Mumbai / IN. (ihc) India Hospitality Corporation (IHC) announced its mid-year trading update for the six-month period ended September 30, 2007. IHC is continuing the integration of the various businesses under its control and the evaluation of potential future acquisition targets.
Performance of existing businesses
SkyGourmet Catering: «Sky» provides in-flight meals to domestic airlines in India, in particular Jet Airways and Kingfisher Airlines. Sky also has a growing international business.
Sky experienced rapid growth in meals served for the second quarter of 2007 (July-September) compared to the same period last year – Delhi served almost three times as many meals while Mumbai saw an increase of 41 percent and Bangalore volumes grew 89 percent in the same period. Driving this growth were several factors including the addition of new capacity discussed below.
All India volumes for Sky grew nine percent in the quarter ended September 2007 over the previous quarter (April-June 2007) and a strong 67 percent over the prior year´s quarter. Key factors driving the growth in throughput were the acquisition of additional Jet Airways business from Delhi in July and the expansion of sectors servicing Kingfisher and Indian Airlines in Mumbai. In addition, the June opening of a much larger kitchen in Delhi marked a key milestone and will provide the capacity required for the Company´s forecasted growth in that city.
Sky is now firmly established as a leading player in the air catering industry in India with active relationships with all key domestic airlines and a solid presence in three major air traffic hubs – Mumbai, Delhi and Bangalore. The company also has a smaller kitchen in the city of Pune. Three new production facilities – in Kolkata, Chennai and Hyderabad – are currently under development and will expand significantly the network and ability to service both existing and new customers. The airline industry in India is projected to continue its rapid growth and investments will continue to be required at Sky to expand capacity ahead of airline requirements. Margins have shown some volatility as fixed costs have increased due to new capacity not yet being fully utilized, and as customers have grown more demanding on service and price. SkyGourmet remains well-positioned in a rapidly growing industry.
Mars Restaurants: «Mars» operates a portfolio of restaurants in Mumbai, including the «Birdys» chain of bakeries, «Not Just Jazz by the Bay» and «Pizzeria and Pasta Bar». Mars also operates two Gordon House Hotels – one in Mumbai (owned) and another in Pune (management contract).
Performance of Mars was steady for the quarter. The Mumbai hotel performed well with ARR´s rising 33 percent over the same quarter in 2006 (from 3.548 Rupees (INR) to 4.716 INR). Average occupancy for the quarter was robust and over 80 percent. In addition, Mars recently signed a management contract to operate a 66 room Gordon House Hotel in Ghandi Nagar, Bangalore. The hotel is expected to open in April 2009. IHC is pleased with this planned addition as it will secure a footprint in one of India’s key hotel markets.
1’000 Indian Rupees (INR) = 16,93630 Euro (EUR)
1’000 Euro (EUR) = 59’044,80 Indian Rupees (INR)
Sales for the Mars restaurants in Mumbai increased 13 percent over last year, mainly driven by same-store sales growth of 12 percent, and by the addition of five new bakery shops in Mumbai in late 2006 and early 2007. However, the pace of new store openings has slowed this year and no new stores were opened in the last quarter, partly as a result of high rental costs in Mumbai and partly as a result of Group management time and attention being diverted to the rapidly growing business at SkyGourmet. The new management structure outlined below will ensure that both restaurants and hotels receive the time, attention and resources required for future growth.
Acquisition update
Nirula´s: IHC retains an option to buy the Nirula’s Group at the end of the calendar year. Nirula’s would bring an exciting and iconic brand to IHC – a pioneer of the fast food industry in India which opened its first location in 1934. There are currently over 60 Nirula´s fast food outlets throughout Northern India, and its presence continues to rapidly expand.
Noida Hotel: IHC has completed due diligence on the acquisition of the Noida Hotel from Nirula´s and has confirmed its intention to proceed with this purchase on the originally stated terms. For technical reasons, completion may be delayed to coincide with the Nirula´s transaction. The property is ideally situated in close proximity to the upcoming Commonwealth Games village.
SAJ: Navis Capital has chosen not to pursue the acquisition of SAJ and therefore IHC will not be exercising its option to acquire SAJ.
Management
IHC is in the process of building a Group-level organization to complement the strong management teams in its existing businesses and those it plans to acquire. IHC intends to manage the businesses as three operating units (Airline Catering, Restaurants and Hotels), each led by a Senior Executive with overall leadership being provided by an IHC Chief Executive Officer. As a result, recruitment is underway to employ additional senior group management.
Executives from Navis Capital and Hayground Cove will also play increasingly active roles at the Board level as outlined below, building on their extensive experience in these businesses.
Administrative matters
Change of Fiscal Year End: India Hospitality Corp. (IHC) intends to change its Financial Year end to be consistent with that of its operating companies. The current Financial Year will therefore end on 31st March 2008, and reports and accounts will be prepared accordingly.
Change of Directors: Mr. Pawan Munjal, Mr. Manvinder Puri and Mr. Rajeev Talwar resigned on 20 July and were immediately replaced by Mr. Richard Foyston, Mr. Nicholas Bloy and Mr. Bruno Seghin – all the nominees of Navis Capital. On 14 September, Ms. Christa Short resigned and was replaced by Mr. Scott LaPorta.
About India Hospitality Corp.: IHC was created as a blank-check company to acquire Indian businesses or assets in the hospitality, leisure, tourism, travel and related industries, including but not limited to hotels, resorts, timeshares, serviced apartments and restaurants.
In August 2006, IHC raised 103 million USD in an IPO and private placement and is listed on AIM, a market operated by London Stock Exchange PLC, under the ticker IHC. IHC was sponsored and advised by Hayground Cove Asset Management LLC, a New York-based investment management firm with approximately 1,9 billion USD in assets under management as of July 31, 2007.
In July 2007, IHC closed on the acquisition from Navis Capital Partners and its Affiliates of India-based Mars Restaurants Private Limited, an emerging hotel and restaurant company, and SkyGourmet Catering Private Limited, an airline catering company operating out of four locations in India.
About Mars and SkyGourmet: Since its incorporation in 2000, Mars has diversified into bakery outlets and operating and managing food courts and hotels. SkyGourmet was incorporated in 2002 and is headquartered in Mumbai. SkyGourmet currently provides in-flight catering services to a number of domestic and international airlines, including Jet Airways, Kingfisher Airlines, Air India Express, Indian Airlines, Malaysian Airlines and Air France. It has operations in Mumbai, Bangalore, New Delhi and Pune, and 1.700 employees.
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