TIDMSSTY
RNS Number : 4612Y
Safestay PLC
09 September 2015
Safestay plc
("Safestay" or "the Company" or "the Group")
Interim Results
For the Six Months to 30 June 2015
Safestay (AIM: SSTY), the owner and operator of a new brand of
contemporary hostel, announces its unaudited interim results for
the six months ended 30 June 2015
Financial Highlights
-- Revenues in H1 2015 increased to GBP1.4m (H1 2014*: GBP0.5m)
-- EBITD in H1 2015 GBP0.258m (H1 2014* GBP0.230m)
-- Reflecting significant investment in expanding the central
infrastructure to manage the expanding portfolio, the Group
recorded a loss before tax of GBP0.249m (H1 2014*: profit before
tax of GBP0.137m)
-- Introduced dynamic pricing structure which increased the
number of beds occupied at the Elephant & Castle hostel by 5%
in the 6 months to 30 June 2015 compared with the pro forma 6 month
to 30 June 2014, whilst average bed rate (ABV) in the 6 months to
30 June 2015 reduced slightly to GBP18.73 (pro forma 6 months to 30
June 2014: GBP18.76), overall revenues increased as a
consequence
Operational Highlights
-- During the period, the Group operated Safestay hostels in Elephant & Castle and York
-- Substantially completed the refurbishment of the Holland Park
hostel which opened to the public in August 2015; upon completion
in September 2015, the Group will be able to offer 781 beds in
London each night
-- Appointment of Philip Houghton as Chief Executive Officer in
January 2015 and joined the Board in June 2015
-- After the period end, on 17 August 2015, the Company
announced the proposed acquisition of a 132 room/615 bed hostel and
student accommodation scheme in Edinburgh, a freehold property, for
GBP14.9m which when completed will lift the total number of beds
across the four hostels in the peak summer season to over 1,500
beds and to 1,200 beds in the remainder of the year
*while the Company was incorporated on 29 January 2014, the
comparative figures for H1 2014 represent 2 months' trading (from 2
May 2014 to 30 June 2014) and for the most part are for the
Elephant & Castle hostel as the York hostel was acquired on 23
May 2014
Larry Lipman, Chairman of Safestay, said:
"At the beginning of 2014, we were a private business running
one hostel, today we have three contemporary hostels operating
under the Safestay brand and we are poised to add what will be our
largest hostel to date, in a very strong location in central
Edinburgh.
A lot has happened in that time and these results reflect the
rapid changes that have taken place. Importantly demand is good, we
have invested in putting the infrastructure in place ahead of the
expansion of our portfolio and we are well positioned to continue
to grow the business, whilst underpinning the underlying value of
the Company with a mix of freehold and long leasehold
properties."
Enquiries
Safestay Tel: 020 8815 1600
Larry Lipman, Chairman
Phil Houghton, Chief Executive
Colin Stone, Finance Director
Westhouse Securities Tel: 020 7601 6100
Tom Griffiths
Richard Johnson
David Coaten
Novella Tel: 020 3151 7008
Tim Robertson
Ben Heath
For more information visit: www.safestay.com
Chairman's Statement
Introduction
I am pleased to present the unaudited interim results of
Safestay plc for the six months to 30 June 2015. The Company has
grown rapidly and these results reflect the changes that have taken
place, including the increase in Safestay hostels, the investment
in the operational team and infrastructure and the value of the
expanding portfolio.
It is difficult to extract meaningful comparisons with the
corresponding period in the prior year, as those figures represent
only two months' trading (from 2 May 2014 to 30 June 2014) and for
the most part are for the Elephant & Castle hostel as the York
hostel was acquired on 23 May 2014. What these results do show is
our significant progress in developing the business towards
establishing an expanding network of Safestay hostels.
Understanding and awareness of what a modern hostel has to offer
in terms of comfort, affordability and enjoyment is increasing.
Whilst the majority of our guests come from schools or colleges or
are young travellers, there is a growing proportion of other older
groups who are becoming aware of the option to stay in clean,
comfortable rooms located in the centres of these cities for less
than GBP15 per bed per night.
Today, Safestay operates three hostels in Holland Park, Elephant
& Castle and York with a fourth hostel in Edinburgh expected to
become part of the Group shortly.
