our strategy of refurbishing, repositioning
and repricing our hotels is working. All of our other hotels were
affected by the tougher market conditions in the second half of the
year.
Turtle Beach began to recover from the disruption of the
refurbishment works at the neighbouring hotel, which affected
bookings last year. However, the hotel still experienced a decline
in RevPAR of 8%. Similarly, The House, Tamarind and Crystal Cove,
saw RevPAR declines of 8%, 11% and 6% respectively, primarily due
to a decrease in occupancy. We expect The House, Turtle Beach and
Tamarind to benefit from some targeted refurbishment expenditure
next year. Daphne's restaurant, which sits between Tamarind and The
House, was also negatively impacted by the declines in occupancy at
both properties.
Arrivals to Barbados from the UK and the US, which are the key
markets for customers in our hotels, rose by 2.2% and 11.5%
respectively for the 2016 calendar year up to the end of October.
However, while visitor numbers and airlift to the island have
continued to increase, demonstrating good underlying growth in
demand for Barbados as a holiday destination, most of that growth
has recently been in the villa rental segment and at the lower-cost
end of the hotel market. Data from Barbados Tourism Marketing Inc.
shows that, for the first six months of calendar 2016, demand for
luxury accommodation from the UK decreased by 6.6%, while overall
arrivals increased by 5.6%.
Longer term, customer demand is expected to continue to be
bolstered by recent increases in airlift to the island. Throughout
winter 2016 and running into 2017 there have been additional
flights from JetBlue, Delta and British Airways. Extra services
will be running from Atlanta, Toronto and Montreal, and new routes
from continental Europe, via Condor from Munich and Air France from
Paris, should also serve to boost visitor numbers to Barbados.
Elegant's ability to manage yield is assisted by stronger
negotiating positions with tour operators than most of our
competitors. This is partly because, with six hotels on the island,
we are by far the largest hotel operator on Barbados; but also
because we benefit from the expertise of our specialised revenue
team based in Florida.
Profitability
Group operating profit before exceptional items and the bargain
purchase gain decreased by 14.5% to $16.3 million (2015: $19.1
million). Adjusted EBITDA (EBITDA before exceptional items and the
bargain purchase gain on Waves) decreased by 11.6% to $19.6 million
(2015: $22.2 million). Adjusted EBITDA margin was lower at 34.4%,
reflecting the decline in revenue and increased central costs
(2015: 36.9%).
Our most recent addition to the portfolio, Waves, had a 'soft
opening' in August and, as is normal when a hotel initially opens,
incurred a small EBITDA loss of $0.3m. Demand for Waves is growing
well and the Board is confident about its outlook and future.
The Group continues to focus closely on cost control through its
increasingly centralised functions that serve all the properties.
The aim of these central functions is to reduce costs while not
compromising on the quality of the properties or customer service.
For example, procurement and accounting have been working in
conjunction with the engineering team to introduce more efficient
air-conditioning units across the portfolio to reduce the Group's
cost of electricity. The procurement department is also working
towards a programme of direct importation that should combine with
the Group's on-island supplier relationships to lower food and
beverage unit costs.
In the current financial year, our operational improvements have
been offset by an increase in the Group's central costs. There have
been two major drivers of this increase:
-- Firstly, costs associated with being a publicly listed
company. The IPO of Elegant Hotels occurred in May 2015 so in the
2016 financial year the Group bore the costs associated with being
a public company for a full 12 months versus only about one third
of that period in the prior year; and
-- Secondly, Elegant Hotels has added to its central structure
in order to position the Group for growth. The 192 rooms that will
be added to Elegant Hotels' portfolio as a result of the Waves
acquisition and the Hodges Bay management contract represent a 40%
increase in rooms since the IPO. The Board believes that the longer
term benefits from these and future additions to the portfolio
justify the extra cost base that has been required to establish a
platform for growth. The head office team has been strengthened
across the areas of finance, operational management and marketing.
This has increased central costs in advance of revenue.
Basic and diluted earnings per share were 15.5 cents (2015: 7.2
cents). On an adjusted basis (excluding exceptional costs and the
bargain purchase gain associated with the acquisition of Waves,
together with the associated tax impact), and reflecting the total
shares in issue - basic earnings per share were 13.1 cents (2015:
14.7 cents) and diluted earnings per share were 13.1 cents (2015:
14.6 cents).
Expansion strategy
In March 2016, the Group announced that it had acquired Waves
Hotel & Spa ("Waves"), its first acquisition since becoming a
public company last year. Waves has been independently valued at
$22 million by Terra Caribbean. The difference of approximately
$4.0 million between the total consideration and the fair value of
the assets is shown as a gain on acquisition in the income
statement. This gain has been excluded from the calculation of the
adjusted EBITDA of the Group.
Waves is a four star, 70-bedroom all-inclusive resort located at
Prospect Bay in the parish of St. James in Barbados. 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. The
hotel occupies approximately 1.8 acres of freehold land on a
beachfront of 178 feet and its facilities include two restaurants,
a bar, a coffee shop, a gym and a destination spa with eight
treatment rooms.
Waves was closed in mid-April 2016, fully refurbished at a cost
of approximately $5.6m, and re-opened in August 2016. Occupancy for
the 2017 financial year is expected to exceed initial estimates and
the property has been well received by guests and tour operators
alike. As forecasted in the development plan, Waves lost $0.3
million of EBITDA during its initial opening period. The Group
expects Waves to be EBITDA positive for the year ending 30
September 2017 with profitability growing further in the 2018
financial year and beyond.
In November 2016, the Group signed its first management contract
to bring Hodges Bay, a 122-room luxury hotel in Antigua into the
Elegant Hotels portfolio. The hotel is currently under construction
and is expected to open its doors in mid to late 2017. This will be
Elegant Hotels' first property outside Barbados. It is expected to
be earnings enhancing in the 2018 financial year. The Board
believes that management contracts of this kind represent a
compelling opportunity to expand beyond Barbados, given they
require far less capital investment than full ownership, and is
therefore considering a number of other similar targets.
The 192 rooms that will be added to Elegant Hotels' portfolio as
a result of the Waves acquisition and the Hodges Bay management
contract represent a 40% increase in available rooms (from 483 to
675) since the Company's admission to AIM in May 2015.
The Board believes that acquisitions and management agreements,
both on Barbados and in other parts of the Caribbean, will be key
to the long-term growth of Elegant Hotels - and therefore remains
firmly committed to its long-term expansion strategy.
Key Performance Drivers
Guest experience: Elegant's core philosophy and strategy are
unchanged. We recognise that everything starts and ends with the
guest experience we provide. Refurbishing, repositioning and
re-pricing our existing portfolio remains a key part of our
strategy of continual improvement, and we plan to invest
approximately $1.5 million in the next financial year on our
existing hotels, over and above the usual 4% of Group revenue that
we allocate for regular furniture, fixtures and equipment
(FF&E) and our regular maintenance expenditure at each
property.
Rate and occupancy: We believe the current decline in demand
requires us to continue to tactically manage our rates day-to-day
in order to maintain occupancy and maximise RevPAR, a task our
specialised revenue team in Florida is well equipped for. Taking
into account the Group's booking patterns (current and historic),
competitor pricing and flight availability, the team develops
tactical offers, value-added offers and promotional sales and
marketing programmes. In higher demand seasons, such as the
extremely busy Christmas and New Year periods, we continue to be
disciplined and cautious with any discounting.
Cost control: The largest component of cost in almost any
hospitality business is labour. Given fluctuations in occupancy
during the 2016 financial year this has been a major focus for the
Group. Each hotel has a 'labour grid programme' to provide
discipline in manning levels. For each hotel, there is a defined
manning programme that varies with forecast occupancy every week
and is strictly applied. The forecasts are also fed through to the
procurement team to improve control, the competitive bid process
and to reduce wastage. Central corporate costs have risen in the
year for two reasons; the increased costs of being a listed company
(Elegant Hotels was public for only about four months of the prior
financial year); and the costs associated with positioning the
Group for growth.
Expansion: Our strategy is focused on driving long-term growth
from expanding the Group further through acquisitions both on
Barbados and in other parts of the Caribbean. Following the
successful acquisition of Waves in Barbados and the signing of the
Hodges Bay management agreement in Antigua, the team continues to
work actively on a number of other opportunities.
Dividend
The Board is recommending to shareholders at its Annual General
Meeting a final dividend of 3.5 pence per share. Together with the
interim dividend of 3.5 pence per share, this equates to a total
dividend of 7.0 pence per share for the 2016 financial year. The
final dividend is subject to the approval of the Company's
shareholders and will be paid on 8 March 2017 to shareholders on
the register on 27 January 2017. The Company's ordinary shares will
become ex-dividend on 26 January 2017.
It is the Board's intention to maintain the current dividend
policy. 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. Each member
of staff in every property plays their part in making sure our
guests enjoy the best possible experience. Our back office teams in
Barbados and in Florida support the hotels in doing this. They have
also been instrumental in integrating the Waves acquisition into
the portfolio.
We have made a number of changes to our head office team. We
welcome Jeff Singleton as interim Chief Financial Officer. We would
like to thank our previous Chief Financial Officer, Richard Jones,
for his efforts and wish him well in the future. Further, we would
like to congratulate Gayle Tamla on her promotion to Group
Operations Director.
During the year, our team's dedication to quality and service
has been reflected in numerous awards that each of the hotels has
received. Most recently, Elegant won the Sales and Marketing Best
Practices Award at the Caribbean Hotel Information Exchange Forum.
In addition, all of the Group's properties apart from Waves (which
has only recently come under the Group's ownership) were awarded
TripAdvisor's coveted Certificate of Excellence for 2016, as well
as the prestigious Green Globe Certificate.
On behalf of the Board, we would like to thank all of those
people that have made a difference at Elegant Hotels this year. It
has been a challenging year and we are grateful for the dedication
and support of our employees, suppliers and business partners. We
would also like to thank our shareholders for their continued
support and belief in the long-term prospects of Elegant
Hotels.
Summary and Outlook
Over the last year the Group has experienced a variety of
challenges. 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.
However, we are encouraged by positive trends such as the increased
popularity of Barbados as a tourist destination and the improving
airlift to the island and believe our strategy of continued
investment in our properties to improve them every year will
position us well for the future.
The Board is delighted with the progress of our expansion
strategy since the Company's IPO last year. It remains committed to
increasing the scale of our business both in Barbados and the wider
Caribbean islands. Despite the challenging market conditions, we
firmly believe in our strategy and remain confident in our
long-term prospects.
FINANCIAL REVIEW
A year of solid financial performance in a challenging trading
environment
The 2016 financial year has seen a decrease in total revenue,
gross profit and adjusted earnings before interest, tax,
depreciation and amortisation (adjusted EBITDA) as a result of the
reduced demand for luxury holidays in Barbados because of economic
uncertainty and weaker currency affecting the UK traveller in
particular.
