TIDMEHG
RNS Number : 0752N
Elegant Hotels Group PLC
15 January 2019
15 January 2019
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014. Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
Elegant Hotels Group plc
Results for the Year Ended 30 September 2018
A year of good financial and operational progress
Elegant Hotels Group plc ("Elegant Hotels" or the "Company" or
the "Group"), the owner and operator of seven upscale freehold
hotels and a beachfront restaurant on the island of Barbados, today
announces its audited results for the year ended 30 September
2018.
Financial Highlights
-- Revenue up 5.0% to $62.9m (2017: $59.9 million), reflecting
the acquisition of Treasure Beach, the renovation of the House, and
a continued strong performance from Waves
-- RevPAR (revenue per available room) broadly flat at $225 (2017: $227)
-- ADR (average daily rates) up 2.0% to $361 (2017: $354)
-- Adjusted EBITDA* up 10.6% to $19.7 million (2017: $17.8 million)
-- Profit after tax up 3.5% to $9.5 million (2017: $9.2 million)
-- Adjusted diluted EPS up 15.9% to 11.3 cents per share (2017: 9.8 cents per share)
-- Implied Net Asset Value (NAV) of 200 cents per share (153 pence per share )
-- Year-end net debt of $72.2 million (2017: $73.1 million)
-- Proposed final dividend of 2.66 pence per share, resulting in
a full year dividend of 4.0 pence per share
Operational Highlights
-- Opened Treasure Beach hotel, a 35-suite property, in December
2017, in line with the Group's expansion strategy, having
refurbished, repositioned and repriced the property
-- Hodges Bay Resort in Antigua, operated by Elegant Hotels
under management contract, opened subsequent to year end, in
December 2018. This is the Group's first managed property outside
Barbados
-- Refurbishment projects during the year have included: the
public area renovations and new spa at The House; the addition of a
rum vault to Colony Club; and renovations of some rooms and
bathrooms at Turtle Beach and Crystal Cove, respectively
-- Established a centralised warehouse in order to increase
operational efficiencies and take advantage of direct importation
of food and beverage
* The Group uses adjusted EBITDA as a measure of performance as
it better represents underlying performance. Adjusted EBITDA is
earnings before interest, tax, depreciation, amortisation and
one-off costs that are outside the ordinary course of business.
Adjusted profit and adjusted EPS reflect the adjusted EBITDA
figure. Comparative figures have been re-presented to include
non-exceptional share-based payments in line with best
practice.
based on an exchange rate of GBP1 : $1.30
Please note that due to rounding, numbers presented throughout
this document may not add up precisely to the totals provided.
Percentage changes are calculated on unrounded figures.
Commenting on the results, Sunil Chatrani, CEO of Elegant
Hotels, said:
"We are pleased to have had a year of good financial and
operational progress. The revenue increase reflects our strategy of
delivering day-to-day excellence, developing our existing
properties, and expanding our portfolio. The acquisition,
refurbishment and subsequent relaunch of Treasure Beach in Barbados
was a notable highlight, and since the year end Hodges Bay Resort
& Spa in Antigua has opened under management contract.
Barbados continues to be a hugely attractive destination for
visitors and holidaymakers from all over the world, and visitor
numbers from the key markets of the UK and the US have continued to
increase. While the market remains competitive, we firmly believe
that we are well positioned due to the quality of our properties,
our relentless focus on providing our guests with outstanding
service, and the viability of our strategy. Our trading since the
start of the new financial year has remained in line with market
expectations, and our bookings are currently tracking ahead of the
same period last year. While we are confident in our prospects for
FY19, the Board continues to monitor macroeconomic conditions
closely, which have the potential to reduce UK consumer
discretionary spend."
Analyst conference call
A presentation and conference call for analysts and
institutional investors with the Company's management team will
take place at 9.00am (GMT) today, the details of which are as
follows:
Standard International Access +44 (0) 20 3003 2666
Barbados Toll Free 1 877 562 2218
Password Elegant
For further information
Elegant Hotels Group plc
Sunil Chatrani, Chief Executive Officer
Jeff Singleton, Chief Financial Officer +1 246 432 6500
Liberum Capital Limited (NOMAD and Joint
Broker)
Clayton Bush / Chris Clarke / William Hall +44 (0) 203 100 2222
Zeus Capital Limited (Joint Broker)
John Goold / Dominic King +44 (0) 203 829 5000
Powerscourt
Rob Greening / Lisa Kavanagh / Isabelle
Saber
Email: eleganthotels@powerscourt-group.com +44 (0) 207 250 1446
NOTES TO EDITORS:
Elegant Hotels owns and operates seven luxury freehold hotels
and a beachfront restaurant, Daphne's, on the island of Barbados.
The Group's portfolio currently comprises 588 rooms, making it
twice as large (by room number) as the closest competitor in the
Barbados luxury hotel room market. Six of the seven 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 23 acres and an
aggregate beachfront of 2,600 feet.
In the year ended 30 September 2018, the Group achieved revenue
of $63 million and EBITDA before non-recurring items of $20
million.
Together, the Group's seven existing hotels - Colony Club,
Treasure Beach, Tamarind, The House, Crystal Cove, Waves Hotel
& Spa and Turtle Beach - offer styles encompassing classic and
contemporary, family-friendly and adults-only. The Group also has a
management contract for Hodges Bay Resort in Antigua and a sales
and marketing contract for The Landings Resort & Spa in St.
Lucia.
The Group's strategy is to leverage its position as a leading
hotel operator in Barbados and to expand both on Barbados as well
as further into the Caribbean.
Investor website: http://www.eleganthotelsgroup.com
Consumer website: http://www.eleganthotels.com
BUSINESS REVIEW
Market overview
Barbados arrivals and competition
Recent data from the Barbados Tourism Marketing Inc shows that
between January and October 2018, Barbados recorded over 540,000
visitors staying on the island, an increase of 3% on the prior
period (2017: 6%). US visitors represented the strongest area of
growth in this period with an increase in visitors of 9% (2017:
14%), accounting for circa 30% of all visitors to Barbados, while
the 32% of visitors arriving from the UK grew by around 1% (2017:
1%). However, those UK visitors continued to spend more due to
their longer average length of stay.
The increase in US arrivals was partly due to increased airlift
(with additional flights from both Miami, Florida and Charlotte,
North Carolina) providing even greater connectivity between
Barbados and this strategically important market. In the UK,
following the success of its additional direct daily flight from
Heathrow over the 2017/18 peak season, Virgin has resumed this
service for the 2018/19 peak season. In addition, a new air route
from Panama commenced in July 2018.
The Sterling/USD exchange rate continues to affect the Group.
Our rates are priced in USD while the majority of customers are
from the UK (around 76% on a room night basis). The increased cost
of a holiday to Barbados for our UK guests inevitably affects
demand and also impacts the rates that the Group is able to
achieve.
However, as outlined at our H1 2018 results in May, Barbados
continues to be an attractive destination for UK travellers, and
overall market conditions are stabilising. Its reputation as a safe
country that is rarely affected by hurricanes allows it to be a
year-round destination, as reflected by the solid H2 (low season)
revenue performance for the Group.
Barbados' attractiveness does mean that we face competition on
the island, especially in the all-inclusive segment, with new hotel
openings continuing throughout 2018. This effect is partially
mitigated by reduced room stock due to ongoing renovations as well
as a slightly more difficult environment for new entrants due to
the government changes outlined below. We continue to see a trend
toward value accommodation, but the impact of this is being
mitigated by increased airlift and visitor numbers to the
island.
In response to this growing competition, we continue to enhance
and differentiate our properties and services. In addition, the
increase in airlift and general profile for Barbados that results
from the new competitive offerings represents an opportunity for
the Group.
Change in Barbados Government
On taking office in June 2018, the recently elected Barbados
Labour Party reviewed the financial position of Barbados and
determined that it was in a weaker position than previously
believed. In order to improve the state of the country's finances,
foreign reserves and debt position, the government prepared a
'mini-budget' which sought to raise US$0.6bn over three years.
Measures announced in the budget include an increase in taxes
and levies which began to affect the Elegant Hotels Group from 1
July 2018. However, the Group has, with the help of its partners in
the travel industry, passed the majority of these additional costs
through to customers. Given the size of the new taxes and levies
compared with the total cost of a holiday to Barbados, we believe
the changes are at a level that the market will be able to absorb.
We did not see a material impact of these changes on the results
for the year to 30 September 2018 and , while we continue to
monitor the situation closely, we do not currently believe that the
outlook for the Group in 2019 and beyond will be materially
affected.
As part of the measures, the Government also currently plans to
increase VAT for the tourism industry from 7.5% to 15% from 1
January 2020. This increase is expected to be offset by the
reduction in other levies currently in place such as the room night
levy (a charge on each night of accommodation) and the Direct
Tourism Services levy (a 2.5% charge on all tourism services save
rooms). The Group continues to work with the Government to ensure
any changes in taxes and levies are appropriate for the
industry.
In the longer term, the Company is supportive of the
Government's plans to invest both in the tourism industry and the
infrastructure of the island.
Review of performance against strategy
Day-to-day operational excellence
Revenue - pricing and occupancy
Revenue for 2017/18 was $62.9 million, up 5% on the prior year
(2017: $59.9 million). The increase was primarily driven by the
addition of our recent acquisition of Treasure Beach from December
2017, our renovation of The House, and a continued strong
performance from Waves.
Occupancy fell in the period by 1.6 percentage points to 62.3%
from 63.9%. However, excluding Treasure Beach, which was opened in
December 2017 and missed the peak tourist season, the Group's
occupancy would have been largely consistent with the prior
year.
ADR improved $7 or 2% in the period from $354 to $361. This was
largely driven by The House, following its refurbishment, and
Waves, as it continues to gain popularity. There is currently a
trend towards our all-inclusive properties as guests, especially
those from the UK, look to lock-in the cost of their holiday.
As in the prior year, the Group reviewed the pricing strategy
for some of its properties in response to the weakening of
Sterling. Rates were discounted on a targeted and tactical basis in
certain cases in order to maximise occupancy based on the
season.
Targeted promotions were used to boost occupancy during slower
periods. Over the high demand periods, our specialist US-based
revenue team continues to be disciplined and cautious with
discounting, leveraging both the Group's excellent relationships
with tour operators as well as its scale and its substantial share
of available luxury rooms in Barbados.
Daphne's, our beachfront restaurant, had a mixed year in
2017/18. While performance was improved on the prior year when it
was closed for a portion of the peak season due to renovations, the
restaurant is underperforming due to increased competition. We are
looking at new initiatives to improve its performance in
2018/19.
Target market and go-to-market strategy
We continue to focus on maintaining our strong relationships
with tour operators, but are also increasing the direct business
that we are attracting through our direct booking website.
Reflecting this, the percentage of revenue from tour operators
decreased from 80% to 78%. We are equally focussed on increasing
our market penetration in North America, and have recently
appointed a marketing agency in the US to help drive customers from
this strategically important region. The percentage of customers
from North America, based on room nights, increased to 20% from 18%
in 2016/17.
In the longer term, we are looking to attract more of the
millennial segment which includes families and "double income no
kids", and for whom repeat visits are less common. These customers
have been shown to value experiences and sustainability. Our
property refurbishments therefore focus on appealing to this
segment as well as our more established guest-type.
