Corinthia's IHI warns events in Libya will affect future financial position

International Hotel Investments, the investment company for the Corinthia Hotel International group, have warned shareholders the events in Libya will affect the company’s current year’s performance and may also affect its future financial position.

Reporting IHI’s preliminary statements for 31 December 2010, chairman and chief executive Alfred Pisani said that it was “premature to provide estimates of the consequences of these events that are unfolding.”

Corinthia’s business activities are spread in different countries, giving the group a natural hedge against localised problems. “However, the events in Libya will affect the company’s current year’s performance and may also adversely affect its future performance and financial position,” Pisani said.

The Corinthia Hotel Tripoli has remained operational albeit with a reduced level of activity and staff complement in line with the current business demand.

The company also implemented the restrictive measures with respect to the shareholding in the company held by Libyan Foreign Investment Company.

“Although these UN and EU sanctions were implemented to freeze the shareholdings of Libyan entities in companies worldwide, they are not intended to disrupt the operations of such latter companies,” Pisani said in his report.

“The company has sought and obtained the necessary clarifications and licenses from governments in various jurisdictions in order to enable it to continue trading.”

IHI said that in 2010 the sluggish economic recovery was negatively affected by the austerity measures introduced in countries that provide the group’s feeder markets. At €101.8 million, the Group’s revenues for the year remained substantially on the same levels as those of the previous year (€103.3 million). This small reduction in revenue was mainly the result of a drop of €8.5 million in the Group’s hotel in Tripoli which was partly compensated by increases in the Group’s hotel properties in Lisbon (€3.5 million) and in St Petersburg (€3.9 million).

The performance of the Corinthia Hotel Tripoli was negatively affected by visa restrictions over a six-week period, the increased competition and a general slowdown in business.

On the other hand, the Corinthia Hotel Lisbon is steadily regaining lost ground while the Corinthia Hotel St Petersburg is now benefitting from a higher room-stock following the completion of the refurbishment project in 2009, and from the general economic recovery in the Russian Federation.

In December 2010 IHI acquired the ‘Corinthia’ brand from its parent company Corinthia Palace Hotel Company Limited for €19.6 million. The agreement also provides for a ten-year  period within which any addition of Corinthia-branded rooms will result in an additional payment of €6,400 per room.

In the meantime the reconstruction project of the Corinthia Hotel and Residences, London, is now nearing full completion in line with the planned schedule and the hotel has just opened its doors for business. This luxury hotel is expected to significantly raise the profile of the Group’s brand and hotel portfolio and a number of promotional events are being held in conjunction with this hotel opening.