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Annual Report & Financial Statements 31 December 2023 Contents
Statement by the directors on the financial statements and other information Statement by the directors on non-financial information Statement by the directors on compliance with the Code of Principles of Good Corporate Governance Other disclosures in terms of the Capital Market Rules Consolidated financial statements: Statement of comprehensive income Statement of financial position Statement of changes in equity Statement of comprehensive income Statement of financial position Statement of changes in equity Notes to the financial statements
Company registration number: C 26136
GROUP STRUCTURE
We are owners, investors, developers and operators of luxury hotels & real estate
We are a plc, with a stable shareholding base, comprising the founding family alongside funds & public investors.
OUR PORTFOLIO
OUR VISION IS TO BUILD CORINTHIA WORLDWIDE, NOT ONLY WITHIN EUROPE AND THE MIDDLE EAST, BUT EQUALLY IN THE WORLD’S MAIN GATEWAY CITIES AND RESORTS.
Board of Directors
ALFRED PISANI Chairman of IHI. He founded the Corinthia Group in 1962 and has guided the Group and IHI ever since, spearheading investment and growth across three continents over five decades.
SIMON NAUDI Simon Naudi is the Managing Director and Group CEO of International Hotel Investments plc.
Simon joined Corinthia in 1997 and was primarily responsible for asset management, acquisitions and developments across Europe, the Gulf, North Africa and the USA. This included the acquisition, development and launch of the flagship Corinthia Hotel & Residences in London, as well as other luxury hotels and real estate under development in Brussels, Rome, Bucharest, New York, Riyadh, the Maldives and Doha. Up until 2023, he was also CEO of Corinthia Hotels Limited, the operating arm of the Group.
MOUSSA ATIQ ALI Mr Atiq Ali is the General Manager of Libyan Foreign Investment Company (LAFICO) since 13 June 2021. He has previously occupied the post of Manager Director of Libya Africa Investment Portfolio (LAIP). He also occupied the position of Legal Consultant at the Libyan Investment Authority (LIA).
HAMAD BUAMIM President and CEO of the Dubai Chamber of Commerce and Industry and serves as the Deputy Chairman of the World Chambers Federation – ICC – in Paris. He is a member of the Board of Directors of the UAE Central Bank, Chairman of National General Insurance and Board Member of Union Properties.
JOSEPH PISANI Founder director and member of the main board of CPHCL Company Limited (CPHCL) as from 1962 and has served on a number of boards of subsidiary companies. From 2000 to 2014 he has served as Chairman of the Monitoring Committee of IHI.
RICHARD CACHIA CARUANA Joined the Board of IHI in 2022 as an independent director. He is also an Independent Director, Chairperson of the IHI Audit Committee and the IHI Remuneration and Nominations Committee. He has occupied senior positions within the Maltese government and the European Union. In particular, he was Malta’s Chief Negotiator for its EU accession negotiations, a long-serving Chief of Staff to the Maltese Prime Minister and Member of the EU’s Committee of Permanent Representatives.
FRANK XERRI DE CARO Joined the Board of IHI in 2005, having previously been the General Manager of Bank of Valletta p.l.c., besides serving on the boards of several major financial, banking and insurance institutions.
DOURAID ZAGHOUANI Chief Operating Officer of the Investment Corporation of Dubai (ICD). Previously, he was with Xerox for over 25 years, holding a number of senior management, sales and marketing posts in Europe and North America. Was Board Chairman of several Xerox companies; his last appointment was Corporate Officer and President, Channel Partner Operations for Xerox in New York.
MOHAMED MAHMOUD SHAWSH Joined the Board of IHI in 2022. Mr Shawsh holds the position of Chief Investment Officer at LAFICO. Prior to taking up this position in 2021, Mr Shawsh occupied several senior positions within subsidiaries of LAFICO and International Companies including BP Exploration, Libya. He is experienced in digital transformation, financial investments and risk management. Mr Shawsh holds a Bachelor’s degree in Accounting and Finance from the National Institute of Business Administration in Tripoli and a high diploma in accounting and finance, from the High Institute of Administrative and Financial Occupations, Tripoli.
STEPHEN BAJADA Stephen Bajada is the Company Secretary of International Hotel Investments plc and its subsidiaries.
Since joining the Corinthia Group in 1998, he held several key positions and preformed duties in various aspects of the business including that of Company Secretary of Mediterranean Investments Holding Plc, a leading real estate developer in North Africa, Company Secretary of several Corinthia Group and International Hotel Investments Plc entities, and directorships of Corinthia subsidiaries. His involvement also includes other facets of the business particularly insurance procurement for all group entities.
Mr Bajada holds a Bachelor’s degree in business management from the University of Malta and is a member of the Forum of Company Secretaries.
Chairman’s Statement
Dear Shareholders,
I look forward to meeting you once again at the forthcoming Annual General Meeting. This will be the 24th AGM under my chairmanship since the inception of the company and whilst it has been challenging, it has also given me tremendous satisfaction.
I would like to inform that, with effect from January this year, I have handed over my IHI executive responsibilities to Simon Naudi who is now on the Board of Directors in the position of Managing Director. I will retain my position as Chairman as long as reasonably possible.
God willing, we will this year open several new Corinthia hotels, namely in New York, Bucharest and Brussels. Next year, we are scheduled to open Corinthia hotels in Rome and soon after in Doha and Riyadh, followed by a lovely resort in the Maldives. As a result of these openings, we have engaged a number of General Managers and other top executives, with the result that we are now incurring additional salaries and other pre-opening costs, whilst the income and benefit of managing these new properties, will only materialise once these hotels are in operation.
This preparatory approach is necessary to ensure that the new hotels are up to the standard of the Corinthia Brand, thereby achieving worldwide recognition whilst attracting more third-party hotel owners to seek out our management services. This is no less similar to the interest that had been generated with the opening of our London Hotel and others, creating a snowball effect of attracting more attention to the Corinthia Brand. Our target is to operate many more hotels belonging to third-party owners, as offering management services should be a faster road to fly the Corinthia flag in many more destinations without IHI, the holding company, having to invest in these new properties. This is no different to what all the other international hotel management brands have done to achieve growth. It is our plan to manage one hundred hotels on behalf of third-party owners by 2030.
With great personal pride I can say that Corinthia is Malta’s international hotel brand. The development of our first hotel took place in 1968 with the opening of the Corinthia Palace Hotel in Attard. We could have then chosen the easier road of appointing established international hotel management companies to manage this hotel and other wholly owned properties that followed, rather than creating the brand, Corinthia. Instead, we chose the more difficult road to manage our first and subsequent hotels, thereby creating and building the Corinthia Brand.
Our hotel management company, CHL has focused on providing hotel management services to hotels owned by IHI as also to third party owners. Presently, with all the hotels under our portfolio and, taking into account the opening of the seven hotels referred to above, all owned by third-party owners, will make it possible for Corinthia Hotels Limited (CHL) to contribute €25 million in EBITDA by 2026 as a stand-alone activity and owned by the holding company IHI. The development of our own Corinthia brand has created substantial additional value to our Group and this is additional to the value of the properties we own. The strategic decision to set up our own management company, CHL, is now delivering the desired results.
Likewise, we have been growing QP, from what was originally a division within the group to a wholly owned subsidiary of IHI. QP has today become a global design, engineering, and management office of professionals servicing clients in different continents. Over the past few years, QP has secured contracts in Romania, Belgium, Rome, Tripoli, Doha and United Kingdom with plans to be also present in Dubai, the United States, Oman, Saudi Arabia and Ethiopia. QP’s target is to achieve €5 million in EBITDA by 2026 and €10 million by 2030.
Likewise, we are also looking forward to seeing our real estate development company, CDI, providing its own contribution of EBITDA.
These three subsidiaries, that is CHL, QPM and CDI, which are wholly owned by IHI, will likely facilitate a possible flow of about €35 million in EBITDA to IHI as the holding company in addition to what IHI will generate from the ownership of its own hotels.
Therefore, we have not only survived the two and a half years of Covid and the subsequent increase in bank interest and other rising costs, but we are now also looking at a future where we will see regular financial support from IHI’s three service companies, bringing us that much closer to issue regular dividends.
Concurrently with achieving these EBITDAs and in anticipation that bank interest will be reduced, we will endeavour to sell one or more non-core assets. From these sales we will be able to repay circa €50 million in bank loans thus leaving an amount that would give us enough latitude to decide on a possible dividend distribution with the rest being reinvested for further growth.
IHI, the holding company, has seen a further increase in its EBITDA from €51.7 million in 2022 to €60.3 million in 2023. The ultimate result would have been more positive had we not incurred the necessary preparatory costs for the opening of the new hotels. Extra to these costs, one must also keep in mind the increase in bank interest charges of recent years.
Additionally, we are also suffering the loss of trade from our hotel in St Petersburg, whilst the hotel in Tripoli is still facing low occupancy due to the political uncertainty in that country. However, I believe that, as these uncertainties would hopefully wane, all our properties will eventually make a fair contribution to our Group’s financial results.
Notwithstanding all these difficulties, the net asset value as determined by the IFRSs as at the 31st December 2023, when adopting a very conservative approach, still reads €1 per share on our books. Therefore, it is so unfortunate that, due to the lack of liquidity on the local exchange, the shares of IHI are being traded at half their par value.
My assessment of the Company is that we have a very solid management structure as well as the ownership of valuable properties in a number of countries. The operations of our own hotels will keep improving and, therefore, we should be able to achieve an EBITDA of between €90 to €100 million in the very near future. Extra to this is the anticipated additional income from our subsidiary companies, adding a further contribution to EBITDA within the next three years. We believe that these projections should be met, and we would then be able to proceed with a second listing by 2030, at the latest.
In conclusion, since 2020 we have battled against many adverse situations in the hospitality sector, with the toughest being Covid and the subsequent effects of rising costs. Now that we are seeing an improved environment and outlook, I am convinced that all the hard work of the past years will provide the desired benefits for the Company and its stakeholders.
Thank you.
Alfred Pisani Chairman
Indirizz taċ-Chairman għas-sena li għalqet nhar il-31 ta’ Diċembru 2023
Għeżież Azzjonisti,
Għandi pjaċir li nerġa niltaqa’ magħkom fil-Laqgħa Ġenerali Annwali li jmiss. Din se tkun l-24 waħda taħt it-tmexxija tiegħi bħala Chairman minn meta bdiet il-Kumpanija. Waqt li dan kien xogħol ta’ sfida, kien wkoll ta’ sodisfazzjoni kbir.
Nixtieq ninfurmakom li b ’ effett minn Jannar ta’ din is-sena, jien għaddejt ir-responsabiltajiet tiegħi eżekuttivi f’IHI lil Simon Naudi li issa qiegħed fuq il-Bord tad-Diretturi bħala Managing Director. Jien se nibqa’ fil-kariga ta’ Chairman sakemm ikun raġonevolment possibbli.
Jekk Alla jrid, din is-sena Corinthia se tiftaħ diversi lukandi ġodda f ’ New York, Bukarest u Brussell. Il-pjan hu li fis-sena li ġejja niftħu f ’ Ruma, u ftit wara f’Doha u Riyadh, u warajhom b ’ resort mill-isbaħ fil-Maldives. Bħala riżultat ta’ dan, daħħalna numru ta’ General Managers u uffiċjali eżekuttivi għolja, bir-riżultat li qegħdin inħallsu salarji addizzjonali u spejjeż oħra waqt li d-dħul u benefiċji ta’ tmexxija ta’ dawn il-propjetajiet ġodda se jimmaterjalizzaw biss meta dawn il-lukandi jibdew joperaw.
Din il-ħidma hija meħtieġa sabiex niżguraw li l-lukandi ġodda jkunu ta’ livell tal-marka Corinthia. B ’ hekk niksbu għarfien dinji u nkunu nistgħu nattiraw aktar sidien ta’ lukandi biex jitolbu servizzi ta’ management minn għandna. Dan bħalma ġara mill-interess li kien ġenerat mal-ftuħ tal-lukanda tagħna f ’ Londra u bnadi oħra, li kattar sew l-attenzjoni lejn il-marka Corinthia. Il-mira tagħna hi li noperaw ħafna aktar lukandi ta’ terzi li jwassluna aktar malajr li ntajjru l-bandiera ta’ Corinthia f ’ ħafna aktar postijiet. Dan jista jseħħ mingħajr il-bżonn li IHI jkollha tinvesti f’dawn il-propjetajiet ġodda. Dan hu eżattament kif għamlu l-marki ta’ tmexxija ta’ lukandi internazzjonali oħra biex jiksbu tkabbir. Il-pjan tagħna hu li qabel l-2030 immexxu mitt lukanda ta’ terzi.
Jiena kburi ngħid li Corinthia hija rikonoxxuta internazzjonalment. L-ewwel lukanda tagħna, il-Corinthia Palace Hotel, infetħet f ’ Ħ ’ Attard fl-1968. Dak iż-żmien stajna nagħżlu alternattivi eħfef u nqabbdu kumpaniji ta ’ immaniġġjar ta’ lukandi internazzjonali biex imexxu dik il-lukanda u oħrajn li ġew wara u li kienu totalment tagħna, minflok ma noħolqu l-marka Corinthia. Imma minflok, għażilna t-triq aktar iebsa li mmexxu aħna l-ewwel lukanda tagħna u dawk li ġew wara. B ’ hekk ħloqna u kattarna il-marka Corinthia.
Il-kumpanija tagħna tat-tmexxija tal-lukandi, CHL, iffukat li tipprovdi servizzi ta’ tmexxija ta’ lukandi kemm jekk propjeta` ta’ IHI kif ukoll ta’ terzi. Preżentement, bil-lukandi kollha fil-portafoll tagħna u, jekk wieħed ukoll jieħu in konsiderazzjoni l-ftuħ tas-seba’ lukandi li huma propjeta` ta’ terzi, se jkun possibbli għal Corinthia Hotels Limited (CHL) li hi propjeta` tal-IHI tikkontribwixxi €25 miljun EBITDA sal-2026. L-iżvilupp tal-marka tagħna Corinthia żied b ’ mod sostanzjali l-valur tal-Grupp tagħna. U ma’ dan irridu nsemmu l-valur tal-propjetajiet tagħna. L-istrateġija li nwaqqfu kumpanija ta’ ġestjoni tagħna, CHL, issa qed trendi r-riżultati mixtieqa.