Revenue
Total revenue decreased by 5.2% in the year to $57.0 million
(2015: $60.1 million). Colony Club delivered a record year with
RevPAR up 3%, providing further evidence that our strategy of
refurbishing, repositioning and repricing our hotels is working.
However, Turtle Beach, The House, Tamarind and Crystal Cove saw
RevPAR declines of 8%, 8%, 11% and 6% respectively because of
decreases in occupancy. Daphne's restaurant, which sits between the
two hotels, was negatively impacted by the declines in occupancy at
both properties.
Gross profit
Total gross profit decreased by 6.5% to $35.1 million (2015:
$37.6 million) as a direct result of the fall in revenue.
Exceptional costs
The Group incurred costs in relation to the acquisition of Waves
and other projects which are considered to be non-recurring. In the
prior year there were costs for the IPO that were specific to the
listing and also to other related activities such as the amendment
to the Group's borrowing arrangements. All of these costs are
regarded as one-off in nature and will not recur. However, in the
case of share awards in relation to the IPO, the cost will be
recognised over several years.
As exceptional costs do not reflect the underlying performance
of the Group, the financial performance of the business is being
presented after adjustment for such items. The table below sets out
the impact on each of the lines in the Income Statement. The
remainder of this review is based on the adjusted results excluding
the impact of exceptional costs.
Exceptional costs incurred in the year amounted to $2.2 million
(2015: $10.2 million). They comprised acquisition and other one-off
costs of $2.0 million (2015: $4.1 million, comprising re-financing
costs, one-off legal costs and restructuring costs) and share based
payments charges relating to share options issued to Directors and
senior management at the time of IPO under the Group's Long Term
Incentive Plan (LTIP) amounting to $0.2 million (2015: $0.5
million). In the 2015 financial year there were also costs directly
associated with the IPO of $5.6 million.
Reported Adjustments Reported Adjustments
Adjusted Adjusted
2016 2016 2016 2015 2015 2015
$m $m $m $m $m $m
Gross profit 35.1 - 35.1 37.6 - 37.6
Selling, general
and admin (18.2) (1.6) (19.8) (29.3) 10.2 (19.1)
Other income 1.1 - 1.1 0.7 - 0.7
-------- ----------- -------- -------- ----------- --------
Operating profit 18.0 (1.6) 16.4 9.0 10.2 19.2
Financial expenses (2.2) - (2.2) (3.1) - (3.1)
-------- ----------- -------- -------- ----------- ------------
Profit before
taxation 15.8 (1.6) 14.2 5.9 10.2 16.1
Taxation (2.0) (0.5) (2.5) (1.0) (2.0) (3.0)
-------- ----------- -------- -------- ----------- --------
Profit for the
year 13.8 (2.1) 11.7 4.9 8.2 13.1
======== =========== ======== ======== =========== ========
Selling, General and Administrative Expenses
Selling, general and administrative (SG&A) expenses at $18.2
million were significantly lower than the previous year (2015:
$29.3 million) as the Group incurred costs in relation to the IPO
in the prior year. SG&A expenses after adjusting for
acquisition, IPO and other one-off costs, non-exceptional
share-based payment charges, and the bargain purchase gain
associated with the acquisition of Waves, were up $0.7 million on
the prior year at $19.8 million (2015: $19.1 million), principally
reflecting the full year costs of running a public company.
EBITDA
Reported EBITDA and adjusted EBITDA are set out in the following
table:
Reported Adjustments Reported Adjustments Adjusted
Adjusted
2016 2016 2016 2015 2015 2015
$m $m $m $m $m $m
Revenue 57.0 - 57.0 60.1 - 60.1
-------- ----------- -------- -------- ----------- ------------
Operating profit 18.0 (1.6) 16.4 9.0 10.2 19.2
Depreciation 3.2 - 3.2 3.0 - 3.0
-------- ----------- -------- -------- ----------- ------------
EBITDA 21.2 (1.6) 19.6 12.0 10.2 22.2
======== =========== ======== ======== =========== ============
Adjusted EBITDA
margin 34.4% 36.9%
Adjusted EBITDA decreased by 11.6% to $19.6 million (2015: $22.2
million). Adjusted EBITDA margin in the 2016 financial year was
34.4% (2015: 36.9%). This reduction is because certain central
costs are fixed in nature so a fall in revenue will lead to a fall
in EBITDA margin combined with the additional full year costs of
running a public company.
Financial expenses
Financial expenses in the 2016 financial year were $2.2 million
(2015: $3.1 million), a reduction of $0.9 million. This was
principally due to the fact that the Group was operating with
higher debt levels in the period prior to the IPO in May 2015.
Proceeds from the issue of shares amounting to $42.0 million
were used, along with cash resources in the business, to achieve a
renewal of the Group's credit agreement with the Bank of Nova
Scotia. Prior to the IPO, the drawdown of facilities under the
credit agreement was $102.0 million. At IPO, the drawdown was
reduced to $45.0 million. However, it was increased by $18.5
million in March 2016 to finance the Waves acquisition.
Taxation
The total taxation charge for the year of $2.0 million was $1.0
million higher than the prior year (2015: $1.0 million) due to the
reduction in the level of one-off costs incurred during the year.
After adjusting for exceptional costs, the taxation charge on the
adjusted profit before tax amounted to $2.5 million (2015: $3.0
million).
The effective tax rate on the adjusted profit before tax is
17.6% (2015: 18.8%).
Adjusted profit for the year
Profit after tax and after adjustment for exceptional costs and
the bargain purchase gain has decreased by $1.3 million to $11.7
million (2015: $13.0 million), representing a decrease of 10%.
Earnings per share
Basic earnings per share (EPS) for the year was 15.5 cents
(2015: 7.2 cents). Adjusted basic EPS (after adjusting for
exceptional costs) decreased by 11% to 13.1 cents per share (2015:
14.7 cents).
Dividend
At the time of the IPO the Directors stated an intention to
implement a progressive dividend policy in line with the growth in
future earnings, subject to the discretion of the Board and to the
Company having sufficient distributable reserves. For the year
ending 30 September 2016, having taken into account the current and
expected future trading performance of the Company, and subject to
the Company having sufficient distributable reserves, the Directors
intend that the total annual dividend payable will equate to a
dividend yield of 7% (calculated on the basis of the IPO price of
GBP1 per ordinary share).
The Board is recommending a final dividend of 3.5 pence per
share for shareholders on the register on 27 January 2017, payable
on 8 March 2017, subject to the approval of the Company's
shareholders at its Annual General Meeting. This makes a total
dividend of 7.0 pence per share for the year ended 30 September
2016.
Balance Sheet
The most significant change in the balance sheet during the
period was the result of the acquisition and subsequent
refurbishment of Waves, in addition to the continued investment in
maintaining and improving the existing hotels. Property plant and
equipment at historic cost increased by $27.5 million to $172.8
million (2015: $145.3 million).
The strength of the Group's balance sheet lies in its assets as
well as the renewed financing arrangements. 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. Waves was recently valued by Terra Caribbean at $22.0
million which is the fair value used in the accounts. While we
acknowledge that there has been a recent fall in demand for luxury
holidays in Barbados which may affect the cash flow generation
which we do not expect to be permanent, the asset values are still
in the Directors' opinion significantly in excess of their carrying
values in the accounts.
Third party debt of $45.0 million with the Bank of Nova Scotia
was renegotiated at the time of the Waves acquisition and increased
to a fully drawn term loan facility of $63.5 million. There is an
undrawn overdraft facility of $10.0 million and a revolving credit
facility of $5.0 million.
Cash Flow
Strong EBITDA conversion provides a sound basis for the Group's
cash flow. Capital expenditure on the existing hotels for the year
of $3.9 million is in line with expectations. At year end, the
Group had net debt of $61.8 million (2015: $40.8 million)
comprising a term loan of $63.5 million; an outstanding balance of
$2.0 million relating to a loan from the vendor of Waves and cash
and cash equivalents of $3.7 million.
Consolidated Statement of Comprehensive Income
Note Year ended Year ended
30 September 30 September
2016 2015
$000 $000
Revenue 8 56,981 60,075
Cost of sales (21,863) (22,521)
--------------------------------- -----------------------------
Gross profit 35,118 37,554
Selling, general and administrative
expenses
--------------------------------- -----------------------------
Recurring (20,074) (19,152)
Exceptional costs 12 (2,188) (10,173)
Bargain purchase gain 7,9 3,995 -
--------------------------------- -----------------------------
(18,267) (29,325)
--------------------------------- -----------------------------
Other operating income 1,112 712
--------------------------------- -----------------------------
Operating profit 17,963 8,941
--------------------------------- -----------------------------
Finance income 13 22 27
Finance expenses 14 (2,201) (3,103)
--------------------------------- -----------------------------
Finance expenses - net (2,179) (3,076)
Profit before taxation 9 15,784 5,865
--------------------------------- -----------------------------
Taxation 15 (2,004) (975)
--------------------------------- -----------------------------
Profit for the year and total
comprehensive income attributable
to equity holders of the parent
Company 13,780 4,890
================================= =============================
Earnings per share
Basic earnings per share (cents) 16 15.5 7.2
--------------------------------- -----------------------------
Diluted earnings per share
(cents) 16 15.5 7.2
================================= =============================
Adjusted earnings per share
Adjusted basic earnings per
share (cents) 16 13.1 14.7
--------------------------------- -----------------------------
Adjusted diluted earnings
per share (cents) 16 13.1 14.6
================================= =============================
EBITDA and Adjusted EBITDA
Operating profit 17,963 8,941
Depreciation 9 3,230 3,044
--------------------------------- -----------------------------
EBITDA 21,193 11,985
IPO and listing expenses and
other one-off costs 12 2,188 10,173
Non-exceptional share-based 180 -
payment charges
--------------------------------- -----------------------------
Bargain purchase gain 7,9 (3,995) -
--------------------------------- -----------------------------
Adjusted EBITDA 19,566 22,158
--------------------------------- -----------------------------
Adjusted EBITDA margin 34.4% 36.9%
All amounts relate to continuing activities.
The notes below form part of these financial statements.
