SORTED GROUP HOLDINGS PLC — Audit Report / Information 2014

Feb 24, 2015

Date of Announcement: 24 February 2015 Reference: 67/2015

The following is a Company Announcement issued by Island Hotels Group Holdings plc pursuant to the Malta Financial Services Authority Listing Rules.

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The Board of Directors of Island Hotels Group Holdings p.l.c. (the Company) has today, the 24 February 2015, approved the audited financial statements for the financial year ended 31 October 2014. The board resolved that these audited financial statements be submitted for the approval of the shareholders at the forthcoming Annual General Meeting which is scheduled to be held on 20 May 2015. The said audited financial statements are available for viewing on the company's website www.islandhotels.com or at the company's registered address at Radisson Blu Resort St. Julians, Louis V. Farrugia Street, St George's Bay, St. Julians. A preliminary statement of annual results is being attached herewith in terms of the Listing Rules.

In view of the proposed transaction with International Hotel Investments plc referred to in the commentary section of this company announcement, the directors do not propose the payment of a dividend for the year ended 31 October 2014 (2013 – Nil.) It is pertinent to point out that the value of the company for the purposes of the transaction is based on the financials up to 31 October 2014 and hence the price agreed takes into account the profits registered during the financial year under review.

Shareholders on the Company's share register at the Central Securities Depository of the Malta Stock Exchange as at close of business on Monday 20 April 2015 (this will include trades undertaken up to and including Thursday 16 April 2014), will receive notice of the Annual General Meeting, together with the Financial Statements for the financial year ended 31 October 2014.

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Signed:

_____________________

Kenneth Abela Company Secretary

Island Hotels Group Holdings p.l.c. Registered Address: Radisson Blu Resort St. Julians, Louis V. Farrugia Street, St. George's Bay, St. Julians STJ 3391 Malta Company Registration No.: C44855

Statements of profit and loss and other comprehensive income

Year ended 31 October 2014

	Group 2014 2013		2014	Holding 2013
Continuing operations Revenue Staff costs Food and beverage costs Other operating costs Other operating income	€ 36,558,717 (12,141,548) (3,979,998) (11,643,546) - ——————	€ 30,669,121 (11,282,715) (3,688,755) (9,677,716) - ——————	€ - - - (168,484) 152,465 ——————	€ - - - (231,618) 214,355 ——————
Earnings/(loss) before interest, taxation, depreciation and amortisation Depreciation and amortisation	8,793,625 (3,007,345)	6,019,935 (2,828,871)	(16,019) -	(17,263) -
Operating profit/(loss) Share of losses of associates Investment income Finance costs	—————— 5,786,280 - 67,217 (3,386,502)	—————— 3,191,064 (25,000) 60,538 (2,541,041)	—————— (16,019) - 2,490,714 (2,277,218)	—————— (17,263) - 2,046,204 (1,526,754)
Profit before tax Income tax (expense)/credit	—————— 2,466,995 (936,924) ——————	—————— 685,561 10,205 ——————	—————— 197,477 (67,986) ——————	—————— 502,187 (65,494) ——————
Profit for the year from continuing operations	1,530,071	695,766	129,491	436,693
Discontinued operations Profit/(loss) for the year from discontinued operations	1,202,385 ——————	(141,047) ——————	- ——————	- ——————
Profit for the year attributable to the owners of the holding company	2,732,456 ——————	554,719 ——————	129,491 ——————	436,693 ——————
Other comprehensive income/(expense): Exchange differences on translating foreign operations	1,437,025 ——————	(820,440) ——————	- ——————	- ——————
Total comprehensive income/ (expense) for the year attributable to the owners of the holding company	4,169,481 =========================	(265,721) =========================	129,491 =========================	436,693 =========================
Basic/diluted earnings per share from continuing operations	0.042	0.019
Basic/diluted earnings per share from continuing and discontinued operations	========================= 0.075 =========================	========================= 0.015 =========================

Island Hotels Group Holdings p.l.c.

Statements of financial position

31 October 2014

	Group			Holding
	2014	2013	2014	2013
	€	€	€	€
ASSETS AND LIABILITIES Non-current assets
Goodwill	34,391,243	33,147,407	-	-
Other intangible assets	588,211	725,684	-	-
Property, plant and equipment	71,131,216	86,010,457	-	-
Investments in subsidiaries Investment in associates Investments in jointly	- 150	- 150	52,801,199 -	52,801,199 -
controlled entities	-	-	17,314,460	17,314,460
Loans and receivables	8,941,054	8,970,321	11,024,760	3,432,970
Other cash at bank	137,327	-	-	-
	——————	——————	——————	——————
	115,189,201	128,854,019	81,140,419	73,548,629
	——————	——————	——————	——————
Current assets
Inventories	755,790	1,224,929	-	-
Trade and other receivables	10,709,687	10,085,145	5,659,121	4,239,464
Loans and receivables	26,042	94,264	198,272	1,060,642
Current tax asset	321,265	217,734	242,463	117,102
Cash and cash equivalents	21,898,444	664,930	19,583,881	22,765
Other cash at bank	211,349	-	-	-
	——————	——————	——————	——————
	33,922,577	12,287,002	25,683,737	5,439,973
	——————	——————	——————	——————
Assets classified as held for sale	651,984	-	-	-
Total assets	——————	——————	——————	——————
	149,763,762	141,141,021	106,824,156	78,988,602
	=========================	=========================	=========================	============================
EQUITY AND LIABILITIES Equity attributable to the owners of the holding company
Share capital Currency translation reserve Retained earnings /	36,583,660 1,522,222	36,583,660 85,197	36,583,660 -	36,583,660 -
(Accumulated losses)	2,266,815	(465,641)	633,676	504,185
	——————	——————	——————	——————
Total equity	40,372,697	36,203,216	37,217,336	37,087,845
	——————	——————	——————	——————