Product and service
In order to ensure all of our guests enjoy their stay at our
hotels, we attach great importance to the training and development
of staff. The Group has rigorous programmes in place which are key
to improving its guest satisfaction scores, which in turn will
encourage a high level of repeat business. During 2017/18, we
delivered over 25,000 hours of training to our staff, compared to
18,000 hours in 2016/17. Our focus on training also creates
confidence in our brand with travel agents and tour operators.
Cost control
Cost control continues to be a key focus for the Group. The
increase and subsequent repeal of the National Social
Responsibility Levy (or NSRL, a tax on most goods which was
increased to 10% in the prior year and repealed in July 2018) has
disrupted the costs of many goods. The majority of suppliers
increased prices in excess of the NRSL increase, but these prices
have yet to fall by the same level following the removal of the
NSRL.
In response to the NSRL increase, we streamlined and centralised
our functions in order to achieve economies of scale. We also
commenced direct importation of goods in the financial year and
established a centralised warehouse in order to deliver savings on
a large proportion of food and beverage items. This programme has
been a success and we are looking to increase its use in the
2018/19 financial year. As stated previously, the programme is
expected to save $0.5m annually.
Existing portfolio enhancement
We have continued with our strategy of enhancing our portfolio
by refurbishing, repositioning and repricing our hotels. These
steps interplay to find the best combination of physical structure
(refurbish), guest experience (reposition) and yield management
(reprice). In addition to our regular capex spend of 3-4% of each
hotel's revenue, we spent approximately $2m on special
projects.
We started the year by completing the public area renovations
and new spa at The House. These renovations enabled The House to
deliver a 6% increase in EBITDA in the year. Additionally, we added
a rum vault to Colony Club towards the end of the financial year.
The rum vault is the first of its kind on the island of Barbados,
featuring a collection of 150 rums from all over the world. It
offers unique experiences such as rum pairings (with a dedicated
rum sommelier) and multi-course dining options along with
rum-themed mixology and cooking classes. In addition, we carried
out renovations of some rooms and bathrooms at Turtle Beach and
Crystal Cove, respectively.
Several properties have not been refurbished for a number of
years. Historically, the Group has been able to significantly
enhance profitability of properties as a result of refurbishment
programmes. We are currently reviewing our refurbishment plans to
focus capital expenditure on the areas providing the most
compelling return on investment.
Expansion
We are delighted with the renovation of Treasure Beach which
opened in December 2017. The 35 all-suite hotel is located next to
Tamarind Hotel on the west coast and now gives the Group almost 300
meters of continuous beachfront on the prestigious 'Platinum
Coast'.
In Treasure Beach, we saw an underperforming hotel that could be
refurbished, repositioned and repriced in line with our enhancement
strategy. Prior to opening, we conducted a full renovation of the
property to create a modern hotel that is focussed on art and food.
Unfortunately, Treasure Beach opened later than originally
anticipated due in part to extreme weather events in Miami that
delayed imports of materials. This meant that it missed the peak
tourist season and has therefore contributed less in 2017/18 than
was previously anticipated. However, we expect the property to
perform well as it becomes more established.
Hodges Bay Resort & Spa, which we operate under management
contract, opened in December 2018. This hotel is one of the best
properties on the island of Antigua. As the Group's first full
management contract, and its first operation outside Barbados, we
intend to use this as a template for further expansion in the
region. Our sales and marketing contract in St. Lucia continues to
perform well.
There continue to be a number of compelling expansion
opportunities in the Caribbean. However, the Board took the
decision to strengthen our balance sheet during 2017/18 before
expanding further. While further expansion in the Caribbean is key
to the Group's strategy, the Group was mindful of the impact that
macro-economic issues - such as the recent change in the Barbados
Government and Brexit in the UK - could have on the Group. It is
likely that this approach will continue into the current financial
year.
Dividend
Elegant Hotels set out its dividend policy in the prior year.
The Board is recommending a 2.66p final dividend in line with that
policy. This, combined with the 1.33p interim dividend we paid in
July, gives a full year dividend of 4.00p per share. The final
dividend is subject to the approval of the Company's shareholders
and will be paid on 8 March 2019 to shareholders who are on the
register on 8 February 2019.
Board
During the year, David Adams stepped down from his role as
Non-Executive Director and Chair of the Remuneration Committee. The
Board is currently undertaking a search for an additional
Independent Non-Executive Director with due regard to ensuring any
new appointment contributes to the Board's skills, capabilities,
experience and diversity.
As announced separately today, Jeff Singleton, Chief Financial
Officer, has informed the Board of his intention to leave the
Company. Jeff will remain with the Company for a period of time to
ensure a smooth transition with his successor. As a result, Elegant
Hotels has initiated a search for a new CFO and an appointment will
be made in due course.
Outlook
Our trading since the start of the new financial year has
remained in line with market expectations, and our bookings are
currently tracking ahead of the same period last year. As a result,
the Group remains confident in its prospects for FY19. However, the
Board continues to monitor macroeconomic conditions closely, which
have the potential to reduce UK consumer discretionary spend.
FINANCIAL REVIEW
Overview
Our financial performance in 2017/18 has remained solid as the
market stabilised in H1 2018 and we delivered on the strong
pipeline of bookings in the second half. There has been less
pressure on our rates compared to the prior year, and we are
starting to see the positive impacts of a number of our cost
control and streamlining activities that we put in place over the
last 18 months. However, the uncertainty around Brexit in the UK,
our key market, continues to affect UK demand for luxury travel as
well as the value of Sterling.
In the finance function, we continue to focus on supporting
operations, managing risk and controlling costs, while enabling the
Group's strategic goals of expansion and development.
Gross profit
Gross profit for the year increased by $1.8m to $37.3m (2017:
$35.5m) reflecting the increase in revenue, while gross margin
remained steady compared to the prior year at 59.3% (2017:
59.3%).
Gross margin had dropped by 0.8 percentage points year-on-year
in H1 2018, partially due to the introduction of the National
Social Responsibility Levy (NSRL) in Barbados. However, the
commencement of direct importation through the Group's centralised
warehouse in March 2018 and the repeal of the NSRL in July 2018
contributed to a 0.6 percentage point year-on-year recovery in H2
2018 gross margin. The direct importation programme, as stated
previously, is expected to save $0.5m annually.
Selling, general and administrative expenses
Selling, general and administrative expenses before exceptional
items increased slightly to $23.5m (2017: $22.9m), reflecting the
addition of Treasure Beach, increased utility costs and increased
depreciation offset by corporate and sales and marketing cost
reductions.
Selling, general and administrative expenses before exceptional
items decreased as a percentage of revenue year-on-year to 37% in
FY 2018 from 38% in FY 2017. This partially reflected the impact of
cost control measures and continued streamlining of functions
within the Group.
Depreciation and amortisation increased from $4.1m to $4.6m
primarily due to the opening of Treasure Beach in December 2017 and
recent renovation projects.
Exceptional costs and bargain purchase gain
Exceptional costs were $0.8m in FY 2018 compared to $1.1m in the
prior year. These costs largely arose in H1 2018 and reflected
pre-opening costs for Treasure Beach and restructuring costs. In
addition, the prior year included a credit of $0.6m from the
reversal of share-based payment expense related to the share
options issued on IPO which did not vest.
In the prior year, the Group also recognised a bargain purchase
gain of $1.3m related to the acquisition of Treasure Beach (refer
to note 4 for further details).
The Group presents non-statutory measures of adjusted EBITDA,
adjusted profit before tax and adjusted EPS. These measures exclude
exceptional costs and bargain purchase gains. These items are
excluded as they do not reflect the underlying performance of the
Group. The tables below set out the calculation of these
measures.
From FY 2018 onwards, the Group no longer excludes
non-exceptional share-based payment charges from these measures in
line with best practice. The effect of this non-statutory
presentational change on adjusted EBITDA and adjusted EBITDA margin
is as follows:
FY 2018 FY 2017
Adj. EBITDA Adj. EBITDA Adj. EBITDA Adj. EBITDA
margin margin
------------ ------------ ------------ ------------
As originally presented 19.5 31.0% 18.1 30.2%
------------ ------------ ------------ ------------
Revised presentation 19.7 31.3% 17.8 29.7%
------------ ------------ ------------ ------------
Reconciliation of adjusted profit before tax and adjusted
earnings per share
Reported Adjustments Adjusted Reported Adjustments* Adjusted*
2018 2018 2018 2017 2017 2017
$m $m $m $m $m $m
Gross profit 37.3 - 37.3 35.5 - 35.5
--------- ------------ --------- --------- ------------- ----------
Selling, general and
admin expenses (24.3) 0.8 (23.5) (22.7) (0.2) (22.9)
--------- ------------ --------- --------- ------------- ----------
Other operating income 1.2 - 1.2 1.0 - 1.0
--------- ------------ --------- --------- ------------- ----------
Operating profit 14.2 0.8 14.9 13.8 (0.2) 13.6
--------- ------------ --------- --------- ------------- ----------
Net finance expenses (3.6) - (3.6) (2.8) - (2.8)
--------- ------------ --------- --------- ------------- ----------
Profit before tax 10.6 0.8 11.4 11.0 (0.2) 10.8
--------- ------------ --------- --------- ------------- ----------
Taxation (1.1) (0.2) (1.3) (1.8) (0.3) (2.1)
--------- ------------ --------- --------- ------------- ----------
Profit after tax 9.5 0.6 10.1 9.2 (0.5) 8.7
--------- ------------ --------- --------- ------------- ----------
Weighted average number
of shares - basic
(m) 88.8 - 88.8 88.8 - 88.8
--------- ------------ --------- --------- ------------- ----------
Weighted average number
of shares - diluted
(m) 89.0 - 89.0 89.1 - 89.1
--------- ------------ --------- --------- ------------- ----------
Basic earnings per
share (cents) 10.7 0.6 11.4 10.3 (0.5) 9.8
--------- ------------ --------- --------- ------------- ----------
Diluted earnings per
share (cents) 10.7 0.6 11.3 10.3 (0.5) 9.8
--------- ------------ --------- --------- ------------- ----------
Reconciliation of adjusted EBITDA
Reported Adjustments Adjusted Reported Adjustments* Adjusted*
2018 2018 2018 2017 2017 2017
$m $m $m $m $m $m
Revenue 62.9 - 62.9 59.9 - 59.9
--------- ------------ --------- --------- ------------- ----------
Operating profit 14.2 0.8 14.9 13.8 (0.2) 13.6
--------- ------------ --------- --------- ------------- ----------
Depreciation and amortisation 4.6 - 4.6 4.1 - 4.1
--------- ------------ --------- --------- ------------- ----------
Impairment of short-term
investments - - - 0.0 - 0.0
--------- ------------ --------- --------- ------------- ----------
Loss on disposal of
assets 0.1 - 0.1 0.0 - 0.0
--------- ------------ --------- --------- ------------- ----------
EBITDA 18.9 0.8 19.7 18.0 (0.2) 17.8
--------- ------------ --------- --------- ------------- ----------
EBITDA margin 30.0% 31.3% 30.1% 29.7%
--------- ------------ --------- --------- ------------- ----------
Reconciliation of adjusted operating profit
2018 2017
$m $m
Operating profit 14.2 13.8
----- ------
Exceptional costs 0.8 1.1
----- ------
Bargain purchase gain - (1.3)
----- ------
Adjusted operating profit* 14.9 13.6
----- ------
* Comparative figures have been re-presented to include
non-exceptional share-based payment charges as set out above.