Consolidated statement of financial Group Group
position Note 2016 2017
$000 $000
Non-current assets
Property, plant and equipment 7, 17 172,788 145,304
Deferred tax assets 19 4,564 4,846
--------- -------------------------
177,352 150,150
--------- -------------------------
Current assets
Inventories 20 2,950 2,794
Trade and other receivables 21 3,170 3,198
Short-term investments 22 515 466
Cash and cash equivalents 23 3,704 5,599
--------- -------------------------
10,339 12,057
--------- -------------------------
Total assets 187,691 162,207
--------- -------------------------
Current liabilities
Loans and borrowings 7, 24 4,969 2,339
Trade and other payables 25 7,554 6,917
Dividend payable - 2,392
Tax payable 1,678 643
--------- -------------------------
14,201 12,291
--------- -------------------------
Non-current liabilities
Loans and borrowings 24 60,531 44,075
--------- -------------------------
Total liabilities 74,732 56,366
--------- -------------------------
Net assets 112,959 105,841
--------- -------------------------
Equity attributable to equity holders
of the parent
Share capital 28 1,367 1,367
Merger reserve 43,497 43,497
Share based payment reserve 909 494
Retained earnings 67,186 60,483
--------- -------------------------
Total equity 112,959 105,841
--------- -------------------------
Approved on behalf of the Board of Directors on 16 January 2017
and signed on its behalf by:
.......................................... Director
.......................................... Director
Simon Sherwood Sunil Chatrani
Consolidated statement of changes in
equity
Share based
Share Share Merger payment Retained Total
capital premium reserve reserve earnings equity
Note $000 $000 $000 $000 $000 $000
Balance at 1 October 2015 1,367 - 43,497 494 60,483 105,841
--------- --------- --------- ------------ ---------- --------
Profit for the year - - - - 13,780 13,780
--------- --------- --------- ------------ ---------- --------
Total comprehensive income for the year - - - - 13,780 13,780
--------- --------- --------- ------------ ---------- --------
Foreign exchange - - - - 57 57
Dividends - - - - (7,134) (7,134)
Share based payments 27 - - - 415 - 415
--------- --------- --------- ------------ ---------- --------
Total contributions by owners of the
parent - - - 415 (7,077) (6,662)
--------- --------- --------- ------------ ---------- --------
Balance at 30 September 2016 1,367 - 43,497 909 67,186 112,959
--------- --------- --------- ------------ ---------- --------
The following describes the nature and purpose of each reserve within owners'
equity:
Share capital Amount subscribed for shares at nominal value.
Share premium Amount subscribed for share capital in excess of nominal value.
Merger reserve Amounts attributable to equity in respect of merged subsidiary
undertakings and includes an amount relating to the capitalisation
of an intercompany loan within the subsidiaries which is shown
within merger reserve on consolidation (see note 33).
Share based payment Fair value of employee and non-employee services received
reserve in exchange for the grant of options.
Retained earnings Cumulative profit of the Group attributable to equity shareholders.
The notes below form part of these financial statements.
Consolidated statement of changes
in equity
Share Share Merger Share based payment Retained Total
capital premium reserve reserve earnings Equity
Note $000 $000 $000 $000 $000 $000
Balance at 1 October 2014 905 - 33,497 - 8,798 43,200
--------- --------- --------- -------------------- ---------- --------
Profit for the year - - - - 4,890 4,890
--------- --------- --------- -------------------- ---------- --------
Total comprehensive income for
the year - - - - 4,890 4,890
--------- --------- --------- -------------------- ---------- --------
Shares issued in the period 496 49,153 - - - 49,649
Capital reduction and other
reserve movements - (49,153) 10,000 - 49,153 10,000
Foreign exchange (34) - - - 34 -
Dividends - - - - (2,392) (2,392)
Share based payments 27 - - - 494 - 494
--------- --------- --------- -------------------- ---------- --------
Total contributions by owners of
the parent 462 - 10,000 494 46,795 57,751
Balance at 30 September 2015 1,367 - 43,497 494 60,483 105,841
--------- --------- --------- -------------------- ---------- --------
The following describes the nature and purpose of each reserve within owners'
equity:
Share capital Amount subscribed for shares at nominal value.
Share premium Amount subscribed for share capital in excess of nominal value.
Merger reserve Amounts attributable to equity in respect of merged subsidiary
undertakings.
Share based payment Fair value of employee and non-employee services received
reserve in exchange for the grant of options.
Retained earnings Cumulative profit of the Group attributable to equity shareholders.
The notes below form part of these financial statements.
Consolidated statement of cash
flows
30 September 30 September
2016 2015
$000 $000
Cash flows from operating activities
Profit after taxation 13,780 4,890
Depreciation 3,230 3,044
Income tax expense 2,004 975
Interest expense 2,201 3,103
Bargain purchase gain (3,995) -
Gain on disposal of fixed assets (78) -
Share based payments 415 494
Operating profit before working
capital changes 17,557 12,506
(Increase) in inventories (156) (599)
Decrease in trade and other receivables 28 794
Increase/(decrease) in trade and
other payables 319 (826)
Increase in short-term investments (49) (38)
Taxation paid (687) (437)
------------- -------------
Net cash generated from operating
activities 17,012 11,400
------------- -------------
Cash flows from investing activities
Purchase of property, plant and
equipment (9,660) (3,460)
Proceeds from disposal of equipment 669 -
Acquisition of subsidiary, net
of cash acquired (3,424) -
Net cash used in investing activities (12,415) (3,460)
------------- -------------
Cash flows from financing activities
Proceeds from the issuance of ordinary
shares - 49,593
Repayment of bank borrowings (12,226) (61,023)
Repayment of third party loans (1,414) -
Receipt of bank and third party
loans 18,500 -
Dividends paid (9,526) -
Interest paid (1,826) (3,103)
------------- -------------
Net cash used in financing activities (6,492) (14,533)
------------- -------------
Net decrease in cash and cash equivalents (1,895) (6,593)
Cash and cash equivalents at the
beginning of the year 5,599 12,192
Cash and cash equivalents at the
end of the year 3,704 5,599
============= =============
The notes below form part of these financial statements.
Company statement of financial Note Company Company
position 2016 2015
$000 $000
Non-current assets
Investments in subsidiary undertakings 18 125,127 134,142
--------
Total non-current assets 125,127 134,142
-------- --------
Current assets
Prepaid expenses 18 -
Cash and cash equivalents 611 -
-------- --------
Total current assets 629 -
-------- --------
Total assets 125,756 134,142
Current liabilities
Trade and other payables 25 935 340
Dividend payable - 2,392
-------- --------
Total liabilities 935 2,732
--------
Net assets 124,821 131,410
======== ========
Equity attributable to equity
holders of the parent
Share capital 28 1,367 1,367
Merger reserve 86,208 86,208
Share based payment reserve 909 494
Retained earnings 36,337 43,341
-------- --------
Total equity 124,821 131,410
======== ========
Approved on behalf of the Board of Directors on 16 January 2017
and signed on its behalf by:
.......................................... Director
.......................................... Director
Simon Sherwood Sunil Chatrani
The notes below form part of these financial statements.
Company statement of changes in
equity
Share Share Merger Share based payments Retained Total
capital premium reserve reserve earnings equity
Note $000 $000 $000 $000 $000 $000
Balance at 1 October 2015 1,367 - 86,208 494 43,341 131,410
--------- --------- --------- --------------------- ---------- --------
Loss for the year - - - - (575) (575)
--------- --------- --------- --------------------- ---------- --------
Total comprehensive income for
the year - - - - (575) (575)
--------- --------- --------- --------------------- ---------- --------
Foreign exchange - - - - 705 705
Dividends - - - - (7,134) (7,134)
Share based payments 27 - - - 415 - 415
--------- --------- --------- --------------------- ---------- --------
Total contributions by owners of
the parent - - - 415 (6,429) (6,844)
--------- --------- --------- --------------------- ---------- --------
Balance at 30 September 2016 1,367 - 86,208 909 36,337 124,821
--------- --------- --------- --------------------- ---------- --------
The following describes the nature and purpose of each reserve within owners'
equity:
Share capital Amount subscribed for shares at nominal value.
Share premium Amount subscribed for share capital in excess of nominal
value.
Merger reserve Amounts attributable to equity in respect of merged subsidiary
undertakings.
Share based payments Fair value of employee and non-employee services received
reserve in exchange for the grant of options.
Retained earnings Cumulative profit of the Company attributable to equity
shareholders.
The notes below form part of these financial statements.
Company statement of changes in equity
Share based
Share Share Merger payments Retained Total
capital premium reserve reserve earnings equity
Note $000 $000 $000 $000 $000 $000
Balance at 10 April 2015 - - - - - -
--------- --------- --------- ------------ ---------- --------
Loss for the year - - - - (3,468) (3,468)
--------- --------- --------- ------------ ---------- --------
Total comprehensive income for the year - - - - (3,468) (3,468)
--------- --------- --------- ------------ ---------- --------
Shares issued in the period 1,415 49,153 86,208 - - 136,776
Capital Reduction - (49,153) - - 49,153 -
Foreign exchange (48) - - - 48 -
Dividends - - - - (2,392) (2,392)
Share based payments 27 - - - 494 - 494
--------- --------- --------- ------------ ---------- --------
Total contributions by owners of the
parent 1,367 - 86,208 494 46,809 134,878
--------- --------- --------- ------------ ---------- --------
Balance at 30 September 2015 1,367 - 86,208 494 43,341 131,410
The following describes the nature and purpose of each reserve within owners'
equity:
Share capital Amount subscribed for shares at nominal value.
Share premium Amount subscribed for share capital in excess of nominal
value.
Merger reserve Amounts attributable to equity in respect of merged subsidiary
undertakings.
Share based payments Fair value of employee and non-employee services received
reserve in exchange for the grant of options.
Retained earnings Cumulative profit of the Company attributable to equity
shareholders.
The notes below form part of these financial statements.
Company statement of cash flows 30 September 30 September
2016 2015
$000 $000
Cash flows from operating activities
Loss for the year (575) (3,468)
Finance expense 660 -
Share based payments 415 494
Exchange adjustments (86) (980)
-------------
Operating loss before working
capital changes 414 (3,954)
Increase in trade and other
receivables (1) -
Increase in trade and other
payables 122 340
Increase in due to related parties (1,506) -
Increase in due from related
parties 11,108 -
-------------
Net cash used in operating activities 10,137 (3,614)
------------- -------------
Cash flows from investing activities
Acquisition of Elegant Hotels
businesses and Group subsidiaries - (46,954)
Net cash used in investing activities (46,954)
------------- -------------
Cash flows from financing activities
Proceeds from the issuance of
ordinary shares - 50,568
Dividends paid (9,526) -
Net cash used in financing activities (9,526) 50,568
------------- -------------
Net increase in cash and cash
equivalents 611 -
Cash and cash equivalents at
the beginning of the year - -
Cash and cash equivalents at
the end of the year 611 -
------------- -------------
The notes below form part of these financial statements.
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.
Elegant Hotels Group plc was incorporated on 10 April 2015.
On 11 May 2015 the subsidiaries were acquired by the Company
shortly before the listing of the Company's shares on the London
Stock Exchange's AIM on 26 May 2015.
By applying the principles of reverse acquisition accounting
under IFRS 3 "Business Combinations", the Group has presented its
2015 results as if the Company had always owned the subsidiaries
and has included the results for the Group from 1 October 2014
rather than from the 11 May 2015 acquisition date.
