TIDMAHCG
RNS Number : 1801W
Action Hotels PLC
23 December 2013
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN
PART, IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA, JAPAN
NOR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF
THE RELEVANT LAWS OF SUCH JURISDICTION
This announcement is an advertisement and not a prospectus or an
admission document and does not constitute a recommendation
regarding any securities. Any investment decision must be made
solely on the basis of the admission document dated 17 December
2013 in connection with the admission of the ordinary share capital
of Action Hotels plc.
This communication is directed only at (i) persons who have
professional experience in matters relating to investments falling
within Article 19(5) of the Financial Services and Markets Act 2000
(Financial Promotion) Order 2005 ("Order") (investment
professionals) or (ii) persons falling within Article 49(2)(a) to
(d) of the Order (high net worth companies, unincorporated
associations etc) (all such persons referred to above being
"Relevant Persons"). Any investment activity to which this
communication relates will only be available to and will only be
engaged with Relevant Persons.
23 December 2013
Action Hotels plc
("Action Hotels" or the "Company")
Admission and First Day of Dealings on AIM
Action Hotels plc (AIM: AHCG), an owner, developer and asset
manager of branded three and four star hotels in the Middle East
and Australia, is pleased to announce the admission of its entire
issued and to be issued ordinary share capital to trading on the
AIM market of the London Stock Exchange, and the commencement of
dealings at 8.00am today, Monday 23 December 2013.
Admission highlights:
-- The Group has raised GBP30.5 million (before expenses)
through a placing of 47,637,195 new ordinary shares at 64 pence per
share;
-- The total number of Ordinary Shares in issue at Admission is
147,637,195, giving the Group a market capitalisation of
approximately GBP94.5 million at the Placing Price;
-- The proceeds of the Placing will be used to fund development of the hotel pipeline;
-- Pro forma net asset value at Admission is $170.1 million (GBP103.7 million);
-- The Company's major shareholder, Action Group Holdings
("AGH"), is not selling any ordinary shares; and
-- Sanlam Securities is Nominated Adviser and sole Broker to the
Company; Chrystal Capital acted as placing sub-agent under Sanlam
Securities.
Overview:
The business of Action Hotels was established in 2005 with the
intention of developing a leading economy and midscale hotel
business focused on the undersupplied and high growth markets in
the Middle East. Hotel room supply in the GCC (Gulf Cooperation
Council) countries is principally geared towards the luxury end of
the market, meaning that the penetration of branded economy and
midscale hotels has been historically low. However, a number of
factors are driving strong demand for quality affordable hotel
accommodation such as an emerging middle class within the GCC, an
increase in intra-regional leisure and business travel and
increased budget airline capacity in the region.
The Company's current operating portfolio consists of six
hotels, of which five are in the Middle East and one in Australia,
with a total of 1,004 rooms. A further two hotels are under
construction and due to open by the end of 2014 which are expected
to add a further 470 rooms. In addition, the Group has a
development pipeline of six hotels which are expected to add 1,032
rooms, expanding the portfolio to 2,516 rooms by 2016.
The Group develops and actively manages its hotel portfolio,
working with established international branded hotel operators
under long-term management agreements, including Accor SA (ibis),
InterContinental Hotels Group (Holiday Inn and Staybridge Suites)
and Whitbread (Premier Inn).
The operating hotels in the Middle East have achieved well above
average market occupancies, with strong operating performances and
have demonstrated the viability of branded economy and midscale
hotels in each of their locations. The average break-even occupancy
level of 33 per cent. across the portfolio is low compared to the
upscale and luxury hotel segments.
Action Hotels is a profitable and cash generative business. From
2010 until 2012 (year ended 31 December), gross profit increased
from $15.2 million to $21.2 million) and adjusted EBITDA increased
from $3.1 million to $8.8 million (a CAGR of 68.5 per cent.). In
the six months ended 30 June 2013, the Company achieved gross
profit of $11.6 million and adjusted EBITDA of $4.8 million. Pro
forma net asset value at admission is $170.1 million.
The Company intends to use the proceeds of the Placing to fund
its hotel development pipeline. Growth is expected to be driven by
improving the performance of the existing hotel portfolio,
delivering the pipeline of new hotels and through developing new
opportunities by leveraging the Company's growing reputation in the
sector and its strong network of contacts both in the industry and
in its target markets.