Other operating income
Other operating income of $1.2m (2017: $1.0m) principally
comprises gains on foreign exchange on converting US dollars into
Barbados dollars.
Reported and adjusted EBITDA
Reconciliations of reported and adjusted EBITDA are set out in
the table above. After adjusting for one-off items, adjusted EBITDA
was $19.7m (2017: $17.8m), 11% higher than the prior period.
Adjusted EBITDA margin was 1.6 percentage points higher than the
prior period at 31.3%.
As well as the 5% increase in gross profit and the improvements
to selling, general and admin expenses mentioned above, 2017/18
adjusted EBITDA benefited from the refurbishment of The House and
an improved performance from Daphne's which were both closed for
renovations during portions of 2016/17.
In addition, the change in presentation of non-exceptional
share-based payments contributed $0.5m and 0.8 percentage points of
this positive movement. This was due to a non-exceptional
share-based payment credit of $0.2m in the current year, compared
to a charge of $0.3m in the prior year.
Finance expenses
Interest on loans increased in the current year from $2.5m to
$3.5m. This was a result of interest due on $8.4m of additional
debt drawn down for the Treasure Beach acquisition in May 2017 as
well as movements in the US LIBOR rate from circa 125 basis points
at the start of the year to 230 basis points at the end. The Group
continues to explore opportunities to convert variable interest
rates to fixed rates in the future. Net finance expenses of $3.6m
(2017: $2.8m) includes non-operating foreign exchange losses of
$0.1m (2017: $0.3m loss).
Taxation
As a result of the change in Barbados Government, the Barbados
corporate tax rate was raised to 30% from 25%, applicable
retrospectively to the 2017/18 financial year. However, the
recognition of prior year losses and increased capital allowances
due to the construction of Treasure Beach contributed to an overall
$0.7m reduction in taxation to $1.1m (2017: $1.8m).
The effective tax rate on adjusted profit before tax was 11.4%
compared to 19.2% in the prior year, reflecting the above
impacts.
Post year end, the Barbados corporate tax rate was reduced to
rates of between 1% and 5.5%, applicable for the Group from 1
January 2019. No adjustments were made to the 2017/18 current tax
or deferred tax balances.
Profit after tax and earnings per share
Profit after tax increased to $9.5m in 2017/18 from $9.2m in the
prior year. This reflected increasing operating profit, with lower
tax expenses offsetting higher interest expenses.
Basic and diluted EPS was 10.7 cents per share compared to 10.3
cents per share in 2016/17.
Adjusted profit after tax increased to $10.1 million from $8.7m
in the prior year, while adjusted basic and diluted EPS increased
from 9.8 cents per share to 11.4 and 11.3 cents per share
respectively (re-presented to include non-exceptional share-based
payments).
Net debt and net asset values
Net debt reduced to $72.2m at 30 September 2018 (2017: $73.1m),
as set out in the table below. While the Group drew down $0.8m of
its revolving facility and increased its drawn down overdraft
facility by $6.2m, these movements were offset by total repayments
of $6.6m against bank and vendor loans.
At 30 September 2018, the Group's revolving facility was almost
fully drawn down and it had an additional undrawn overdraft
facility available of $3.4m.
Based on adjusted EBITDA for the last 12 months, the Group has
an adjusted EBITDA to net debt ratio of 3.7 times, reduced from 4.1
times at 30 September 2017. This internal KPI is used by the Board
to assess the Group's levels of debt. The Group continues to comply
with all covenants with comfortable headroom.
The Group's property portfolio was valued by CBRE at $249.5m as
at 1 January 2018. This was a decrease of $17.7m (6.6%) from the
previous valuations which totalled $267.2 million and were based on
valuations provided by CBRE in 2015 (at the time of the IPO) and
subsequent valuations by Terra Caribbean for Waves (2016) and
Treasure Beach (2017).
Based on net debt of $72.2m at 30 September 2018, this equates
to an implied net asset value (NAV) of approximately $177.3m (200
cents per share or 153 pence per share, based on an exchange rate
of GBP1 : $1.30).
Despite the reduced property portfolio valuation due to the
shift in the market affecting the cash flow valuation of the
properties, in the Directors' opinion and based on internal
impairment testing, asset values remain significantly in excess of
carrying values and no impairments are required.
Reconciliation of net debt and net asset value
2018 2017
$m $m
Term loan (due 2020) (62.4) (67.9)
------- -------
Revolving facility (5.0) (4.8)
------- -------
Waves vendor loan (0.5) (1.0)
------- -------
Total loans and borrowings (67.9) (73.7)
------- -------
Bank overdraft (6.6) (0.4)
------- -------
Cash and cash equivalents 2.4 1.0
------- -------
Net debt (72.2) (73.1)
------- -------
Property value 249.5 267.2
------- -------
Net asset value 177.3 194.1
------- -------
Cash flow
The Group's free cash flow (defined as cash flow from operations
less capital expenditure) increased to $7.8m for FY 2018 (2017:
$6.9m).
The increase reflects more normalised cash tax payments ($1.7m
compared to $2.5m) following the introduction of payments on
account for Barbados tax expenses in the prior year, partially
offset by a $0.6m increase in capital expenditure ($6.2m compared
to $5.6m) largely due to the completion of the Treasure Beach
renovations.
Working capital outflow increased to $2.7m from $1.8m, largely
reflecting a decrease in trade payables relating to the timing of
payments and increased VAT receivables, which offset increased cash
flows from operating activities.
Dividend payments were $4.2m lower than the prior year as a
result of the change in dividend policy, partially offsetting $2.2m
higher interest and net debt repayments and the impact of the $5.0m
revolver drawdown in the prior year.
Net cash outflow increased to $4.9m in 2017/18 from $3.1m,
leading to cash and cash equivalents, net of drawn overdraft,
decreasing from $0.6m to a net overdraft position of $4.3m at 30
September 2018.
While the Group's cash position has declined in the short term,
this has primarily been the result of financing the renovations and
pre-opening activities of Treasure Beach through operating cash
flows and the cash flows related to debt service. In the 2018/19
financial year, the Group expects to become cash flow positive and
commence a refinancing exercise with a view to reducing the
amortisation burden of the secured loans.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended Year ended
30 September 30 September
2018 2017
Note $'000 $'000
Revenue 5 62,870 59,872
------ -------------- --------------
Cost of sales (25,581) (24,378)
------ -------------- --------------
Gross profit 37,289 35,494
------ -------------- --------------
Selling, general and administrative expenses
------ -------------- --------------
Before exceptional items and bargain purchase
gain (23,537) (22,900)
------ -------------- --------------
Exceptional items 9 (761) (1,054)
------ -------------- --------------
Bargain purchase gain 4, 6 - 1,259
------ -------------- --------------
(24,298) (22,695)
------ -------------- --------------
Other operating income 1,175 986
------ -------------- --------------
Operating profit 14,166 13,785
------ -------------- --------------
Finance income 10 29 12
------ -------------- --------------
Finance expenses 10 (3,581) (2,810)
------ -------------- --------------
Finance expenses - net (3,552) (2,798)
------ -------------- --------------
Profit before taxation 6 10,614 10,987
------ -------------- --------------
Taxation 11 (1,103) (1,799)
------ -------------- --------------
Profit for the year and total comprehensive
income attributable to equity holders of
the parent company 9,511 9,188
------ -------------- --------------
Earnings per share
------ -------------- --------------
Basic earnings per share (cents) 12 10.7 10.3
------ -------------- --------------
Diluted earnings per share (cents) 12 10.7 10.3
------ -------------- --------------
Other comprehensive income
------ -------------- --------------
Items that may be subsequently reclassified
to profit or loss
------ -------------- --------------
Currency translation differences - (112)
------ -------------- --------------
Total comprehensive income for the year 9,511 9,076
------ -------------- --------------
Non-GAAP measures
------ -------------- --------------
EBITDA and Adjusted EBITDA
------ -------------- --------------
Operating profit 14,166 13,785
------ -------------- --------------
Loss on disposal of assets 125 49
------ -------------- --------------
Depreciation and amortisation 6 4,630 4,135
------ -------------- --------------
Impairment of short-term investments 18 - 34
------ -------------- --------------
EBITDA 18,921 18,003
------ -------------- --------------
Exceptional items 9 761 1,054
------ -------------- --------------
Bargain purchase gain 4, 6 - (1,259)
------ -------------- --------------
Adjusted EBITDA* 19,682 17,798
------ -------------- --------------
Adjusted EBITDA margin* 31.3% 29.7%
------ -------------- --------------
* Comparative adjusted EBITDA figures have been re-presented to
include non-exceptional share-based payment charges.
All amounts relate to continuing activities.
CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION
Group Group Company Company
2018 2017 2018 2017
Note $'000 $'000 $'000 $'000
Non-current assets
------ -------- -------- -------- ---------
Investments in subsidiary undertakings 30 - - 100,061 104,639
------ -------- -------- -------- ---------
Property, plant and equipment 13 184,666 183,714 - -
------ -------- -------- -------- ---------
Intangible assets 14 443 114 - -
------ -------- -------- -------- ---------
Deferred tax assets 15 5,350 4,938 - -
------ -------- -------- -------- ---------
190,459 188,766 100,061 104,639
------ -------- -------- -------- ---------
Current assets
------ -------- -------- -------- ---------
Inventories 16 3,133 3,062 - -
------ -------- -------- -------- ---------
Trade and other receivables 17 6,210 4,668 397 42
------ -------- -------- -------- ---------
Short-term investments 18 33 33 - -
------ -------- -------- -------- ---------
Cash and cash equivalents 19 2,357 996 184 -
------ -------- -------- -------- ---------
11,733 8,759 581 42
------ -------- -------- -------- ---------
Total assets 202,192 197,525 100,642 104,681
------ -------- -------- -------- ---------
Current liabilities
------ -------- -------- -------- ---------
Loans and borrowings 20 7,542 7,095 - -
------ -------- -------- -------- ---------
Bank overdraft 19 6,629 411 - -
------ -------- -------- -------- ---------
Trade and other payables 21 6,256 7,081 13 43
------ -------- -------- -------- ---------
Provisions 22 281 615 - -
------ -------- -------- -------- ---------
Tax payable 118 892 - -
------ -------- -------- -------- ---------
20,826 16,094 13 43
------ -------- -------- -------- ---------
Non-current liabilities
------ -------- -------- -------- ---------
Loans and borrowings 20 60,350 66,602 - -
------ -------- -------- -------- ---------
Deferred tax liabilities 15 5,646 5,047 - -
------ -------- -------- -------- ---------
Total liabilities 86,822 87,743 13 43
------ -------- -------- -------- ---------
Net assets 115,370 109,782 100,629 104,638
------ -------- -------- -------- ---------
Equity attributable to equity
holders of the parent
------ -------- -------- -------- ---------
Share capital 24 1,367 1,367 1,367 1,367
------ -------- -------- -------- ---------
Merger reserve 24 43,497 43,497 86,208 86,208
------ -------- -------- -------- ---------
Share-based payment reserve 355 556 355 556
------ -------- -------- -------- ---------
Retained earnings at the beginning
of the year 64,362 63,191 16,507 36,337
------ -------- -------- -------- ---------
Profit/(loss) for the year
attributable to the owners 9,511 9,188 (86) 142
------ -------- -------- -------- ---------
Other changes in retained earnings (3,722) (8,017) (3,722) (19,972)
------ -------- -------- -------- ---------
Retained earnings 70,151 64,362 12,699 16,507
------ -------- -------- -------- ---------
Total equity 115,370 109,782 100,629 104,638
------ -------- -------- -------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share-based
payment
Share Merger reserve Retained Total
capital reserve $'000 earnings equity
Note $'000 $'000 $'000 $'000
Balance at 1 October 2016 1,367 43,497 909 63,191 108,964
------- ---------- ---------- ------------ ----------- ---------
Profit for the year - - - 9,188 9,188
------- ---------- ---------- ------------ ----------- ---------
Foreign exchange - - - (112) (112)
------- ---------- ---------- ------------ ----------- ---------
Total comprehensive income
for the year - - - 9,076 9,076
------- ---------- ---------- ------------ ----------- ---------
Dividends - - - (7,905) (7,905)
------- ---------- ---------- ------------ ----------- ---------
Share-based payments 23 - - (353) - (353)
------- ---------- ---------- ------------ ----------- ---------
Total transactions with owners
recognised directly in equity - - (353) (7,905) (8,258)
------- ---------- ---------- ------------ ----------- ---------
Balance at 30 September 2017 1,367 43,497 556 64,362 109,782
------- ---------- ---------- ------------ ----------- ---------
Profit for the year - - - 9,511 9,511
------- ---------- ---------- ------------ ----------- ---------
Total comprehensive income
for the year - - - 9,511 9,511
------- ---------- ---------- ------------ ----------- ---------
Dividends - - - (3,722) (3,722)
------- ---------- ---------- ------------ ----------- ---------
Share-based payments 23 - - (201) - (201)
------- ---------- ---------- ------------ ----------- ---------
Total transactions with owners
recognised directly in equity - - (201) (3,722) (3,923)
------- ---------- ---------- ------------ ----------- ---------
Balance at 30 September 2018 1,367 43,497 355 70,151 115,370
------- ---------- ---------- ------------ ----------- ---------
COMPANY STATEMENT OF CHANGES IN EQUITY
Share-based
payment
Share Merger reserve Retained
capital reserve $'000 earnings Total equity
Note $'000 $'000 $'000 $'000
Balance at 1 October 2016 1,367 86,208 909 36,337 124,821
------- ---------- ---------- ------------ ----------- ---------------
Profit for the year - - - 142 142
------- ---------- ---------- ------------ ----------- ---------------
Currency translation differences - - - (12,067) (12,067)
------- ---------- ---------- ------------ ----------- ---------------
Total comprehensive income
for the year - - - (11,925) (11,925)
------- ---------- ---------- ------------ ----------- ---------------
Dividends - - - (7,905) (7,905)
------- ---------- ---------- ------------ ----------- ---------------
Share-based payments 23 - - (353) - (353)
------- ---------- ---------- ------------ ----------- ---------------
Total transactions with
owners recognised directly
in equity - - (353) (7,905) (8,258)
------- ---------- ---------- ------------ ----------- ---------------
Balance at 30 September
2017 1,367 86,208 556 16,507 104,638
------- ---------- ---------- ------------ ----------- ---------------
Loss for the year - - - (86) (86)
------- ---------- ---------- ------------ ----------- ---------------
Total comprehensive loss
for the year - - - (86) (86)
------- ---------- ---------- ------------ ----------- ---------------
Dividends - - - (3,722) (3,722)
------- ---------- ---------- ------------ ----------- ---------------
Share-based payments 23 - - (201) - (201)
------- ---------- ---------- ------------ ----------- ---------------
Total transactions with
owners recognised directly
in equity - - (201) (3,722) (3,923)
------- ---------- ---------- ------------ ----------- ---------------
Balance at 30 September
2018 1,367 86,208 355 12,699 100,629
------- ---------- ---------- ------------ ----------- ---------------
CONSOLIDATED AND COMPANY STATEMENTS OF CASH FLOWS
Group Group Company Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
Cash flows from operating activities
--------- --------- -------- -------------
Profit/(loss) after taxation 9,511 9,188 (86) 142
--------- --------- -------- -------------
Depreciation and amortisation 4,630 4,135 - -
--------- --------- -------- -------------
Impairment of short-term investment - 34 - -
--------- --------- -------- -------------
Income tax expense 1,103 1,799 - -
--------- --------- -------- -------------
Net finance expense 3,581 2,810 - 283
--------- --------- -------- -------------
Bargain purchase gain - (1,259) - -
--------- --------- -------- -------------
Loss on disposal of assets 125 49 - -
--------- --------- -------- -------------
Share-based payments (201) (353) (201) (353)
--------- --------- -------- -------------
(Decrease)/increase in provisions (334) 354 - -
--------- --------- -------- -------------
Operating profit/(loss) before working
capital changes 18,415 16,757 (287) 72
--------- --------- -------- -------------
Increase in inventories (71) (112) - -
--------- --------- -------- -------------
Increase in trade and other receivables (1,540) (1,237) (355) (24)
--------- --------- -------- -------------
Decrease in trade and other payables (1,116) (426) (30) (892)
--------- --------- -------- -------------
Increase in due to related parties - - 5,176 9,438
--------- --------- -------- -------------
Increase in due from related parties - - (598) (1,017)
--------- --------- -------- -------------
Taxation paid (1,688) (2,489) - -
--------- --------- -------- -------------
Net cash generated from operating
activities 14,000 12,493 3,906 7,577
--------- --------- -------- -------------
Cash flows from investing activities
--------- --------- -------- -------------
Purchase of property, plant and equipment (5,764) (5,440) - -
--------- --------- -------- -------------
Purchase of intangible assets (397) (137) - -
--------- --------- -------- -------------
Proceeds from disposal of equipment 73 212 - -
--------- --------- -------- -------------
Acquisition of subsidiary, net of - (7,766) - -
cash acquired
--------- --------- -------- -------------
Net cash used in investing activities (6,088) (13,131) - -
--------- --------- -------- -------------
Cash flows from financing activities
--------- --------- -------- -------------
Receipt of bank loans 800 13,316 - -
--------- --------- -------- -------------
Repayment of bank borrowings (6,105) (4,120) - -
--------- --------- -------- -------------
Repayment of third party loans (500) (1,000) - -
--------- --------- -------- -------------
Dividends paid (3,722) (7,905) (3,722) (7,905)
--------- --------- -------- -------------
Interest paid (3,242) (2,489) - -
--------- --------- -------- -------------
Loss on forward contract settlement - (283) - (283)
--------- --------- -------- -------------
Net cash used in financing activities (12,769) (2,481) (3,722) (8,188)
--------- --------- -------- -------------
Net (decrease)/increase in cash and
cash equivalents (4,857) (3,119) 184 (611)
--------- --------- -------- -------------
Cash and cash equivalents at the
beginning of the year (net of overdraft) 585 3,704 - 611
--------- --------- -------- -------------
Cash and cash equivalents at the
end of the year (net of overdraft) (4,272) 585 184 -
--------- --------- -------- -------------
Bank overdraft 6,629 411 - -
--------- --------- -------- -------------
Cash and cash equivalents at the
end of the year 2,357 996 184 -
--------- --------- -------- -------------
NOTES TO THE FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Elegant Hotels Group plc ("Elegant Hotels" or the "Company") is
a public limited company incorporated in the UK and listed on the
Alternative Investment Market (AIM) of the London Stock Exchange.
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 in the Caribbean, principally on the island of
Barbados. During the prior year, the Group acquired Treasure Beach,
a 35 suite hotel in Barbados.
2. SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these Consolidated and Company Financial Statements are set out
below. They have been consistently applied in the financial years
ending 30 September 2018 (2017/18 financial year) and 30 September
2017 (2016/17 financial year) unless otherwise stated.
2.1. BASIS OF PREPARATION
The financial statements of Elegant Hotels Group plc and the
consolidated financial statements for the Group have been prepared
in accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU and in accordance with the Companies
Act 2006 applicable to companies reporting under IFRS. 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 Company and Consolidated Financial Statements are prepared
on the historical cost basis, modified by the revaluation of
certain assets and liabilities at amortised cost.
The functional currency of the Company is United States dollars
($). The dominant currency of the trading entities is United States
dollars. The Company and Group presents the financial statements in
United States dollars, and all information is stated in United
States dollars unless otherwise indicated. All amounts have been
rounded to the nearest thousand ('000), unless otherwise
indicated.
2.1.1. GOING CONCERN
Notwithstanding net current liabilities of $9.1 million as at 30
September 2018, and cash outflows for the year of $4.9 million, the
financial statements have been prepared on a going concern basis
which the Directors consider to be appropriate for the following
reasons.
The Group meets its day-to-day working capital requirements with
the assistance of its bank facilities which include term loans,
revolving credit facilities and an overdraft facility. These
facilities were renewed on 26 May 2015 and expire in May 2020. In
the 2018/19 financial year, the Group expects to commence a
refinancing exercise with a view to reducing the amortisation on
the secured loans. Initial discussions with the Group's finance
partners indicate that the loans will be renewed at similar
commercial terms to those currently in place.
In confirming the appropriateness of the going concern basis,
the Group prepares forecasts and projections which take account of
possible changes in trading performance, cost of debt and exchange
rates. While the Group's cash position has declined in the short
term, this has primarily been the result of financing the
renovations and pre-opening activities of Treasure Beach through
operating cash flows and the cash flows related to debt service.
The Group continuously monitors liquidity and actively manages
working capital, capital expenditure and debt servicing
requirements to provide sufficient headroom in available
facilities.
The Group regularly forecasts short, medium and long-term cash
flows in order to ensure the Group can continue as a going concern.
These forecasts are sensitised for possible changes in trading
performance, cost of debt and exchange rates. Were the performance
of the Group to fall below expectations, the Group is able to
manage working capital and reduce expenditure on capital items and
dividends.
These projections demonstrate that, subject to any significant
changes to the Group's business or economic environment, the Group
should be able to operate within the level of its current
facilities, meet future debt repayments and continue to comply with
its banking covenants for at least the foreseeable future. As such,
the Directors consider it appropriate to adopt the going concern
basis in preparing the Group financial statements.
2.1.2. CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES
No new standards, interpretations or amendments effective for
the first time to the year ended 30 September 2018 have had a
material impact on the consolidated results or financial position
of the Group or Company.
Management is assessing the following relevant standards,
interpretations and amendments, which are not yet effective or
adopted, for the impact on the Group:
-- IFRS 15 Revenue from contracts with Customers (effective date
for accounting periods from 1 January 2018).
Management has reviewed IFRS 15 and has considered specifically
the treatment of service charge in accordance with the revised
standard.
Currently, service charge collected as part of revenue and paid
to employees is not recorded as revenue. After analysing the
treatment of service charge in accordance with IFRS 15, the Group
has concluded that amounts collected as service charge should be
recognised as revenue as service charge is not considered to be a
separately identifiable performance obligation. This is because a
customer cannot benefit from it separately. It is an integral
component of each of the relevant performance obligations
provided.
In recognising service charge as revenue, a corresponding
expense is recognised in salaries and wages.