2. Basis of preparation
The consolidated financial statements presented in this document
have been prepared in accordance with International Financial
Reporting Standards as adopted by the EU. The Company's financial
statements have been prepared in accordance with International
Financial Reporting Standards as adopted by the EU and as applied
in accordance with the Companies Act 2006. The Company has taken
advantage of the exemption provided under section 408 of the
Companies Act 2006 not to publish its individual income statement
and related notes. The profit for the year included a loss on
ordinary activities after tax of $575,000 (2015: $3,468,000) in
respect of the Company. The Company had no other items of
comprehensive income in the year.
The functional currency of the Company is sterling. The Group
presents its financial information in United States dollars, which
is the dominant currency of the trading entities.
The financial information is presented in United States dollars
unless otherwise indicated. All amounts have been rounded to the
nearest thousand, unless otherwise indicated.
3. Measurement convention
The consolidated financial statements are prepared on the
historical cost basis except that certain assets and liabilities
are stated at their fair value. These include loans and
receivables.
4. Accounting policies
Both the parent company financial statements and the group
financial statements have been prepared and approved by the
directors in accordance with International Financial Reporting
Standards as adopted by the EU ("Adopted IFRSs").
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 financial statements.
The principal accounting policies applied by the Group and
Company in the preparation of these consolidated financial
statements for the years ended 30 September 2015 and 30 September
2016 are set out below. These policies have been consistently
applied to all periods presented.
Changes to accounting policies since the last period
The following standards, interpretations and amendments, issued
by the International Accounting Standards Board (IASB) or the
International Financial Reporting Interpretations Committee
(IFRIC), are both relevant and effective for the first time in the
current financial year and have been adopted by the Group with no
significant impact on its consolidated results or financial
position for the current reporting period:
-- Annual improvements to IFRSs (2010-2012 Cycle) - Minor
amendments to various accounting standards, effective for periods
beginning on or after 1 January 2014 onwards.
-- Annual improvements to IFRSs (2011-2013 Cycle) - Minor
amendments to various accounting standards, effective for periods
beginning on or after 1 January 2015 onwards.
-- IFRS 10 'Consolidated Financial Statements'.
-- IFRS 12 'Disclosure of Interests in Other Entities'.
-- Amendments to IFRS 10, IFRS 11 and IFRS 12 'Consolidated
Financial Statements, Joint Arrangements and Disclosure of
Interests in Other Entities: Transition Guidance'.
Management are assessing the following standards, which are not
a full list of those coming into effect, for the impact on the
Group:
-- IFRS 9 'Financial Instruments' (effective date for accounting
periods from 1 January 2018). This standard has not yet been
endorsed for use in the EU.
-- IFRS 15 'Revenue from contracts with Customers' (effective
date for accounting periods from 1 January 2017). This standard has
not yet been endorsed for use in the EU.
-- IFRS 16 'Leases'. This standard has not yet been endorsed by the EU.
-- Amendments to IAS 1: 'Disclosure Initiative' (effective date
for accounting periods from 1 January 2016). This amendment has not
yet been endorsed for use in the EU.
-- Annual improvements to IFRSs (2012-2014 Cycle) - Minor
amendments to various accounting standards, effective for periods
beginning on or after 1 January 2016 onwards. This amendment has
not yet been endorsed for use in the EU.
-- Annual improvements to IFRSs (2013-2015 Cycle) - Minor
amendments to various accounting standards, effective for periods
beginning on or after 1 January 2017 onwards.
-- Annual improvements to IFRSs (2014-2016 Cycle) - Minor
amendments to various accounting standards, effective for periods
beginning on or after 1 January 2017 onwards.
-- Amendments to IAS 16 and IAS 38: 'Clarification of Acceptable
Methods of Depreciation and Amortisation' (effective date for
accounting periods from 1 January 2016). This amendment has not yet
been endorsed for use in the EU.
The other standards not yet in effect are not expected to have a
material impact on the Group or Company.
Basis of consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
In assessing control, the Group takes into consideration potential
voting rights that are currently exercisable. The acquisition date
is the date on which control is transferred to the acquirer. The
financial statements of subsidiaries are included in the
consolidated financial statements from the date that control
commences until the date that control ceases.
The consolidated financial statements include the results of the
Company and all its subsidiary undertakings made up to the same
accounting date.
Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income
and expenses arising from intra-group transactions, are eliminated.
Unrealised gains arising from transactions with equity-accounted
investees are eliminated against the investment to the extent of
the Group's interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the
extent that there is no evidence of impairment.
Separate parent company financial statements
In the parent company financial statements, all investments in
subsidiaries are carried at cost less impairment.
Merger reserve
On 11 May 2015 the Company became the new holding company for
the Group. This was put into effect through a share-for-share
exchange of 56,615,788 ordinary shares of GBP0.01 in the Company
for the whole of the issued capital of eight St Lucia domiciled
companies. These companies own all of the share capital in ten
trading subsidiaries. The accounting treatment for this type of
transaction, where the new and the acquired companies remain under
common control is scoped out of IFRS 3.
Accordingly, as required under IAS 8 'Accounting Policies,
Changes in Accounting Estimates and Errors' the Group has applied
the principles within IFRS 3 'Business Combinations' to assist its
judgement in identifying a suitable accounting policy. The
introduction of the new holding company has been accounted for as a
capital reorganisation using the merger accounting principles
prescribed within IFRS 3 'Business Combinations'. Therefore the
consolidated financial statements of the Group are presented as if
the acquired entities have always been part of the Group.
The use of merger accounting principles has resulted in a
balance on Group and Company capital and reserves which has been
classified as a merger reserve and included in the Group's
shareholders' funds.
The Company has recognised the value of its investment in the
acquired St Lucian companies at a value based upon the initial
share placing price on admission to AIM of GBP1 per share. As
permitted by section 612 of the Companies Act 2006 the amount
attributable to share premium has been transferred to the merger
reserve.
Revenue Recognition
Revenue for the Group is measured at the fair value of the
consideration received or receivable. The Group recognises revenue
for services provided when the amount of revenue can be reliably
measured and it is probable that future economic benefits will flow
to the entity.
Revenue arising from the provision of hotel accommodation,
restaurant and bar services and activities is recognised when the
service is provided and the products are delivered to the
customer.
All deposits for accommodation and similar income which are
received in advance of the related performance are classified as
deferred revenue and shown as a liability until completion of the
performance.
Finance income and expense
Finance income is recognised in profit and loss on an accruals
basis. Finance cost is recognised as it accrues in profit or loss,
using the effective interest method.
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.
Retirement Benefits: Defined contribution schemes
Contributions to defined contribution schemes are charged to the
Consolidated Statement of Comprehensive Income in the year to which
they relate.
Share based payment transactions
Employees (and Directors) receive remuneration in the form of
equity-settled share-based payments, whereby employees render
services in exchange for shares or for rights over shares. The fair
value of the employee services received in exchange for the grant
of options or shares is recognised as an expense. The total amount
to be expensed on a straight line basis over the vesting period is
determined by reference to the fair value of the options or shares
determined at the grant date, excluding the impact of any
non-market based vesting conditions (for example, continuation of
employment and performance targets).
The share options are valued using the Black-Scholes option
pricing model. Non-market based vesting conditions are included in
assumptions about the number of options that are expected to become
exercisable or the number of shares that the employee will
ultimately receive. This estimate is revised at each Balance Sheet
date to allow for forecast leaving employees and the difference is
charged or credited to the Statement of Profit and Loss and Other
Comprehensive Income, with a corresponding adjustment to
reserves.
Foreign currency transactions and balances
The individual financial statements of each Group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the
consolidated financial statements, the results and financial
position of each Group company are expressed in US dollars, which
is the functional currency of the subsidiary companies, and the
presentation currency for the consolidated financial
statements.
In preparing the financial statements of the individual
companies, transactions in currencies other than the entity's
functional currency (foreign currencies) are recognised at the
rates of exchange prevailing on the dates of the transactions. At
each balance sheet date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing at that date. Non-monetary items carried at fair value
that are denominated in foreign currencies are translated at the
rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in
a foreign currency are not retranslated.
For the purpose of presenting consolidated financial statements,
the assets and liabilities of the Group's foreign operations are
translated at exchange rates prevailing on the balance sheet date.
Income and expense items are translated at the average exchange
rates for the period, unless exchange rates fluctuate significantly
during that period, in which case the exchange rates at the date of
transactions are used. Exchange differences arising, if any, are
recognised in other comprehensive income and accumulated in
equity.
Exchange differences are recognised in profit or loss in the
period in which they arise except for exchange differences on
monetary items receivable from or payable to a foreign operation
for which settlement is neither planned nor likely to occur
(therefore forming part of the net investment in the foreign
operation), which are recognised initially in other comprehensive
income and reclassified from equity to profit or loss on disposal
or partial disposal of the net investment.
On the disposal of a foreign operation (i.e. a disposal of the
Group's entire interest in a foreign operation), or a disposal
involving loss of control over a subsidiary that includes a foreign
operation, all of the accumulated exchange differences in respect
of that operation attributable to the Group are reclassified to
profit or loss.
The Group contracted foreign exchange forward contracts to
secure the required funding, in US dollars, from the proceeds of
the placing which were denominated in sterling. The Group also
enters into forward US dollar/sterling forward exchange contracts
to secure the amount of approved and declared dividends. No other
forward contracts or similar contracts are conducted.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs. 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 1 October 2005 being the
effective date of the Elegant Hotels subsidiary companies'
conversion of IFRS.
Depreciation on assets under construction does not commence
until they are complete and available for use. These assets
represent 'fit-outs'. Land is not depreciated.
Depreciation is provided on all other items of property, plant
and equipment so as to write off their carrying value over the
expected useful economic lives. It is provided at the following
annual rates:
Buildings - on a straight-line basis
on cost less residual value
over 50 years or the remaining
life of the building if lower.
Furniture, fixtures - 15% on a straight-line basis.
and fittings
Motor vehicles - 15% on a straight-line basis.
Inventories
Inventories are valued at the lower of cost and net realisable
value on a first in, first out basis. The cost is determined using
a weighted average basis. Net realisable value is the estimated
selling price in the normal course of business less the estimated
costs necessary to make the sale.
Loans and receivables
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
arise principally through the provision of services to customers
(e.g. trade receivables), but also incorporate other types of
contractual monetary asset.
They are initially recognised at fair value plus transaction
costs that are directly attributable to their acquisition or issue,
and are subsequently carried at amortised cost using the effective
interest rate method, less provision for impairment. 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.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
receivable.
The Company advances loans to its subsidiary undertakings which
are accounted for as part of its net investment in those
operations. These loans are repayable on demand and are stated at
amortised cost less provision for impairment.
Financial assets
The Group classifies non-derivative financial assets into the
following categories: cash and cash equivalents, short-term
investment deposits to secure local electricity supplies, 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.
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.
Impairment of 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.
Financial liabilities
All financial liabilities are recognised initially at fair value
and subsequently at amortised cost.