Action Hotels believes that it possesses a number of strengths
that give it a competitive advantage, namely:
-- it operates an existing and attractive hotel portfolio;
-- its business is exposed to the high growth economies of the GCC;
-- there are strong drivers for market growth including an
increase in intra-regional leisure and business travel and
expansion of budget airline capacity;
-- there is limited competition with high barriers to entry.
Current demand is serviced by unbranded and independent hotels
which offer inconsistent quality of service and product;
-- it has strong, long-standing relationships with leading
international branded hotel operators;
-- it is an asset-backed business with the majority of hotels under freehold ownership; and
-- its management team has extensive experience in the hotel and hospitality industry.
A copy of the Company's admission document can be found at its
website: www.actionhotels.com.
Commenting on Action Hotel's admission to AIM, Alain Debare,
Chief Executive Officer of Action Hotels plc, said:
"Over the past eight years we have established a successful and
profitable hotel business which is well-placed to take advantage of
the significant growth opportunities for branded economy and
midscale hotels across the Middle East. The move to become a listed
company is the next logical step for us. It will enable us to
solidify Action Hotels' position in the region and to access
capital markets for the development of our hotel pipeline. We have
high aspirations for Action Hotels and this listing on AIM will
provide increased visibility and recognition with our global
partners, driving opportunities for continued growth."
For further enquiries, please contact:
Action Hotels plc +971 (4) 328 9211
Alain Debare, Chief Executive Officer
Alaister Murray, Finance Director
Sanlam Securities +44 (0) 20 7628 2200
Lindsay Mair/Virginia Bull/Richard Goldsmith (Corporate
Finance)
Katie Shelton (Corporate Broking)
Chrystal Capital +44 (0) 20 7850 4762
James Innes
Powerscourt Group +44 (0) 20 7250 1446
Victoria Palmer-Moore
Justin Griffiths
Simon Compton
Defined terms used in this announcement have the same meaning as
set out in the Company's admission document dated 17 December
2013.
Sanlam Securities (UK) Limited, which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority,
is acting exclusively for the Company and no-one else in connection
with this announcement, the Placing and Admission. Sanlam
Securities (UK) Limited will not regard any other person as its
client in relation to the matters described in this announcement
and will not be responsible to anyone other than the Company for
providing the protections afforded to its clients, nor for
providing advice in relation to the Placing and Admission, the
contents of this announcement or any transaction, arrangement or
other matter referred to herein.
About Action Hotels
Action Hotels is an owner, developer and asset manager of
branded three and four star economy and midscale hotels in the
Middle East and Australia. The Group's objective is to become a
leading owner, developer and asset manager of branded economy and
midscale hotels in key Middle East markets and Australia. Action
Hotels has completed six hotels, of which five are in the Middle
East and one is in Australia, with a further two hotels under
construction (both in the GCC), one hotel expansion and another six
Pipeline projects (one in Australia and the remainder in the
GCC).
The business of Action Hotels was established as a wholly owned
subsidiary of Action Group Holding Company (K.S.C.C.), a private
Kuwait based conglomerate which has public and private interests
across a range of sectors including energy, real estate, and
hotels, in the Middle East, Australia and Europe. As at 31 December
2012, AGH held assets of $968 million and produced an operating
income of $50 million.
The Directors believe that Action Hotels has the following key
strengths which form the foundation of its success to date,
competitive differentiation and its growth strategy.
Attractive hotel portfolio
Action Hotels has a portfolio of three and four star hotels
located in the Middle East and Australia. The Group's hotels are
conveniently located, close to key transport links, business areas,
main shopping areas, local attractions or airports. Each of the
Group's hotels is of recent construction and is subject to regular
maintenance and repair schedules.
The Group's portfolio also includes 11 long stay apartments
serviced by the Holiday Inn Muscat. These apartments target another
segment of the economy and midscale accommodation market, offering
an additional revenue stream.
In addition to the two hotels under construction in Bahrain and
Sharjah, the Group is planning a further six hotel projects across
Bahrain, Oman, Saudi Arabia, the UAE and Australia. If completed in
full, it is expected that the Pipeline will add a total of 1,512
rooms by the end of 2016. Based on their experience with the
current portfolio, the Directors expect that these properties will
contribute positively to Action Hotels' earnings within a short
period of the hotels opening.
Exposure to high growth economies
Action Hotels' portfolio gives it exposure to the growing hotel
markets in the GCC. The GCC controls almost half of the world's oil
reserves and despite being among the first to be affected by the
global financial crisis, its member states have been able to
demonstrate sustained economic growth and recovery through
programmes of economic diversification. GDP growth is forecast to
continue in the Group's target markets at an average of 4.0 per
cent. per year between 2012 and 2018, outperforming the more
developed markets in Europe (1.0 per cent.) and the USA (2.9 per
cent.) over the same period.
