Elegant Hotels Group agrees management contract for first Antigua hotel

AIM-listed Elegant Hotels Group, an operator of six upscale hotels and a beachfront restaurant in Barbados, reported that it had agreed a new management contract in Antigua while experiencing low bookings due to political uncertainties in the UK arisen from the Brexit result.

In a trading update for the year ended the 30 September, the company said it agreed, in principle, to bring a 123-room luxury hotel in Antigua into its portfolio under a management contract, the company’s first hotel outside Barbados.

Political uncertainties in the UK over the summer months are, the company said, responsible for bookings for the current financial year tracking slightly behind last year and believes it would be prudent to have a cautious outlook, with revenue for the current year expected to be broadly flat.

However, its “core strategy remains robust and is taking action to respond to tighter market forces, with further sales and marketing campaigns underway, and a new website due to be launched in January 2017.

Chief executive Sunil Chatrani said: “Notwithstanding the immediate headwinds that we face, we remain confident in the long-term growth prospects for Elegant Hotels."

The Antigua hotel, currently under construction, is anticipated to open in mid to late 2017 and is expected to be earnings enhancing in the 2018 financial year.

The company said it believes management contracts like this represent an opportunity to expand beyond Barbados, as they require less capital investment than full ownership and is considering a number of other similar targets.

The overall level of net debt, supported by its high quality freehold assets, continues to be at a “comfortable level”, which allows for a full capital expenditure programme in the current year as part of the ongoing refurbishment strategy.

The company added it “remains adequately resourced” in the short to medium term with the gradual return of UK consumer confidence in the longer term, and believes it is positioned to maintain the dividend based on its current estimates.

Long-term benefits from these and future additions to the portfolio justifies the extra costs that have been required to grow the hotel operator, while the company added to its team, which has increased central costs in advance of revenues, management said.

The company’s March $18m acquisition of Waves Hotel and Spa is expected to be earnings enhancing in the 2017 financial year, with potential for further improvement in 2018.

The 193 rooms that will be added to Elegant Hotels' portfolio from Waves and the new management contract represent a 40% increase to 676 since floating on AIM in May 2015.

The company paid an interim dividend of 3.5p and intends to pay second dividend of 3.5p in February 2017, representing a total of 7p the year.

Shares in Elegant Hotels Group down 2.24% to 0933 BST.