Financial Review
For the period under review, the Company generated revenues of
GBP1.4m (2014*: GBP0.5m), the Group recorded an operating profit of
GBP0.028m (2014*: GBP0.221m) and a loss before tax of GBP0.249m
(2014*: profit of GBP137k). As a consequence, the Group reported a
loss per share of 2.84p (2014* profit: 5.1p). It is worth noting
that while the comparable figures for 2014 are for only two months'
trading and the figures for H1 2015 include a full 6 month period,
the first couple of months of the year are among the Group's
quietest trading months of the year.
During the period, the Group has invested in expanding its
operational team and structure which will be capable of supporting
a much bigger portfolio, bringing relevant hotel, booking and
management experience that will help establish a modern flexible
platform best suited to supporting the growing portfolio.
As at 30 June 2015, the Company had gross bank and loan note
borrowings of GBP9.12m (30 June 2014: GBP9.92m) secured against its
freehold properties with an average weighted interest cost of 4.5%
(30 June 2014: 5.25%).
The Company has two freehold and one leasehold properties. As at
31 December 2014, its freehold property portfolio was independently
valued at GBP15.0m.
On 12 January 2015, the Group entered into a 50 year lease on
the Holland Park hostel. In accordance with IAS 17, the lease is
accounted for as a finance lease arrangement (see note 7). Over the
50 year lease period and using a discount rate of 6%, the
capitalised value of the lease is GBP10.4m.
The Board is not declaring the payment of an interim
dividend.
*while the Company was incorporated on 29 January 2014, the
comparative figures for H1 2014 represent two months' trading (from
2 May 2014 to 30 June 2014) and for the most part are for the
Elephant & Castle hostel as the York hostel was acquired on 23
May 2014
Operational review
At the start of 2015, Safestay was offering 560 beds each night,
very shortly we will be able to offer over 1,500 beds per night (in
the peak summer season) with the addition of the Holland Park and
Edinburgh hostels. The increasing scale of the Group is an
important part of our offer as the majority of our guests are
travelling around the UK (and many of them are also travelling
around Europe), and our ability to increasingly meet all their
accommodation needs is a strong selling point and a key part of our
business model.
To achieve this aim and manage growing the scale of the
business, we have been investing in people and infrastructure to
ensure that we have the necessary skills and systems in place to
build a leading network of contemporary hostels. Most notably,
Philip Houghton joined the Group in January 2015 and was appointed
Chief Executive in June 2015; Philip is an established industry
figure and founder of Starboard Hotels who has been driving a
series of changes to manage the enlarged business.
Our Elephant & Castle hostel, located at John Smith House,
the former headquarters of the Labour Party, has had another strong
trading period with occupancy in the six months to 30 June 2015
increasing to 79.6% (H1 2014: 75.6%). The average bed rate for the
six months to 30 June 2015 was slightly reduced at GBP18.73 (H1
2014*: GBP18.76) as we have sought to price more dynamically and
fill slower periods with targeted discounts. As a result, we saw an
overall increase in total bed revenue for the six months to 30 June
2015 of GBP53k up 5% when compared with the pro forma six months to
30 June 2014.
Our York hostel, located inside the historic walls of the city,
is a 147 bed hostel operating from a freehold property which was
acquired by the Group on 23 May 2014. After a programme of
refurbishment, which was completed in December 2014, it was
launched as a Safestay branded hostel in January 2015. While the
hostel is seeing revenue and profitability growth, it is at a rate
behind management's pre-opening expectations and occupancy in H1
2015 was 47% (H1 2014*: 55%). The general manager is being replaced
and a dedicated sales and marketing resource is being employed who
will initially focus on driving York revenues and support the
Group's sales and marketing activities. Trading at York in the two
months since the half year has been ahead of management's
expectations and we expect that York will achieve its potential and
anticipated trading levels.
Our Holland Park hostel, which is located in the park itself, is
a Grade I listed building and was acquired on 12 January 2015 on a
long leasehold. Unique in many ways, this extraordinary site opened
under the Safestay brand in August 2015, offering 368 beds and upon
completion of the refurbishment project in September 2015, will
bring our total number of beds in London to 781. We expect demand
for the Holland Park hostel to be strong.
In June 2015, the Group introduced charging for breakfast at
each of its then operating hostels. The Board anticipates that this
change will increase both revenue and profit.
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*while the Company was incorporated on 29 January 2014, the
comparative figures for H1 2014 represent 2 months' trading (from 2
May 2014 to 30 June 2014) and for the most part are for the
Elephant & Castle hostel as the York hostel was acquired on 23
May 2014
Proposed Acquisition of Edinburgh Hostel
On 17 August 2015, the Company announced the proposed
acquisition of a 132 room/615 bed hostel and student accommodation
scheme for a consideration of GBP14.9m. The Edinburgh hostel, which
is located in the heart of Edinburgh Old Town just off the Royal
Mile, provides a mix of hostel and student accommodation and has a
12 year contract with Edinburgh University to provide student
accommodation during the academic year. On completion, the
acquisition will significantly expand the Group's business. The
Company has convened a general meeting of shareholders to be held
on 9 September 2015 to approve among other things the acquisition
of the Edinburgh hostel.
