Hotel group Fattal posts NIS 307m first quarter loss

David Fattal Photo; Eyal Izhar

Fattal Holdings sees worse results for the second and third quarters, but there is some revival in bookings in Israel and Europe.

Fattal Holdings, controlled by hotelier David Fattal, who is CEO and chairman of the company, reported a net loss of NIS 307 million for the first quarter of 2020 this morning. This compares with a loss of NIS 88 million in the first quarter of 2019.

Fattal's share price is up by nearly 3.5% on the Tel Aviv Stock Exchange.

The company, which was badly hit by the closure of hotels in Israel and elsewhere because of the coronavirus pandemic, reported an 18% drop in revenue in the first quarter in comparison with the first quarter of 2019, to NIS 839 million. The company made an operating loss of NIS 161 million, which compares with an operating profit of NIS 38 million in the corresponding quarter.

EBITDAR (earnings before interest tax, depreciation, amortization and rent) totalled NIS 165 million in the first quarter of this year, which compares with NIS 259 million in the corresponding quarter.

Fattal says that its EBITDAR will decline substantially in the second and third quarters of the year as a direct result of the closure of most of the group's hotels in the second quarter.

The Fattal hotel chain has some 43,000 rooms in 221 hotels (including hotels under construction) in nineteen countries. In Europe, the chain manages 173 hotels (including hotels under construction).

In the past few weeks, some of the chain's hotels have gradually reopened, and it expects to have 146 hotels open by the end of July. Bookings in Israel for the summer season (June-August) are 50% down on the same period last year.

At the end of March, Fattal held cash and securities worth NIS 1.045 billion. The company's shareholders' equity was NIS 2.7 billion. It plans to raise NIS 100 million in a rights issue in which David Fattal will invest NIS 57 million.

Fattal's share price has fallen 72% so far this year, shrinking the company's market cap to NIS 2.3 billion. Since becoming listed on the Tel Aviv Stock Exchange in February 2018, the stock has fallen 51%.

Fattal reports that since the coronavirus crisis started, it has put 5,500 of its employees in Israel on unpaid leave, and that most of its employees in Europe are on unpaid leave or mandatory vacation, and some have been laid off. The remaining employees have been subject to salary cuts of 20-45%. About 1,000 employees in Israel and Europe have now returned to work.

Shahar Aka, a director of Fattal Holdings and its CFO, said today, "Since the company sees a decline in the second and third quarters as well, we have acted and continue to act to cut expenditure and to increase the company's liquidity. These actions include negotiations on the sale and lease-back of three hotels in Europe, reducing rents by NIS 45 million and deferring payments amounting to NIS 33 million, obtaining state-guaranteed loans in Spain, the Netherlands, Germany, the UK, and Israel totaling more than NIS 400 million, refinancing of assets that are not mortgaged or have a low LTV, and deferment of payments to the banks amounting to about NIS 120 million.

"In the company's view, our cash of NIS 1.045 billion and the additional measures being taken to reduce expenses will enable us to meet all our commitments in the coming year. The chain is aware of the resurgence of the spread of the virus in the countries in which it operates, and according to the UN panel of experts UNWTO local demand for tourism will recover more rapidly than international demand, and by the final quarter of 2020 signs of recovery will appear that will mainly be manifest in 2021. Bookings in Israel for June-August have reached 50% of their levels in the same period last year. In Europe, bookings are at 22% of last year's levels, and in the UK they are at 20%. We are currently seeing a further revival in bookings in Europe, but at the moment we are wary of optimistic assumptions."

Earlier this month, at the second attempt, Fattal Holdings obtained its bondholders' consent to a temporary waiver of financial covenants, in return for an undertaking by the company to increase its rights issue to NIS 200 million if there is a further decline in its business. Fattal has bond debt totaling about NIS 1 billion. Fattal will pay its bondholders additional annual interest of 0.25%, over and above the 0.5% supplement to which they are entitled following the downgrade of the rating for Fattal's debt by Midroog to A3.

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

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

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