We have extracted a Company’s Secretary Statement from the 2020 First Quarter report of Lux Island Resorts Limited (NRL.mu) listed on the Stock Exchange of Mauritius:
Tourist arrivals to Mauritius for the quarter ended 30th September 2019 contracted by 1% to 325,000 compared to corresponding quarter last year. Europe remains our main market and arrivals went up by 3% driven by increase in arrivals from France and Italy, which grew by 11% and 18% respectively. However, arrivals from both UK and Germany contracted by 6% to 38,000 and 27,000 respectively. Arrivals from China for the quarter under review continued its downward trend to 12,000 passengers, a drop of 42% on last year due to reduced seat capacity.Arrivals in the Maldives for the quarter increased by 10% to 390,000 with China remaining the main source market with 23% of total arrivals.
Adoption of IFRS 16
The new standard for leases (IFRS 16) came into effect for accounting period beginning 1st January 2019. This new standard requires lessees to recognize nearly all leases on the balance sheet, which reflect the right to use an asset for a period of time and the associated liability. The new IFRS therefore grosses up balance sheets and changes the Income statements and cash flow presentation. The rental lease payment is replaced by depreciation and Interest expense in the income statement.
The Group has adopted the modified retrospective approach to its entire lease portfolio that concerns mainly its leasehold lands. At 1st July 2019, a new lease asset and liability amounting to Rs 2.4bn has been accounted representing the present value of future lease payments required under the leases, taking into account their lease terms. The rental lease payments during the quarter previously charged to the income statement were apportioned between interest and finance lease repayment. The overall impact on the Income Statement for the quarter is an increase in the loss for the period by Rs 7m, representing the difference between the depreciation and finance charges on the lease assets and liabilities less rental lease payments.
The quarter under review is the low season for the hotel industry in the Indian Ocean. All our hotels were operational during the quarter except Merville Beach hotel which is closed for renovation. Our hotels in Mauritius posted an occupancy of 83% up by 2 percentage points on last year and their ADR (Room Revenue per occupied room) increased by 4%. The increase in both occupancy and ADR resulted in an increase in RevPAR (Revenue per Available Room) of 10%.
The performance of our hotels in Reunion Island was similar to last year with a combined occupancy of 79% and an unchanged ADR and RevPAR. Despite strong competition in Maldives, LUX* South Ari Atoll maintained last year’s RevPAR.
Against the above backdrop, total revenue for the quarter under review reached Rs 1.2 billion, same level as last year despite the closure of Merville Beach Hotel. EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) on a like for like basis is down by Rs 2m from Rs 182m to Rs 180m. The depreciation charge for the period under review increased by Rs 15m of which Rs 33m is in respect of the Right of Use Assets. Finance charges increased by Rs 48m compared to last year due to interest on the finance lease liability associated with the Right of use assets. The loss for the quarter under review was lower by Rs 16m from Rs 99m to Rs 83m.
The drop in tourist arrivals in Mauritius during the last quarter is a source for concern and it is imperative that the authorities and the hoteliers work together to reverse the trend. The Maldives will continue to be a challenging market with new rooms coming on the market. However, over time, Maldives tourism has proven to be resilient and the 16% increase in arrivals for the nine months ended 30 September 2019 should mitigate the impact of oversupply. With regards to Reunion Island, the increase in arrivals is very encouraging and we expect this trend to continue.
For the quarter, ending 31st December 2019 the Group should maintain last year’s EBITDA on the basis of current market conditions.