Leased assets
Where substantially all of the risks and rewards incidental to
ownership are not transferred to the Group (an 'operating lease'),
the total rentals payable under the lease are charged to the
Consolidated Statement of Profit and Loss and Other Comprehensive
Income on a straight line basis over the lease term. The aggregate
benefit of lease incentives is recognised as a reduction of the
rental expense over the lease term.
Finance leases, which transfer to the Group substantially all
the risks and benefits incidental to ownership of the leased item,
are capitalised at the inception of the lease at the fair value of
the leased property or, if lower, at the present value of the
minimum lease payments. Lease payments are apportioned between the
finance charges and reduction of the lease liability so as to
achieve a constant rate of interest on the remaining balance of the
liability. Finance charges are reflected in profit or loss.
Borrowing costs
All borrowing costs are recognised in profit or loss in the
period in which they are incurred.
Share capital
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Group's ordinary shares are classified as
equity instruments.
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.
All revenue and operating profit is derived from the main
activity of the Group. Each hotel is considered to be a separate
operating segment of the Group based on the information provided to
the CODM (considered to be the Board of Directors). These segments
are aggregated for the purposes of disclosure as the aggregation
criteria of International Financial Reporting Standard 8 are
considered to be met.
Dividend distribution
Dividend distribution to the shareholders is recognised as a
liability in the Group's financial statements in the period in
which the dividends are appropriately authorised and approved for
payment and are no longer at the discretion of the Company. Unpaid
dividends that do not meet these criteria are disclosed in the
notes to the financial statements.
Taxation
Income tax on the profit or loss for the period comprises
current and deferred tax. Income tax is recognised in the statement
of profit or loss except to the extent that it relates to items
recognised directly into equity, in which case it is recognised
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 utilised) or liability resulting from temporary
difference is accounted for at the expected corporation tax
rate.
Current tax for the year is the expected tax payable on the
taxable income for the year, 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 recognised 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 realisation 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 recognised 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 utilised. 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 realised.
Deferred tax assets and liabilities are offset only if certain
criteria are met.
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.
5. Accounting estimates and judgements
The preparation of consolidated 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. Judgements made by the Directors,
in the application of these accounting policies that have
significant effect on the financial statements and estimates with a
significant risk of material adjustment in the next year are:
Property, plant and equipment - The assessment of the useful
economic lives requires judgement in order that depreciation can be
charged over the life selected. This also includes the assessment
of residual values that will be attributed to the hotel properties.
Judgement is also required in determining whether the carrying
values of the assets have any indication of impairment.
Taxation - Management judgement is required to determine the
amount of deferred tax assets that can be recognised based on the
likely timing and level of future taxable profits. Where entities
are loss making and are expected to continue to be loss making into
the future it is judged that deferred tax assets should not be
recognised in respect of these losses as it is not known when the
losses will be able to be utilised in these entities.
The Group provides for anticipated risks, based on reasonable
estimates, for tax risks in the respective countries in which it
operates. The amount of such provisions are based on various
factors, such as experience with previous tax audits and differing
interpretations of tax regulations by the taxable entity and the
responsible authority. Uncertainties exist with respect to the
interpretation of complex tax regulations, changes in tax laws and
the amount and timing of future taxable income. Differences could
arise between the actual results and the assumptions made or future
changes to these assumptions which could necessitate future
adjustment to tax income or expense already recorded.
Allowances for bad debts and inventory obsolescence - Valuation
allowances are made with reference to the ageing of receivable and
inventory balances and the view of management as to whether amounts
are recoverable.
Share based payments - Estimating the fair value for share-based
payment tranactions requires determination of the most appropriate
valuation model, which is dependent on the terms and conditions of
the grant. The estimate also requires determination of the expected
life of the share option, volatility and dividend yield and making
assumptions about them. These estimates are reassessed at the end
of each reporting period. The assumptions and model used for
estimated fair value for share-based payment transactions is
disclosed in note 27.
6. Financial instruments - risk management
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies. The overall
objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group's
competitiveness and flexibility. The Group has not issued or used
any other financial instruments of a speculative nature. The Group
contracts forward currency contracts to secure the value of
approved dividends payable to its shareholders. No other new
forward currency contracts are undertaken.
The Group is exposed to the following financial risks:
-- Credit risk
-- Liquidity risk
-- Market interest rate risk
To the extent financial instruments are not carried at fair
value in the Consolidated Statement of Financial Position, book
value approximates to fair value at 30 September 2016 and 30
September 2015.
Trade and other receivables are measured at amortised cost. Book
values and expected cash flows are reviewed by the Board and any
impairment charged to the Consolidated Statement of Comprehensive
Income in the relevant period.
Cash and cash equivalents are held in various currencies
including US dollars, Barbados dollars and sterling .
Trade and other payables are measured at book value and
amortised cost.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group is mainly exposed to credit
risk from credit sales. At 30 September 2016 the Group has trade
receivables of $2,396,000 (2015: $2,217,000).
The Group is exposed to credit risk in respect of these balances
such that, if one or more of the customers' encounter financial
difficulties, this could adversely affect the Group's financial
results. The Group attempts to mitigate credit risk by assessing
the credit rating of new customers prior to entering into contracts
and by entering into contracts with customers with agreed credit
terms. Provision is made against any receivable considered to be
impaired.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital. It is the risk that the Group will encounter difficulty in
meeting its financial obligations as they fall due. The Group's
policy is to ensure that it will always have sufficient cash to
allow it to meet its liabilities when they become due. To achieve
this aim, it seeks to maintain cash balances to meet its expected
cash requirements as determined by regular cash flow forecasts
prepared by management.
Market interest rate risk
Market interest rate risk arises from the Group's borrowings
which are denominated in US dollars.
None of the Group's financial assets and liabilities are subject
to fixed rates of interest. The most significant element of the
financial liabilities relates to the Group's long-term loan which
is subject to interest at LIBOR plus 2.75 basis points and is
therefore entirely variable.
The Group is also exposed to market interest rate risk in
respect of its cash balances held pending investment in the growth
of the Group's operations. The effect of interest rate changes in
the Group's interest-bearing assets and liabilities and the
re-pricing of its interest-bearing liabilities are set out in note
34.
Capital Management
The Group's capital is made up of share capital, share premium,
merger reserve, translation reserve and retained earnings totalling
$112,959,000 (30 September 2015: $105,841,000).
The Group's objectives when maintaining capital are:
-- To safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
-- To provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The capital structure of the Group consists of shareholders
equity as set out in the Consolidated Statement of Changes in
Equity. All funding required to expand the Group's business,
including the acquisition and development of new hotels and for
working capital purposes are financed from existing cash resources
where possible. Management will also consider future fund-raising
or bank finance where appropriate.
7. Acquisition of Swiss International Ltd (owner of Waves Hotel & Spa)
On 3 March 2016 the Group purchased Waves Hotel & Spa via
the acquisition of 100% of the shares of Swiss International Ltd
for $5.4m. This was satisfied in cash and a loan from the vendor of
$2.0m. The loan is payable in four equal instalments which
commenced on 3 September 2016 and will be settled within the next
three years.
The acquisition is in line with the Group's stated strategy to
expand both on Barbados and further into the Caribbean. In the
period immediately following the date of acquisition up to 18 April
2016 the operation of the hotel and spa was licensed back to the
former owner to fulfil existing customer reservations. The property
closed for renovation and reopened in August 2016. Waves therefore
contributed a small operating loss for the period.
Effect of acquisition
The acquisition had the following effect on the Group's assets
and liabilities.
Acquiree's Fair value Carrying
book values adjustments amounts
$000 $000 $000
Acquiree's net assets at
the acquisition date
Property, plant and equipment 28,524 (6,609) 21,915
Trade and other receivables 63 - 63
Short-term investments 27 27
Cash and cash equivalents - - -
Interest-bearing loans
and borrowings (12,226) - (12,226)
Trade and other payables (360) - (360)
Net identifiable assets
and liabilities 16,028 (6,609) 9,419
Consideration paid
Cash paid 3,424
Vendor loan 2,000
Total consideration 5,424
Bargain purchase gain 3,995
Acquisition related costs
The Group incurred acquisition related costs of $0.9m comprising
legal, professional and due diligence fees, stamp duty and
renovation/refurbishment project management fees. These costs have
been included in administrative expenses in the Group's Statement
of Comprehensive Income.
Acquired receivables
The fair value of acquired receivables was $0.1m. The gross
contractual amounts receivable are $0.1m and, at the acquisition
date, all of the contractual cash flows were expected to be
received.
8. Revenue
2016 2015
$000 $000
Accommodation 42,843 44,995
Food and beverage 13,416 14,299
Other services 722 781
------ ------
56,981 60,075
------ ------
Virgin Holidays represented 12% of the Group's total revenue
(2015: 12%). No other customer represented more than 10% of the
Group's total revenue.
9. Profit before taxation
Included in profit are the following: 2016 2015
$000 $000
Depreciation 3,230 3,044
Repairs and maintenance 2,280 2,298
Operating lease expense 65 66
Employee costs before share based
payments (note 10) 15,924 15,395
Bargain purchase gain (3,995) -
Fees payable to the Company's auditor 459 1,788
Exceptional costs (note 12)
IPO and listing expenses - 5,546
Share based payments related to
the IPO (note 27) 235 494
Acquisition and other one-off costs 1,953 4,133
Auditor's remuneration
Audit of these financial statements 98 86
Amounts receivable by the Company's
auditor and its associates for:
Audit of financial statements of
subsidiaries of the Company 194 155
Taxation compliance services to subsidiaries
of the Company 20 17
Other assurance services to the Company 12 22
Other assurance services to subsidiaries
of the Company - 146
Other taxation advisory services 39 405
Corporate finance services 96 957
459 1,788
------- ------
10. Staff numbers and costs
The average number calculated on a full time equivalent basis,
of persons employed by the Group (including Directors) during the
year, analysed by category, was as follows:
Number of employees 2016 2015
Number Number
Directors 3 2
Administration 24 22
Sales and marketing 13 13
Hotels and restaurant 748 681
------ ------
788 718
------ ------
The aggregate payroll costs of employees were as follows:
2016 2015
$000 $000
Wages and salaries 13,909 13,358
Social security costs 1,901 1,847
Contributions to defined
contribution plans 114 190
------ ------
Total before share based
payments 15,924 15,395
Share based payment expenses
(see note 27) 415 494
------ ------
16,339 15,889
------ ------
11. Directors' remuneration
2016 2015
$000 $000
The remuneration of the Directors
comprises:
Salaries, fees and other short-term
employee benefits 815 510
Compensation payments for loss
of office - 67
---- ----
Total salaries and other short-term
employment benefits 815 577
Share based payments charge 154 183
---- ----
969 760
---- ----
The aggregate remuneration (including amounts receivable under
long-term incentive schemes) of the highest paid Director during
the year was $437,000 (2015: $409,000).
None of the Directors received a payment in lieu of pension
contribution (2015: none).