Bl-istess mod, kabbarna QP minn sempliċi taqsima nterna tal-Grupp għal sussidjarja ta’ IHI. Illum, QP żviluppat f ’ kumpanija li toffri servizzi globali ta’ disinn, inġinerija u tmexxija minn professjonisti għal klijenti f ’ pajjiżi differenti. Tul dawn l-aħħar snin, QP kisbet kuntratti fir-Rumanija, Belġju, Ruma, Tripli, Doha u Renju Unit. Hemm pjanijiet li tkabbar f ’ Dubai, Stati Uniti tal-Amerika, Oman, Arabja Sawdija u Etjopja. Il-mira ta’ QP hi li tilħaq il-€5 miljun EBITDA sal-2026 u €10 miljuni sal-2030.
Bl-istess mod, qed inħarsu ’l quddiem li l-kumpanija CDI, kumpanjia tagħna għall-iżvilupp ta’ propjeta` immobbli, tikkontribwixxi wkoll għall-EBITDA.
Dawn it-tliet sussidjarji, CHL, QPM u CDI, li huma kollha propjeta` ta ’ IHI, x’aktarx se jiffaċilitaw dħul ta’ madwar €35 miljun f’EBITDA lil IHI, u li jingħaddu ma’ dak li IHI se tiġġenera mill-lukandi li huma propjeta` tagħha.
Għalhekk, mhux biss għelibna sentejn u nofs ta’ Covid u sussegwentement żieda kemm fl-imgħax bankarju kif ukoll spejjeż ohra, imma issa qed inħarsu lejn futur fejn se naraw sapport finanzjarju regolari minn tlett kumpaniji ta’ servizz ta’ IHI, li jressquna aktar viċin għall-ħruġ ta’ dividend regolari.
Flimkien mal-kisba tal-EBITDA li diġa semmejt u bit-tama li l-imgħax bankarju jonqos, aħna għandna pjanijiet biex inbiegħu xi propjetajiet li huma non-core u minn dan il-bejgħ se nkunu nistgħu nħallsu s-self bankarju ta’ madwar €50 miljun u nħallu ammont li jtina marġini biżżejjed li niddeċiedu fuq possibilita’ ta’ tqassim ta’ dividend. Il-bilanċ li jibqa’, jerġa’ jiġi investit għal aktar tkabbir.
IHI, bħala holding company, rat tkabbir fl-EBITDA tagħha minn €51.7 miljun fl-2022 għal €60.3 miljun fl-2023. Ir-riżultat finali kien ikun aktar pożittiv kieku ma kienux għal spejjeż preparatorji neċessarji biex niftħu lukandi ġodda. Barra minn dawn l-ispejjeż, wieħed ma għandux jinsa ż-żieda fl-imgħax bankarju tul dawn l-aħħar snin.
Barra minn hekk, qed inħossu t-tnaqqis fil-kummerċ fil-lukanda tagħna f ’ San Petroburgu, waqt li l-lukanda fi Tripli għadha tbati b’okkupazzjoni baxxa minħabba l-inċertezzi politiċi f ’ dan il-pajjiż. Madankollu, nemmen li dawn l-inċertezzi jistgħu imajnaw u għalhekk il-propjetajiet tagħna kollha eventwalment jagħtu kontribuzzjoni xierqa għar-riżultati finanzjarji tal-Grupp.
Minkejja dawn id-diffikultajiet kollha, il-valur nett tal-assi kif determinat fil-31 ta’ Diċembru 2023 mill-International Financial Reporting Standards bl-adozzjoni ta’ approċċ konservattiv, għadu ta’ €1 għal kull sehem fil-kotba tagħna. Għalhekk hi tassew ħasra li, minħabba nuqqas ta’ likwidita` fil-Borża, l-ishma ta’ IHI qed jiġu negozjati bil-valur ta’ nofs il-valur attwali (par value) tagħhom.
Jien nemmen li l-Kumpanija għandha struttura ta’ tmexxija solida ħafna u propjetajiet ta’ valur għoli f ’ diversi pajjiżi. L-operat tal-lukandi tagħna jibqa’ jitjieb u għalhekk inkunu nistgħu nilħqu EBITDA ta’ bejn €90 u €100 miljun fil-ġejjieni qrib. Barra minnhekk, hemm mistenni dħul addizjonali mill-kumpaniji sussidjarji tagħna fi żmien it-tliet snin li ġejjin. Nemmnu li dawn il-proġezzjonijiet għandhom jintlaħqu u nkunu nistgħu nkomplu bis-second listing sa mhux aktar tard mill-2030.
Biex nagħlaq, ilna sa mill-2020 nissieltu kontra ħafna sitwazzjonijiet negattivi fis-settur tal-ospitalita` - l-agħar kienu l-Covid u l-effetti taż-żieda fl-ispejjeż sussegwenti. Jiena konvint li x-xogħol iebes tas-snin li għaddew se jwassalna għall-benefiċċji mixtieqa kemm għall-Kumpanija kif ukoll għall-partijiet interessati tagħha.
Iffirmat minn Alfred Pisani (Chairman) fit-30 ta’ April 2024.
CEO’s Report
REPORT ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
Dear Shareholders,
The year under review was characterized by a welcome return to normality in the global travel markets following the havoc wreaked by the prior years’ pandemic.
On the other hand, as revenues return, and even outpace pre-pandemic levels in certain countries, the Company continues to exercise a tight handle on operating costs in an environment of adverse geopolitical developments, significant inflationary pressures and rising interest rates.
This report will demonstrate that our business is progressing in revenue growth and resulting contributions to our EBITDA and cashflows. Our total revenue increased by 21% to €288 million in 2023, year on year, and likewise our EBITDA by an equal margin, recorded at €60.3 million in 2023 notwithstanding well documented cost pressures and operational investments we will describe in further detail.
The principal highlights reported in these financial statements are as follows:
The major part of our business is of course hotel ownership and operations and here, we can report significant improvements in operating profits in our hotels’ performance year on year.
The above table excludes revenues from other sources reported in the first table above.
This financial snapshot on Revenues, GOP and EBITDA shows a 21% conversion of revenues to EBITDA. This implies the continued safeguarding of hard-earned operational efficiencies forced upon us during the pandemic, as well as a mitigation of other exceptional circumstances in 2023:
This table describes salient below the line items reported in our financial statements. Our company is heavily invested in real estate financed in part by bank borrowings and bonds. We are therefore subject to annual re-assessments on the “value in use” of our properties, as well as susceptible to interest rate and exchange rate fluctuations, besides charging depreciation.
The table shows:
Separately, the Statement of Comprehensive Income detailed in this report shows:
The Statement of Financial Position reported in our financial statements reports the following:
BUSINESS PLAN
Our Founding Chairman has well explained the key strategies for the IHI Group in his statement.
Firstly, as explained, we are positively investing in our management company CHL. This company operates 25 hotels around the world, of which eight are luxury Corinthia Hotels under development and expected to come on stream over the next couple of years. This investment is in the form of recruitment of added senior level human resources, based mostly out of a new corporate office we have acquired in London, as well as significant global marketing and technology investments to underpin the Corinthia brand, now being exclusively focused on the luxury segment worldwide. Our target is to grow this Brand by providing services to 3rd party hotel owners and developers worldwide.
Secondly, and partly as a consequence to the decision to focus our Corinthia brand solely on luxury operations, we are reassessing our owned property portfolio, and in consequence our overall Statement of Financial Position.
IHI owns 12 hotels and related commercial real estate globally, of which eight are branded as Corinthia Hotels, the rest operated by CHL under different brands or under different marketing strategies.
On a strategic level, your Board has tasked management to re-assess our strategy for all our assets, ensuring that our core, owned Corinthia branded assets, are well-invested and maintained to a level that matches the brand’s aspirations and luxury segment positioning. Where property age and design style has passed its peak, we will be supporting further with industry standard capital improvements, or re-assigning such property to a new brand more appropriate to its positioning.
In reviewing our asset strategies, we are also actively assessing opportunities to sell non-core assets. This is a clear direction from your Board, but one which has to take into account the international investment climate, which currently is penalising hotel valuations on account of higher borrowing costs.
Where a sale is thus not possible in the immediate term, we will assess interim solutions for the management of such non-core hotels, as we did in Prague where we have deferred a potential sale until a lowering of interest rates translates into healthy valuations that would be far in excess of our book values. In the meantime, we have leased the property, which was operated as a Corinthia up until Q1 2024, to a third party local specialist operator and securing an appropriate return on this investment.
All of the above implies a concentrated focus at IHI on our role as asset managers, with a brief to maximise returns in the immediate term for our shareholders.
We would wish to emphasize here that net proceeds from sales of assets will be deployed exclusively towards paying down debt we took on during the pandemic, as well as a combination of dividends and further investments into new real estate projects.
This recycling of our capital, through the ownership cycle of acquisition, development and disposal at a gain, will increasingly become a hallmark of IHI’s central strategy in years ahead. Furthermore, as EBITDA grow in years ahead on account of an improved economic climate and the opening of our new hotels, and as debt is itself paid down, we will no doubt achieve our goal to balance our net debt versus EBITDA to a multiple of a maximum 6 times.
We are also in parallel open to, and actively seeking to add new capital to the Group, either in our parent public company, or equally, on specific projects we are pursuing. Such added funds will be exclusively utilised for growth and investment.
Specifically, we have created a division inside our development company, named C-REV, which is tasked to originate real estate projects, and carry these forward by piecing acquisitions and 3rd party funding, and then acting on behalf of investors in executing such projects in return for fees and profit share arrangements. Preliminary agreements for mixed use real estate developments, which will feature a luxury Corinthia Hotel component, have already been executed in prominent locations around the world awaiting 3rd party funding. We will continue to work on this developer model elsewhere across the globe.
PROJECTS
BRUSSELS
IHI owns 50% of this hotel under development. Besides, our own subsidiary companies are project managing design and construction, acting as owners’ representatives on corporate matters, and finally, will operate the hotel through CHL.
This has been a delicate and complex job in the making. The property we acquired was the famed Grand Hotel Astoria, built as Belgium’s flagship hotel in 1909. By the time of our acquisition, the hotel had been shut and fallen into disrepair. Following extensive negotiations with the local authorities, including the Royal Commission responsible for heritage properties, we agreed a plan to demolish all of the upper floors, whilst retaining and restoring the historic ground floor and façade. We were also granted permission to excavate beneath the ground floor, meaning the property at one point consisted solely of the historic ground floor literally suspended in mid-air while excavations and demolitions were proceeding above and below, and all behind the original façade which was retained and propped up. We are now in the final stages of construction. The building is up and watertight, and extended by two additional floors and other volumes we added on neighbouring land we had acquired along with the original hotel. Fit out and finishing works are proceeding and a pre-launch marketing campaign is underway, led by a fully-fledged management team who are already in place. Partnerships with some of Belgium’s best known culinary leaders, chefs, spa brands and art curators are in place to provide the depth and substance expected of what will become one of Europe’s leading luxury hotels. Opening is slated for Q4 2024.
Our all-in total investment in the project, including design, construction and fit out, as well as land, finance costs and all pre-opening costs is set to be around €150 million, which equates to €1.2 million per bedroom, an industry metric which should be well regarded when viewed against comparable projects across Europe. Half of the investment is being financed by our partner Ares Bank of Spain.
NEW YORK
Our role in New York is through CHL, which has been appointed as the operator of the famed Surrey, an iconic 100-year hotel in Manhattan’s affluent Upper East Side.
Investors Reuben Brothers acquired the property some years back, and appointed Corinthia to support design development and eventually operate the hotel. The property itself has been replanned to feature 100 bedrooms and 14 residences to be sold and serviced by the hotel. World renown designers were appointed and works have been ongoing, here too now reaching their final fit out stage. We are targeting an opening of the hotel through the summer months of 2024, trading as The Surrey, a Corinthia Hotel. The hotel will also include dining and a private members club operated by Casa Tua, an exclusive private members club originating in South Beach, Miami.
We had agreed commercial terms for the entering into of our arrangements on this hotel, which include industry-standard key money versus income to our group via management, marketing and incentive fees over a minimum 25 years.
BUCHAREST
Private investors from Romania had acquired the famed Grand Hotel du Bulevard, Bucharest’s most famous historic hotel, first opened in 1867, but latterly utilized as corporate offices. They subsequently decided to gut the property back to its bones, saving all its protected and historic halls, and external façade, and return the iconic property back to hotel use. Other than its external fabric and historic hallways, most of the rest of the property has been entirely rebuilt.
Our role here has been twofold.
Corinthia was appointed as the operator of the hotel, to be known as the Corinthia Hotel Bucharest. Subsequent to this appointment, the owners asked us to also put forward QP, our project management company, to supervise and drive design and construction.
The property is in its final stages of construction and opening is scheduled for Q3 2024. The hotel is an all-suite product, with 30 keys, and intended to occupy the top spot for luxury accommodation in Romania. The dining options will include a Sass Café brasserie being developed with the well-known Sass Café of Monaco.
ROME
Our role in this project is twofold.
Firstly, our development company CDI has been engaged as the owner’s representative in coordinating design and contractors. Secondly, CHL is the hotel’s tenant, occupying the property on a long-term lease once it is completed. This means Corinthia will retain all revenues, incur all operating costs and retain all profits after paying an agreed rent to the owners.