To fund the acquisition and rebranding of the Edinburgh hostel,
the Company is proposing to raise approximately GBP18.0 million
through a mix of debt and equity. The Company has already agreed a
new GBP8.5 million secured debt facility with its bank to part
finance the acquisition and is proposing to finance the balance
through a firm placing and open offer of 13,764,938 new shares at
62p per share to raise GBP7. 44m (net of expenses) and the issue of
new Loan Notes to raise GBP1.0 million (before expenses).
Outlook
Trading has been positive in the first two months since the half
year end in both the Elephant & Castle and York hostels. The
Holland Park hostel is a superb site and we look forward to seeing
it progress over the coming year. The Edinburgh hostel is an
established business, with predictable revenue streams, but
currently occupancy is at 65% creating the opportunity under the
Safestay umbrella for this to increase. The concept for a Safestay
hostel is compelling, offering safe and stylish accommodation at
affordable rates in the heart of leading cities and consequently we
are confident in the future growth of the business.
Larry Lipman
Chairman
Condensed consolidated income Unaudited Audited
statement Unaudited Period from Period from
6 months 29 January 29 January
to to to
30 June 30 June 31 December
2015 2014 2014
Note GBP000 GBP000 GBP000
---------- ------------- ----------------
Revenue 3 1,400 502 1,938
Cost of sales (145) (41) (204)
Gross profit 1,255 461 1,734
Administrative expenses (1,227) (240) (1,154)
Operating profit 28 221 580
EBIT
--------------------------------- ------ ---------- ------------- -------------
EBITD* 258 230 710
Depreciation 230 9 130
---------- ------------- -------------
Operating profit 28 221 580
--------------------------------- ------ ---------- ------------- -------------
Finance income 1 - 1
Finance costs (278) (84) (444)
(Loss)/profit before tax (249) 137 137
Tax - (30) (22)
---------- ------------- -------------
(Loss)/profit for the financial
period attributable to owners
of the parent company (249) 107 115
---------- ------------- -------------
Basic earnings per share 4 (2.84) 5.10 1.29
Diluted earnings per share 4 (2.84) 4.68 1.18
The revenue and operating result for the periods is derived from
acquired and continuing operations in the United Kingdom
* Earnings before interest, tax and depreciation
Condensed consolidated statement Unaudited Audited
of comprehensive income Unaudited Period from Period from
29 January 29 January
6 months to to to
30 June 30 June 31 December
2015 2014 2014
GBP000 GBP000 GBP000
------------- ------------- -------------
(Loss)/profit for the period (249) 107 115
------------- ------------- -------------
Other comprehensive income
Items that will not be reclassified
to profit and loss
Revaluation of freehold land
and buildings 33 - 206
------------- ------------- -------------
Total comprehensive income
for the period attributable
to owners of the parent company (216) 107 321
------------- ------------- -------------
Condensed consolidated statement
of Unaudited Unaudited Audited
financial position 30 June 30 June 31 December
2015 2014 2014
Note GBP000 GBP000 GBP000
----------- ----------- -------------
Non-current assets
Property, plant and equipment 6 27,881 14,701 15,000
----------- ----------- -------------
Total non-current assets 27,881 14,701 15,000
----------- ----------- -------------
Current assets
Stock 2 2 4
Trade and other receivables 508 230 167
Deferred tax 21 - 21
Derivative financial instruments 6 - 7
Cash and cash equivalents 842 1,423 3,310
Total current assets 1,379 1,655 3,509
----------- ----------- -------------
Total assets 29,260 16,356 18,509
----------- ----------- -------------
Current liabilities
Loans 7 387 1,824 1,314
Trade and other payables 1,427 820 662
1,814 2,644 1,976
----------- ----------- -------------
Non-current liabilities
Bank loans, finance lease
and convertible loan notes 18,969 7,881 7,786
Derivative financial instruments 45 - 46
----------- ----------- -------------
Total non-current liabilities 19,014 7,881 7,832
----------- ----------- -------------
Total liabilities 20,828 10,525 9,808
----------- ----------- -------------
Net assets 8,432 5,831 8,701
----------- ----------- -------------
Equity
Share capital 8 192 132 192
Share premium account 6,410 3,808 6,410
Merger reserve 1,772 1,772 1,772
Share-based payment reserve 11 12 6
Revaluation reserve 239 - 206
Retained earnings (192) 107 115
Total equity attributable
to owners of the parent company 8,432 5,831 8,701
----------- ----------- -------------
Condensed consolidated statement Unaudited Audited
of cash flows Unaudited Period from Period from
6 months 29 January 29 January