12. Exceptional items
2016 2015
$000 $000
IPO and listing expenses - 5,546
Share based payments charge relating
to awards issued on IPO 235 494
Acquisition and other one-off costs 1,953 4,133
------- -------
2,188 10,173
------- -------
Expenses incurred in respect of the acquisition of Waves, the
Company's placing and AIM listing transaction and other one-off
costs including re-financing costs and one-off professional
fees.
13. Finance income
2016 2015
$000 $000
Interest receivable in relation
to security deposits 22 27
----- -----
14. Finance expense
2016 2015
$000 $000
Interest on loans 1,826 3,103
Foreign exchange loss on forward
contracts 375 -
------ ------
2,201 3,103
------ ------
15. Taxation
Recognised in the Income Statement 2016 2015
$000 $000
Current tax expense
Current year 1,807 676
Adjustments for prior years (85) 111
----- ----
Total current tax expense 1,722 787
----- ----
Deferred tax expense
Origination and reversal of temporary
differences 282 188
Recognition of previously unrecognised
tax losses - -
----- ----
Total deferred tax expense 282 188
----- ----
Tax expense in the Income Statement 2,004 975
----- ----
Reconciliation of effective tax rate 2016 2015
$000 $000
Profit for the year 15,784 5,865
------ ------
Tax using the Barbados corporation
tax rate of 25% (2015: 25%) 3,946 1,466
Effect of tax rates in foreign jurisdictions 122 2
Qualifying capital expenditure (407) (592)
Non-deductible expenses (18) 17
Marketing development allowance (753) (899)
Tax on bargain purchase gain not
recognised (999) -
Tax losses not recognised 198 870
Under provided in prior years (85) 111
------ ------
Total tax expense 2,004 975
------ ------
16. Earnings per share
30 September 30 September
2016 2015
$000 $000
Profit used in calculating basic
and diluted earnings per share 13,780 4,890
Bargain purchase gain (3,995) -
Exceptional costs 2,188 10,173
Non-exceptional share-based payment
charges 180 -
Tax on one-off items (488) (2,039)
------------- -------------
Profit used in calculating adjusted
basic and diluted earnings per
share 11,665 13,024
------------- -------------
Number of shares Number Number
Weighted average number of shares
* for the purpose of basic earnings per share 88,815,789 67,819,625
------------- -------------
* for the purpose of diluted earnings per share 89,037,710 68,005,065
------------- -------------
Adjusted number of shares
* for the purpose of adjusted basic earnings per share 88,815,789 88,815,789
------------- -------------
* for the purpose of adjusted diluted earnings per
share 89,037,710 89,001,230
------------- -------------
Earnings per share
Basic earnings per share (cents
per share) 15.5 7.2
------------- -------------
Diluted earnings per share (cents
per share) 15.5 7.2
------------- -------------
Adjusted earnings per share (cents
per share) 13.1 14.7
------------- -------------
Adjusted diluted earnings per share
(cents per share) 13.1 14.6
------------- -------------
Basic earnings per share amounts are calculated by dividing
profit for the year and total comprehensive income attributable to
equity holders of the parent company by the weighted average number
of ordinary shares outstanding during the year.
The Company has 4,037,084 potentially issuable shares (2015:
2,657,895) all of which relate to share options issued to Directors
and key management personnel of the Company. The dilutive number of
issuable shares is 221,921 (2015: 185,441) for the purposes of
calculating the dilutive earnings per share.
Diluted earnings per share amounts are calculated by dividing
profit for the year and total comprehensive income attributable to
equity holders of the parent Company by the weighted average number
of ordinary shares outstanding during the year together with the
dilutive number of ordinary shares.
Adjusted basic earnings per share have been calculated in order
to compare earnings per share year on year and to aid future
comparisons. The weighted average number of shares in issue in 2015
has been restated on a pro-forma basis to reflect the post-IPO
share capital structure. The adjustment assumes that the total
shares issued were in issue throughout all of 2015. In addition,
earnings have been adjusted to exclude IPO and listing expenses,
share based payments and other one-off costs (and any associated
impact on the taxation charge).
Adjusted diluted earnings per share is calculated by applying
the same adjustments to earnings as described in relation to
adjusted earnings per share divided by the weighted average number
of ordinary shares outstanding during the year adjusted by the
effect of the outstanding share options.
17. Property, plant and equipment - Group
Land Fixtures Under
and Motor & construct-
buildings Vehicle Fittings ion Total
$000 $000 $000 $000 $000
Cost
Balance at 1 October
2014 138,811 27 34,946 130 173,914
Additions 987 - 2,296 176 3,460
Disposals - - (66) - (66)
---------- -------- --------- ----------- ---------
Balance at 30 September
2015 139,798 27 37,177 306 177,308
---------- -------- --------- ----------- ---------
Balance at 1 October
2015 139,798 27 37,177 306 177,308
Additions 4,622 - 4,598 170 9,390
Additions from business
combinations 21,915 - - - 21,915
Transfers 19 - 262 (281) -
Disposals (27) - (808) - (835)
---------- -------- --------- ----------- ---------
Balance at 30 September
2016 166,326 27 41,229 195 207,778
---------- -------- --------- ----------- ---------
Depreciation and
impairment
Balance at 1 October
2014 4,563 - 24,463 - 29,026
Depreciation charge
for the year 557 4 2,483 - 3,044
Disposals - - (66) - (66)
---------- -------- --------- ----------- ---------
Balance at 30 September
2015 5,120 4 26,880 - 32,004
---------- -------- --------- ----------- ---------
Balance at 1 October
2015 5,120 4 26,880 - 32,004
Depreciation charge
for the year 565 4 2,661 - 3,230
Disposals (7) - (238) - (244)
---------- -------- --------- ----------- ---------
Balance at 30 September
2016 5,678 8 29,303 - 34,990
---------- -------- --------- ----------- ---------
Net book value
At 1 October 2014 134,248 27 10,483 130 144,888
---------- -------- --------- ----------- ---------
At 30 September 2015 134,678 22 10,298 306 145,304
---------- -------- --------- ----------- ---------
At 30 September 2016 160,648 19 11,926 195 172,788
---------- -------- --------- ----------- ---------
No interest has been capitalised into property, plant and
equipment. No items of property, plant and equipment are held under
finance leases. The Group's principal properties are used as
security for bank loans (see note 24).
The subsidiary companies transitioned to IFRS in 2005. On
transition the properties were revalued by independent valuers. The
overall increase in value was taken to the revaluation surplus.
Subsequent additions have been shown at cost. The fair value of the
Group's property, plant and equipment is considered to be greater
than the book value recorded in these financial statements on the
basis of the property valuation carried out by CBRE at the time of
the IPO. The valuation was performed as at 15 April 2015 and
indicated a value of $235.5 million.
All of the Group's non-current assets are located in
Barbados.
18. Investments in subsidiaries
The Group and Company have the following investments in
subsidiaries:
2016 2015
Principal
place
of business
/ Country Class
Company name of incorporation of shares % shareholding % shareholding
Elegant Finance (St Lucia)
Limited St Lucia Ordinary 100% 100%
Elegant Services (St Lucia)
Limited St Lucia Ordinary 100% 100%
Colony SL1 Limited St Lucia Ordinary 100% 100%
The House SL1 Limited St Lucia Ordinary 100% 100%
Crystal SL1 Limited St Lucia Ordinary 100% 100%
Tamcove SL1 Limited St Lucia Ordinary 100% 100%
Turtle SL1 Limited St Lucia Ordinary 100% 100%
Daphne's Restaurant (St
Lucia) Limited St Lucia Ordinary 100% 100%
Waves SL1 Limited St Lucia Ordinary 100% 0%
BW SL1 Limited St Lucia Ordinary 100% 0%
International Tourism
Management Services Limited* Barbados Ordinary 100% 100%
International Tourism United
Management Services LLC* States Ordinary 100% 100%
Colony Club (Barbados)
Limited* Barbados Ordinary 100% 100%
Windward Investments Limited* Barbados Ordinary 100% 100%
Crystal Cove Hotel Limited* Barbados Ordinary 100% 100%
Tamarind Cove Hotel Co.
Limited* Barbados Ordinary 100% 100%
Turtle Beach Resort Limited* Barbados Ordinary 100% 100%
Daphne's Restaurant Limited* Barbados Ordinary 100% 100%
Paynes Bay Investments
Limited* Barbados Ordinary 100% 100%
Waves Hotel Limited* Barbados Ordinary 100% 0%
Elegant Hotels (Barbados)
Management Ltd* Barbados Ordinary 100% 100%
*Wholly owned held indirectly through subsidiary
undertakings
All investments in subsidiaries have been consolidated in these
financial statements. Included within investments are intercompany
loans to the subsidiaries which are considered by management to be
as permanent as equity and have been treated as such.
During the year, investments held by the Company decreased by
$9.0 million as a result of movements in intercompany loans
classified as investments.
19. Deferred tax assets and liabilities - Group
Recognised deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the
following:
Assets Liabilities
2016 2015 2016 2015
$000 $000 $000 $000
Property, plant and
equipment 1,803 1,720 (871) (708)
Tax value of loss carry-forwards 841 254 - -
Qualifying capital expenditure 2,791 3,580 - -
Tax assets / (liabilities) 5,435 5,554 (871) (708)
====== =====
Net of tax (liabilities) (871) (708)
Net deferred tax assets 4,564 4,846
===== =====
The recoverability of the deferred tax asset is dependent on
future taxable profits in excess of those arising from the reversal
of deferred tax liabilities. The deferred tax asset has been
recognised to the extent that it is considered to be recoverable
based on forecasts for future periods. At 30 September 2016, the
value of the unrecognised deferred tax asset is $892,000 (2015:
$694,000). Deferred tax assets and deferred tax liabilities are
presented net in the statement of financial position as the Group
has the legal right to settle current tax amounts on a net basis
and the deferred tax amounts are levied by the same taxing
authority on the same group of entities that intend to realise the
asset and settle the liability at the same time.
Movement in deferred 1 October Recognised Recognised 30 September
tax during the year 2015 in income in equity 2016
$000 $000 $000 $000
Property, plant and
equipment 1,012 (81) - 931
Tax value of loss carry-forwards
utilised 254 588 - 842
Qualifying capital expenditure 3,580 (789) - 2,791
4,846 (282) - 4,564
--------- ---------- ---------- ------------
20. Inventories
Group Group Company Company
2016 2015 2016 2015
$000 $000 $000 $000
Food and beverage 524 681 - -
Linen, china, glass,
cutlery and utensils 2,200 1,932 - -
Stationery 226 181 - -
2,950 2,794 - -
----- ----- ------- -------
There is no significant difference between the fair value of
inventories and the values stated above
21. Trade and other receivables
Group Group Company Company
2016 2015 2016 2015
$000 $000 $000 $000
Trade receivables 2,396 2,217 - -
Prepayments and accrued
income 774 981 - -
----- ----- ------- -------
3,170 3,198 - -
----- ----- ------- -------
There were no receivables that were past due or considered to be
impaired. There is no significant difference between the fair value
of the other receivables and the values stated above.
