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Horwath Bastow Charleton IHF Conference – Banking Issues 8 March 2011

Horwath Bastow Charleton IHF Conference – Banking Issues 8 March 2011. Audit | Tax | Advisory. 20%. Then. Net profit % (before finance). 18%. 16%. Now. 14%. 12%. 10%. 8%. 6%. 4%. 2%. 50%. 60%. 70%. Occupancy. Profits Under Pressure. A. C. B.

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Horwath Bastow Charleton IHF Conference – Banking Issues 8 March 2011

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  1. Horwath Bastow Charleton IHF Conference – Banking Issues 8 March 2011 Audit |Tax |Advisory

  2. 20% Then Net profit % (before finance) 18% 16% Now 14% 12% 10% 8% 6% 4% 2% 50% 60% 70% Occupancy Profits Under Pressure A C B • Does excess capacity mean higher occupancy levels will be achieved at current room rates?

  3. Limit to Cash Available to Service Debt • 100 bedroom hotel with turnover of €4m • Loan of €10m over 15 years at rate of 4% • Is it the banks that have a problem?

  4. Hotels & the Banking Sector • How long will it take to return to profit and debt levels similar to 2003?

  5. Over Investment in the Hotel Sector

  6. Financial Institutions (Certus) • How do the Banks deal with their problem? • No appetite for providing working capital

  7. What the Banks Have Learnt

  8. What the Banks Have Learnt

  9. Banking Strategies

  10. Why Banks are forced to appoint Receivers

  11. Working Capital Problems • N • The sustainable level should be c€550k • A reduction of €400k is therefore required • This is the equivalent of 1-2 years profit • Creditors compete with the Banks for payment • Banks address the problem by appointing a Receiver

  12. Receiverships • These 5,000 rooms are likely to have €500m in outstanding loans • Is 50% in the € a good return for the banks? • Are there likely to be 100 hotels in Receivership by the end of 2011?

  13. Discussion

  14. Aiden Murphy Partner Horwath Bastow Charleton aiden.murphy@hbc.ie Horwath Bastow Charleton Chartered Accountants and Business Advisors Marine House Clanwilliam Court Dublin 2 Ireland www.hbc.ie Horwath Bastow Charleton is a member of Crowe Horwath International, a Swiss verein (Crowe Horwath). Each member firm of Crowe Horwath is a separate and independent legal entity. Horwath Bastow Charleton and its affiliates are not responsible or liable for any acts or omissions of Crowe Horwath or any other member of Crowe Horwath and specifically disclaim any and all responsibility or liability for acts or omissions of Crowe Horwath or any other Crowe Horwath member.

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