Strong market growth prospects
The Directors consider the economy and midscale branded hotel
market in the GCC to be a growth sector due to the strong business
drivers, as set out below, and the shortage of such hotels in the
region.
In the Middle East, on the supply side, there is limited
competition from other regional owners of branded economy and
midscale hotels and the current announced pipeline of branded
hotels in the region is predominantly in the upscale and luxury
segments.
On the demand side, the GCC is experiencing rapid urbanisation
due to a growing population and emerging middle class, which has
resulted in a significant boom in construction and infrastructure
projects across the region (over US$2.9 trillion of planned
infrastructure projects announced by the GCC region's governments
in 2011), leading to an increase in regional business and leisure
travellers. In addition, continued growth of intra-regional travel
and budget airlines capacity within the GCC are expected to fuel
further growth in demand for hotels from business and leisure
travellers.
In Australia, the Group, through trust arrangements,
beneficially owns the ibis Glen Waverley in Melbourne and it plans
to open another hotel in Brisbane, which is due to start
construction in 2014. The economy and midscale markets in Australia
have performed well, with high average room rates and strong demand
from domestic business and leisure travellers. The Group's
expansion in Australia has been opportunistic and has further
developed its strong relationships with Accor. RevPAR for the ibis
Glen Waverley grew at a CAGR of 15 per cent. from 2010 to 2012.
High barriers to entry
There are high barriers to entry in the GCC owing to a
combination of local ownership requirements and difficulty in
acquiring appropriate real estate. International branded hotel
operators therefore generally have to work with local partners in
the region. The Group enjoys longstanding relationships with
influential decision makers in the region and has a strong network
of contacts in the hospitality and real estate sectors.
Strong relationships with leading international branded hotel
operators
The Group has strong relationships with leading branded hotel
operators in the economy and midscale sectors and to date has
entered into long-term management agreements (10 to 20 years) with
Accor SA, a wholly owned subsidiary of InterContinental Hotels
Group PLC and Premier Inn Hotels LLC (Whitbread PLC).
The hotel operators with which the Group has developed
relationships are market leaders in the global hospitality
industry: ibis, for example, recently won 'Best Budget Hotel Brand'
at the Business Traveller Middle East Awards in 2013.
Action Hotels determines the most appropriate brand for each
property and location on an objective basis and benefits from the
market position of the operators. This drives the market's
perception of the hotel and enhances distribution channels, which
ultimately improves the hotel's revenue generation. On a like for
like basis, a leading brand will generally command a premium over
local unbranded competition.
Asset backed ownership and lower development costs
Action Hotels is an asset-backed business that has built its
hotel portfolio by developing freehold assets (83 per cent. of its
1,004 operating rooms) and, in one case, through a lease (17 per
cent. of its operating rooms). The pro forma net asset value of the
Group at Admission is $170.1 million.
Economy and midscale hotels have lower development costs than
upscale and luxury hotels as they can make more effective use of
real estate and have turn-key and lower design specifications. As
the project build is simpler, the construction execution risk is
reduced and, once opened, a combination of strong operating
performance and lower development costs should result in higher
returns.
The Directors expect to grow the portfolio of hotels through a
mix of freehold, long term lease and conversion opportunities. The
inclusion of leasehold properties should allow for faster growth
with lower capital expenditure whilst maintaining control of the
asset.
Experienced management team
Action Hotels' management team has extensive experience in the
hospitality industry. The Group's Chief Executive Officer (Alain
Debare) has 18 years' experience in the hotel and hospitality
industry. The Group's Finance Director (Alaister Murray) has 26
years' finance experience, of which just under 10 years were in the
hospitality industry. In addition, members of the Board have
extensive regional expertise and the Group's founder and Chairman,
Sheikh Mubarak, has excellent relationships with key and
influential decision makers across the region.
The economy and midscale hotel sector in the GCC
Hotel room supply in the GCC is principally geared towards the
luxury end of the market. This is most evident in the UAE which is
well known for its luxury hotels, servicing both leisure and
business travellers. Accordingly, hotel brands in the GCC typically
offer a significantly higher product quality than in more developed
hotel markets.
