Hello all Inderes TV viewers. Today we'll be talking about Sunborn International and I have the company's CEO Hans Niemi here for the interview. Welcome Hans.

Thank you. Good morning, Thomas.

To kick off, what's going on with Sunborn International? How has the beginning of the year been so far? How would you summarize?

Well, we put out our Q1 results and business review. And as we stated there, it was a bit of a mixed first quarter in terms of Gibraltar that has had the previous four quarters have been fantastic with double-digit growth in revenue and EBITDA. All good things come to an end. I guess we saw that in Q1. Really Gibraltar's Q1 was to do with... The market situation that's going around us perhaps, you know, the war in Iran, people's unpredictability in their income and traveling and all those things played out. And then we had some larger corporate groups that we didn't have this year. I'd say that that's kind of normal in the hospitality business where the first quarter is always the sort of quietest and slowest and we obviously have a fixed cost line that spreads over the whole year. So the good thing is that, you know, being slightly behind last year, which was the record-breaking Q1 that we've ever had in Gibraltar, so we were benchmarking against a really, really good quarter. And then this year, the revenue being just a couple hundred thousand pounds less than it was last year, but the impact on the EBITDA line looks pretty dramatic. But you have to remember that the fixed cost line is there. So if you lose a couple hundred thousand pounds of revenue The costs are still there.

The incremental margins are very high.

Exactly. But the impact to the EBITDA line for the H1 and H2 is going to be very, very limited. So we're not worried about that at all. And as a guidance in looking at Q2, that's more in line with what we're expecting to see in Gibraltar. London did really well. I think we did 13% year-on-year growth in revenue and EBITDA is in line with our expectations and hopefully that's going to continue in Q2 as well. So we're expecting decent results for H1.

If we double click on some of the geopolitical tensions going on, how has that affected Sunborn International's business so far? I can imagine with oil prices going up and some flights being cancelled that easily has an impact on demand.

Absolutely, it does. If we look at London and Gibraltar in combination, both are going to be impacted slightly differently. As in London, we have quite a lot of... business coming from the exhibition center, so their business is going to be impacted by these kind of geopolitical crises and fuel costs going up. So far we haven't seen any evidence of that, so we're still pretty much in line with our expectations for Q2. In Gibraltar we're kind of looking at where the situation is developing in terms of the Iran war, fuel prices going up, that's going to impact our carriers British Airways, EasyJet um and so forth, so so far we haven't really seen any major impact after the first quarter sort of first response from the market and some flight cancellations and what at the end of Q1 um so hopefully it's going to play out nicely and I think while that's going on there's the biggest sort of change in the local market in Gibraltar that's happening now with the border opening, which they kept postponing because it's kind of complicated process, I guess, to remove the border and the passport controls and what not. It takes them time to get adjusted for that, but that's gonna be the big uh impact that we're expecting to see.

Yeah. We'll probably return to the border controls a bit further down the line, but maybe staying on the topic of London. So how are you able to improve so well, despite these geopolitical tensions in London, which is Already, I would say at a mature state. I mean, the usage rates are high in those rooms there.

Yeah, London is a very stabilized business. We have a long track record, so it's tweaking and turning and looking at the details of that. There's the seasonality and the structure, which comes from the exhibition market and the general tourism market. But if you look at the overall hospitality in London right now. I think the market is a bit in turmoil. I've read reports lately that you know the overall hotel market in London isn't actually doing so well so in comparison we're doing better than the market. And so I think it's about tweaking a clear management response to cost controls, if the labour costs are going up, the government is making policy changes, we need to react to all of those things. And so all of the good results we've done in London is in the backdrop of the rest of the hospitality market in London not being, you know, growing and going really well. So we're doing well in that respect. And then we've been able to absorb these additional taxes and labor cost increases. And so it's taken a lot of work from the management team and I think we have a really, really good team in both hotels running these businesses.

There is quite a bit of cost pressures in London, right? So are you able to transfer it into your own ADRs?

We've been able to so far to absorb it and that's kind of what I'm saying is that it's not a it's a stable business from our point of view but then we're having to react to the policy changes, tax changes, labor costs and so far we've been able to absorb it and the team continues to look for those savings and of course in increasing the experience for the client, so we're trying to improve the product. That's one way for us to make more bang for the buck in London, is you increase your Level of service, you bring in new packages, you find new client segments and expand your business where you can.