The property is itself a protected landmark. It is the former seat of the Bank of Italy right opposite Italy’s Parliament in central Rome. It was acquired by the Reuben Brothers some years back and works have been ongoing to repurpose the building into a 60-room and suites luxury hotel, complete with a Carlo Cracco dining operation, him being arguably Italy’s best known chef personality.
Works are ongoing and entering the fit out stage. A hotel management team is in place and pre-opening marketing has commenced. An opening date is to be set shortly, within Q1 2025.
RIYADH, DOHA & MALDIVES
Our work in Doha, the Maldives and Riyadh is ongoing.
Having successfully opened the Corinthia Yacht Club, which is now in its second year, as well as the Gewan Island Golf Club, both on the Pearl Island in Doha, construction works are now focused on the adjoining 100-room Corinthia Hotel and beach club, as well as the completion of 18 branded villas being sold with the hotel. The villas are expected to be completed in 2024 and an opening target date for the hotel has been set for the end of 2025. Our role in all of these projects in Doha is that of a provider of technical services, the hotel operator and licensor for the Corinthia brand name, in return for fees.
Work in Riyadh, capital of Saudi Arabia, is also ongoing. Our project here is among the most iconic of several mega projects ongoing in the Kingdom. We are one of eight prominent hotel brands worldwide selected to manage a series of luxury hotels being built in a clustered, traditional style in a reconstruction of old Diriyah, the ancient capital. The site selected for Corinthia is the most prominent, on the main square of Diriyah, and features 80 bedrooms and suites, as well as 10 villas for sale. Our role here is also that of a provider of technical services, the hotel operator and licensor for the Corinthia brand name, in return for fees. A target opening is set for 2027.
Finally, in the Maldives, the owners of the project are proceeding with the land reclamation underway to form the five islands which will host a 100-key luxury hotel. Our arrangements here are again via an operating agreement entered into by CHL to provide technical services and eventually manage the hotel once it is completed in 2027.
OASIS
Closer to home, we have completed the full design of our landmark Oasis project at a site formerly known as Hal Ferh in our home country Malta. This 85,000m² site is located in pristine, beachfront open countryside, where a former UK Military barracks once stood. Our project is fully respectful of sustainability and environmental considerations, with only a fraction of the site being developed, and limited to single and two storey buildings. The project features a 162-room luxury hotel and 25 villas for sale. The permit process is ongoing, expected by year end, after which financing will be put in place for construction to commence.
Conclusion
We wish to conclude the report by repeating our over-riding message. IHI has passed from some turbulent years in the recent past, firstly the pandemic and then an era of adverse geopolitical events and high inflation. Notwithstanding, we have stayed the course, and in parallel continued to invest in our portfolio and human capital in preparation of our next growth phase with the opening of eight hotels in rapid succession. This augurs well for a strong future, and for this, I wish to personally thank all of my colleagues on the Board and in management, and across the entire company for their support, direction and unbending commitment. IHI is a company made up of thousands of colleagues, and each one of us is proud to contribute to our collective success.
Signed by Simon Naudi (Chief Executive Officer & Managing Director) on 30 April 2024 .
Directors’ Report -Year ended 31 December 2023 The Directors present their report on International Hotel Investments p.l.c. (the ‘Company’) and the Group of which it is the parent for the year ended 31 December 2023.
Principal activities
International Hotel Investments p.l.c. carries on the business of an investment company in connection with the ownership, development and operation of hotels, residential and commercial real estate. The Company owns a number of investments in subsidiary and associate companies (as detailed in the notes to the financial statements), through which it furthers the business of the Group.
Review of business development and financial position
Total reven ue for the year under review increased to €287.8 million from €238.2 million last year, an increase of 21%. Total Revenue represents 107 % of 2019 revenue figures as the group has recovered from the COVID-19 pandemic in most of its operations. In reviewing this performance, it is important to note that the financial performance for 2023, particularly for the Group’s operations in Russia, continued to be affected by the military conflict between Russia and Ukraine which commenced in February 2022. This conflict led to international sanctions on Russia and had an effect on the Group’s results and assets held in Russia as disclosed in Note 5.2. The geopolitical situation between Russia and the west continues to result in a drop in international business which is partially impacting the operational results in Russia. On a positive note, in spite of the situation in and around the Russian market, the hotel continued to strengthen its occupancy levels in 2023 with the occupancy for 2023 amounting to 44% or 73% of the pre COVID-19 occupancy levels, this in view of the local trade that the hotel always enjoyed.
On the strength of the increased revenue, the Group recorded a gain on operating results before depreciation and fair value of €60.3 million, an increase of €8.6 million on the €51.7 million registered last year. In 2023, the Group incurred one-off preopening costs amounting to €1.9 million relating to the opening in Rome and Brussels.
In 2023, the Group is reporting in its Income Statement, an exchange loss of €1.3 million compared to a gain of €15.1 million in 2022. The positive movement in exchange differences in the prior year, was mainly related to the repayment of the bank loan on the St. Petersburg property in May 2022. This repayment had eliminated future exchange rate volatility from the Income Statement on this loan.
In 2023, the Group recognised in its Income Statement, uplifts on its investment properties amounting to €6.4 million. These related mainly to an uplift of €7.9 million on the Tripoli Commercial Centre, on account of consistent cashflows based on long term agreements, offset by a decrease in fair value of the St. Petersburg investment property of €1.7million.
During the current year, the Group also recognised uplifts on the London hotel amounting to €17.3 million, on the Corinthia Hotel Lisbon amounting to €12.2 million and €37.5 million on its Malta properties, on account of continued recovery and improved operational performance. These uplifts were offset by a fair value loss recognised on the property in Hungary amounting to €4.5 million, following the delay in recovery for this operation due to inflationary pressures including a hike in energy prices.
The Group recorded a combined currency translation loss of €20.8 million in Other Comprehensive Income, relative to a loss of €22.6 million registered in 2022 . The weakening of the Rouble in 2023 relative to the reporting currency of the Group, which is the Euro, resulted in a loss on translation of the investment in Russia. This was partially offset by gains on the Pound Sterling in relation to the Group’s operations in London.
The Group registered total comprehensive income of €18.5 million in 2023 against a loss of €20.3 million registered in 2022. The share of total comprehensive income attributable to the shareholders of IHI amounted to €6.4 million for the year under review. The corresponding figure for 2022 was a loss of €17.9 million.
At 31 December 2023, the Group is reporting a pos itive working capital of €6.3 million relative to a negative working capital of €26.5 million reported in 2022.
Future developments
With most of the Group’s owned hotels having fully recovered from the pandemic, conversion ratios from Revenue to operating results before depreciation and fair value movements are expected to continue to improve.
The inflationary pressures, high interest rates and tight labour markets experienced in the past years are expected to persist. We continue to counter or minimise these pressures by retaining as many of the efficiencies and cost discipline gained during the pandemic.
In Malta, the permitting process on the Oasis project is ongoing, expected by year end, after which financing will be put in place for construction to commence.
Going concern
The Directors have reviewed the Company’s and the Group’s operational cash flow forecasts. Based on this review, after making enquiries, and in the light of the current financial position, the existing banking facilities and other funding arrangements, the Directors confirm, in accordance with Capital Markets Rule 5.62, that they have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future.
Principal risks and uncertainties
The Group started trading in 2000, undertaking a strategy of rapid expansion. The hotel industry globally is marked by strong and increasing consolidation and many of the Group’s current and potential competitors may thus have bigger name recognition, larger customer bases and greater financial and other resources than the companies within the Group.
The Group is subject to general market and economic risks that may have a significant impact on the valuations of its properties (comprising hotels and investment property). A number of the Group’s major operations are located in stable economies.
The Group also owns certain subsidiaries that have operations situated in emerging or unstable markets. Such markets present different economic and political conditions from those of the more developed markets and present less social, political and economic stability. Businesses in unstable markets are not operating in a market-oriented economy as known in other developed or emerging markets. Further information about the significant uncertainties being faced in Libya and Russia are included in Note 5 .
The Group is exposed to various risks arising through its use of financial instruments including market risk, credit risk and liquidity risk, which result from its operating activities.
The most significant financial risks as well as an explanation of the risk management policies employed by the Group are included in Note 41 of the financial statements.
Reserves
The movements on reserves are as set out in the statements of changes in equity.
Board of directors
Mr Alfred Pisani (Chairman) Mr Simon Naudi (Managing Director) – appointed 18 January 2024 Mr Richard Cachia Caruana (Senior Independent Non-Executive Director) Mr Frank Xerri de Caro Mr Moussa Atiq Ali Mr Hamad Buamim Mr Douraid Zaghouani Mr Joseph Pisani Mr Mohamed Mahmoud Shawsh Mr Alfred Camilleri - appointed 13 June 2023
Auditors
PricewaterhouseCoopers have expressed their willingness to continue in office. A resolution proposing the re-appointment of PricewaterhouseCoopers as auditors of the Company will be submitted at the forthcoming Annual General Meeting.
Signed on behalf of the Board of Directors on 30 April 2024 by Alfred Pisani (Chairman) and Richard Cachia Caruana (Senior Independent Non-Executive Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
Registered Office 22 Europa Centre, Floriana FRN 1400, Malta
STATEMENT BY THE DIRECTORSOn the Financial Statements and other information included in the Annual Report
Pursuant to Capital Markets Rules 5.68, we, the undersigned, declare that to the best of our knowledge, the financial statements included in the annual report and prepared in accordance with the requirements of International Financial Reporting Standards, as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and results of the Company and its undertakings included in the consolidation taken as a whole and that this report includes a fair review of the development and performance of the business and position of the Company and its undertakings together with a description of the principal risks and uncertainties that they face.
STATEMENT BY THE DIRECTORSOn non-financial information
This report on non-financial information provides an overview of the various actions taken by International Hotel Investments p.l.c. (the ‘Company’) as the parent company, and its subsidiaries (the ‘Group’), to enhance sustainability efforts in its operations and corporate responsibility initiatives. As described in more detail in the annual report, the Group is a hotel and real estate developer, as well as a hotel operator. The Group is also engaged in the ownership and leasing of investment property. The Group is deeply committed to upholding sustainability principles across three vital pillars, essential for its continued growth:
The Group strives to achieve the highest standards in the most sustainable way possible, ensuring that the resulting benefits are enjoyed by its shareholders, clients, and the wider community, alike. The primary objective is to align with multiple Sustainable Development Goals (SDGs) set out by the United Nations in 2015 for the 2030 Agenda for Sustainable Development. These goals are designed to foster development that aims to eradicate poverty, protect the planet, and ensure peace and prosperity. Specifically, the key SDGs that the Company’s activities will focus on tackling include: good health and well-being, quality education, gender equality, clean water and sanitation, affordable and clean energy, decent work and economic growth, industry, innovation and infrastructure, reduced inequalities, responsible consumption and production, climate action, and life on land. All actions should contribute to one or more of these goals without adverse effects, all while tackling climate change and working to preserve our natural environment. This report will delve into the actions and plans developed by the Group to improve its sustainability footprint and meet regulatory disclosure requirements. ENVIRONMENTAL SUSTAINABILITYThe hospitality sector, including the Group which trades as Corinthia, has recognised the critical importance of sustainability, stemming not only from the realities of climate change, but also from the ever-growing awareness of employees, customers and financial institutions regarding environmental and social responsibilities. The Group believes that an authentic approach to sustainability principles is foundational for making a positive impact. This commitment extends beyond environmental conservation to enhancing the well-being of its workforce, customers and the broader society; recognising proper governance as pivotal in achieving this. In view of this, the Group has strategically embraced sustainability into the core of its growth and operational philosophy. This commitment started with a formulation of a sustainability policy in 2021, underscored by a declaration from the Company’s Chairman, whereby it was stated in no uncertain terms that the vision of the Group was to continue ‘uplifting lives within the wider community’ and that it would be ‘bringing sustainability to the forefront of our agenda’ with the goal of attaining ‘long term sustainable success’. The policy outlines important principles such as to ‘continually reduce and mitigate the impact of our activities on the physical and social environment we operate in, without affecting the quality of service we offer’ and ‘safeguarding the well-being of our people and the communities within which we operate’ while we seek the ‘development of new services and initiatives which will alleviate some of the problems we face and create better outcomes for current and future generations’. The establishment of the Head of Sustainability position in 2022 served as a significant milestone in the Group’s sustainability journey, meaning that sustainability within the Group now had a driver and coordinator who would coordinate initiatives across the organisation. The plan was to develop a structured but practical strategy that would provide direction by setting clear targets and mapping out measurable actions needed to attain these targets. The aim is to have a comprehensive, realistic, modern strategy that would serve as a road map for the Group’s sustainability journey. As a living document, the strategy is subject to periodic reviews to take into account and adapt to the ever-changing geopolitical, economic, regulatory, environmental, and operational landscapes. This adaptable approach ensures that the Group’s sustainability efforts remain relevant and effective, paving the way for a sustainable future. The Group has since also contracted external consultants to identify the Group’s obligations for sustainability regulatory reporting under the EU Taxonomy and the Corporate Sustainability Reporting Directive (CSRD). The object was to identify the Group’s reporting framework and identify gaps that require action in the short and medium term. In addition, these consultants were tasked with helping the Group develop its sustainability strategy for the hotel business by setting targets and devising practical action plans. This process started in the last quarter of 2023 and will be completed in second quarter of 2024. CSRD A peer study was conducted with relevant peers to benchmark hotel operations and establish the Group’s present state, which also informed the identification of the list of potential material topics for the organisation. Following this, stakeholder consultations were conducted with various stakeholder groups, which helped further refine and consolidate the list of potential material topics. The Group then conducted its Double Materiality Assessment in accordance with CSRD and established the main material topics for reporting. Double materiality takes into account both the impacts of the Group on the environment and society (outward-looking) and the financial implications that external factors have on the Group (inward-looking), and helped us understand the sustainability-related impacts, risks, and opportunities being faced as an organisation, considering the interests of all stakeholders. This approach helped guide the Group in determining the most pressing issues needed to be addressed and supports the development of effective management through action plans and objectives. Reporting data points were defined and categorised into existing reporting, easily extendable data for the current year, and areas requiring further data collection efforts to enable improved reporting in the coming years. A plan was outlined to tackle these data collection enhancements. In anticipation of the upcoming reporting year, the Company is actively engaged in several initiatives aimed at strengthening our sustainability practices and corporate responsibility. These efforts include but are not limited to:
The Company remains committed to driving meaningful progress in our sustainability journey. Strategy The results of the Double Materiality Assessment, combined with insights from the peer study and stakeholder consultations, have laid the groundwork for a potential strategic framework. This framework is set to be further defined and analysed in the first half of 2024. Once the strategy is clearly defined and approved by our primary stakeholders, the targets and action plans will be elaborated upon, with the aim of consolidating these by end 2024. In parallel, a sustainability organisational framework will be established, starting at Board level and filtering down to all levels of the organisation, ensuring that sustainability is integrated into every facet of our operations. Actions In 2023 the Group set up a Sustainability Committee comprising of representatives of all major internal stakeholders. The Committee, together with the Head of Sustainability, identified easily attainable opportunities and set up a number of focus groups (F&B, drinking water, low energy rooms and waste) to investigate and take actions in this regard. The activities of these focused groups resulted in the following:
A number of other actions were taken in 2023 to improve the sustainability profile of the hotel operations. These included:
Renewables All owned hotels located in Malta within the Group now have photovoltaic panels (PVs) on their rooftops with a total generating capacity of 679kWp. The hotels’ PV systems started operating in Q1 2023 and generated 889,601kWh of electricity over the year with an equivalent reduction of CO ₂ emissions by 345 tons. ENERGY CONSUMPTION AND EMISSIONSThe continued rollout of measurement and control technologies, and directed operational measures, have increased overall energy efficiency, driving down relative emissions. Company policy and the effective management of resources has had a tangible effect and although occupancy rates increased in the year under review, the relative energy use increased by a smaller proportion, as is demonstrated by the KPIs. These KPIs are from all IHI owned Hotels and properties leased to directly owned business entities (QP, CHL, Corinthia Caterers, Costa Coffee).