The Group will adopt IFRS 15 for the year ended 30 September
2019, and expects to apply the cumulative effect method for
transition. Full disclosures under IFRS 15, including the
cumulative transition effect at 1 October 2018, will be provided in
the 2018/19 financial statements.
For information, if IFRS 15 had been adopted for these financial
statements, the current year changes to revenue and salaries and
wages would have been as follows:
2018 in
accordance
with IFRS
15
IFRS 15 $'000
adjustment
2018 $'000
$'000
Accommodation 47,604 4,789 52,393
-------- ------------- ------------
Food and beverage 14,060 1,415 15,475
-------- ------------- ------------
Other services 1,206 - 1,206
-------- ------------- ------------
Revenue 62,870 6,204 69,074
-------- ------------- ------------
Other operating income 1,175 (125) 1,050
-------- ------------- ------------
Salaries and wages 19,878 6,079 25,957
-------- ------------- ------------
-- IFRS 9 Financial Instruments (effective date for accounting
periods from 1 January 2018). Management has reviewed its financial
instruments in line with IFRS 9 and does not expect the new
standard to have a material impact on the Group.
The Group currently recognises all financial assets as loans and
receivables, initially recognised at fair value plus transaction
costs and then carried at amortised cost. As the objective of the
Group's business model in relation to these financial assets is to
collect contractual cash flows, these assets will continue to be
recognised as basic loans and receivables at fair value and carried
at amortised cost under IFRS 9. No short-term receivables have a
significant financing component and any differences between fair
value and transaction price are immaterial.
All of the Group's trade receivables are due within two months.
A valuation allowance is assessed at each reporting period for the
small proportion of receivables that are past due. In the current
and prior year, the Group did not use any valuation allowances. The
Group only has less than $0.1m in short-term investments and no
other financial assets. Therefore, the Group does not expect any
material change from the IFRS 9 requirements to recognise expected
credit losses on trade and other receivables.
-- IFRS 16 Leases (effective date for accounting periods from 1
January 2019). Management has reviewed IFRS 16 and does not believe
it will have a material impact on the Group.
The Group owns all of its properties and has very few
arrangements that meet the definition of a lease per IFRS 16. The
Group has leases for office space in the US and a warehouse in
Barbados. The combined payments under these leases is less than
$0.1m annually. Further, the Group has leases in respect of office
equipment. The payments under these leases are less than $0.1m
annually. The Group does not currently have any additional
contracts that would meet the definition of a lease per IFRS
16.
-- IFRIC 23 Uncertainty over Income Tax Treatments (effective
date for accounting periods from 1 January 2019). Management has
reviewed IFRIC 23 and does not believe it will have a material
impact on the Group. The Group retains the services of an external
tax advisor, who reviews the deferred tax calculation in accordance
with IAS 12.
-- Annual improvements to IFRSs (2015-2017 Cycle) - Minor
amendments to various accounting standards, effective for periods
beginning on or after 1 January 2019 onwards. None of these
amendments are expected to have a material impact on the Group.
2.2. 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.
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.
ACQUISITIONS
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the fair values of the assets transferred, the
liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Group.
The consideration transferred includes the fair value of any
asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are
measured initially at their fair values at the acquisition date.
The Group recognises any non-controlling interest in the acquiree
on an acquisition-by-acquisition basis, either at fair value or at
the non-controlling interest's proportionate share of the
recognised amounts of acquiree's identifiable net assets.
Acquisition related costs are expensed as incurred.
INTRA-GROUP
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.
In the Company financial statements, all investments in
subsidiaries are carried at cost less impairment.
2.3. FOREIGN CURRENCY TRANSACTIONS AND BALANCES
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 reporting 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 reporting 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.
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.
In prior years, the Group had entered into forward US
dollar/Sterling forward exchange contracts to secure the amount of
approved dividends. No forward exchange contracts were in place
during 2017/18, and the Group does not enter into other forward or
similar contracts.
2.4. REVENUE RECOGNITION
Revenue for the Group is measured at the fair value of the
consideration received or receivable, net of discounts, value added
taxes and service charges. 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 or 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 delivery of the
service.
2.5. FINANCE INCOME AND EXPENSE
Finance income is recognised in profit and loss on an accruals
basis. Finance expense is recognised in profit or loss using the
effective interest method.
2.6. EXCEPTIONAL ITEMS
Exceptional items are items that are, in the judgment of
management, material due to their size or nature, or non- recurring
items that are considered exceptional. They are disclosed
separately in the financial statements where it is necessary to do
so to provide further understanding of the financial performance of
the Group.
2.7. 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.
Contributions to defined contribution pension schemes are
charged to the Consolidated Statement of Comprehensive Income in
the year to which the employee's services relate.
2.8. 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 IFRS 8 Operating Segments are considered to be met. The
Directors believe the aggregation criteria is met due to the
similar economic characteristics of the hotels which all operate on
the island of Barbados.
2.9. SHARE-BASED PAYMENTS
Employees (and Executive Directors) receive remuneration in the
form of equity-settled share-based payments, whereby employees
render services in exchange for rights over shares (share options).
The fair value of the employee services received in exchange for
the grant of share options 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 share
options determined at the grant date, excluding the impact of any
non-market based vesting conditions (for example, continuation of
employment and performance targets).
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 reporting date to allow for
forecasted employee attrition and the difference is charged or
credited to the Statement of Comprehensive Income, with a
corresponding adjustment to reserves.
2.10. 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 in equity or other comprehensive income, where
it is recognised in other comprehensive income or directly in
equity, respectively.
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.
Deferred tax is recognised using the liability method 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.
Deferred income tax is not provided on the initial recognition
of an asset or liability in a transaction, other than a business
combination, if at the time of the transaction there is no effect
on either accounting or taxable profit or loss.
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 when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when they relate to income tax levied
by the same taxation authority and the Group intends to settle
current tax assets and liabilities on a net basis.
2.11. 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 for inventories held
for sale is the estimated selling price in the normal course of
business less the estimated costs necessary to make the sale.
The Group records certain materials and supplies that are
consumed in delivery of hotel and restaurant services as base
stock. These items include linen (sheets, pillows, duvets, bed
skirts), crockery (plates, bowls, cups, saucers), cutlery (knives,
forks, spoons), glassware and stainless steel items (teapots,
serving platters).
Net realisable value for inventories held for consumption in the
provision of services is equivalent to cost.
2.12. PROPERTY, PLANT AND EQUIPMENT
Items of property, plant and equipment are initially recognised
at cost, including directly attributable costs, and subsequently
stated at historical cost less depreciation and impairment.
Land is not depreciated.
Depreciation is calculated on other items of property, plant and
equipment on a straight line basis over the expected useful
economic life of the asset as follows:
Buildings - 30 to 50 years.
Furniture, fixtures and fittings - 2 to 15 years.
Motor vehicles - 7 years.
Depreciation on assets under construction does not commence
until they are complete and available for use. These assets
represent "fit-outs".
2.13. INTANGIBLE ASSETS
The Group records intangible assets relating to software,
including commercial website and internal systems. These assets are
initially recorded at cost. The class of software assets has been
assessed as finite, having a useful life of three to five years.
The cost of the software assets is amortised on a straight line
basis over this period. The carrying value and the amortisation
period is reviewed annually.
Costs associated with maintaining software are recognised as an
expense when incurred.
2.14. 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 Group determines any impairment by comparing the carrying
values of each of the Group's 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 Group's own projections using pre-tax discount rates.
2.15. 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 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.
2.16. FINANCIAL ASSETS
The Group classifies its existing financial assets, including
cash and cash equivalents, as loans and receivables. The
classification depends on the purpose for which the assets are
held.
Management determines the classification of financial assets at
initial recognition and re-evaluates this designation at every
reporting date.
2.16.1. 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.
The Group's loans and receivables comprise cash and cash
equivalents, short-term deposits, and accounts and other
receivables.
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, which are presented as
non-current assets.
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 allowance for impairment.
Cash and cash equivalents comprise 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.
2.17. FINANCIAL LIABILITIES
All financial liabilities are recognised initially at fair
value, net of transaction costs incurred, and subsequently carried
at amortised cost. The Group's financial liabilities include bank
and third-party loans, the bank overdraft and trade and other
payables.
Fees paid on the establishment of loan facilities are recognised
as transaction costs of the loan and amortised to the profit and
loss over the life of the loan.
All borrowing costs are recognised in profit or loss in the
period in which they are incurred.
2.18. PROVISIONS
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, it
is probable that the Group will be required to settle the
obligation, and a reliable estimate can be made of the amount of
the obligation.
The Group's provisions are made up of legal amounts relating to
specific legal claims, employee benefits, specifically annual
leave, and sales incentive schemes. The timing of the utilisation
of the provision is uncertain and is largely outside of the Group's
control.
2.19. 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.
2.20. DIVID DISTRIBUTION
Final dividend distributions to the Company's shareholders are
recognised as a liability in the Group's financial statements in
the period in which the dividends are approved by the Company's
shareholders. Interim dividends are recognised when paid. Unpaid
dividends that do not meet these criteria are disclosed in the
notes to the financial statements.
3. 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 - Judgement is required in
determining whether the carrying values of the assets have any
indication of impairment, as outlined further in note 2.13.
Acquisition accounting - The classification of an acquisition as
a business combination and recognition of identifiable assets and
liabilities are key areas of both judgement and estimation.
4. BUSINESS COMBINATIONS
ACQUISITION OF TREASURE BEACH HOTEL
On 5 May 2017, the Group purchased 100% of the share capital of
Treasure Beach Limited for $7.9 million. Treasure Beach Limited is
a Barbados externally registered company which owns the business
and property of Treasure Beach Hotel, located in Paynes Bay, St.
James, Barbados. The Group purchased Treasure Beach to further
expand within Barbados. It has refurbished the property as an
adults-only European plan offering.
Treasure Beach Limited's property was independently valued on
acquisition at $9.7 million by Terra Caribbean. In addition, a
deferred tax liability of $0.6 million was recognised on the value
of the buildings. The difference of approximately $1.3 million
between the total consideration and the fair value of the assets
and liabilities is shown as a bargain purchase gain on acquisition
in the Consolidated Statement of Comprehensive Income. The bargain
purchase gain resulted from the property being for sale for a
number of years. The property was loss making prior to acquisition
and the Directors believed the property was not operating to its
full potential. The Directors reviewed the purchased assets for
unrecognised intangible assets but could not identify any.
The acquisition accounting policies are consistent with those of
the Group.
In the period immediately following the date of acquisition in
May 2017 to July 2017, the operation of the hotel was under the
existing brand and losses of $0.1 million were recognised as
exceptional expenses. In the year-ended 30 September 2018, a
further $0.6 million of pre-opening costs were recognised as
exceptional expenses relating primarily to operating, supplies and
equipment and labour (2017: $0.2 million). The property closed for
renovations and reopened in December 2017 under the Elegant Hotels
brand.
Acquisition related costs
The Group incurred acquisition related costs of $0.4 million
comprising legal, professional and due diligence fees, stamp duty
and renovation/refurbishment project management fees. These costs
have been included as exceptional administrative expenses in the
Consolidated Statement of Comprehensive Income.
Acquired receivables
The fair value of acquired receivables was $0.1 million. The
gross contractual amounts receivable are $0.1 million and, at the
acquisition date, all of the contractual cash flows were expected
to be received.