Yeah. And moving on to Gibraltar, considering the profitability decrease there, would you say that this market is more affected by these geopolitical tensions or is more, how would I say, well. of just affected by them in general.

Yeah, I think London and Gibraltar are completely different types of markets.

Yep.

London is an urban centre in one of the major metropolitan cities in the world. Gibraltar is a bucket list destination for tourists and then you have the corporate segment. What we're seeing... In terms of difference between the two markets is that London is very stable, it's very predictable. In Gibraltar you have the seasonality and the impact from, you know, the air carriers changing their routes or capacities and even weather. I mean it's weather permitting. As a bucket list holiday destination Gibraltar is going to be impacted if there's poor weather in the first quarter. That's going to impact people's willingness to fly there because they're looking for sun and sea. not rain and misery. Um so even weather is is impacting it.

Yes, I can imagine you saw more cancellations of bookings. in that market.

Yeah, we did. But then the first quarter is the first quarter. It's the slowest quarter in the year and with the fixed costs and the EBITDA impact that we're seeing from that. So that's not going to really impact the rest of the year. So we're very robustly expecting a good sort of H1 with

Yeah, and I guess

regard

it's

less.

safe to assume that seasonality affects the Gibraltar market more than the London one,

Very

which is

much so.

the last.

Yeah, very much so. And the unpredictability there is greater. And then with these kind of changes of the border controls, we have an idea how that's going to positively impact us, and how long that's going to take, we'll see. We have high expectations for that. And one of the things that happened in Gibraltar lately is that there's been some changes in the gambling and gaming companies taxation. policies and that's had some impact into those companies who are stationed there. They're employing hundreds if not thousands of people and they're our biggest clients, you know. They bring us accommodation, they bring us events. So any impact that impacts our clients in the local market, that's going to impact us as well, so

But moving on to the border deal that the EU and UK are finalizing, what kind of an impact should investors? expect that to have on travel to Gibraltar and your demand overall.

Well, travelling to Gibraltar is going to get a lot easier. As previously, if you flew into Spain, you're going to go through a passport control, there might be queues lining up and the unpredictability of that has had an impact on how many clients we get from the Spanish side. So the land border is going to get a very fluid and open transition. There is no border basically. basically and the border is basically being transferred to the airport and the port and we're expecting there to be more flights. The border deal allows the Gibraltar airport to capitalize on Schengen flights and I've said that, so each and every new flight route that we get into Gibraltar is going to be a huge impactor for demand for occupancy in hotels and restaurants and events, so we're expecting more flights Hopefully sooner than later, and we're expecting the fluidity of the border not only positively impact our clients, but staff as well. And so it's a situation when you're on an island or a peninsula that has a border, then clearly that's going to impact people's willingness to work in that jurisdiction because they have to consider their work time and travel time to work and those things. So that going away, we're expecting impact in terms of labor availability, labor cost, supplier costs, and a lot of our suppliers are coming from the Spanish side. They're going to also get a positive change.

Exactly, so this would have both a demand effect and also an effect on your cost base, hopefully.

Ideally so,

Yes.

yeah. Let's see.

But staying on the topic of Gibraltar, you were able to refinance the bond of this subsidiary. What kind of a deal is this and why did you opt to go for... bank financing or financing company financing instead of issuing a new bond