Note: Figures for transport fuel in 2023 have been reviewed and data collection efforts enhanced.
Total energy consumed for 2023 was 94,658MWh, notwithstanding an increase in occupancy across the whole Group, which increased by 26% as can be seen in the table below. The total CO ₂ e footprint stands at 29,023 tons. Electricity generated by the PV plant from 4 hotels in Malta was fed into the grid. Combined Heat and Power (CHP) generation has been separated from RES for ease of analysis.
The main consumption of energy was electrical, which made up 55% of total energy consumption, as can be seen in the table provided. This was followed by energy required for heating and hot water, totalling 43%. Energy used in kitchens (fuel) was less significant, making up 1% of total energy consumption, and CHP only contributed 0.20%. Data for fuel for transport was improved over previous year with data collected from most parts of the organisation. Notwithstanding this, fuel consumption attributed to transport remains minimal, with a contribution of only 1% of total energy use.
The main fuels used in 2023 were natural gas, representing 32.94% of total energy, followed by light heating oil (LHO) 8.90%, used mainly for boilers in Malta and Libya. LPG accounted for 2.07% of total energy use in hotels. Absolute values in kWh can be seen in the tabulation above.
Note: The following conversion factors have been used:
In 2023, the CO ₂ e equivalent emissions footprint closely mirrored the energy consumption patterns. Electrical energy was the predominant contributor, accounting for 69% of the total CO ₂ e footprint with 20,553 tons, followed by natural gas with 21% and 6,314 tons.
Notes: 2022 data has been updated with latest figures. PV generation is fed to the grid. Total Energy Consumed excludes RES to the grid but includes CHP own use. Net Energy Consumed is Total Energy Consumed less RES to the grid.
In the year under review, the total energy consumed decreased from 151.93 kWh per occupied room in 2022 to 124.15 kWh per occupied room in 2023, representing a decrease of 18%. The corresponding CO ₂ e decrease was 8.82 Kg CO ₂ e /OR. Non-transport fuel also decreased by 18%, while electrical consumption decreased by 19%. The main reasons for this were twofold:
The Group has maintained a strong emphasis on reducing energy use, which not only enhances operational efficiency and sustainability, but also decreases the CO ₂ e footprint, thereby lowering operational costs.
Since 2021, the Group has implemented ongoing operational energy efficiency measures which include:
Energy Management System
The Group also continued the rollout of its hotel energy management system, EDGE MARS, in five (5) hotels:
This digital energy management system uses AI and utilises a comprehensive network of sub-meters installed as part of the same project. It systemically identifies opportunities to improve energy performance and optimise the operation of the central plant and other site equipment, while also improving guest comfort. The system monitors energy use, and a follow up with hotel engineering, performed periodically to ensure that these events are tackled and sorted in a timely manner. All events are tracked and reported on.
The system was fully operational in 2023 at Corinthia St Georges, Corinthia Lisbon and Radisson Blu Resort St Julians. In Corinthia Budapest it started full operation in the last quarter of 2023, however, its implementation at Corinthia St Petersburg was suspended temporarily due to the prevailing circumstances in Russia.
BMS Upgrading
The BMS systems of Radisson Golden Sands in Malta and Corinthia Budapest were being upgraded as part of a renewal project. The systems are expected to be completed in 2024 and this would help improve energy efficiency further.
USING WATER EFFICIENTLY
Note: 2022 data was updated with latest figures and a correction due to misclassification was corrected.
The total water consumption increased by 8%, yet due to higher occupancy rates, the water consumed per guest actually decreased by 16% from 2022 figures. This improvement can be attributed to effective water management and monitoring practices implemented by the organisation.
MANAGING WASTEThe Group is diligently monitoring the evolving waste regulations as they unfold across the various territories in which the Group’s Hotels are located. Despite the dynamic nature of these regulations, the Group is committed to being ahead, especially where the regulations are lacking. To this end, a focus on avoidance, reduction, recycling and reuse has therefore been adopted across the Group’s operations.
The indicated increase in waste is attributed partly to an increase in the number of guests, but also to enhancements in data collection. Previously, not all waste streams were fully recorded, but recent improvements in data collection methodology and procedures are expected to improve accuracy and completeness of the gathered data. In addition, the Group is committed to continuously exploring and implementing solutions that promote waste avoidance and reduction, along with improved opportunities for recycling and reuse. Food waste is receiving particular attention, and a trial project using camera recognition and AI technology is being run to establish better monitoring methods and follow up actions to reduce food waste.
SOCIAL RESPONSIBILITYAs the Group continues to grow, our founding ethos, known as the Spirit of Corinthia, becomes increasingly important. This ethos is based on a set of values inspired by our founder, captured under the concepts of Heart, Head, and Hands. These values are not only the cornerstone of our culture immersion programme, but also underpin our suite of learning programmes and orientation initiatives.
These values guide our colleagues in their daily interactions as they strive to fulfil their purpose of uplifting the lives of fellow colleagues, guests, and surrounding communities. No matter what role, colleagues are all expected to embody ‘The Spirit of Corinthia’ in their place of work.
Our values are also reflected in policies and procedures that are summarised in the Colleague Handbook, with an emphasis on:
As we strive to uplift colleagues’ lives, we focus on the following six areas of employee experience:
Our purpose of uplifting lives, guided by our core values, lie at the heart of every colleague’s journey with the Group. Delivering on our commitments across all aspects of the employee experience is vital to the success and sustainability of Corinthia Hotels. While we operate luxury Hotels in some of the most beautiful places in the world, our success is dependent upon the invaluable effort and contribution of all our colleagues .
COLLEAGUES
As of 31 December 2023, the group employed 2,946 full-time and part-time employees (2,468 in 2022). The distribution of the workforce by gender and categories was as follows:
* Comparative data by age was not collected for 2022
Learning lies at the heart of the Group’s philosophy, and each year we make substantial investments in the development of our workforce. Colleagues who show the willingness and potential to advance their careers are given the opportunity to progress and are often promoted to leadership positions.
Managers are expected to lead by example, treating their immediate reports with care, dignity and respect. Colleagues in leadership positions are expected to act as coaches rather than just superiors, engaging in regular, meaningful discussions with team members to evaluate performance and behaviour, and to identify areas for improvement or further development.
The Group operates businesses in multiple destinations and high-performing colleagues have the opportunity to embark on cross-exposure programmes and undertake management traineeships. Additionally, throughout the year, employees attend in-person and online learning programmes aimed at fine-tuning their operational know-how and contributing towards their personal and professional development.
Colleagues across all levels, from operative and supervisory, to middle and senior management, are given equal opportunity and access to education and training. This ensures that they possess the necessary generic and specialist knowledge and skills for the effective execution of their duties and responsibilities. Training is provided in-house or via third-party training service providers.
INCLUSION AND DIVERSITY
The Group is committed to fostering inclusion and diversity in the workplace, promoting equal employment opportunities regardless of age, disability, gender reassignment, marital or civil partner status, pregnancy or maternity, race, colour, nationality, ethnic or national origin, religion, belief or non-belief, sex, or sexual orientation (Protected Characteristics) or any other characteristics identified by local law and regulation.
As an equal opportunity employer, the Group understands the importance of striking a balance between work and family life. It supports colleagues with parental responsibilities through family-friendly measures, including the granting of parental leave to both male and female members of the workforce.
HEALTH AND SAFETY
The Group prioritises health and safety of both its clients and employees across all its entities and on all its premises. To ensure adequate security, the Group continues to upgrade the physical security systems in all its properties, especially in jurisdictions considered high risk, by investing significantly in enhanced security systems and.
To standardise procedures for handling security concerns across the various jurisdictions where the Group operates, operational emergency action plans have been developed to comply with local and international health and safety standards. These standards are rolled out across its operations and updated on a regular basis.
The Emergency Action Plan is split into three sections namely:
Throughout its operations, the Group encourages its employees, through constant communication and rigorous training, to promptly report any risks so that they can be addressed as they arise.
Additionally, a new health and safety management system was developed to meet today’s international health & safety requirements. The new management plan includes a new health and safety policy, a general statement of intent, new implementation arrangements, a risk assessment, safety checklists, and statutory compliance (e.g. service and maintenance regimes etc.). The management plan has been digitalised so that related work can be completed online via desktops and the shield’s safety app.
COMMUNITIES
The Group is committed to fostering ongoing engagement within the communities where it operates. This commitment involves endorsing local development initiatives and catering to the distinctive needs of each destination it serves through its business efforts. This approach originates from a sincere recognition of the company's ability to create value through its operational practices.
During the year, a wide range of initiatives were undertaken:
GOVERNANCE
The Group maintains that strong governance processes are critical to integrating sustainability topics seamlessly into the business, rather than treating them as separate business issues. The Board plays an essential role in determining strategic priorities and considers sustainability issues as an integral part of the business oversight. To aid the Board, the Audit Committee provides more focussed oversight for the Group’s policies, programmes and related risks that concern key public policy and sustainability matters.
The Audit Committee met 12 times during 2023 with detailed minutes being kept of all proceedings and decisions taken.
RISK MANAGEMENT
The Group acknowledges that the management, prevention and mitigation of risk are integral components of its strategic management processes. To ensure that potential risks and issues are adequately identified and addressed in an effective and efficient manner, the Group has established an Enterprise Risk Management framework which falls under the responsibility of the Risk Management Committee, on behalf of the Board of Directors.
The primary responsibilities of the Risk Management Committee (“RMC”) is to:
In line with the Risk Management Committee Terms of Reference, the RMC is composed of senior management executives with diverse backgrounds and expertise in their respective fields who are responsible for overseeing the implementation of policies and practices aimed at enhancing the enterprise risk management framework in the Group.
As part of its comprehensive risk framework, the Group has drafted a Risk Management Policy and Risk Assessment Procedure to provide an effective structure for managing risk and formalising and communicating the Group’s approach towards risk management. In so doing, the Group has adopted a standard methodology, based on the International Risk Management Standard ISO 31000:2009 and the COSO (Committee of Sponsoring Organisations of the Treadway Commission) standard for Enterprise Risk Management, to guide its risk management practices.
Through the enterprise risk management framework, the Group proactively identifies, mitigates, and manages principal business risks including sustainability and ESG considerations to ensure the Group’s risk register captures a 360-perspective of its risk universe.
DATA PROTECTION
Aligned with the Group’s Enterprise Risk Management strategy, the Group is firmly committed to manage and protect the personal data it processes in line with the General Data Protection Regulation (EU) 2016/679 (“GDPR”), the Data Protection Act (“DPA”) (Cap 586 of the Laws of Malta), and other applicable laws and regulations. In so doing, the Group is elevating its stance to proactively enhance its awareness and foster a culture of data protection as an integral part of its business activities.
The Group considers personal data as any information relating directly or indirectly to an individual, be it the individual’s private, professional or public life. With the broadening of disclosure requirements for each category of data subjects, it has become crucial to inform them of the legal grounds for processing their data, their rights as data subjects, and the data retention periods involved. As a Maltese company, the Group recognises the Office of the Information and Data Protection Commissioner (“IDPC”) in Malta as its Lead Supervisory Authority in relation to data protection matters. Data subjects have a right to lodge a complaint to the IDPC if they believe their data is being handled in a non-compliant manner.
The Group’s commitment towards Data Protection is also shown through the appointment of an internal Data Protection Officer (DPO) who is responsible for ensuring that the Group and the underlying group entities remain in compliance with the applicable data protection legislation at all times.
Furthermore, the Group has implemented a comprehensive data protection governance structure that includes robust reporting processes to the Board and stronger control mechanisms. These measures ensure that the Group’s Board, executive team, senior management, employees, and third parties are aware of their respective obligations under the GDPR and other data protection legislation.