Island Hotels Group Holdings p.l.c.

Statements of financial position (continued)

31 October 2014

		Group	Holding
	2014 €	2013 €	2014 €	2013 €
Non-current liabilities Bank loans Other financial liabilities Trade and other payables Deferred tax liabilities	15,667,811 57,192,619 2,648,327 9,731,882 —————— 85,240,639 ——————	25,222,246 25,725,356 4,738,226 11,814,605 —————— 67,500,433 ——————	5,668,392 61,967,568 - - —————— 67,635,960 ——————	9,384,001 30,140,386 - - —————— 39,524,387 ——————
Current liabilities Trade and other payables Bank overdrafts and loans Current tax liabilities Other financial liabilities	14,818,558 7,175,070 28,501 1,207,089 ——————	19,199,815 15,772,138 45,489 2,419,930 ——————	1,230,077 740,782 - - ——————	428,132 1,450,651 - 497,587 ——————
Liabilities directly associated with assets classified as held for sale	23,229,218 —————— 921,208 ——————	37,437,372 —————— - ——————	1,970,859 —————— - ——————	2,376,370 —————— - ——————
Total liabilities	109,391,065	104,937,805	69,606,819	41,900,757
Total equity and liabilities	—————— 149,763,762 =========================	—————— 141,141,021 =========================	—————— 106,824,155 =========================	—————— 78,988,602 ============================

Island Hotels Group Holdings p.l.c.

Statement of changes in equity - Group

Year ended 31 October 2014

Group

Equity attributable to the owners of the holding company

	Share capital	Currency reserve	Retained earnings/ translation (Accumulated losses)	Total
	€	€	€	€
Balance at 31 October 2012	36,340,160 ——————	905,637 ——————	(776,860) ——————	36,468,937 ——————
Issue of ordinary shares	243,500 ——————	- ——————	(243,500) ——————	- ——————
Profit for the year Other comprehensive	-	-	554,719	554,719
expense for the year	-	(820,440)	-	(820,440)
Total comprehensive (expense)/income for the year	—————— -	—————— (820,440)	—————— 554,719	—————— (265,721)
	——————	——————	——————	——————
Balance at 31 October 2013	36,583,660 ——————	85,197 ——————	(465,641) ——————	36,203,216 ——————
Profit for the year Other comprehensive	-	-	2,732,456	2,732,456
income for the year	-	1,437,025	-	1,437,025
Total comprehensive income for the year	—————— -	—————— 1,437,025	—————— 2,732,456	—————— 4,169,481
Balance at 31 October 2014	—————— 36,583,660	—————— 1,522,222	—————— 2,266,815	—————— 40,372,697
	=========================	=========================	=========================	============================

Island Hotels Group Holdings p.l.c.

Statement of changes in equity – Holding company

Year ended 31 October 2014

Holding company

	Share capital €	Retained earnings €	Total €
Balance at 31 October 2012	36,340,160	67,492	36,407,652
Issue of ordinary shares	——————	——————	——————
	243,500	-	243,500
	——————	——————	——————
Profit/total comprehensive income	-	436,693	436,693
for the year	——————	——————	——————
Balance at 31 October 2013	36,583,660	504,185	37,087,845
	——————	——————	——————
Profit/total comprehensive income	-	129,491	129,491
for the year	——————	——————	——————
Balance at 31 October 2014	36,583,660	633,676	37,217,336
	==========================	=========================	============================