All amounts shown under trade and other receivables are due to
be received within one year.
22. Short-term investments
Group Group
2016 2015
$000 $000
Utility supply security deposits 515 466
----- -----
Deposits are lodged with the providers of utility services in
Barbados to secure supplies. There is no significant difference
between the fair value of the short-term investments and the values
stated above.
23. Cash and cash equivalents
Group Group
2016 2015
$000 $000
Cash and cash equivalents 3,704 5,599
----- -----
Cash and cash equivalents comprise cash, cash at bank and bank
deposits with a maturity of up to 90 days.
24. Bank loans, other interest-bearing loans and borrowings
This note provides information about the contractual terms of
the Group and Company's interest-bearing loans and borrowings,
which are measured at amortised cost. For more information about
the Group and Company's exposure to interest rate and foreign
currency risk, see note 34.
Group Group Company Company
2016 2015 2016 2015
$000 $000 $000 $000
Non-current liabilities
Secured bank loans 59,531 44,075 - -
Waves vendor loan 1,000 - - -
------ ------ ------- -------
60,531 44,075
Current liabilities
Secured bank loans 3,969 925 - -
Waves vendor loan 1,000 - - -
Property mortgage - 1,414 - -
------ ------ ------- -------
4,969 2,339
------ ------ ------- -------
Total 65,550 46,414
Terms and debt repayment schedule
Nominal Year
interest of Face Carrying Face Carrying
Currency rate maturity value amount value amount
2016 2016 2015 2015
$000 $000 $000 $000
LIBOR
The Bank of +275
Nova Scotia US$ bps 2020 63,500 63,500 45,000 45,000
Ludo Marcelo US$ 0% 2018 2,000 2,000 - -
Henry Stanley
Rawle Moe Bds$ 5% 2016 - - 1,414 1,414
------- -------- ------ --------
65,500 65,500 46,414 46,414
------- -------- ------ --------
Face value Carrying Face Carrying
amount value amount
2016 2016 2015 2015
$000 $000 $000 $000
Current portion of loans and borrowings 4,969 4,969 2,339 2,339
Long-term portion of loans and borrowings 60,531 60,531 44,075 44,075
----------- --------- ------- ---------
65,500 65,500 46,414 46,414
----------- --------- ------- ---------
The Bank of Nova Scotia
On 26 May 2015, certain subsidiaries of the Group entered into a
Credit Agreement with the Bank of Nova Scotia to provide a Term
Loan Commitment of up to $50 million at LIBOR plus 275 basis
points. This was increased for the acquisition of Waves to $63.5m
and is fully drawn; a Revolving Loan Commitment of $5 million at
LIBOR plus 275 basis points; and an Uncommitted Operating Overdraft
of $10 million at Base Rate less 200 basis points. Neither the
Revolving Loan nor the Operating Overdraft has been drawn.
The Company is party as a guarantor to cross-guarantees in
respect of the indebtedness of the subsidiary undertakings to the
Bank of Nova Scotia. At 30 September 2016 the total indebtedness of
subsidiary undertakings under these cross-guarantees amounted to
$63.5 million (2015: $45.0 million).
As part of the acquisition of the Waves Hotel & Spa
property, the Group agreed a loan with the vendor in the amount of
$2,000,000. This loan is to be settled by four instalments of
$500,000 each. Two instalments are due in the 2017 financial year
and the remainder in February 2018 and February 2019.
Henry Stanley Rawle Moe
On 3 March 2014, Daphne's Restaurant Limited (the "Mortgagor")
signed an agreement with Henry Stanley Rawle Moe (the "Lender") to
finance the purchase of a parcel of land of approximately 12,000
square feet situated at Paynes Bay, St, James, Barbados.
The Mortgagor agreed to pay the balance of Bds$5,600,000
(US$2,828,000) by two equal annual payments together with interest
of 5% per annum. Final payment of principal and interest was made
on 3 March 2016.
25. Trade and other payables
Group Group Company Company
2016 2015 2016 2015
$000 $000 $000 $000
Current
Trade payables 2,176 2,589 - -
Social security and
other taxes 187 306 - -
Accrued expenses 2,566 1,671 935 340
Deferred income 2,625 2,351 - -
----- ----- ------- -------
7,554 6,917 935 340
----- ----- ------- -------
All trade and other payables are due for repayment within 12
months. There is no significant difference between the fair value
of the trade and other payables and the values stated above.
Trade payable days at 30 September 2016 were 42 days (2015: 36
days).
26. Employee benefits
The Group operates a number of defined contribution pension
plans. The total expense relating to these plans in the current
year was $114,000 (2015: $190,000).
27. Share based payments
Awards are made under long-term incentive and other
arrangements. Certain employees of the Group have been eligible for
options over ordinary shares in the Company, awarded under the
Share Option Scheme. The Company has no employees.
Options granted under the Scheme have a fixed exercise price
base of 1p per option. The contractual life of the options is five
years. Options cannot normally be exercised until the full vesting
conditions have been met. These options are classified as
equity-settled.
Options were valued using the Black-Scholes option pricing
model. The assumptions used in the calculation of share based
payments are as follows:
-- The nature of all arrangements is the grant of share options
and these have an expected option life at grant date of five
years
-- Expected dividend (dividend yield) in all cases is 7%
-- All option exercises are expected to be equity-settled
-- The expected volatility in all cases is 40% based upon
historical share price volatility of listed, comparable businesses
over a period of time equal to expected option life ending on date
of grant
-- The risk free rate applied to the options is 5.5% and is
based upon the yield on zero-coupon Barbados government bonds of a
term consistent with the expected option life
-- It has been assumed that the employee attrition rate will
remain at 6.3% throughout the period
Period to Period to
The inputs into the Black-Scholes 30 September 30 September
model are as follows: 2016 2015
Weighted average share price 89.3p 100p
Weighted average exercise price 1p 1p
Expected volatility 40% 40%
Expected life 5 years 5 years
Risk free rate (weighted average) 5.5% 5.5%
Expected dividends 7% 7%
Options over ordinary shares outstanding as at 30 September
2016
Fair
value
Share Exercise per
Price Number price Risk-free Option Expected
Grant Date (p) of Options (p) Rate (p) forfeiture
8 May 2015 100.0 2,483,553 0.01 5.5% 70.0 10%
18 March
2016 106.5 894,421 0.01 5.5% 75.2 10%
18 July 2016 66.0 659,110 0.01 5.5% 45.7 10%
The weighted average exercise price for options outstanding at
the period end was 1 pence.
A reconciliation of movements in all options outstanding during
the period ended 30 September 2016 and an analysis of outstanding
options is set out below.
There were 4,037,084 options outstanding as at 30 September
2016. As at 30 September 2016, options totalling 2,483,553 had a
weighted average remaining contractual life of 3 years and 7
months, options totalling 894,421 had a weighted average remaining
contractual life of 4 years and 6 months, and options totalling
659,110 had a remaining contractual life of four years and 10
months.
The options vest after 30 September 2017 and 2018 subject to the
market and non-market condition tests. The market condition tests
are based the total shareholder return over the performance period
which is from 1 October 2014 to 30 September 2017. The non-market
conditions are based on the Company's earnings per share return
over the same performance period. Once these criteria have been met
the options remain exercisable subject to the vesting provisions.
If performance conditions are not met then some or potentially all
of the awards will lapse.
Based on the calculations described in this note, a charge of
$415,000 has been included in the Statement of Comprehensive Income
(2015: $494,000). Of this amount, $200,000 related to the awards
issued on IPO (2015: $494,000).
28. Share capital
Company Ordinary shares
2016 Number 2015 Number
Issued of shares Issued of shares
Number of shares $000 $000
88,815,789 ordinary Ordinary shares of GBP0.01 each
As at 1 October 1,367 88,815,789 - 1
Issue of shares in the year - - 905 56,615,788
Issue of shares under capital raising - - 496 32,200,000
Exchange differences - - (34) -
As at 30 September 1,367 88,815,789 1,367 88,815,789
----------------------- ---------- ------ ----------
The Company had one ordinary share of GBP0.01 and 50,000
redeemable shares of GBP1 each on incorporation. All of the
redeemable shares were repaid during the financial year ended 30
September 2015.
In the 2015 financial year the Company issued 56,615,788
ordinary shares pursuant to a share-for-share exchange to acquire
the whole of the equity interests of the Elegant Hotels investment
and trading companies. The Company also issued 32,200,000 ordinary
shares for cash under a placing agreement for the purposes of
reducing the borrowings of the Group and to pay for costs
associated with the IPO and the listing of the Company on AIM.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
Dividends
During the year the Company declared an interim dividend of 3.5
pence per ordinary share (2015: 1.75 pence per ordinary share)
which was paid. After the balance sheet date, a final dividend of
3.5 pence per ordinary share (2015: 1.75 pence) was proposed by the
Directors. The final dividend has not been provided for.
29. Obligations under operating leases
Group Group
Non-cancellable operating lease
rentals are payable as follows: 2016 2015
$000 $000
Less than one year 80 65
Between one and two years 83 80
Between three to five years 43 126
----- -----
206 272
----- -----
All lease payments relate to a rented property in the United
States. No other lease obligation is considered significant. The
Company has no operating lease commitments.
30. Commitments
There were no outstanding capital commitments at 30 September
2016 (30 September 2015: $nil).
31. Contingencies
The Company is a party as a guarantor to cross-guarantees in
respect of the indebtedness of subsidiary undertakings. At 30
September 2016 the total indebtedness of subsidiary undertakings
under these cross-guarantees amounted to $63.5 million.
There are no other material contingent liabilities attributable
to the Group or Company.
32. Post-balance sheet events
The Group announced on 14 October 2016 that it had reached an
agreement, in principle, to bring a 122-room luxury hotel in
Antigua into the Elegant Hotels Group portfolio under a management
contract. On 8 November 2016, the Group announced that the
Management Contract had been signed with owner JSN Development
Group Ltd. The Antigua hotel is currently under construction and is
expected to open its doors in mid to late 2017.
33. Related parties
Group
Immediately prior to the listing of the Company on AIM the
Group's then controlling shareholder Vision Elegant Holdings LP had
an outstanding loan to the Group of $10,000,000. This loan was
settled by the issue of one share in Crystal SL1 Limited, Tamcove
SL1 Limited and Turtle SL1 Limited on 11 May 2015. No interest was
charged on the loan.
Transactions with key management personnel
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.
Directors of the Company and their immediate relatives control
5.3% of the voting shares of the Company. The remuneration of the
Directors is disclosed in the Remuneration Report in the Annual
Report.