ETHICAL CONDUCT
ANTI-FRAUD AND WHISTLEBLOWER POLICY
The Group’s set of values underpins its high standards of ethical conduct. It respects human rights, embraces diversity and stands firmly against corruption. In September 2014, the Group introduced the Anti-Fraud and Whistleblower Policy.
This was drawn up by the Audit Committee with the purpose of minimising the risk of fraud and maintaining integrity in the Group’s business dealings. The Anti-Fraud and Whistleblower Policy is implemented across all jurisdictions in which the Group operates.
The primary objectives of the policy are to:
The policy also outlines the systems in place that facilitate reporting misconduct and the procedures for investigating and resolving instances of malpractices. As a Group that prioritises good governance, we are committed to ensuring that our staff acts with the utmost integrity. This commitment is supported by thorough training and well-defined guidelines and procedures.
The policy has been widely distributed and is currently available on the Group’s website www.corinthiagroup.com. In 2023, one report was submitted through the whistleblower channel, prompting a comprehensive investigation. Despite diligent efforts, the investigation yielded no conclusive evidence that would implicate any individual as a perpetrator.
ANTI-MONEY LAUNDERING/COMBATING THE FINANCING OF TERRORISM (AML/CFT)
Although the Group is not considered a subject entity under Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) regulations, it has formally adopted and internally communicated a policy which in itself, reflects the commitment of the Group to the prevention of money laundering and terrorist financing. This policy is aimed at detecting and preventing the use of the Group and its subsidiary companies, which operate within the travel accommodation, hospitality, industrial catering, leisure industries and asset management activities, including rental/leasing activities (the “Group Entities”), for these purposes. The Group is committed to the highest standards of compliance and seeks to follow best practice wherever possible.
This policy is applicable to, and shall be followed by all employees, members of management and executives of the Group authorised to accept payments, including, without limitation, staff members working at the front desk, reception and lobby areas of the hotels, spas and/or restaurants, within the billing departments and other relevant departments matters relating to the payment for accommodation, hospitality, catering, leisure-related services, and/or any other business activity of the Group may be handled.
Conflicts of Interest POLICY
This policy establishes the procedures and guidelines to manage situations where the interest of the Company or any of the Group entities might conflict with the direct or indirect personal interest of the directors or of persons subject to rules governing conflicts of interest.
Capital Market Rules
These rules establish the minimum standards for the buying and selling of securities and the management of privileged and confidential information. They outline compliance measures in accordance with sections 5.102 to 5.116, ensuring that all financial transactions and information handling are conducted ethically and legally.
CODE OF CONDUCT
The Code of Conduct sets out the highest moral and ethical standards that are expected from all employees. The Group’s rationale behind the Code of Conduct is to set the highest example for employees, guests, and the wider business community. Failure to comply with local laws can result in our business incurring fines or other penalties, suffering restrictions on our business activities and, in some cases, the withdrawal of the right to operate.
Colleagues must avoid unethical practices and attitudes, not only to avoid potential consequences, but because acting ethically aligns with the core values of the Group.
The Code of Conduct is applicable to all colleagues and extends to the Group’s wider business operations. It is intended to foster a culture of transparency and integrity. The Code of Conduct comprises our guiding principles and strict adherence is expected from all colleagues.
COLLEAGUE HANDBOOK
All colleagues receive a copy of the employee handbook which provides an introduction to the culture of the Company, as well as information on key policies and procedures, including anti-fraud, anti-bribery, whistleblowing, fair competition, equal opportunity, customer/employee data privacy, as well as anti-modern slavery.
All colleagues are familiarised with the content of the colleague handbook during the orientation programme, thus ensuring that they are aware of the expectations of the Group related to ethical and professional conduct.
It is the responsibility of management to behave in an exemplary manner, lead by example, and ensure adherence to policies and procedures. |
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CONSOLIDATED DISCLOSURES PURSUANT TO ARTICLE 8 OF THE TAXONOMY REGULATION
INTRODUCTION
In order to achieve the targets established by the European Union (‘EU’) of reaching net zero greenhouse gas (‘GHG’) emissions by 2050, with an interim target of reducing GHG emissions by 55%, compared to 1990 levels, by 2030, the EU has developed a classification system, by virtue of the EU Taxonomy Regulation [1] , or (‘the EU Taxonomy’) which establishes the criteria for determining whether an economic activity qualifies as environmentally sustainable.
The EU Taxonomy establishes criteria in terms of six environmental objectives, against which entities will be able to assess whether economic activities qualify as environmentally sustainable.
In order to qualify as such, an economic activity must be assessed to substantially contribute to at least one of these environmental objectives, whilst doing no significant harm (‘DNSH’) to the remaining objectives. This is achieved by reference to technical screening criteria established in delegated acts to the EU Taxonomy. The economic activity is also required to meet minimum safeguards established in the EU Taxonomy.
The six environmental objectives considered by the EU Taxonomy are the following, where climate-related environmental objectives (i-ii below) are established in the Climate Delegated Act [2] (‘CDA’), whilst non-climate environmental objectives (iii-vi below) are established in the Environmental Delegated Act [3] (‘EDA’). This financial year is the first reporting period in which the Group is required to report in the context of the EDA, which was formally adopted in 2023.
A Delegated Act to the EU Taxonomy was issued in 2021, supplementing Article 8 of the Taxonomy Regulation (‘the Disclosures Delegated Act [4] ’), which establishes the disclosure requirements of entities within the scope of the Taxonomy Regulation.
This currently comprises entities subject to an obligation to publish non-financial information pursuant to the Non-Financial Reporting Directive (‘NFRD’) [5] , emanating from article 19a or 29a of the Accounting Directive [6] .
The Disclosures Delegated Act was further updated in 2023 by the Complementary Climate Delegated Act to include certain energy activities relating to fossil gas and nuclear energy.
In the following section, the Group, as a non-financial parent undertaking, presents the share of its turnover, capital expenditure (CapEx) and operating expenditure (OpEx) for the reporting period ended 31 December 2023, which are associated with the following, in accordance with the Disclosures Delegated Act.
This does not include subsidiary level Taxonomy KPIs in the contextual information, which are only required where the parent undertaking identifies significant differences between the risks or impacts of the Group and those of the subsidiaries, in line with FAQ 12 in the Commission Notice on the interpretation and implementation of certain legal provisions of the Disclosures Delegated Act under Article 8 of EU Taxonomy Regulation on the reporting of Taxonomy-eligible and Taxonomy-aligned economic activities and assets (second Commission Notice) [7] . The Group is currently still in the process of identifying such risks and impacts as part of its preparation for CSRD reporting.
The Group does not identify any significant differences between the risks or impacts of the Group and those of its subsidiaries. In addition, none of the Group’s subsidiaries are currently obliged to publish non-financial information pursuant to the NFRD. Neither do they avail of the subsidiary exemption emanating from paragraph (9) of Article 19a, or paragraph (8) of Article 29a, of the Accounting Directive, respectively.
OUR ACTIVITIES
OVERVIEW
The Group also provides comparatives for the financial year ended 31 December 2022.
DEFINITIONS
‘Taxonomy-eligible economic activity’ means an economic activity that is described in the delegated acts supplementing the Taxonomy Regulation (that is, either the Climate Delegated Act or the Environmental Delegated Act), irrespective of whether that economic activity meets any or all of the technical screening criteria laid down in those delegated acts.
The Climate Delegated Act is structured such that Annex I contains a list of activities and the respective technical screening criteria in relation to the Climate Change Mitigation objective, whereas Annex II relates to the Climate Change Adaptation objective, with potentially different activities being considered in the different annexes.
The Environmental Delegated Act similarly comprises respective lists of activities and technical screening criteria in relation to the non-climate environmental objectives therein.
‘Taxonomy-aligned economic activity’ refers to a taxonomy-eligible activity which complies with the technical screening criteria as defined in the Climate Delegated Act or Environmental Delegated Act and it is carried out in compliance with minimum safeguards regarding human and consumer rights, anti-corruption and bribery, taxation, and fair competition. To meet the technical screening criteria, an economic activity must contribute substantially to one or more environmental objectives while ‘doing no significant harm’ to any of the other environmental objectives. Furthermore, the activity must be performed in a manner that meets minimum safeguards in relation to human rights, bribery & corruption, fair competition and taxation.
‘Taxonomy-non-eligible economic activity’ means any economic activity that is not described in the delegated acts supplementing the Taxonomy Regulation.
TAXONOMY-ELIGIBLE AND TAXONOMY-ALIGNED ECONOMIC ACTIVITIES
TAXONOMY ELIGIBILITY OF TURNOVER-GENERATING ACTIVITIES
The Group has examined all economic activities carried out to see which of these are taxonomy-eligible and also taxonomy-aligned in accordance with Annexes I and II to the Climate Delegated Act and Annexes I to IV to the Environmental Delegated Act. The table below indicates the activities performed by the Group which have been identified as taxonomy-eligible and the environmental objective to which the activity may be associated with. Information on the extent to which the economic activities are also taxonomy-aligned is provided in the KPI templates further below.
Taxonomy-eligible activities were identified by extracting the total turnover, CapEx and OpEx required to be captured in the denominators of the respective KPIs and assessing the NACE code of the activities to which the amounts relate. The Group then assessed which of the identified NACE codes relate to activities included within the annexes to the Climate Delegated Act. For the identified eligible activities, the Group then began the process to begin assessing them against the technical screening criteria.
Through the activity highlighted in the table below, the Group generates turnover, and generally incurs both CapEx and OpEx for these activities.
*% of the total turnover, CapEx and OpEx included in the denominator of the respective KPI
Economic activities classified under activity 2.1 ‘Hotels, holiday, camping grounds and similar accommodation’ relate to the generation of income related to short-term accommodation with associated services, through hotel operations.
The CapEx classified as taxonomy-eligible in respect of activity 2.1 entails the refurbishment and upkeeping of property though which the Group offers short term accommodation.
Economic activities classified under activity 7.6 ‘Installation, maintenance and repairs of renewable energy technologies’ relate to the generation of income from PV panels owned by the Group.
The CapEx classified as taxonomy-eligible in respect of activity 7.6 entails the capital investments in relation to solar photovoltaic systems and ancillary technical equipment. In the current year, this relates purely to the acquisition of a new solar photovoltaic system by the Group, partly classified as a ‘right-of-use-asset’ and which supplies electricity to the national grid, generating income.
Economic activities classified under activity 7.7 ‘Acquisition and ownership of buildings’ relate to the generation of rental income through investment property leased by the Group.
The CapEx classified as taxonomy-eligible in respect of activity 7.7 entails capital investments which relate to necessary components to execute the respective turnover-generating economic activity. In the current year, this relates purely to the acquisition of a new property by the Group, partly classified as ‘Investment Property’ and which is currently leased and generating rental income.
The largest change in the Group’s turnover from taxonomy-eligible activities, vis-à-vis the prior period, owes to activity 2.1, which increased from 0% to 86.5% of turnover. Such an increase in taxonomy-eligibility is driven by the inclusion of short-term accommodation services offered by hotels as an eligible activity within the Environmental Delegated Act.
The Group’s OpEx from eligible activities has increased substantially vis-à-vis the prior period, given that the Group opted to classify all OpEx as non-eligible in the prior period due to allocation method constraints.
OTHER TURNOVER GENERATING ACTIVITIES PERFORMED BY THE GROUP CLASSIFIED AS TAXONOMY NON-ELIGIBLE
The Group’s other taxonomy non-eligible activities include:
TAXONOMY ELIGIBILITY OF INVESTMENT ACTIVITIES NOT DIRECTLY RELATED TO TURNOVER-GENERATING ACTIVITIES
Further to the activities from which the Group generates turnover, and generally incurs both CapEx and OpEx, the Group also engages in investment activities not directly related to its turnover-generating activities as highlighted below.
*% of the total CapEx and OpEx included in the denominator of the respective KPI
Included in the above are amounts that relate to the acquisition of motor vehicles, and additions to right-of-use assets in respect of motor vehicles, which are utilised by the Group to enable it to perform certain operations towards its customers. The CapEx in this respect has been classified under activity 6.5 ‘Transport by motorbikes, passenger cars and light commercial vehicles’ as opposed to being allocated to a turnover-generating activity (for which the Group would make use of such vehicles at times in performing its duties). The Group has classified the amounts in this manner since the assessment to determine Taxonomy-alignment of the vehicles acquired would only be possible to be performed against the technical screening criteria developed under activity 6.5.
In a similar manner, CapEx has been allocated to activities classified under category 7 ‘Construction and real estate activities’ given that they are not directly associated with a turnover-generating activity. In particular, construction activities related to works on new hotels are allocated to activity 7.1 ‘Construction of new buildings’, renovation works such as upgrades, structural alterations and related finishing, to the Group’s hotels are allocated under activity 7.2 'Renovation of existing buildings’, installation of air-conditioning systems are allocated under activity 7.3 'Installation, maintenance and repair of energy efficiency equipment’. The Group’s additions in right-of-use assets relating to leases on property are allocated under 7.7 ‘Acquisition and ownership of buildings’.
The largest change in the Group’s CapEx from eligible activities, vis-à-vis the prior period owes to activity 7.2, which increased from 0% to 62.8% of CapEx. Such an increase in taxonomy-eligibility is largely driven by increased construction and civil engineering works on existing properties owned by the Group.
TAXONOMY ALIGNMENT
Determining whether an activity meets the requirements to be classified as taxonomy-aligned requires considerable detailed information about the activity in order to properly assess it against the established technical screening criteria.
The Group is currently still in the process of gathering the necessary information in order to conclude that activities may be considered as taxonomy-aligned and verifying its accuracy. As a result of the ongoing process, the Group has not been able to substantiate the alignment of any of its activities in the current year.
OUR KPIs AND ACCOUNTING POLICIES
The key performance indicators (‘KPIs’) comprise the turnover KPI, the CapEx KPI and the OpEx KPI. In presenting the Taxonomy KPIs, the Group uses the templates provided in Annex II to the Disclosures Delegated Act.