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to to to
30 June 30 June 31 December
2015 2014 2014
GBP000 GBP000 GBP000
------------- ------------- ---------------
(Loss)/profit before tax (249) 137 137
Adjustment for:
Depreciation 235 9 130
Finance costs 278 84 444
Finance income (1) - (1)
Share-based payments charge 5 12 6
Changes in working capital:
Decrease in stock 2 1 1
Increase in trade and other receivables (341) (113) (50)
Increase/(decrease) in trade and
other payables 764 93 (26)
Net cash generated from
operating activities 693 223 639
------------- ------------- ---------------
Cash flows from investing
activities
Interest received 1 - 1
Purchase of property, plant
and equipment (12,821) (2,510) (2,724)
Net cash outflow on acquisition
of subsidiaries - (5,320) (5,320)
-------------
Net outflow from investing
activities (12,820) (7,830) (8,043)
------------- ------------- ---------------
Cash flows from financing
activities
Issue of ordinary shares
for cash - 4,800 8,114
Payment for share issue
costs - (896) (1,549)
Repayment of borrowings (1,164) (4,546) (5,186)
Dividend paid (58) - -
Increase in borrowings 11,434 9,917 9,917
Interest paid (553) (25) (356)
Loan arrangement fees - (220) (226)
-------------
Net cash inflow from financing
activities 9,659 9,030 10,714
------------- ------------- ---------------
Net increase in cash and
cash equivalents (2,468) 1,423 3,310
Cash and cash equivalents -
at beginning of period 3,310 -
-------------
Cash and cash equivalents
at end of period 842 1,423 3,310
------------- ------------- ---------------
Condensed consolidated statement of changes in equity
For the six months to 30 June 2015 (unaudited)
Share Share Merger Share based Revaluation Retained Total
Capital premium Reserve payment Reserve earnings equity
GBP'000 account GBP'000 reserve GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
------- ---------------- ------------- --------- ------------ ----------- --------- ---------
Balance at 1
January
2015 192 6,410 1,772 6 206 115 8,701
Comprehensive
income
loss for the
period - - - - - (249) (249)
Other
comprehensive
income - - - - 33 - 33
-------
Total
comprehensive
income - - - - 33 (249) (216))
Transactions
with
owners
Dividend paid - - - - - (58) (58)
Share based
payment
charge for the
period - - - 5 - - 5
------- ---------------- ------------- --------- ------------ ----------- --------- ---------
Balance at 30
June
2015 192 6,410 1,772 11 239 (192) 8,432
======= ================ ============= ========= ============ =========== ========= =========
For the six months period from 29 January 2014 to 30 June 2014
(unaudited)
Share Share Merger Share based Revaluation Retained Total
Capital premium Reserve payment Reserve earnings equity
GBP'000 account GBP'000 reserve GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
------- ---------------- ------------- --------- ------------ ----------- --------- ---------
Comprehensive
income
Profit for the
period - - - - - 107 107
-------
Total
comprehensive
income - - - - - 107 107
Transactions
with
owners
Issue of shares 132 3,808 1,772 - - - 5,712
Share based
payment
charge for the
period - - - 12 - - 12
------- ---------------- ------------- --------- ------------ ----------- --------- ---------
Balance at 30
June
2014 132 3,808 1,772 12 - 107 5,831
======= ================ ============= ========= ============ =========== ========= =========
For the period from 29 January 2014 to 31 December 2014 (audited)
Share Share Merger Share Revaluation Retained Total
Capital premium Reserve based Reserve earnings equity
GBP'000 account GBP'000 payment GBP'000 GBP'000 GBP'000
GBP'000 reserve
GBP'000
---------- -------------------- --------- --------- ----------- ---------- ----------
Comprehensive income
Profit for the period - - - - - 115 115
Other comprehensive
income - - - - 206 - 206
----------
Total
comprehensive
income - - - - 206 115 321
Transactions with
owners
Issue of shares 192 6,410 1,772 - - - 8,374
Share based payment
charge for the period - - - 6 - - 6
--------- -------------------- --------- --------- ------------ --------- ----------
Balance at 31 December
2014 192 6,410 1,772 6 206 115 8,701
========= ==================== ========= ========= ============ ========= ==========
1. Basis of preparation and accounting policies
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The condensed interim consolidated financial statements of the
Company and its subsidiaries ("the Group") for the 6 months to 30
June 2015 ("the period") have been prepared using accounting
policies consistent with International Financial Reporting
Standards (IFRS) as adopted by the European Union. This interim
statement does not constitute full accounts as defined by Section
434 of the Companies Act 2006.