Market penetration of branded economy and midscale hotels in the
GCC has historically been low relative to the luxury sector;
however, as the GCC economies and tourism industries have grown so
has the demand for quality, affordably priced accommodation.
Economy and midscale branded hotels currently only represent 22
per cent. of branded hotel supply. Demand is primarily serviced by
unbranded and independent hotels and serviced apartments which are
generally considered to offer an inconsistent quality of service
and product.
Hotels in operation and pipeline:
The Group has completed six hotels operating in four countries,
comprising 1,004 rooms and has two hotels under construction
comprising 470 rooms, both of which are expected to be open by the
end of 2014. The following table summarises Action Hotels'
portfolio of currently operating hotels and hotels under
construction:
In operation
Year to date 30 June
2013
Hotel Country/City Rooms Opened Tenure Occupancy ADR RevPar
% $ $
-------------- ------ ------- --------- ---------- ---- -------
ibis Glen Australia,
Waverly Melbourne 155 2007 Freehold 66 154 102
-------------- ------ ------- --------- ---------- ---- -------
Kuwait,
Kuwait
ibis Salmiya City 175 2008 Leased 86 123 106
-------------- ------ ------- --------- ---------- ---- -------
ibis Muscat Oman, Muscat 171 2009 Freehold 82 87 71
-------------- ------ ------- --------- ---------- ---- -------
Jordan,
ibis Amman Amman 158 2009 Freehold 85 75 64
-------------- ------ ------- --------- ---------- ---- -------
Kuwait,
Kuwait
ibis Sharq City 160 2010 Freehold 83 95 78
-------------- ------ ------- --------- ---------- ---- -------
Holiday Oman, Muscat 185 2013 Freehold - - -
Inn Muscat
-------------- ------ ------- --------- ---------- ---- -------
Hotels under construction:
Hotel Country/City Rooms Opening Tenure
Premier Inn UAE, Sharjah 166 2014 Freehold
---------------- ------ -------- ---------
ibis Seef Bahrain, Manama 304 2014 Freehold
---------------- ------ -------- ---------
Hotel construction yet to start:
Hotel Country/City Rooms Opening Tenure
ibis Salmiya Kuwait, Kuwait 10 2014 Leased
(expansion) City
---------------- ------ -------- ---------
Premier Inn Bahrain, Manama 119 2014 Leased*
Bahrain
---------------- ------ -------- ---------
Premier Inn Saudi Arabia, 90 2015 Leased*
Jeddah Industrial Jeddah
---------------- ------ -------- ---------
ibis Brisbane Australia, 368** 2015 Freehold
Brisbane
---------------- ------ -------- ---------
Premier Inn UAE, Dubai 215 2015 Leased*
Dubai Health
Care City
---------------- ------ -------- ---------
ibis Sohar Oman, Sohar 128 2016 Freehold
---------------- ------ -------- ---------
Staybridge UAE, Abu-Dhabi 112 2016 Leased*
Suites Abu-Dhabi
---------------- ------ -------- ---------
Note:
* Option to lease.
** Planning consent received for 289 rooms; application has been
submitted to increase to 368 rooms.
Dividend policy
The Directors intend to declare a final dividend of 0.96p per
share for the year ending 31 December 2013 which is expected to be
paid in April/May 2014 (other than to AGH which has agreed to waive
its entitlement to it) and thereafter it is the Board's intention
to implement a progressive dividend policy subject to the usual
considerations.
The Directors of Action Hotels plc at Admission are as
follows:
Sheikh Mubarak (Non-Executive Chairman), aged 37, is the founder
and Vice Chairman of AGH (AGH). As Vice Chairman of AGH, Sheikh
Mubarak oversees its investment activities, with a particular
emphasis on real estate development and acquisitions in the GCC,
Europe and Australia.
He is a Graduate of The Royal Military Academy Sandhurst in the
UK and holds an M Phil in International Relations from University
of Cambridge and a BA (Hons) in Political Science with Economics
from Buckingham University. Sheikh Mubarak was honoured as a Young
Global Leader in 2009 by the World Economic Forum and is a member
of the Young Presidents Organisation in the Middle East. He is also
actively involved in Kuwait-British Relations and a member of The
Royal Institute of International Affairs (RIIA).
Sheikh Mubarak is also the founding Chairman of Qurain
Petrochemical Industries Company K.S.C., a publicly listed company
in Kuwait with over 40,000 shareholders, net assets in excess of $1
billion and profit before taxation of $81 million (year ended 31
March 2013). He also serves as a board member of EQUATE, Kuwait's
first and largest international joint venture in the petrochemical
sector with a net profit in excess of $1 billion. Sheikh Mubarak
also serves on the board of Egypt Kuwait Holding, a MENA investment
company, with a diversified portfolio of investments, with net
assets of $2.3 billion.