Moreover, since the Group is not performing any of the activities related to fossil gas and nuclear energy (activities 4.26-4.31), the Group only publishes Template 1 of Annex XII of the Disclosures Delegated Act as regards activities in certain energy sectors.
In section A.1 ‘Environmentally sustainable activities (Taxonomy-aligned)’ of respective Turnover, CapEx, and OpEx templates, columns 5 and 6 are marked as ‘N’ given that the Group does not have any Taxonomy-aligned balances, whilst remaining columns 7-17 are marked as ‘-’ since, under Substantial Contribution criteria, Taxonomy-alignment reporting is not required for non-climate environmental objectives and under DNSH criteria and Minimum Safeguards, there is no current Taxonomy-alignment assessment to be reported.
TURNOVER KPI TEMPLATE FOR FINANCIAL YEAR 2023
CAPEX KPI TEMPLATE FOR FINANCIAL YEAR 2023
OPEX KPI TEMPLATE FOR FINANCIAL YEAR 2023
Template 1 Nuclear and fossil gas related activities for financial year 2023
The specification of the KPIs is determined in accordance with Annex I to the Disclosures Delegated Act. The Group adopts the methodology to determine taxonomy-alignment in accordance with the legal requirements and describes its policies in this regard as follows:
TURNOVER KPI
DEFINITION
The proportion of taxonomy-aligned economic activities of the total turnover has been calculated as the part of net turnover derived from products and services associated with taxonomy-aligned economic activities (numerator) divided by the net turnover (denominator), in each case for the financial year from 1 January 2023 to 31 December 2023. Given that the Group has not identified any taxonomy-aligned economic activities, the current proportion of alignment is 0%.
The denominator of the turnover KPI is based on the consolidated net turnover in accordance with paragraph 82(a) of IAS 1. For further details on our accounting policies regarding the Group’s consolidated net turnover, refer to disclosure note 3.14 ‘Revenue recognition’ in the Group’s consolidated financial statements included in this Annual Report.
RECONCILIATION
The Group’s consolidated net turnover captured in the denominator of the KPI of €287,773,000 reconciles with the amount disclosed in the ‘Revenue’ financial statement line item included in the ‘Income Statement’ in the consolidated financial statements included in this annual report. Additionally, the amount also reconciles to Note 6 ‘Segment reporting’ summarised below.
The full amount of €9,710,000 allocated to ‘Rental income from investment property’, in the amounts disclosed above, is disclosed as taxonomy-eligible under activity 7.7 ‘Acquisition and ownership of buildings’ in the Turnover KPI. The amount of €249,125,000 allocated to hotels is disclosed as taxonomy-eligible under activity 2.1 ‘Hotels, holiday, camping grounds and similar accommodation’ and activity 7.6 ‘Installation, maintenance and repair of renewable energy technologies’.
All other revenue allocated to other activities, amounting to €28,938,000 is all disclosed as taxonomy non-eligible in the Turnover KPI.
CAPEX KPI
DEFINITION
The CapEx KPI is defined as taxonomy-aligned CapEx (numerator) divided by the Group’s total CapEx (denominator).
Total CapEx consists of additions to tangible and intangible fixed assets during the financial year, before depreciation, amortisation, and any remeasurements, including those resulting from revaluations and impairments, as well as excluding changes in fair value. It includes acquisitions of tangible fixed assets (IAS 16), intangible fixed assets (IAS 38) and right-of-use assets (IFRS 16) and acquisitions of investment properties (IAS 40). Additions as a result of business combinations would also be captured however, the Group had no such activities in the current year. For further details on our accounting policies regarding the Group’s CapEx, refer to disclosure notes 3.7 ‘Property plant and equipment’,3.8 ‘Investment property’, 3.9 ‘Intangible assets’ and 16 ‘Leases’, in the Group’s consolidated financial statements included within this annual report.
The Disclosures Delegated Act established three categories under which to classify CapEx:
The Group distinguishes between the purchase of output and individual measures as follows:
Eligible CapEx under this category has been disclosed in the table named ‘Individually taxonomy-eligible CapEx/OpEx and the corresponding economic activities’ in the ‘Taxonomy eligibility of investment activities not directly related to turnover generating activities’ section above. The full amount of CapEx considered under this category relates purely to ‘purchase of output’.
Purchases of output qualify as taxonomy-aligned CapEx in cases where it can be verified that the respective supplier performed a taxonomy-aligned activity to produce the output that the Group acquired. Since taxonomy-alignment also includes DNSH criteria and minimum safeguards, the Group is not able to assess the Taxonomy-alignment on its own. For the purchased output in 2023, we were not able to obtain any conclusive confirmation of taxonomy-alignment.
In order to avoid double counting in the CapEx KPI, the Group ensured that CapEx captured as part of “category a”, which relates to turnover-generating activities, was not also included with the activities identified within “category c”, particularly in the case of taxonomy-eligible CapEx relating to the acquisition of a property which is partly leased out to third parties and partly utilised by the Group in the performance of its own operations.
RECONCILIATION
The Group’s total CapEx captured in the denominator of the KPI can be reconciled to the consolidated financial statements of the Group included in this annual report, by reference to the respective disclosures capturing the additions for property, plant and equipment, investment property, intangible assets, and right-of-use assets.
The following is a detailed breakdown of the property, plant and equipment, investment property, intangible assets, and right of use assets amongst the different activities disclosed in the Capex KPI.
OPEX KPI
DEFINITION
The OpEx KPI is defined as taxonomy-aligned OpEx (numerator) divided by the Group’s total OpEx (denominator).
Total OpEx consists of direct non-capitalised costs that relate to all forms of maintenance and repair. This includes staff costs, costs for services and material costs for daily servicing as well as for regular and unplanned maintenance and repair measures. Direct non-capitalised costs in relation to research and development, building renovation measures and short-term leases would also be captured, however, no such costs were incurred in the current year.
In addition to the OpEx items captured in the current denominator of the OpEx KPI, the Group acknowledges that certain additional costs should also be captured, which are not currently included in light of the Group’s developing approach in allocating such expenditure towards taxonomy-eligible activities.
Such costs not currently being included in the OpEx KPI relate to staff costs and repair and maintenance costs in respect of additions to motor vehicles owned by the Group, since in the current year the Group is currently unable to allocate such costs towards taxonomy-eligible activities. Once the Group develops an approach for allocating such costs, these will be captured as OpEx and as part of the KPI accordingly.
The OpEx considered by the Group does not include expenses relating to the day-to-day operation of PPE, such as raw materials, cost of employees operating any equipment and electricity or fluids that are necessary to operate the PPE. Amortisation and depreciation are also not included in the OpEx KPI.
The Group also excludes direct costs for training and other human resources adaptation needs from the denominator and the numerator. This is because Annex I to the Disclosures Delegated Act lists these costs only for the numerator, which does not allow a mathematically meaningful calculation of the OpEx KPI.
Given that the Group has not identified any CapEx as being taxonomy-aligned, naturally, no OpEx is able to be considered as taxonomy-aligned.
RECONCILIATION
The OpEx of the Group recognised during the financial year ended December 2023 is disclosed further in the Group’s consolidated financial statements included within this annual report in disclosure note 7 ‘Expenses by nature’, with the full amount included in the denominator of the KPI, €7,877,000 relating fully to ‘repairs and maintenance’ disclosed in note 7.
The following is a detailed breakdown of the OpEx amongst the different activities disclosed in the OpEx KPI.
STATEMENT BY THE DIRECTORSon compliance with the code of principles of good corporate governance
Listed companies are subject to The Code of Principles of Good Corporate Governance (the ‘Code’). The adoption of the Code is not mandatory, but listed companies are required under the Capital Markets Rules issued by the MFSA to include a Statement of Compliance with the Code in their Annual Report, accompanied by a report of the independent auditors.
The board of directors (the ‘directors’ or the ‘board’) of International Hotel Investments p.l.c. (‘IHI’ or the ‘Company’) restate their support for the Code and note that the adoption of the Code has resulted in positive effects to the Company.
The board considers that during the reporting period, the Company has been in compliance with the Code to the extent that was considered adequate with the size and operations of the Company. Instances of divergence from the Code are disclosed and explained below.
COMPLIANCE WITH THE CODE
PRINCIPLES 1 AND 4: THE BOARDThe board of directors is entrusted with the overall direction and management of the Company, including the establishment of strategies for future development, and the approval of any proposed acquisitions by the Company in pursuing its investment strategies.
Its responsibilities also involve the oversight of the Company’s internal control procedures and financial performance, and the review of business risks facing the Company, ensuring that these are adequately identified, evaluated, managed and minimised. All the directors have access to independent professional advice at the expense of the Company, should they so require.
Further to the relevant section in Appendix 5.1 to the Capital Markets Rules the board of directors acknowledge that they are stewards of the Company’s assets, and their behaviour is focused on working with management to enhance value to the shareholders.
The board is composed of persons who are fit and proper to direct the business of the Company with the shareholders as the owners of the Company. All directors are required to:
The board strives to achieve a balance of ethnicity, age, culture and educational backgrounds in order to reflect the multicultural environment of its ownership and the condition in which it operates.
The board comprises a number of individuals, all of whom have extensive knowledge of hotel operations and real estate development, in particular across the various jurisdictions in which IHI operates. Members of the board are selected on the basis of their core competencies and professional background in the industry so as to ensure the continued success of IHI.
In terms of the Capital Markets Rules 5.117 – 5.134 the board has established an Audit committee to monitor the Company’s present and future operations, threats and risks in the external environment and current and future strengths and weaknesses. The Audit committee ensures that the Company has the appropriate policies and procedures in place to ensure that the Company and its employees maintain the highest standards of corporate conduct, including compliance with applicable laws, regulations, business, and ethical standards. The Audit committee has a direct link to the board and is represented by the Chairman of the Audit committee in all board meetings.
PRINCIPLE 2: CHAIRMAN AND CHIEF EXECUTIVEMr Alfred Pisani occupies the position of Chairman. The role of CEO and Managing Director is held by Mr Simon Naudi.
The Chairman is responsible to:
The CEO and Managing Director is responsible to:
PRINCIPLE 3: COMPOSITION OF THE BOARDThe board of directors consists of one chairman, one Managing Director who occupies the post of CEO, and eight non-executive directors. The present mix of executive and non-executive directors is considered to create a healthy balance and serves to unite all shareholders’ interests, whilst providing direction to the Company’s management to help maintain a sustainable organization.
The non-executive directors constitute a majority on the board and their main functions are to monitor the operations of the Chairman and of the Managing Director/CEO and their performance as well as to analyze any investment opportunities that are proposed by the Managing Director. In addition, the non- executive directors have the role of acting as an important check on the possible conflicts of interest of the Chairman and Managing Director, which may exist as a result of the Chairman’s dual role as executive director of the Company and his role as officer of IHI’s principal shareholder, CPHCL Company Limited and its other subsidiaries.
For the purpose of Capital Markets Rules 5.118 and 5.119, the non-executive directors are deemed independent. The board believes that the independence of its directors is not compromised because of long service or the provision of any other service to the Corinthia Group.
Directors are to be mindful of maintaining independence, professionalism and integrity in carrying out their duties, responsibilities and providing judgement as directors of the Company.
Directors individually declare that they undertake to:
The board is made up as follows:
Mr Stephen Bajada acts as Secretary to the board of directors, effective 20 February 2024.
PRINCIPLE 5: BOARD MEETINGSThe board met five times during the period under review. The number of board meetings attended by directors for the year under review is as follows:
PRINCIPLE 6: INFORMATION AND PROFESSIONAL DEVELOPMENTThe Company ensures that it provides directors with relevant information to enable them to effectively contribute to board decisions. The Company is committed to provide adequate and detailed induction training to directors who are newly appointed to the board. The Company pledges to make available to the directors all training and advice as required.
PRINCIPLE 8: COMMITTEES
AUDIT COMMITTEE The primary objective of the Audit Committee is to assist the board in fulfilling its oversight responsibilities over the financial reporting processes, financial policies and internal control structures. The committee is made up of non-executive directors and reports directly to the board of the financial reporting processes, financial policies and internal control structures. The committee is made up of non-executive directors and reports directly to the board of directors. The committee oversees the conduct of the internal and external audit and acts to facilitate communication between the board, management, the internal audit team and the external auditors.
During the year under review, the committee met 12 times. The internal and external auditors were invited to attend these meetings.
Mr Richard Cachia Caruana acts as Chairman as from 9 June 2022 succeeding Mr Frank Xerri de Caro. Mr Joseph Pisani, Mr Mohamed Mahmoud Shawsh, Mr Frank Xerri De Caro, and Mr Alfred Camilleri (from 13 June 2023) act as members, the Company Secretary, Mr Stephen Bajada acts as Secretary to the committee. The independent directors currently sitting on the Committee are Mr Richard Cachia Caruana, Mr Alfred Camilleri and Mr Mohamed Mahmoud Shawsh.
The board of directors, in terms of Capital Markets Rule 5.118A, has indicated Mr Mohamed Mahmoud Shawsh as the independent non- executive member of the Audit committee who is considered “... to be independent and competent in accounting and/or auditing” in view of his considerable experience at a senior level in the accounting and auditing field.
The Audit committee is also responsible for the overview of the internal audit function. The role of the internal auditor is to carry out systematic risk-based reviews and appraisals of the operations of the Company (as well as of the subsidiaries and associates of the Group) for the purpose of advising management and the board, through the Audit committee, on the efficiency and effectiveness of management policies, practices and internal controls. The function is expected to promote the application of best practices within the organization. During 2023, the internal audit function continued to advise the Audit committee on aspects of the regulatory framework which affect the day-to-day operations of the hotels.
The directors are fully aware that the close association of the Company with CPHCL and its other subsidiaries is central to the attainment by the Company of its investment objectives and implementation of its strategies. The Audit committee ensures that transactions entered into with related parties are carried out on an arm’s length basis and are for the benefit of the Company, and that the Company and its subsidiaries accurately report all related party transactions in the notes to the financial statements.