That's a good question and we have to look at it from a wider context. And first of all, it took a lot longer for us to get this refinancing done because the earlier plan for the company was the Exynos deal which would have basically taken care of the Gibraltar bond at that time. And that has been... postponed and we've agreed a new timeline which we're not going to disclose at the time, but we needed to pretty urgently then find an alternative bridge financing solution. While that was going on, we've been having the discussions for the new development financing. And the type of financing for the new developments in Vancouver and London and Seville and other locations is largely based on the export credit agency funding programs. And these are long-term mature maturity guarantee programs that the governments or the export agencies provide and the bond market simply doesn't have a product that fits that. Typically the bonds that we've seen in the market are three to five to seven years where we're looking at this kind of long-term export financing programs they go up to 15-17 years. And they usually want to have a counterpart in the banking sector, a strong international bank that they can rely on, has sort of ECA experience. And so we've been looking for those partners negotiating with various large international institutions to line up those hundreds of millions of development financing for the ECA. And that was one of the key decision making strategies that we had is that. While we're doing the financing in Gibraltar, we were looking for partners that can then also piggyback into the new development financing and that's exactly what we've done. So we're moving away from the bond market in certain respects, not in all part of our family group, but in this particular company and lining up already the future funding for the new developments. And since we're talking to larger institutions that have appetite. tied for, you know, not tens of millions but hundreds of millions of euros of funding, this sort of starts framing what we're doing here and why we've gone for bank financing instead of the bonds. Plus there's a pricing difference, so we're getting a benefit in terms of the pricing margins have been down from 5% to 3.5%. So you seem quite happy with this new financing deal. Very very happy it was very complicated to get it through because it's also a multi-jurisdictional deal You know, when you're doing land hotel financing in Finland or Sweden or in the UK, it's a very clear-cut pattern. It's a sort of plain vanilla deal where you're looking at floating assets in different jurisdictions where the registration and the flagging and the location and the financing could all be in different jurisdictions. So that's kind of what we've had to deal with. And while this was going on, we had to take the vessel from... the Gibraltar vessel from the Finnish registry because of Brexit, because as far as Gibraltar was part of the European Union, the Finnish maritime registry allows Finnish companies or European companies to have their ships in their registry. But since after Brexit Gibraltar was removed from the European Union, there was a requirement to actually reflag the vessel, so while this was going on we realized that we're going to have to actually take the vessel and reflag it. I get outside of Finland, which we've now done in conjunction with this financing as well.

Sounds like quite a bit of unnecessary bureaucracy here.

Yes, and that takes time. And that's kind of the reason why it's taken months longer than what we anticipated.

Considering this new financing and the fact that you guys do have some foreign exchange rate exposure, is this new financing deal in euros or?

It's

Yeah,

Euros.

yeah, yeah.

Yeah, this is euros.

Okay, and moving on to your future investments. What should investors expect to progress first, your new London assets or... A new Vancouver hotel.

Well, I want to avoid providing any time guidance on these kind of development processes where ultimately it's in the hands of the local regulators and permitting, and these are in the hands of the local government, not ours. Both are going forward consecutively. We've just landed the rezoning approval from the city of Vancouver. And that's a big big win. It's taken us years to get to that point and we're so so happy and excited about that. Now what we're doing in Vancouver is then lining up the other parts, the sort of granular parts of building permitting for various systems that we need, working with environmental agencies and these kind of nitty-gritty permitting phases and waiting for all of the you know the rezoning to be implemented. implemented into bylaws in the city so that's the project we're doing there. In London we're expecting the the renewed planning permission to be granted to us over the next month or two months we're expecting the local council to approve it already end of April and then they postpone those committee meetings because they're also short of staff and there's a lot of pressure and lots of projects that need to deal with so once we have the clarity on when London's permitting comes we are able to say which comes first but it definitely And it looks like we're going to be building two ships at the same time.

Okay, so internally you don't have a need to complete one first.

No.

Yeah.

And so the permitting and then ultimately the financing and the shipyard slots are going to be dictating it, but we're expecting to have two ships pretty much consecutively under building and then an opening.

I feel like we covered a lot of ground here, but prior to letting you go. You guys have an CMD coming up in the beginning of

the ninth of June.

June, yeah.

Hope to see you there.

I'll be there for sure. But what should investors expect from this upcoming capital markets day?

Well, I think there are a couple of key things that we want to deploy to the market and explain to our current and future investors. One is we're going to outline our new strategy. And a bit of expectations where we're gonna be taking this company and and what kind of new products we're gonna be launching, development updates of course, um to make sure that everybody understands what the expected timelines are. Um we will introduce our new team, we'll be expanding our team, bringing in new executives that are gonna help us deliver our strategy over the next years. And then perhaps look at the the rationale for the company's products and where they stand in relation to the rest of the competition. And there's been a lot of activity over the last year. So just going into the details of what we've done in terms of green equity certification with NASDAQ, with Vancouver, with London, with also perhaps we're going to be explaining more about where we are with the Gibraltar joint venture transaction and what we're expecting to see with that.

Lots of exciting stuff coming up. Thank you Hans for

Thanks.

the interview. Always a pleasure talking to you.

Thomas.