Statements of cash flows

Year ended 31 October 2014

	Group				Holding
	2014		2013	2014		2013
Cash flows from operating activities Profit before tax from:	€		€		€	€
Continuing operations Discontinued operations	2,466,995 672,639 ——————		685,561 (240,536) ——————	197,477 - ——————		502,187 - ——————
Profit before tax Adjustments for:	3,139,634		445,025	197,477		502,187
Depreciation and amortisation Movement in provision for bad debts Bad debts written off Loss on disposal of property,	3,252,399 351,468 126,765		3,206,896 2,266 31,045	- - -		- - -
plant and equipment Share of losses of associates Gain on disposal of subsidiary	68,277 - (1,975,400)		56,492 25,000 -	- - -		- - -
Interest income Dividend income Interest expense	(67,217) - 3,386,502		(60,538) - 2,916,081	(340,330) (2,150,384) 2,277,218		(123,127) (1,923,077) 1,526,754
Operating profit/(loss) before working capital movements Movement in inventory Movement in trade and other receivables Movement in trade and other payables	—————— 8,282,428 426,945 (1,581,521) (3,689,954) ——————		—————— 6,622,267 (13,288) (1,444,940) 1,860,712 ——————	—————— (16,019) - (1,419,656) 801,945 ——————		—————— (17,263) - (1,453,274) (19,581) ——————
Cash flows from operations Interest paid Taxation paid	3,437,898 (3,386,502) (110,819) ——————		7,024,751 (2,651,187) (138,937) ——————	(633,730) (2,277,218) (193,347) ——————		(1,490,118) (1,526,754) (168,421) ——————
Net cash flows from operating activities	(59,423) ——————		4,234,627 ——————	(3,104,295) ——————		(3,185,293) ——————
Cash flows from investing activities Purchase of property, plant and equipment Purchase of intangible assets Proceeds from sale of property,	(3,274,476) (61,915)		(4,242,418) (105,079)	- -		- -
plant and equipment Net cash flow on disposal of subsidiary Movement in loans and other receivables	82,423 5,660,788 97,489		119,752 - (895,444)	- - (6,729,420)		- - (1,583,875)
Other cash at bank held as guarantee Dividends received Payment for the issued share capital	(348,676) -		- -	2,150,384	-	- 1,923,077
of an associate Interest received	- 67,217		(25,000) 60,538	- 340,330		- 123,127
Net cash flows from investing activities	—————— 2,222,850 ——————		—————— (5,087,651) ——————	—————— (4,238,706) ——————		—————— 462,329 ——————

Island Hotels Group Holdings p.l.c.

Statements of cash flows (continued)

Year ended 31 October 2014

	Group		Holding
	2014 €	2013 €	2014 €	2013 €
Cash flows from financing activities Movement in bank loans Proceeds from issue of bond Movement in related party balances Movement in obligations under finance lease	(5,216,955) 34,298,521 (3,450,398) 309,513	(1,087,854) - 1,609,978 215,364	(4,425,478) - 31,329,595 -	1,591,715 - 1,154,014 -
Net cash flows from financing activities	—————— 25,940,681	—————— 737,488	—————— 26,904,117	—————— 2,745,729
Net movement in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effect of foreign exchange rate changes	—————— 28,104,108 (10,403,284) 234,369	—————— (115,536) (10,267,390) (20,358)	—————— 19,561,116 22,765 -	—————— 22,765 - -
Cash and cash equivalents at the	——————	——————	——————	——————
end of the year	17,935,193 =========================	(10,403,284) =========================	19,583,881 =========================	22,765 ===========================

Commentary on Financial Statements for period ended 31 October 2014

Background

The group's business remains unchanged and comprises the ownership and operation of hotels in Malta and the provision of accommodation, catering and related services. The group is made up of a holding company that acts as an investment company, together with its subsidiaries and jointly controlled entities.

Review of Business

The results of the group in this preliminary statement represent the results of the holding company together with those of its subsidiaries and its share of jointly controlled entities for the year ended 31 October 2014.

The net profit before tax from continuing operations of €2,466,995 reflected the group's sustained efforts to achieve a profit in all areas of its operations. Despite difficult market conditions continuing to prevail in many of the group's source markets, tourist arrivals in Malta in 2014 were buoyant and reached record levels. This, together with the group's own marketing efforts resulted in slightly higher occupancy levels and significantly better rates in its hotels and thus higher profits. The group also experienced a higher level of Vacation Ownership sales and this, coupled with the efforts initiated in previous years to reduce the cost base of this part of the business, resulted in significantly higher profits. An increased volume of activity in the event catering area of the business was also registered, whilst the Costa Coffee outlets in Malta also began to realise the potential expected from this investment. Focus on that area of the business will now also include Spain. Through its investment in Buttigieg Holdings Limited, after the year end, the group opened its first Costa Coffee outlet in Barcelona with a further 7 outlets contracted to open in the forthcoming months.

On 16 January 2015, the Directors issued a statement whereby the major shareholders of the group had reached an agreement in principle for the sale of the entire shareholding of the group to International Hotel Investments plc (IHI). This transaction is subject to the satisfaction of various conditions, including but not limited to the usual due diligence processes, and is expected to be concluded during the course of the current financial year. The conclusion of this deal will lead to Island Hotels Group Holdings plc (IHGH) becoming a subsidiary of IHI and, in the process, will be placed in a position to leverage the strength of the IHGH operations with those of IHI. The directors believe that through this transaction the combined operations will be placed in a stronger position to achieve further growth in an important segment of the Maltese economy.

In terms of Listing Rule 5.54.6, the financial information of the company and the group for the year ended 31 October 2014 contained within this company announcement has been agreed with the group's auditors and has been extracted from the audited financial statements of the group which were approved by the board of directors on the 24 February 2015.

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Island Hotels Group Holdings p.l.c.