In the year under review the Audit committee ensured compliance in terms of the General Data Protection Regulation which came into effect in 2018.
The Audit committee oversaw the introduction of risk management processes and the development of this function within the Company in 2022.
Pursuant to Articles 16 and 17 of Title III of the provisions of the Statutory Audit Regulations the Audit committee has been entrusted with overseeing the process of appointment of the statutory auditors or audit firms.
NOMINATION AND REMUNERATION COMMITTEE The function of this committee is to propose the appointment and the remuneration package of directors and senior executives of IHI and its subsidiaries. The members of the committee are Mr Alfred Camilleri (as Chairman from 28 February 2024) succeeding Mr Richard Cachia Caruana, , Mr Joseph Pisani, Mr Richard Cachia Caruana, and Mr Mohamed Mahmoud Shawsh.. Mr Stephen Bajada acts as Secretary to the committee from 20 February 2024.
The Nomination and Remuneration committee met seven times in the course of 2023.
PRINCIPLE 9: RELATIONS WITH SHAREHOLDERS AND THE MARKET
The Company is highly committed to having an open and communicative relationship with its shareholders and investors. In this respect, over and above the statutory and regulatory requirements relating to the Annual General Meeting, the publication of interim and annual financial statements, and respective Company announcements, the Company seeks to address the diverse information needs of its broad spectrum of shareholders in various ways.
Moreover, all representations by shareholders at the Annual General Meeting were satisfactorily addressed on the Company’s website.
The Company has invested considerable time and effort in setting up and maintaining its website and making it user- friendly, with a new section dedicated specifically to investors. In the course of 2023, 17 company announcements were issued through the Malta Stock Exchange.
Individual shareholders can raise matters relating to their shareholdings and the business of the Group at any time throughout the year and are given the opportunity to ask questions at the Annual General Meeting or to submit written questions in advance.
The Company holds an additional meeting for stockbrokers and institutional investors twice a year to coincide with the publication of its financial information. As a result of these initiatives, the investing public is kept abreast of all developments and key events concerning the Company, whether these take place in Malta or abroad.
During 2023 the Company continued issuing the IHI Insider newsletter which is available on the IHI website (https:// insider.ihiplc.com). The purpose of this newsletter is to keep stakeholders fully informed of developments in the Company. The Company’s commitment to its shareholders is shown the special concessions which it makes available to them. In order to better serve the investing public, the board has appointed the Company Secretary to be responsible for shareholder relations.
PRINCIPLE 10: INSTITUTIONAL SHAREHOLDERS
The Company ensures that it is constantly in close touch with its principal institutional shareholders and bondholders (institutional investors). The Company is aware that institutional investors have the knowledge and expertise to analyse market information and make their independent and objective conclusions of the information available.
Institutional investors are expected to give due weight to relevant factors drawn to their attention when evaluating the Company’s governance arrangements in particular those relating to board structure and composition and departure from the Code of Corporate Governance.
PRINCIPLE 11: CONFLICTS OF INTEREST
The directors are fully aware of their obligations regarding dealings in securities of the Company as required by the Capital Markets Rules in force during the year. Moreover, they are notified of blackout periods prior to the issue of the Company’s interim and annual financial information during which they may not trade in the Company’s shares and bonds. Meanwhile, Mr Alfred Pisani, and Mr Joseph Pisani have common directorships with the ultimate parent of the Corinthia Group. Commercial relationships between International Hotel Investments p.l.c. and CPHCL Company Limited are entered into in the ordinary course of business.
A new Conflict of Interest policy was approved by the IHI Board of Directors on 6th September 2022. This policy has now come into effect. This policy aims to increase transparency and integrity within the Group by giving all members the opportunity to disclose any potential Conflict of Interest they may be involved in. The policy lists several situations which may lead to a Conflict of Interest and also stipulates that acceptance of gifts, such as hospitality, free travel, tickets, or invitations to sports or entertainment events or other benefits, is considered a conflict of interest if the value of the gift is equal to or greater than €200 or in total exceeds €200 in a 12-month period.
As at year end, Mr Alfred Pisani had a beneficial interest of 5,061,879 shares. Mr Richard Cachia Caruana had an indirect beneficial interest of 20,000 shares, Mr Frank Xerri de Caro had a beneficial interest of 10,927 shares. None of the other Directors of the Company have any interest in the shares of the Company or the Company’s subsidiaries or investees or any disclosable interest in any contracts or arrangements either subsisting at the end of the last financial year or entered into during this financial year.
PRINCIPLE 12: CORPORATE SOCIAL RESPONSIBILITY
The Company understands that it has an obligation towards society at large to put into practice sound principles of Corporate Social Responsibility (CSR). It has embarked on several initiatives which support the community, its culture, as well as sports and the arts in the various locations where it operates.
The Company recognizes the importance of good CSR principles within the structure of its dealings with its employees. In this regard, the Company actively encourages initiative and personal development, and consistently creates such opportunities. The Company is committed towards a proper work-life balance and the quality of life of its workforce and their families, and of the environment in which it operates.
NON-COMPLIANCE WITH THE CODE
PRINCIPLE 7: EVALUATION OF THE BOARD’S PERFORMANCE Under the present circumstances, the board does not consider it necessary to appoint a committee to carry out a performance evaluation of its role, as the board’s performance is always under the scrutiny of the shareholders.
PRINCIPLE 9: CONFLICTS BETWEEN SHAREHOLDERS Currently there is no established mechanism disclosed in the Company’s memorandum and articles of association to trigger arbitration in the case of conflict between the minority shareholders and the controlling shareholders. In any such cases should a conflict arise, the matter is dealt with in the board meetings and through the open channel of communication between the Company and the minority shareholders via the Office of the Company Secretary.
Approved by the board of directors and signed on its behalf by Richard Cachia Caruana (Non-Executive Director and Chairman of the Audit Committee) and Joseph Pisani (Director) on 30 April 2024.
OTHER DISCLOSURES IN TERMS OF CAPITAL MARKETS RULES
Pursuant to Capital Markets Rule 5.64.1
Share capital structure The Company’s issued share capital is six hundred and fifteen million and six hundred and eighty-four thousand nine hundred and twenty (615,684,920) ordinary shares of €1 each. All of the issued shares of the Company form part of one class of ordinary shares in the Company, which shares are listed on the Malta Stock Exchange. All shares in the Company have the same rights and entitlements and rank pari passu between themselves.
Pursuant to Capital Markets Rule 5.64.3
Shareholders holding 5 per cent or more of the equity share capital as at 31 December 2023:
There were no changes in shareholders holding 5 per cent or more of the equity share capital as at 30 April 2024. Pursuant to Capital Markets Rule 5.64.8 Appointment and replacement of directors In terms of the Memorandum and Articles of Association of the Company, the directors of the Company shall be appointed through an election. All shareholders are entitled to vote for the nominations in the list provided by the nominations committee. The rules governing the nomination, appointment and removal of directors are contained in Article 19 of the Articles of Association.
Amendments to the Memorandum and Articles of Association In terms of the Companies Act the Company may by extraordinary resolution at a general meeting alter or add to its Memorandum or Articles of Association. Pursuant to Capital Markets Rule 5.64.9
Powers of board members The powers of directors are outlined in Article 21 of the Articles of Association.
Statement by the directors pursuant to Capital Markets Rule 5.70.1 Pursuant to Capital Markets Rule 5.70.1 there are no material contracts to which the Company, or anyone of its subsidiaries, was party to and in which anyone of the directors had a direct or indirect interest therein. Pursuant to Capital Markets Rule 5.70.2
Company Secretary and registered office
Stephen Bajada 22 Europa Centre, Floriana FRN 1400,
Malta
Pursuant to Capital Markets Rule 5.97.4 Internal Controls and Risk mitigation practices
Internal Control The board is ultimately responsible for the Company’s system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate risk to achieve business objectives, and can provide only reasonable, and not absolute, assurance against normal business risks or loss.
Through the Audit Committee, the board reviews the effectiveness of the Company’s system of internal controls.
The key features of the Company’s system of internal control are as follows:
Organization The Company operates through the CEOs with clear reporting lines and delegation of powers.
Control Environment The Company is committed to the highest standards of business conduct and seeks to maintain these standards across all its operations. Company policies and employee procedures are in place for the reporting and resolution of improper activities.
The Company has an appropriate organizational structure for planning, executing, controlling and monitoring business operations in order to achieve Company objectives. Lines of responsibility and delegation of authority are documented. The Company has implemented control procedures designed to ensure complete and accurate accounting for financial transactions and to limit the potential exposure to loss of assets or fraud. Measures taken include physical controls, segregation of duties and reviews by management, internal audit and the external auditors.
Risk Identification Company management is responsible for the identification and evaluation of key risks applicable to their respective areas of business. These risks are assessed on a continued basis and may be associated with a variety of internal or external sources including control breakdowns, disruption in information systems, competition, natural catastrophe and regulatory requirements.
A risk management function has been set up and training on risk management is being extended to all the Company’s subsidiaries.
Information and Communication The Company participates in periodic strategic reviews including consideration of long-term financial projections and the evaluation of business alternatives.
Monitoring and Corrective Action There are clear and consistent procedures in place for monitoring the system of internal financial controls. The Audit committee met 12 times in 2023 and, within its terms of reference, reviews the effectiveness of the Company’s system of internal financial controls. The Committee receives reports from management, internal audit and the external auditors.
2023 REMUNERATION STATEMENT
In terms of Rule 8A.4 of the Code, the Company is to include a remuneration statement in its annual report which shall include details of the remuneration policy of the Company and the financial packages of Directors and Senior Executives.
The resolution by the shareholders of the Company at the Annual General Meeting held on 9th June 2022, approved an aggregate figure for fees and remuneration due to the Chairman and Directors of the Company, capped at €1,300,000 per annum. This figure relates to:
REMUNERATION COMMITTEE
The role of the Nomination and Remuneration Committee is to devise the appropriate packages needed to attract, retain, and motivate Directors, whether executive or not, as well as senior executives with the right quality and skills for the proper management of IHI and its subsidiaries. The Nomination and Remuneration Committee operates under its Terms of Reference. These terms define the scope of its authority and the procedures it must follow. This Committee is a sub-committee of the Board and is directly responsible and accountable to the Board.
In 2023 the members of the Nomination and Remuneration Committee were Mr Richard Cachia Caruana as Chairman, and non-executive directors Mr Joseph Pisani and Mr Mohamed Mahmoud Shawsh (appointed on 8th February 2023) as members.
Mr Jean-Pierre Schembri acted as Secretary to the Committee.
The Nomination and Remuneration Committee met seven times in the course of 2023.
REMUNERATION POLICY – DIRECTORS AND SENIOR EXECUTIVES
The Remuneration Policy was approved at the 20th Annual General Meeting of 31st July 2020.
It outlines the main principles upon which the fixed and variable elements of the remuneration of Directors, and senior executives are set. The policy further delineates the various components comprising fixed and variable elements, encompassing bonuses and other benefits.
The Chairman and senior executives are entitled to a fixed base salary based on a predefined amount and is determined based on the experience, knowledge, and responsibilities which the position entails.
Meanwhile, non-Executive directors are entitled to a fixed yearly remuneration fee.
The compensation and employment conditions of the Board of Directors of the Company, including the Chairman, and senior executives are considered to be in line with the pay and employment conditions applied by international companies operating in the same sector as the Company and are considered commensurate to the importance of the role performed by such person/s in a Company of such reputation and standing. In determining its remuneration levels, and to ensure that it attracts the right talent, the Company consults with reputable international recruitment and advisory agencies who provide compensation and benefits related data, in order to ensure that it remains an attractive employer of choice.
The variable performance bonus awarded to the Chairman and the CEO is based on a predefined percentage of EBITDA. The variable performance bonus of senior executives is based on a balanced scorecard system which may include, amongst others, revenue, EBITDA, and net profit after tax. The variable remuneration is considered and approved by the Nomination and Remuneration Committee. The Non-Executive Directors are not entitled to any variable performance bonus.
All senior executives are entitled to non-cash benefits in terms of a number of services offered by the Group. These are mainly limited to discounts for services rendered by the Company and its subsidiaries. The Chairman and Senior executives are entitled for company financed health insurance. Furthermore, the Chairman and the directors of the Company are entitled to complimentary accommodation and F&B at the Company’s hotels, and F&B establishments.
In 2023 the Company did not offer share-based remuneration, profit-sharing, stock options, but offered limited pension benefits to all UK based employees, in line with local legislative requirements.
According to the Company's Articles of Association, directors are appointed by shareholders at general meetings and serve until the subsequent general meeting. No contractual agreements exist between directors and the Company that include provisions for termination payments or other compensations associated with early termination.
The remuneration earned by the Chairman, the non-executive Directors of the Company, and the CEO during 2023 amounted to €2,365,280. A total of €196,000 was recovered from CPHCL Company Limited for management services provided by the Chairman.
The following table provides a summary of the remuneration and emoluments earned and paid to the Directors and the CEO for 2023, including fees paid in connection with their membership of board committees and other subsidiary boards:
Directors’ remuneration levels reflect the number of subsidiary companies’ boards on which the different Directors sit on, as also certain statutory positions, including the Audit and Remuneration Committee.
In terms of the requirements within Appendix 12.1 of the Capital Markets Rules, the following table presents the annual change of remuneration, of the Company’s performance, and of average remuneration on a full-time equivalent basis of the Group’s employees and directors over the four most recent financial years.
*The closest equivalent to EBITDA
The years 2020 and 2021 were materially impacted by COVID-19 and the resultant restrictions.
On the basis of legal advice received by the Company, the remuneration of the directors and CEO discussed within this report is solely determined on the basis of remuneration payable by International Hotel Investments p.l.c. as the parent and its subsidiaries.
Mr Simon Naudi, CEO, has been appointed Managing Director of the Group with effect from 18 January 2024.
