Despite Revenues, up 5% increased investment has hit its bottom line.
Companies: Elegant Hotels Group
Elegant Hotels (LON: EHG) shares have been hit this morning after the Group announced its Preliminary results for the 12 months to 30 September 2017, which have seen a downturn in its bottom line Profits.
EHG operates a number of luxury hotels on the Caribbean islands of Barbados, St Lucia and Antigua, all of which sit below the Hurricane Belt and therefore weren't impacted by the devastating 2017 Hurricane Season.
Revenues for the Group grew 5.1% to $59.9m boosted by the addition of Waves Hotel and Spa to the Group's portfolio.
Despite this, most other figures fell including RevPAR (Revenue Per Available Room, a common industry metric) down 4.6%, Adjusted EBITDA also dropped $7.6% to $18.1m and Profit After Tax is down 6% to $9.2m.
"This was the first full year of a rebased Sterling/USD exchange rate," management said, which it explained further:
"As a result, given Elegant Hotels' rates are priced in USD while the majority of its customers are from the UK, it has been necessary for the Group to discount rates at certain of its properties on a targeted and tactical basis. This has inevitably affected the profit margins of the business, but the Group believes that the pricing environment is now much more stable. As such, these market conditions should be seen as the new normal."
Net Debt for the Group grew to $73.1m from $61.8m in FY16 as it expanded its portfolio and increased its sales and marketing spend in the US.
Commenting on its acquisitions and the year ahead, Sunil Chatrani, CEO of Elegant Hotels, said:
"During the year we acquired another hotel in Barbados, in the form of Treasure Beach. We also expanded outside of the island for the first time through a management contract and a sales and marketing agreement on hotels in Antigua and St Lucia, respectively. 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 FY18 and beyond."
Zeus Capital commented in its note on the Group today:
"We reduce our forecasts to reflect the higher levels of investment made through 2017 and the associated increased depreciation and financing costs. We update our dividend expectations to reflect the updated guidance from the company, which still implies an above average sector yield in excess of 4%."
It reduced Revenue forecasts in FY18 by 1% while Adjusted PBT and EPS were reduced by 16%. It also reduced its FY18 DPS forecast by 43% to 7p after EHG management reduced 2017's dividend to 5.25p from 7p the previous year.
Shares in the Group were down 11% to 85p at the time of writing.