EFFECT OF ACQUISITION
The acquisition of Treasure Beach Hotel had the following effect
on the Group's assets and liabilities in the year ended 30
September 2017:
Acquiree's Fair value Carrying
book values adjustments amounts
$'000 $'000 $'000
Acquiree's net assets at the acquisition
date
------------- ------------- ---------
Property, plant and equipment 7,912 1,841 9,753
------------- ------------- ---------
Inventory 17 - 17
------------- ------------- ---------
Trade and other receivables 61 - 61
------------- ------------- ---------
Cash and cash equivalents 103 - 103
------------- ------------- ---------
Trade and other payables (224) - (224)
------------- ------------- ---------
Deferred tax liabilities - (582) (582)
------------- ------------- ---------
Net identifiable assets and liabilities 7,869 1,259 9,128
------------- ------------- ---------
Consideration paid
------------- ------------- ---------
Cash paid 7,869
------------- ------------- ---------
Total consideration 7,869
------------- ------------- ---------
Bargain purchase gain 1,259
------------- ------------- ---------
5. REVENUE
The Group's revenue is earned in Barbados in US dollars or
currencies pegged to US dollars.
2018 2017
$'000 $'000
Accommodation 47,604 45,405
------- -------
Food and beverage 14,060 13,594
------- -------
Other services 1,206 873
------- -------
62,870 59,872
------- -------
Virgin Holidays represented 12% of the Group's total revenue
(2017: 13%). No other customer represented more than 10% of the
Group's total revenue.
6. PROFIT BEFORE TAXATION
Included in profit before taxation are the following
amounts:
2018 2017
$'000 $'000
Depreciation and amortisation (note 13, 14) 4,630 4,135
------- --------
Repairs and maintenance 1,577 1,742
------- --------
Operating lease expense (note 25) 76 78
------- --------
Employee costs before share-based payments (note
7) 20,079 19,463
------- --------
Inventory write-downs 873 937
------- --------
Fees payable to the Company's auditor 272 296
------- --------
Exceptional items (note 9):
------- --------
- Share-based payments related to the IPO - (640)
------- --------
- Acquisition and other exceptional costs 761 1,694
------- --------
Bargain purchase gain (note 4) - (1,259)
------- --------
AUDITOR'S REMUNERATION
2018 2017
$'000 $'000
Audit of these financial statements 89 80
------- -------
Amounts receivable by the Company's auditor
and its associates for:
------- -------
Audit of financial statements of subsidiaries
of the Company 159 157
------- -------
Taxation compliance services to subsidiaries
of the Company - 53
------- -------
Other taxation advisory services to subsidiaries
of the Company 11 6
------- -------
Taxation compliance services to the Company 6 -
------- -------
Other taxation advisory services to the Company 7 -
------- -------
272 296
------- -------
7. STAFF NUMBERS AND COSTS
The average number of people employed by the Group (including
Directors) during the year, analysed by category, was as
follows:
2018 2017
Number Number
Directors 2 2
-------- --------
Administration 42 31
-------- --------
Sales and marketing 19 15
-------- --------
Hotels and restaurant 997 993
-------- --------
1,060 1,041
-------- --------
The aggregate payroll costs of employees were as follows:
2018 2017
$'000 $'000
Salaries and wages 17,711 17,192
------- -------
Social security costs 2,191 2,113
------- -------
Contributions to defined contribution plans 177 158
------- -------
Total before share-based payments 20,079 19,463
------- -------
Share-based payment expenses (see note 23) (201) (353)
------- -------
19,878 19,110
------- -------
The Group operates a number of defined contribution pension
plans. The total expense relating to these plans in the current
year was $0.1 million (2017: $0.1 million).
8. DIRECTORS' REMUNERATION
The remuneration of the Directors comprises:
2018 2017
$'000 $'000
Salaries, fees and other short-term employee
benefits 835 1,031
------- -------
Compensation payments for loss of office - 152
------- -------
Total salaries and other short-term employment
benefits 835 1,183
------- -------
Share-based payments credit (201) (148)
------- -------
634 1,035
------- -------
The aggregate remuneration (including amounts receivable under
long-term incentive schemes) of the highest paid Director during
the year was $0.3 million (2017: $0.3 million). During the year,
none of the Directors exercised options over shares (2017: none).
None of the Directors received a payment in lieu of pension
contribution (2017: none), and one Director received payments
directly into a pension scheme.
9. EXCEPTIONAL ITEMS
2018 2017
$'000 $'000
Share-based payments credit relating to awards
issued on IPO - (640)
------- -------
Acquisition costs for Treasure Beach hotel (14) 419
------- -------
Pre-opening costs for Treasure Beach hotel (including
pre-opening losses in 2017) 537 276
------- -------
Restructuring costs 329 937
------- -------
Other exceptional items (91) 62
------- -------
761 1,054
------- -------
Exceptional items are disclosed separately from underlying
selling, general and administrative expenses where they are
non-recurring or material due to their size or nature. In the
current year and prior year, exceptional costs largely relate to
non-recurring pre-opening costs for Treasure Beach, which the Group
acquired in 2016/17 and opened in December 2017. Restructuring
costs are treated as exceptional because they are not expected to
recur regularly, or in some cases are material due to their
nature.
10. FINANCE INCOME AND EXPENSE
2018 2017
$'000 $'000
Finance income
------- -------
Interest receivable in relation to security
deposits 29 12
------- -------
Finance expense
------- -------
Interest on loans and finance charges 3,466 2,489
------- -------
Amortisation of capitalised finance costs 6 38
------- -------
Foreign exchange losses 109 283
------- -------
3,581 2,810
------- -------
11. TAXATION
Tax recognised in the Consolidated Statement of Comprehensive
Income:
2018 2017
$'000 $'000
Current tax expense
-------- -------
Current year 1,003 2,101
-------- -------
Adjustments for prior years 6 (398)
-------- -------
Total current tax expense 1,009 1,703
-------- -------
Deferred tax expense
-------- -------
Origination and reversal of temporary differences 1,142 96
-------- -------
Recognition of previously unrecognised tax losses (1,048) -
-------- -------
Total deferred tax expense (note 15) 94 96
-------- -------
Tax expense in the Consolidated Statement of
Comprehensive Income 1,103 1,799
-------- -------
RECONCILIATION OF EFFECTIVE TAX RATE
2018 2017
$'000 $'000
Profit before tax for the year 10,614 10,987
-------- -------
Tax using the Barbados corporation tax rate
of 30% (2017: 25%) 3,184 2,747
-------- -------
Effect of change in Barbados corporation tax (18) -
rate on deferred tax balances
-------- -------
Effect of differences in tax rates in foreign
jurisdictions 87 146
-------- -------
Utilisation of capital allowances (937) (533)
-------- -------
Recognition of previously unrecognised tax losses (1,048) 45
-------- -------
Non-deductible expenses 792 527
-------- -------
Marketing development allowance (791) (624)
-------- -------
Tax effect of bargain purchase gain - (314)
-------- -------
Tax losses not recognised 17 203
-------- -------
Over provided in prior years 6 (398)
-------- -------
Unwind of deferred tax liability (189) -
-------- -------
Total tax expense 1,103 1,799
-------- -------
12. EARNINGS PER SHARE
2018 2017
$'000 $'000
Profit used in calculating basic and diluted
earnings per share 9,511 9,188
----------- -----------
Bargain purchase gain - (1,259)
----------- -----------
Exceptional costs 761 1,054
----------- -----------
Tax on one-off items (190) (267)
----------- -----------
Profit used in calculating adjusted basic and
diluted earnings per share 10,082 8,716
----------- -----------
Number of shares
----------- -----------
Weighted average number of shares for the purpose
of:
----------- -----------
- basic earnings per share and adjusted basic
earnings per share (number) 88,815,789 88,815,789
----------- -----------
- diluted earnings per share and adjusted diluted
earnings per share (number) 88,954,936 89,100,871
----------- -----------
Earnings per share
----------- -----------
Basic earnings per share (cents per share) 10.7 10.3
----------- -----------
Diluted earnings per share (cents per share) 10.7 10.3
----------- -----------
Adjusted earnings per share (cents per share) 11.4 9.8
----------- -----------
Adjusted diluted earnings per share (cents per
share) 11.3 9.8
----------- -----------
Basic earnings per share is calculated by dividing profit for
the year attributable to equity holders of the Company by the
weighted average number of ordinary shares outstanding during the
year. Diluted earnings per share amounts are calculated by dividing
profit for the year attributable to equity holders of the Company
by the weighted average number of ordinary shares outstanding
during the year together with the dilutive number of ordinary
shares.
The Company has 1,925,101 potentially issuable shares (2017:
1,717,223) all of which relate to share options issued to Directors
and key management personnel. The dilutive number of issuable
shares is 139,147 (2017: 285,082) for the purposes of calculating
the diluted earnings per share.
Adjusted basic and diluted earnings per share has been shown in
order to compare underlying earnings per share year-on-year. In
order to calculate adjusted basic and diluted earnings per share,
the numerator has been adjusted to exclude the after-tax effect of
bargain purchase gains, acquisition and pre-opening costs relating
to new hotels and other exceptional items. Further details on
exceptional items are given in note 9.
13. PROPERTY, PLANT AND EQUIPMENT
Land and Motor vehicle Fixtures Under construction
buildings $'000 & fittings $'000 Total
$'000 $'000 $'000
Cost
----------- -------------- ------------ ------------------- --------
Balance at 1 October 2016 166,326 27 41,229 195 207,777
----------- -------------- ------------ ------------------- --------
Additions 1,425 - 1,590 2,532 5,547
----------- -------------- ------------ ------------------- --------
Additions from business
combinations 9,700 12 41 - 9,753
----------- -------------- ------------ ------------------- --------
Transfers 171 - 23 (194) -
----------- -------------- ------------ ------------------- --------
Disposals (347) - (470) (2) (819)
----------- -------------- ------------ ------------------- --------
Balance at 30 September
2017 177,275 39 42,413 2,531 222,258
----------- -------------- ------------ ------------------- --------
Additions 2,550 30 2,424 702 5,706
----------- -------------- ------------ ------------------- --------
Transfers 891 - 1,559 (2,450) -
----------- -------------- ------------ ------------------- --------
Disposals (170) (12) (279) (2) (463)
----------- -------------- ------------ ------------------- --------
Balance at 30 September
2018 180,546 57 46,117 781 227,501
----------- -------------- ------------ ------------------- --------
Depreciation
----------- -------------- ------------ ------------------- --------
Balance at 1 October 2016 5,678 8 29,303 - 34,989
----------- -------------- ------------ ------------------- --------
Depreciation charge for
the year 883 6 3,223 - 4,112
----------- -------------- ------------ ------------------- --------
Disposals (170) - (387) - (557)
----------- -------------- ------------ ------------------- --------
Balance at 30 September
2017 6,391 14 32,139 - 38,544
----------- -------------- ------------ ------------------- --------
Depreciation charge for
the year 1,167 21 3,374 - 4,562
----------- -------------- ------------ ------------------- --------
Disposals (45) (3) (223) - (271)
----------- -------------- ------------ ------------------- --------
Balance at 30 September
2018 7,513 32 35,290 - 42,835
----------- -------------- ------------ ------------------- --------
Net book value
----------- -------------- ------------ ------------------- --------
At 30 September 2017 170,884 25 10,274 2,531 183,714
----------- -------------- ------------ ------------------- --------
At 30 September 2018 173,033 25 10,827 781 184,666
----------- -------------- ------------ ------------------- --------
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 properties are used as security for
bank loans (see note 20). The majority of the Group's non-current
assets are located in Barbados.