A new remuneration policy has been drafted and shall be put to a binding vote of the shareholders at the 2024 Annual General Meeting. This remuneration policy shall be reviewed regularly, and any material amendments thereto shall be submitted to a vote by the annual general meeting of the Company before adoption, and in any case at least every four years.
The Remuneration Statement has undergone a thorough review by the Company’s external auditors to ensure compliance with the stipulations outlined in Appendix 12.1 of the Capital Market Rules.
Signed on behalf of the board of directors by Richard Cachia Caruana (Senior Independent Non-Executive Director) on 30 April 2024.
Registered Office 22 Europa Centre, Floriana FRN 1400, Malta
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Statement of changes in equity - the Group |
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Share capital |
Revaluation reserve |
Translation reserve |
Reporting currency conversion difference |
Other equity components |
Accumulated losses |
Total attributable to owners |
Non- controlling interests |
Total equity |
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€’000 |
€’000 |
€’000 |
€’000 |
€’000 |
€’000 |
€’000 |
€’000 |
€’000 |
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Balance at 1 January 2022 |
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( |
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( |
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Loss for the year |
- |
- |
- |
- |
- |
( |
( |
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( |
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Other comprehensive income |
- |
( |
( |
- |
- |
- |
( |
( |
( |
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Total comprehensive income |
- |
( |
( |
- |
- |
( |
( |
( |
( |
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Balance at 31 December 2022 |
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( |
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( |
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Balance at 1 January 2023 |
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( |
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( |
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Loss for the year |
- |
- |
- |
- |
- |
( |
( |
( |
( |
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Other comprehensive income |
- |
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( |
- |
- |
- |
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Total comprehensive income |
- |
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( |
- |
- |
( |
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Balance at 31 December 2023 |
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( |
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( |
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The accompanying notes are an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board of Directors on 30 April 2024 . The financial statements were signed on behalf of the Board of Directors by Alfred Pisani (Chairman) and Richard Cachia Caruana (Director) as per the Directors’ Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report.
The accompanying notes are an integral part of these financial statements.
Notes to the financial statements
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3.3
Standards, interpretations and amendments to published standards
that are not yet effective
3.4
Principles of consolidation and equity accounting
3.5 Investments in subsidiaries,
associates and joint ventures in the Company’s stand-alone
financial statements
3.6
Foreign currency translation
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3.7 Property, plant and
equipment
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3.8 Investment
property
3.9 Intangible assets
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3.10 Financial
instruments
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3.12 Income
tax
3.13
Provisions
3.14 Contingent
liabilities
3.15 Revenue recognition
3.16 Leases
3.16.1 Accounting policy where
the Group is the lessor
3.17 Employee
benefits
3.18 Government
grants
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3.20 Segment
reporting
4. Critical accounting estimates,
judgements and errors
4.1
Significant estimates and judgements
5. The Group’s operations in Libya and Russia
5.1 The Group’s operations in Libya
The Group’s investments in Libya principally comprise:
Since 2014, Libya experienced severe political instability due to the collapse of the central government during the same year and the country has been going through difficult times ever since. A United Nations-brokered ceasefire deal was reached in December 2015 and the Libyan Political Agreement to form a Government of National Accord was signed. On 31 March 2016, the leaders of the new UN-supported unity government arrived in Tripoli. In May 2018 Libya's rival leaders agreed to hold parliamentary and presidential elections following a meeting in Paris. No election has been held as rival leaders were jostling for territory. In March 2021 however, Libya’s parliament endorsed a new, unified government, and the two previous rival governments agreed to dissolve. This transitional government was due to stay in power until the end of 2021, when national presidential and legislative elections were due to take place. The elections were however postponed again after the head of High National Election Commission ordered the dissolution of the electoral committees nationwide. The elections which were initially scheduled for June 2022, were pushed back to the end of 2022 and later pushed back again. The delay of national elections together with the confirmation of a new government cabinet by the eastern-based House of Representatives in February 2022, has returned Libya to a state of institutional division with two parallel government administrations in the East and West.
Encouragingly in March 2024, the speaker of the eastern based House of Representatives and the head of the western based High Council of State met in Egypt and agreed to unify sovereign positions stressing Libya’s sovereignty, independence and territorial integrity and rejecting any foreign intervention that affects the Libyan political process negatively. Following this agreement a technical committee will be formed within a given timeframe to resolve unsettled matters.
The state of economic uncertainty that continued to prevail during the financial year ended 31 December 2023 continues to impact negatively the Libyan hospitality and real estate sectors which in turn impacts the Group’s financial results in Libya. Having stated the above, and notwithstanding the negative impact of the COVID-19 pandemic and Libyan Dinar devaluation in 2021 which saw the Group’s revenue and profitability reduce significantly, it should be noted that the turnover registered during 2023 by Corinthia Towers Tripoli Limited amounts to €11.86 million (2022: €12.19 million) representing 4.12% (2022: 5.12%) of the Group’s Revenue, with a profit before tax of €10.90 million (2022: profit before tax of €4.33 million). In 2023 a fair value gain on the investment property of €7.92 million was recognised (2022: nil) in view of the consistent cashflows based on long-term agreements. Current year’s revenue includes €7.45 million (2022: €7.90 million) generated from rental contracts attributable to the Commercial Centre that remained in full operation throughout since its opening, generating a steady income from the lease of commercial offices within the Centre to international blue-chip companies. The existence of long-term leases has mitigated the impact of the continued political instability and state of uncertainty on the Commercial Centre. The Commercial Centre remained fully leased out in 2023.
Whilst the Commercial Centre continued to generate positive net contributions as in previous years, the year ended 2023 saw the hotel closing with a negative net financial result of €0.50 million mainly due to loss of occupancy, versus the positive net operational financial result achieved in 2022. Management’s objective for the hotel is to continue to build on the current operational base and to ensure that payroll and other operating costs are managed in the context of reduced operating income levels. At the same time, however, the company continues to invest in maintenance and security costs to ensure that the hotel is kept in a pristine condition to allow it to benefit from increased revenues once the situation improves.
There were no major changes during the last year when it comes to the significant economic and political uncertainty prevailing in Libya. This renders fair valuation of property assets situated in Libya, by reference to projected cash flows from operating the asset or to market sales prices, extremely difficult and judgmental. The operating performance of the assets in Libya has remained relatively stable when compared to last year.
The exposures emanating from the Group’s activities in Libya are summarised in the table below:
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Carrying amount as at |
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31 December |
31 December |
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2023 |
2022 |
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€m |
€m |
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Corinthia Towers Tripoli Limited |
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Property, plant and equipment |
65.4 |
67.1 |
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Investment property |
112.8 |
104.8 |
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Inventories |
1.9 |
1.8 |
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Trade receivables, net of provisions |
0.5 |
0.3 |
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Medina Towers J.S.C. |
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Investment in associate accounted for using |
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the equity method of accounting |
5.0 |
5.2 |
The future performance of the Hotel, the Commercial Centre and other operations referred to above, together with the fair value of the related and other property assets situated in Libya are largely dependent on how soon the political situation in Libya will return to normality and on how quickly the international oil and gas industry recovers once political risks subside.
In assessing the value of the Hotel, the Directors also believe that the outlook has not changed significantly over the past twelve months and therefore they have retained the expectations of a gradual recovery for the Hotel. However, the Directors also recognise that there is interest from a number of sources for short and long-term accommodation. Hotel occupancy rates in the initial months of 2024 have shown signs of improvement and the outlook is encouraging. As a result, the results of the valuation assessment supporting the carrying amount of the Hotel in Libya are substantially in line with the assessments made last year, save for a reduction in the carrying value of €1.84 million representing the depreciation charge for the year under review. In accordance with this assessment, no further impairment charges were deemed necessary in these financial statements after taking into account the impairment charges of €40.50 million recognised in 2014 and further depreciation charges amounting to €23.96 million accounted for between 2016 and 2023.
In the case of the Commercial Centre, on account of consistent cashflows based on long-term agreements an uplift in the carrying amount of €7.92 million was recognised during the current year.
Further information on the key assumptions and judgements underlying the valuation of the property assets is disclosed in Note 15, together with an analysis of sensitivity of the valuations to shifts or changes in the key parameters reflected.
The Group’s investment property also includes a site surrounding the Hotel, with no determined commercial use, having a carrying amount of €29.50 million as at 31 December 2023, which is unchanged from the carrying amount as at 31 December 2022. This fair valuation is based on an independent real estate value of the site taking into account limited available market information.
In view of the prevailing circumstances in Libya, The Medina Tower Project owned by an associate of the Group has slowed down considerably. The key assets within this company as at 31 December 2023 held in Libyan Dinar comprise the project site carried at LYD 67.84 million equivalent to €12.89 million (2022: LYD 67.81 million equivalent to €13.16 million), and Euro denominated cash balances amounting to €7.35 million (2022: €7.90 million). The carrying amount of investment held by the Group in this project amounts to €5.00 million (2022: €5.20 million).
At this point in time, different scenarios in terms of the future political landscape in Libya are plausible, which scenarios, negative and positive, could significantly influence the timing and amount of projected cash flows and the availability of property market sales price information. The impact of these different plausible scenarios on the operating and financial performance of the Hotel, and Commercial Centre, and on the fair valuation of the related property assets would accordingly vary in a significant manner.
It is somewhat difficult to predict when the political situation in the country will start stabilising and forecasting the timing of any economic recovery in Libya is judgemental. Past experience has shown that, because of the keen interest by the international oil and gas industry to return to Libya, the Group's performance in respect of its operations in Libya is likely to recover quickly once the situation in the country improves in a meaningful manner.
5.2 The Group’s operations in Russia
The Group’s investments in Russia principally comprise:
The Corinthia Hotel St Petersburg, a fully owned five-star hotel in St. Petersburg with a carrying amount of €53.46 million (2022: €71.83 million) managed through Corinthia Hotels Limited a subsidiary of IHI p.l.c.;
An adjoining Commercial Centre to the above-mentioned hotel, with a carrying amount of €38.32 million (2022: €52.48 million) operated by IHI Benelux B.V., a subsidiary of IHI p.l.c.; and
A 10% equity investment in Lizar Holdings Limited, a hotel and residential development in Moscow, having a carrying amount of €0.03 million (2022: €0.03 million).
In February 2022, a military conflict erupted between Russia and Ukraine with consequential international sanctions being imposed on Russia. The situation regarding these sanctions and counter-sanctions imposed by Russia itself continues to evolve. The consequences of these sanctions on the group and future effects on operational incomes are difficult to determine and depend on the duration of this conflict. The Group has engaged international legal advisers to assist in managing the situation that the sanctions have brought about.
The geopolitical situation between Russia and the west resulted in a drop in international business. Nevertheless, the hotel still increased occupancy levels over 2022 in view of the local trade that the hotel always enjoyed.
In 2022, due to the evolving situation in and around the Russian market and in view of the escalating sanctions that were being imposed on Russia, the Group settled the bank loan on its property in St. Petersburg. Whilst naturally impacting on the Group’s cashflows, the transaction has also had the beneficial effect of removing exchange rate volatility which the Group had experienced during past years due to this facility.
Both the hotel and the Commercial Centre have remained operational since the eruption of the conflict. The turnover registered during 2023 by IHI Benelux BV and Corinthia St.Petersburg LLC amounts to €14.22 million (2022: €13.26 million), representing 4.94% (2022: 5.57%) of the Group’s Revenue, with a profit before tax of €1.67 million after deducting a fair value movement of €1.72 on the investment property (2022: profit before tax of €4.86 million). Current year’s revenue includes €2.28 million (2022: €3.20 million) generated from rental contracts attributable to the Commercial Centre.
The settlement of the bank loan in 2022 resulted in a gain on exchange of €12.09 million reported in the comparative income statement with net exchange differences on borrowings.
Management’s objective for the hotel and the Commercial Centre is to continue to build on the local trade and to ensure that payroll and other operating costs are managed in the context of the reduced operating income levels. At the same time, the company continues to invest in maintenance to ensure that the hotel is kept in a pristine condition to allow it to benefit from increased revenues once the situation improves and international travelers return.
The exposures emanating from the Group’s activities in Russia are summarised in the table below:
|
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Carrying amount as at |
|
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31 December |
31 December |
|
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2023 |
2022 |
|
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€m |
€m |
|
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IHI Benelux BV |
|
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Property, plant and equipment |
53.5 |
71.8 |
|
Investment property |
38.3 |
52.5 |
|
Inventories |
0.6 |
0.7 |
|
Trade receivables, net of provisions |
0.3 |
0.1 |
|
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Moscow project |
|
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Investment and loans |
6.1 |
6.5 |
The future performance of the Hotel, the Commercial Centre and other operations referred to above, together with the fair value of the related and other property assets situated in Russia are largely dependent on how soon the economic and political situation in and around Russia will return to normality and on how quickly international sanctions are lifted.
In assessing the value of the Hotel, the Directors recognised that the recent developments resulted in a drastic drop in international trade and consequentially a delay in the recovery from COVID-19. The valuation assessment carried out by professional valuers includes a higher element of uncertainty. Nevertheless, the carrying amount of the hotel remained unchanged in 2023 (2022: fair value loss of €9.74 million) whilst a negative fair value movement of €1.71 million on the Commercial Centre was reported in the income statement (2022: €5.90 million).
In view of the prevailing circumstances in Russia, the Moscow hotel project owned by an associate of the Group was suspended.
It is somewhat difficult to predict when the political situation in the country will start stabilising and forecasting the timing of any economic recovery for the Group’s operations in Russia is judgmental. Considering the central and strategic location of the hotel and Commercial Centre, the Group's performance in respect of its operations in Russia is likely to recover quickly once the situation in the country improves in a meaningful manner.
The above assets totalling €92.7 million are based on an exchange rate of 99.1919. Should this vary by 5%, the impact on the Group’s assets would increase or reduce by €4.4 milliion.
6. Segment
reporting
