Fattal Hotels implements drastic streamlining

David Fattal Photo; Eyal Izhar

The Israeli chain has closed down 160 of its 182 hotels in Israel and Europe.

Israeli hotel chain Fattal Holdings (TASE: FTAL) is one of the biggest losers on the Tel Aviv Stock Exchange (TASE) in the virus crisis which has completely paralyzed the tourism and hotel industry. The company's share price has plunged 82% since the beginning of the year, driving its market cap down to NIS 1.5 billion. David Fattal is the founder, chairman, controlling shareholder, and CEO of Fattal Holdings.

Fattal Holdings held its IPO on the TASE in February 2018, raising NIS 500 million at a valuation of NIS 4.5 billion, after money. The share has since lost 67% of its value. The company has also issued two bond series totaling NIS 960 million, now being traded on the TASE at junk bond yields of 22-35%.

In view of the decline, Fattal is reporting series of streamlining measures aimed at adapting its expenses to its anticipated substantial decrease in revenue. Among other things, the company reports salary cuts varying from 20% to 45% for all of the employees in the group, and is also considering layoffs. Up until now, the company has put 5,500 of its employees in Israel on unpaid leave, including David Fattal's three sons, who are employed in the group in management positions.

Fattal also plans to put most of its employees in Europe on unpaid or compulsory paid leave (to be deducted from their vacation days), depending on the laws and government policy in each country.

160 of 182 hotels closed

David Fattal announced this week that he was waiving his bonus for 2019 (the company's other executives waived 50% of their annual bonus), in addition to the management fees to which he was entitled under the agreement with him until the end of the second quarter of 2020. The cost of Fattal's salary dropped from NIS 10 million in 2018 to NIS 3.1 million in 2019.

As of now, Fattal has closed down 160 of its 182 hotels in Israel and Europe. In the hotels still open, occupancy rates currently range from 5% to 30%. Fattal is considering closing down more hotels, subject to developments.

Fattal listed many more streamlining and cost-cutting measures that it planned to carry out. Management and the board of directors said, "These measures, together with the group's NIS 1 billion in cash, will enable it to meet its obligations in the coming year."

David Fattal said today, "In our 20 years of activity, we have been through wars, slowdowns, a global recession, and the intifada, and we have learned to overcome difficulties and even to utilize them to grow. The tourism industry was always the first to be hit in a crisis, and will also be the first to recover from it. The excellent reports for 2019 do not reflect the situation today, but they certainly reflect the company's growth and profits in peacetime, to which we will sooner or later return."

Yearly operating profit grew 135%

Fattal finished 2019 with NIS 5.4 billion in revenue, 41% more than in 2018, as a result of deals for purchasing hotels in the second half of 2018 and early 2019.

EBITDA totaled NIS 1.7 billion in 2019, 135% more than in 2018. The strengthening of the shekel against the dollar reduced Fattal's profit by NIS 40 million. In the bottom line, the company reported a NIS 38 million net profit, compared with NIS 239 million in 2018, as a result of applying International Financial Reporting Standard 16. Excluding the effect of this standard, net profit in 2019 was NIS 225 million.

Published by Globes, Israel business news - en.globes.co.il - on March 30, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

David Fattal Photo; Eyal Izhar
David Fattal Photo; Eyal Izhar
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