As founding non-executive Chairman of Action Hotels, Sheikh
Mubarak oversees the setting and implementation of the group's
strategy and through his extensive relationships across the region
and hotel industry is actively involved in the identification of
new developments.
Stefan Allesch-Taylor (Non-Executive Deputy Chairman), aged 44,
has served as either Chairman or CEO of firms in the property,
retail, medical, industrial and financial services sectors in the
UK, US and Europe, in both public and private companies.
He is the co-founder and supervisory board member of Global
Evolution, a hedge fund and long only fund specialising in emerging
markets and serves as a supervisory board member of Nordfinanz Bank
AG, a German commercial bank. He is a Non-Executive Director of
Clearbrook Capital Private Equity, ISG, a sports management
company, and co-founder and Chairman of The Coffeesmiths
Collective. He serves on the advisory board of Roland Berger (UK),
one of the largest strategy consultants in the world. In the
charity sector, he is the Co-founder and Chairman of The Afri-CAN
Cafes, a South African NGO and serves as Chairman of Pump Aid, a UK
charity providing clean water to over a million people in rural
Africa.
Alain Debare (Chief Executive Officer), aged 41, has spent his
entire career in the hospitality industry and, in particular,
management of hotels, and has extensive experience of hotel
operations as well as hotel development. He joined the Group in
February 2008 and has been key to its growth. Alain focuses on real
estate development, oversees hotel projects from initiation to
completion to ensure that the Group's investment objectives are
achieved. Using his sector knowledge and hands-on expertise, Alain
works closely involved with the operators to increase profitability
and the performance of operating hotels.
Prior to joining the Group, Alain held various management
positions with leading hotel management companies, including
Mandarin Oriental and Hilton Hotels Corporation. He joined Hilton
in 1996 and worked his way through hotel operations to reach
general management. Alain has broad international management and
operations experience having worked in the Philippines, France,
Venezuela, Brazil, Spain and the GCC. He received a BA in Hotel
Management from Institut Paul Bocuse - IGL Lyon in France and has
also obtained a certification in hospitality investments and asset
management from Cornell University. He speaks fluent French,
English, Spanish and Portuguese and is a member of HAMA (Hotel
Asset Managers Association).
Alaister Murray (Finance Director), aged 47, is a British
national, an honours graduate in Accounting and an Irish Chartered
Accountant. He spent ten years with PWC in Northern Ireland and
then in Dubai in its business assurance and corporate finance
departments.
For the past sixteen years he has worked in industry, initially
in the oil and gas sector (Emirates National Oil Company Limited, a
substantial integrated oil business) and then in the hotels sector
where, from 2002 until 2012 he was Chief Financial Officer of the
Jumeirah Hotel Group and Jumeirah Hotels and Resorts. Whilst there
he was responsible for its global finance function and reported to
the Executive Chairman and board of the Jumeirah Hotel Group.
Raymond Chigot (Non-Executive Director), aged 68, is a veteran
hotelier with over forty years' experience in hospitality after a
successful career in hotel operations and development with Holiday
Inn and Hilton Hotels.
He was involved in the early development of Holiday Inn in
Europe, moving to the development of Holiday Inn in MENA. He then
joined Hilton International as Senior Vice President, driving the
company's growth in EMEA and was involved in the opening of 50 new
Hilton Hotels in 31 countries during his tenure.
Raymond is an accredited expert at the Court of Appeal in Paris
and at O.M.E.C.A. (Orginisation Mondiale des
Experts-Conseils-Arbitres) in Paris.
John Johnston (Non-Executive Director), aged 55, has spent his
entire career in investment management, initially in fund
management then in equity sales.
He began his career at General Accident as a trainee fund
manager, subsequently working at Ivory & Sime, Murray Johnson
and Legg Mason. In 2003 he established Revera Asset Management and
was its CEO until 2007. In 2008, he joined Seymour Pierce as a
managing director in Institutional Sales & Trading where he was
involved in various IPOs and secondary fund raisings including the
successful IPO of Supergroup plc. In 2011 he left Seymour Pierce to
join Nomura Code in a similar role. After leaving Nomura Code he
established Johnston Asset Management, which is his own
consultancy.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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