Impairment reviews
All properties were valued by CBRE in May 2018. This valuation
indicated a value of $249.5 million, which is in excess of their
carrying amount, but reduced overall from the prior valuation. In
addition, the Group's market capitalisation remained below the
Group's net assets.
In line with IAS 36, the Directors considered these as possible
indicators of impairment and therefore carried out impairment
reviews at the level of cash generating units (CGU).
The value in use calculations include estimates about the future
financial performance of each CGU. The cash flow projections cover
five years based on management-approved financial budgets for the
first year, and reflect management's expectations of the
medium-term operating performance of the CGU and its growth
prospects for the subsequent years. Cash flows beyond the five year
period are extrapolated using the estimated growth rates of 2%.
Key assumptions in the value in use calculations include the
revenue and adjusted EBITDA growth rates which directly influence
the forecasted operating cash flows as well as the discount rate
applied. In determining these assumptions, management has taken
into account the current economic climate and the resulting impact
on expected growth and discount rates, as applicable to the Group's
business and industry. The average annual revenue growth rates used
reflect a conservative estimate based on past experience and are
considered appropriate. The discount rate applied of 7% represents
a pre-tax rate reflecting the Group's weighted average cost of
capital.
Consistent with the CBRE report and internal discounted cash
flow analysis, 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, and as such no impairments have been
recognised.
14. INTANGIBLE ASSETS
1 October 30 September
2016 2017
$'000 Additions Amortisation $'000
$'000 $'000
Cost - 137 - 137
----------- ----------- -------------- -------------
Accumulated amortisation - - (23) (23)
----------- ----------- -------------- -------------
Carrying amount - 137 (23) 114
----------- ----------- -------------- -------------
1 October 30 September
2017 2018
$'000 Additions Amortisation $'000
$'000 $'000
Cost 137 397 - 534
---------- ----------- -------------- -------------
Accumulated amortisation (23) - (68) (91)
---------- ----------- -------------- -------------
Carrying amount 114 397 (68) 443
---------- ----------- -------------- -------------
Intangible assets are classified as software, and largely relate
to the Group's website in the prior year and website and internal
software systems in the current year.
No impairment indicators for intangible assets have been
identified at the year end.
15. DEFERRED TAX ASSETS AND LIABILITIES
RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities are attributable to the
following:
Assets Liabilities
2018 2017 2018 2017
$'000 $'000 $'000 $'000
------- ------- -------- --------
Property, plant and equipment 870 1,420 (5,646) (5,238)
------- ------- -------- --------
Tax value of carried forward
losses 1,943 1,227 - -
------- ------- -------- --------
Qualifying capital expenditure 2,537 2,482 - -
------- ------- -------- --------
Tax assets/(liabilities) 5,350 5,129 (5,646) (5,238)
------- ------- -------- --------
Offsetting - (191) - 191
------- ------- -------- --------
Net deferred tax assets/(liabilities) 5,350 4,938 (5,646) (5,047)
------- ------- -------- --------
Subsequent to year end but effective for the 2017/18 tax year,
the Government of Barbados increased the corporation tax rate to
30% from 25%. The relevant deferred tax assets and liabilities have
been recognised at the new rate.
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. A 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 2018, the value of the unrecognised deferred tax
assets is $0.0 million (2017: $0.2 million). $0.0 million (2017:
$0.2 million) of 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 TAX DURING THE YEAR
1 October Recognised 30 September
2017 in income 2018
$'000 $'000 $'000
Property, plant and equipment (3,818) (958) (4,776)
---------- ----------- -------------
Tax value of loss carry-forwards
utilised 1,227 716 1,943
---------- ----------- -------------
Qualifying capital expenditure 2,482 55 2,537
---------- ----------- -------------
(109) (187) (296)
---------- ----------- -------------
16. INVENTORIES
2018 2017
$'000 $'000
Food and beverage 735 678
------- -------
Base stock 2,192 2,171
------- -------
Guest supplies and stationery 144 170
------- -------
Goods in transit 62 43
------- -------
3,133 3,062
------- -------
There is no significant difference between the fair value of
inventories and the values stated above.
17. TRADE AND OTHER RECEIVABLES
Group Group Company Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
Trade receivables 2,531 2,411 - -
------- ------- -------- --------
Prepayments 756 746 48 42
------- ------- -------- --------
Electricity bonds 529 461 - -
------- ------- -------- --------
VAT receivables 1,010 446 349 -
------- ------- -------- --------
Other receivables 1,384 604 - -
------- ------- -------- --------
6,210 4,668 397 42
------- ------- -------- --------
There were no receivables that were past due or considered to be
impaired. There is no significant difference between the fair value
of other receivables and the values stated above. All amounts shown
under trade and other receivables are due to be received within one
year.
CREDIT RISK CONCENTRATION BY GEOGRAPHY
The concentration of credit risk for trade receivables for the
Group at the reporting date by geographic region was:
2018 2017
$'000 $'000
Barbados 57 80
------- -------
UK 1,672 1,629
------- -------
United States and Canada 454 559
------- -------
Other 348 143
------- -------
2,531 2,411
------- -------
CREDIT RISK CONCENTRATION BY COUNTERPARTY
The concentration of credit risk for trade receivables for the
Group at the reporting date by type of counterparty was:
2018 2017
$'000 $'000
Tour operators 1,948 2,165
------- -------
Credit card companies 281 219
------- -------
Other 302 27
------- -------
2,531 2,411
------- -------
CREDIT QUALITY OF TRADE RECEIVABLE AND VALUATION ALLOWANCES
Industry standard repayment terms for credit sales are applied
to all receivables. The Group monitors each receivable balance on a
regular basis with regard to credit sales granted and payments
received. 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 finance team on a regular basis based on the customer's debt
ageing and collection history.
The ageing of trade receivables for the Group at the reporting
date was:
Carrying Carrying
amount amount
Gross 2018 Gross 2017
2018 $'000 2017 $'000
$'000 $'000
Not past due 1,983 1,983 2,124 2,124
-------- --------- -------- ---------
Past due (0-30 days) 498 498 212 212
-------- --------- -------- ---------
Past due (31-120 days) 46 46 74 74
-------- --------- -------- ---------
More than 120 days 4 4 37 1
-------- --------- -------- ---------
2,531 2,531 2,447 2,411
-------- --------- -------- ---------
Trade receivables are non-interest bearing. There are no
indications at the reporting date that recognised debtors will not
meet their payment obligations.
The movement in the allowance for impairment in respect of trade
receivables for the Group during the year was as follows:
2018 2017
$'000 $'000
Balance at the start of the year 36 -
------- -------
Allowance recognised 12 36
------- -------
Allowance utilised - -
------- -------
Allowance reversed (36) -
------- -------
Balance at end of the year 12 36
------- -------
18. SHORT-TERM INVESTMENTS
The Group has an investment in the Barbados Golf Club which was
originally undertaken for commercial reasons. During the financial
year ended 30 September 2017, the Group impaired its investment
from $0.1 million to less than $0.1 million. The carrying amount
reflects the fair value of this investment.
19. CASH AND CASH EQUIVALENTS
2018 2017
$'000 $'000
Cash and cash equivalents 2,357 996
-------- -------
Bank overdraft (6,629) (411)
-------- -------
Net cash and cash equivalents (4,272) 585
-------- -------
Cash and cash equivalents comprise cash, cash at bank and bank
deposits with a maturity of up to 90 days.
20. LOANS AND BORROWINGS
2018 2017
$'000 $'000
Current liabilities
------- -------
Secured bank loans 6,042 5,595
------- -------
Third party loan 500 500
------- -------
Revolving credit facility 1,000 1,000
------- -------
7,542 7,095
------- -------
Non-current liabilities
------- -------
Secured bank loans 56,370 62,252
------- -------
Third party loan - 500
------- -------
Revolving credit facility 3,980 3,850
------- -------
60,350 66,602
------- -------
67,892 73,697
------- -------
Changes in the Group's liabilities arising from financing
activities are as follows:
Cash flows
1 October Drawdowns Repayments 30 September
2017 2018
$'000 $'000 $'000 $'000
---------- ---------- ----------- -------------
Secured bank loans 67,847 - (5,435) 62,412
---------- ---------- ----------- -------------
Revolving credit facility 4,850 800 (670) 4,980
---------- ---------- ----------- -------------
Third party loan 1,000 - (500) 500
---------- ---------- ----------- -------------
73,697 800 (6,605) 67,892
---------- ---------- ----------- -------------
The Group's loans and borrowings are measured at amortised cost.
The carrying amount of loans and borrowings is equivalent to their
outstanding originated value. For more information about the Group
and Company's exposure to interest rate risk, see note 29.
During the period, the Group received $0.8 million from loans
and borrowings (2017: $13.4 million) and repaid $6.1 million (2017:
$4.2 million). The Group also repaid $0.5 million in relation to
third-party borrowings (2017: $1.0 million).
Secured bank loans
In May 2015, the Group entered into a Credit Agreement with the
Bank of Nova Scotia to provide a US-dollar Term Loan Commitment of
$50 million with a maturity of 2020 which was fully drawn. This
loan facility was increased and drawn for the acquisition of Waves
in April 2016 by $13.5 million and Treasure Beach in May 2017 by
$8.4 million for a total of $71.9 million. After accounting for
repayments of $5.4 million during the year (2017: $4.0 million),
$62.4 million of this facility remains outstanding.
As part of the Credit Agreement with the Bank of Nova Scotia,
the Group also has a Revolving Loan Commitment of $5.0 million.
Amounts drawn on this facility are repayable over five years from
the date of drawdown. $5.0 million of this facility was drawn at
the end of the year (2017: $4.8 million).
The Group also has an operating overdraft facility denominated
in Barbados dollars of $10 million. This facility was drawn down by
$6.6 million as at 30 September (2017: $0.4 million).
The secured bank loans and revolving credit facility carry
interest at US LIBOR plus 275 basis points. The Group's management
review the forecast US LIBOR rates on a regular basis and may lock
in the future rate for a specific period depending on the
assessment of trends and forecasts. The overdraft carries interest
at the Barbados Government Base rate less 200 basis points. The
Group does not have any fixed rate debt.
The Company is party as a guarantor to cross-guarantees in
respect of the indebtedness of its subsidiary undertakings to the
Bank of Nova Scotia. At 30 September 2018, the total indebtedness
of subsidiary undertakings under these cross-guarantees amounted to
$67.4 million (2017: $72.7 million).
Subsequent to the year-end, in October 2018 the Group syndicated
a portion of the Bank of Nova Scotia loans to FirstCaribbean
International Bank (Bahamas) Limited on the same terms and
conditions existing with the Bank of Nova Scotia.
Third-party loan
As part of the acquisition of Waves Hotel & Spa, the Group
agreed a US dollar interest-free loan with the vendor in the amount
of $2.0 million. This loan is repayable in four annual instalments
of $0.5 million commencing from September 2016. The final
instalment is due in September 2019.
Sensitivity analysis
An increase of 100 basis points in LIBOR interest rates would
decrease profit by $0.6 million on an annual basis. This analysis
assumes that all other variables remain constant.