The compensation of key management personnel excluding the
Directors is as follows:
Group Company
2016 2015 2016 2015
$000 $000 $000 $000
Key management remuneration
including social security
costs 667 717 - -
Share based payments 186 196 - -
----- ---- ------- ----
853 913 - -
----- ---- ------- ----
Transactions between the Company and its subsidiary
undertakings
The Company has provided funding from the proceeds of the IPO
that has enabled subsidiary undertakings to significantly reduce
their external borrowing commitments. A total amount of $42.0
million was transferred from the Company to Elegant Finance (St
Lucia) Limited on 26 May 2015. The majority of the funds were used
to repay a portion of the outstanding debt of the Barbados hotel
companies and the balance was used to fulfil the Group's
commitments for the payment of costs associated with the IPO. The
transfer of $42.0 million has been recorded as an inter-company
balance and converted into an investment in equity in the
subsidiaries.
In consideration for the services that the Company provides in
the management of the Group and in arranging the financing of the
subsidiaries, the Company has entered into management service
agreements.
34. Financial Instruments
34. (a) Fair values of financial instruments
Fair values
The table below analyses financial instruments, into a fair
value hierarchy based on the valuation technique used to determine
fair value.
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e., as prices) or indirectly (i.e., derived from
prices)
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable input)
The fair values of all financial assets and financial
liabilities by class together with their carrying amounts shown in
the statement of financial position are as follows:
Carrying Fair Level Level Level Carrying Fair Level Level Level
Group amount value 1 2 3 amount value 1 2 3
2016 2016 2016 2016 2016 2015 2015 2015 2015 2015
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Loans and
receivables
Cash and cash
equivalents
(note 23) 3,704 3,704 - - 3,704 5,599 5,599 - - 5,599
Receivables
(note 21) 2,396 2,396 - - 2,396 3,198 3,198 - - 3,198
Short-term
investments
(note 22) 515 515 - - 515 466 466 - - 466
Total loans and
receivables 6,615 6,615 - - 6,615 9,263 9,263 - - 9,263
--------- --------- ------ ------ --------- --------- --------- ------ ------ ---------
Total financial
assets 6,615 6,615 - - 6,615 9,263 9,263 - - 9,263
========= ========= ====== ====== ========= ========= ========= ====== ====== =========
Financial
liabilities
measured at
amortised
cost
Bank loans
(note 24) (63,500) (63,500) - - (63,500) (45,000) (45,000) - - (45,000)
Other
interest-bearing
loans and
borrowings
(note 24) - - - - - (1,414) (1,414) - - (1,414)
Trade and other
payables
(note 25) (7,554) (7,554) - - (7,554) (6,917) (6,917) - - (6,917)
Waves vendor loan
(note 24) (2,000) (2,000) - - (2,000) - - - - -
Total financial
liabilities
measured at
amortised
cost (73,054) (73,054) - - (73,054) (53,331) (53,331) - - (53,331)
--------- --------- ------ ------ --------- --------- --------- ------ ------ ---------
Total financial
liabilities (73,054) (73,054) - - (73,054) (53,331) (53,331) - - (53,331)
========= ========= ====== ====== ========= ========= ========= ====== ====== =========
Total financial
instruments (66,439) (66,439) - - (66,439) (44,068) (44,068) - - (44,068)
========= ========= ====== ====== ========= ========= ========= ====== ====== =========
The Company had trade and other payables with a carrying value
of $935,000 (2015: 340,000) which would be classified as level
three in the fair value hierarchy.
34. (b) Credit risk
Financial risk management
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations, and arises principally from the
Group's receivables from customers and investment securities.
Group
The Group's principal assets subject to credit risk are cash
deposits, cash and trade receivables. The credit risk associated
with cash is limited. The principal credit risk arises from
non-recovery of trade receivables. In order to manage credit risk
credit limits are set for customers based on volume of business and
payment history. New accounts are usually on a prepaid basis.
Credit limits are reviewed by the credit controller on a regular
basis in conjunction with debt ageing and collection history.
Company
The Company has no significant assets that are exposed to credit
risk.
Exposure to credit risk
The maximum exposure to credit risk at the balance sheet date by
class of financial instrument was:
Group Company
2016 2015 2016 2015
$000 $000 $000 $000
Cash and cash equivalents 3,704 5,599 - -
Receivables 3,170 3,198 - -
Security deposits 515 466 - -
----- ---------------- -------------- --------------
Total financial assets 7,389 9,263 - -
----- ---------------- -------------- --------------
The concentration of credit risk for trade receivables at the
balance sheet date by geographic region was:
Group Company
2016 2015 2016 2015
$000 $000 $000 $000
Geographic region
Barbados 242 253 - -
United Kingdom 1,735 1,359 - -
United States and
Canada 311 505 - -
Other 104 100 - -
----- ------------------ -------------- --------------
Trade receivables 2,396 2,217 - -
Prepayments and accrued
income 774 981 - -
----- ------------------ -------------- --------------
3,170 3,198 - -
----- ------------------ -------------- --------------
The concentration of credit risk for trade receivables at the
balance sheet date by type of counterparty was:
Group Company
2016 2015 2016 2015
$000 $000 $000 $000
Tour operators 2,118 1,775 - -
Credit card companies 221 153 - -
Other 57 289 - -
----- ----- ------- ----
Total trade receivables 2,396 2,217 - -
===== ===== ======= ====
Credit quality of financial assets and impairment losses
Management has instituted standard repayment periods for credit
sales and monitors each receivable balance on a weekly basis with
regard to credit sales granted and payments received.
The ageing of trade receivables at the balance sheet date
was:
Gross Impairment Gross Impairment
Group 2016 2016 2015 2015
$000 $000 $000 $000
Not past due 2,121 - 1,965 -
Past due (0-30 days) 259 - 162 -
Past due (31-120
days) 16 - 42 -
More than 120 days - - 72 (24)
------ ---------- ----- ----------
2,396 - 2,241 (24)
========== ==========
- (24)
------ -----
2,396 2,217
====== =====
The Company had no trade receivables at the balance sheet date
(2015: $nil).
Trade receivables are non-interest bearing.
With respect to trade receivables that are neither impaired nor
past due, there are no indications as of the reporting date that
the debtors will not meet their payment obligations.
The movement in the allowance for impairment in respect of trade
receivables during the year was as follows:
Group Company
2016 2015 2016 2015
$000 $000 $000 $000
Balance at 1 October 24 39 - -
Impairment loss recognised - - - -
Impairment loss reversed (24) (15) - -
----- ---- ------- ----
Balance at 30 September - 24 - -
===== ==== ======= ====
34. (c) Liquidity risk
Financial risk management
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due.
Group
Liquidity risk arises from the Group's management of working
capital, finance charges and principal repayment on its debt
instruments. The Group and the Company seek to manage financial
risk by ensuring sufficient liquidity is available to meet
foreseeable needs and to invest cash safely and profitably. The
Group monitors its cash resources through short, medium and
long-term cash forecasting, against available facilities.
Management monitors the liquidity risk by considering the maturity
of both financial assets and projected cash flows from operations.
Short-term flexibility is available through additional overdraft
and capital expenditure facilities as set out in note 24.
Liquidity risk - Group
The following are the contractual maturities of financial
liabilities, including estimated interest payments and excluding
the effect of netting agreements:
2016 2015
Group Contract-ual More Contract-ual More
Carrying cash 1 year 1 to 2 to than Carrying cash 1 year 1 to 2 to than
amount flows or less 2 years 5 years 5 years amount flows or less 2 years 5 years 5 years
$000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000 $000
Non-derivative
financial
liabilities
Trade and other
payables (note
25) 7,554 7,554 7,554 - - - 4,566 4,566 4,566 - - -
Long-term loans
(note 24) 65,520 72,170 7,014 7,671 57,485 - 46,414 73,395 3,704 5,534 64,157 -
Related party
loan
(note 24) - - - - - - - - - - - -
The contractual cash maturities of the $935,000 ($2015:
$340,000) of trade and other payables in relation to the Company
are within one year.
34. (d) Market risk
Financial risk management
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices will
affect the Group's income or the value of its holdings of financial
instruments.
Group and Company
The functional currency of the Company is sterling but the
dominant currency of the trading operations is the US dollar. The
Group's financial results are reported in US dollars.
The majority of the Group's business is conducted in US dollars
and Barbados dollars. The exchange rate of the Barbados dollar is
fixed to the US dollar at a rate of Bds$1.98 = US$1.00. Revenue is
earned in US dollars from contracts with tour operators who
effectively take the risk of any fluctuation against the currency
paid by the end consumer. The longer-term risk to the Group of a
deterioration in the rate of exchange in origin countries is that
the rates for hotel accommodation may be perceived as becoming more
expensive.
The majority of the Group's expenditure, including operating
costs as well as capital expenditure, occurs in US dollars or in
Barbados dollars.
The Group's exposure to foreign currency risk is limited to the
carrying amount for monetary financial instruments that are
denominated in currencies other than US dollars and Barbados
dollars and to transactions that are payable in sterling, including
dividends to shareholders of the Company.
Market risk - Interest rate risk
Profile
At the balance sheet date the interest rate profile of the
Group's interest-bearing financial instruments was:
Group Company
2016 2015 2016 2015
$000 $000 $000 $000
Fixed rate instruments
Financial assets - - - -
Financial liabilities - - - -
-------- -------- ---- ----
- - - -
======== ======== ==== ====
Variable rate instruments
Financial assets 515 466 - -
Financial liabilities (63,500) (46,414) - -
-------- -------- ---- ----
(62,985) (45,948) - -
======== ======== ==== ====
None of the Group's financial assets and liabilities are subject
to fixed rates of interest. The most significant element of the
financial liabilities relates to the Group's long-term loan which
is subject to interest at LIBOR plus 2.75 basis points and is
therefore entirely variable. The Group's management review the
forecast LIBOR rates on a regular basis and lock-in the future rate
for a specific period depending on the assessment of trends and
forecasts.
Sensitivity analysis
An increase of 100 basis points in interest rates would decrease
profit or loss by US$629,850 on an annual basis. This analysis
assumes that all other variables, in particular foreign currency
rates, remain constant
34. (e) Capital management
Group
The Group manages its capital to ensure that the Group will be
able to continue as a going concern while maximising the return to
shareholders through optimising the debt and equity balance. The
capital structure of the Group consists of cash and cash
equivalents and equity attributable to equity holders of the
Company comprising issued capital, reserves and retained earnings
as disclosed in the Consolidated Statement of Changes in Equity. In
order to maintain or adjust the capital structure, the Group may
adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets to reduce debt.
The Group's capital is not restricted. Management may seek
additional external borrowings to fund the future investment and
growth of the Group.
The Group has a progressive dividend policy which aims to
increase the value of ordinary dividends over time, taking into
account the results of the past year and the outlook.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFIFUMFWSEFF
(END) Dow Jones Newswires
January 17, 2017 02:00 ET (07:00 GMT)
Elegant Hotels (LSE:EHG)
Historical Stock Chart
From Apr 2024 to May 2024
Elegant Hotels (LSE:EHG)
Historical Stock Chart
From May 2023 to May 2024