The financial liabilities which have a contractual maturity
greater than one year are the Group's secured loans and revolving
credit facility. Including estimated interest payments and
excluding the effect of netting agreements, the payments due in
relation to the Group's loans and borrowings are $10.4 million due
within one year and $63.4 million due between one and five years
(2017: $8.6 million due within one year and $68.6 million due
between one and five years).
21. TRADE AND OTHER PAYABLES
Group Group Company Company
2018 2017 2018 2017
$'000 $'000 $'000 $'000
Trade payables 2,320 2,682 - -
------- ------- -------- --------
Social security and other
taxes 454 567 - -
------- ------- -------- --------
Accrued expenses 1,527 1,576 13 43
------- ------- -------- --------
Deferred income 1,906 2,149 - -
------- ------- -------- --------
Other payables 49 107 - -
------- ------- -------- --------
6,256 7,081 13 43
------- ------- -------- --------
All trade and other payables are due for payment 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 for the Company at 30 September 2018 were 30 days
(2017: 30 days).
22. PROVISIONS
Provisions recognised at the end of the year were as
follows:
1 October Additional Provisions Provisions 30 September
2017 provision utilised released 2018
$'000 $'000 $'000 $'000 $'000
Legal 198 - - (51) 147
---------- ----------- ----------- ----------- -------------
Annual leave 312 92 (227) (85) 92
---------- ----------- ----------- ----------- -------------
Sales incentive 105 34 (68) (29) 42
---------- ----------- ----------- ----------- -------------
615 126 (295) (165) 281
---------- ----------- ----------- ----------- -------------
The Group recognises provisions with respect to the
following:
-- Legal claims - the Group is sometimes involved in litigation
where the timing, amount or likelihood of any outcome is
uncertain;
-- Annual leave - the Group recognises an amount with respect to
annual leave owing to employees; and
-- Sales incentives - the Group rewards certain travel agents
with accommodation or cash rewards based on sales. The timing,
amount or likelihood of any settlement of these rewards is
uncertain.
23. 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 award of options is subject to market and non-market
conditions. The market conditions are based on the total
shareholder return over the performance period. The non-market
conditions are based on the Group'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 a portion or all of the
awards will lapse.
All options granted under the Scheme have a fixed exercise price
of 1 pence per option. The contractual life of the options is five
years. Options cannot normally be exercised until the full vesting
conditions including term of service have been met. The options are
classified as equity-settled.
The issued share options include market-based performance
conditions. Option granted under the Share Option Scheme have been
valued using a combination of the Monte Carlo option pricing model
(TSR conditions) and Black- Scholes method (EPS conditions).
The assumptions used in the calculation of the fair value of
share-based payments are as follows:
-- The expected life of the share options is five years (2017: five years).
-- Expected dividends (dividend yield) is 4% (2017: 7%).
-- All option exercises are expected to be equity-settled.
-- The expected volatility in all cases is 26%. This was based
upon the historical share price volatility of the Company's TSR to
the grant date using daily TSR data over a period from the grant
date at 10 April 2018 to the midpoint of the 30 day average period
at the end of the performance period on 30 September 2020.
-- The risk free rate applied to the options is 1% and is based
upon the yield on zero-coupon government bonds of a term
commensurate with the expected option life.
-- It has been assumed that the employee attrition rate will be
5% (2017: 5%) throughout the period.
-- The exercise price and weighted average exercise price of all options is 1 pence.
-- The weighted average share price during the year was 82 pence (2017: 80 pence).
OPTIONS OVER ORDINARY SHARES OUTSTANDING AS AT 30 SEPTEMBER
2018
Grant date Share Number Exercise Fair value Expected Contractual Vesting date
price of options price per option forfeiture maturity
(p) outstanding (p) (p) rate (years)
21 July 30 September
2017 78 947,945 1 73 5% 3.8 2019
------- ------------- --------- ------------ ------------ ------------ -------------
10 April 30 September
2018 85 977,156 1 55 5% 4.5 2020
------- ------------- --------- ------------ ------------ ------------ -------------
1,925,101
------- ------------- --------- ------------ ------------ ------------ -------------
A credit of $0.2 million has been included in the Statement of
Comprehensive Income (2017: credit of $0.4 million). No outstanding
options at 30 September 2018 are exercisable.
24. SHARE CAPITAL AND RESERVES
2018 2017
Issued Number Issued Number
Number of Ordinary Shares of the $'000 of shares $'000 of shares
Company of 1p each
------- ----------- ------- -----------
As at 30 September 1,367 88,815,789 1,367 88,815,789
------- ----------- ------- -----------
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.
DIVIDS
During the year the Company declared an interim dividend of 1.33
pence per ordinary share (2017: 3.5 pence per ordinary share) which
was paid. After the balance sheet date, a final dividend of 2.66
pence per ordinary share (2017: 3.5 pence) was proposed by the
Directors. The final dividend has not been provided for.
MERGER RESERVE
The merger reserve represents amounts attributable to equity in
respect of merged subsidiary undertakings and includes an amount
relating to the capitalisation of an inter-company loan within the
subsidiaries which is shown within merger reserve on
consolidation.
In 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 owned all of the share capital in ten trading
subsidiaries. The introduction of the new holding company was
accounted for as a capital reorganisation using the merger
accounting principles prescribed within IFRS 3 Business
Combinations.
The use of merger accounting principles resulted in a balance in
the Group and Company reserves which has been classified as a
merger reserve and included in the Group's shareholders' funds. The
Company 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.
25. OBLIGATIONS UNDER OPERATING LEASES
The Group has total non-cancellable operating lease rentals in
respect of its US sales office of $0.1 million (2017: $0.2
million). Of these amounts, $0.1 million (2017: $0.1 million) are
payable in less than one year and no amounts are payable between
one and two years (2017: $0.1 million).
No other lease obligation is considered significant. The Company
has no operating lease commitments.
26. COMMITMENTS AND CONTINGENCIES
There were less than $0.1 million of outstanding capital
commitments at 30 September 2018 (30 September 2017: $0.1
million).
The Company is party as a guarantor to cross-guarantees in
respect of the indebtedness of subsidiary undertakings. At 30
September 2018 the total indebtedness of subsidiary undertakings
under these cross-guarantees amounted to $67.4 million (2017: $72.7
million).
There are no other material contingent liabilities attributable
to the Group or Company.
27. POST-BALANCE SHEET EVENTS
There are no disclosable post-balance sheet events.
28. RELATED PARTIES
TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
The 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" includes certain senior officers of the Elegant Hotels
Group.
Directors of the Company and their immediate relatives control
16.7% of the voting shares of the Company.
The compensation of key management personnel is as follows:
Group Group Company Company
2018 2017
2018 2017 $'000 $'000
$'000 $'000
Key management remuneration including
social security costs 1,666 2,002 - -
------- ------- -------- --------
Share-based payments credit (201) (316) - -
------- ------- -------- --------
1,465 1,686 - -
------- ------- -------- --------
TRANSACTIONS BETWEEN THE COMPANY AND ITS SUBSIDIARY
UNDERTAKINGS
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 with those subsidiaries on an arm's length basis. The
Company recognised $0.6 million in management fees during the year
(2017: $1.0 million) and there were no amounts receivable from
subsidiaries at 30 September 2018 (2017: nil).
29. FINANCIAL INSTRUMENTS
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Group's financial instruments are classified into a fair
value hierarchy based on the valuation technique used to determine
fair value. This hierarchy can be summarised as follows:
-- 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 Group's cash and cash equivalents of $2.4 million (2017:
$1.0 million) are classified as Level 1 in the valuation hierarchy.
All other financial assets of $2.5 million (2017: $2.4 million) and
financial liabilities of $84.7 million (2017: $81.9 million) are
classified as Level 3 in the valuation hierarchy. The carrying
value of all of the Group's net financial liabilities of $80.8
million (2017: $78.4 million) is equivalent to their fair
value.
A valuation conducted by CBRE dated May 2018 indicated a value
of $249.5 million for the Group's properties. This is classified at
level 3 under the fair value hierarchy and valued using the highest
and best use method. The fair value has been primarily derived
using discounted cash flows, supported by market transaction
data.
The Company had trade and other payables with a carrying value
of $0.0 million (2017: $0.0 million) which would be classified as
Level 3 in the fair value hierarchy.
FINANCIAL 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 financial instruments of a speculative nature.
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 2018 and 30
September 2017.
Cash and cash equivalents are held in various currencies
including US dollars, Barbados dollars and Sterling.
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.
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, and arises principally from the
Group's receivables from customers. 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. An allowance is
made against any receivable considered to be impaired.
The Group is only exposed to credit risk on cash and cash
equivalents (refer note 19) and trade receivables (refer note 17).
The maximum exposure to credit risk at the balance sheet date by
class of financial asset is limited to its carrying amount. The
credit risk associated with cash is remote. The Group's principal
credit risk arises from non-recovery of trade receivables. The
credit risk relating to receivables is detailed in note 17.
The Company has no assets that are exposed to credit risk.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due.
Liquidity risk is mitigated by management of working capital,
capital expenditure and debt servicing requirements. The Group and
the Company seek to manage liquidity risk by ensuring sufficient
funds are 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
20.
All financial liabilities classified as current have a
contractual maturity of less than one year. The contractual
maturities for the loans and borrowings can be found at note
20.
The Company has contractual cash maturities of $nil (2017: $nil)
in relation to trade and other payables of less than one year.
Market risk
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.
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 small and
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.
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 US LIBOR plus 275 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 on
the Group's financial instruments is set out in note 20.
Capital management
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. The Group's capital is made up of share capital, share
premium, merger reserve, translation reserve and retained earnings
totalling $115.4 million (30 September 2017: $109.8 million).
The Group's objectives for 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.
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. 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
fundraising or bank finance where appropriate.
The Group has a progressive dividend policy which takes into
account the results of the past year and the trading outlook.
30. INVESTMENTS IN SUBSIDIARY UNDERTAKINGS
The Company has the following subsidiaries:
Principal
place of business
/ country
of registered
office address
2018 2017
Class of % %
shares
Company name 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% 100%
===================================== ===================== ============ ================ ================
BW SL1 Limited St Lucia Ordinary 100% 100%
===================================== ===================== ============ ================ ================
Treasure SL1 Limited* St Lucia Ordinary 100% 100%
===================================== ===================== ============ ================ ================
International Tourism Management
Services Limited* Barbados Ordinary - 100%
===================================== ===================== ============ ================ ================
International Tourism Management
Services LLC* United 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% 100%
===================================== ===================== ============ ================ ================
* Wholly owned held indirectly through subsidiary
undertakings.
The entities listed in the above have the following registered
addresses according to their country:
-- St. Lucia - Hewanorra Corporate Services Limited, Hewanorra
House, Trou Garnier Financial Centre, Point Seraphine, Castries,
St. Lucia
-- Barbados - Suite 250 Tamarind Cove Hotel, Paynes Bay, St. James, BB24023, Barbados
-- United States - Incorp Services Inc., 17888 67th Court North,
Loxahatchee FL, 33470, United States
All investments in subsidiaries have been consolidated in these
financial statements. Included within investments are inter-company
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
$4.6 million as a result of movements in intercompany loans
classified as investments.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SFEEELFUSEDF
(END) Dow Jones Newswires
January 15, 2019 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