These condensed interim financial statements have not been
audited, do not include all of the information required for full
annual financial statements and should be read in conjunction with
the Group's consolidated annual financial statements for the period
ended 31 December 2014. While the financial figures included within
this interim report have been computed in accordance with IFRS
applicable to interim periods, this report does not contain
sufficient information to constitute an interim financial report as
set out in International Accounting Standard 34 Interim Financial
Reporting.
2. Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision makers.
The chief operating decision makers, who are responsible for
allocating resources and assessing performance of the operating
segments, have been identified as the executive directors.
Currently there is only one operating segment, which is the
operation of hostel accommodation in the UK.
3. Revenue
Revenue is stated net of VAT and comprises revenues from
overnight hostel accommodation and the sale of ancillary goods.
Accommodation and the sale of ancillary goods is recognised when
services are provided.
Sale of ancillary goods comprises sales of food, beverages and
merchandise.
Deferred income comprises deposits received from customers to
guarantee future bookings of accommodation. This revenue is
recognised once the bed has been occupied.
4. Earnings per share
Unaudited Audited
Unaudited Period from Period from
6 months 29 January 29 January
to to to
30 June 30 June 31 December
2015 2014 2014
GBP000 GBP000 GBP000
------------- -------------
(Loss)/profit for the financial period
attributable to owners of the parent
company (249) 107 115
------------- ------------- -------------
No No No
000 000 000
Weighted average number of ordinary
shares for
the purposes of basic earnings per
share 9,622 2,100 8,948
Effect of potential dilutive ordinary
shares:
share options - 189 792
------------- -------------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 9,622 2,289 9,740
------------- ------------- -------------
Basic earnings per share (2.61)p 5.10p 1.29p
Diluted earnings per share (2.61)p 4.68p 1.18p
------------- ------------- -------------
Diluted Earnings per share is calculated by adjusting the
earnings and number of shares for the effects of dilutive options
and other dilutive potential ordinary shares.
5. Dividends
A final dividend of 0.3p per share for the period ended 31
December 2014 was paid on 26 June 2015. No interim dividend has
been declared.
6. Property, plant and equipment
For the period from 1 January 2015 to 30 June 2015
(unaudited)
Freehold Leasehold Plant and Total
land and land and equipment
buildings buildings
GBP000 GBP000 GBP000 GBP000
---------- ---------- ---------- --------
Cost
Acquisitions 12,128 - 72 12,200
Additions 2,683 -- 2,683
Revaluations 110 - 41 151
---------- ---------- ---------- --------
At 31 December
2014 14,921 - 113 15,034
---------- ---------- ---------- --------
Depreciation
Charge for
the period 96 - 34 130
Revaluation (96) - - (96)
---------- ---------- ---------- --------
At 31 December
2014 - - 34 34
---------- ---------- ---------- --------
Net book value
At 31 December
2014 14,921 - 79 15,000
---------- ---------- ---------- --------
For the period from 29 January 2014 to 30 June 2014
(unaudited)
Freehold Leasehold Plant and Total
land and land and equipment
buildings buildings buildings
GBP000 GBP000 GBP000 GBP000
--------------------- --------------------- --------------------- -------------------
Cost
Acquisitions 12,128 - 72 12,200
Additions 2,470 - 40 2,510
--------------------- --------------------- --------------------- -------------------
At 30 June 2014 14,598 - 112 14,710
--------------------- --------------------- --------------------- -------------------
Depreciation
Charge for the
period - - 9 9
At 30 June 2014 - - 9 9
--------------------- --------------------- --------------------- -------------------
Net book value
At 30 June 2014 14,598 - 103 14,701
--------------------- --------------------- --------------------- -------------------
For the period from 29 January 2014 to 31 December 2014
(audited)
Freehold Leasehold Plant and Total
land and land and equipment
buildings buildings
GBP000 GBP000 GBP000 GBP000
--------------------- --------------------- --------------------- -------------------
Cost
Acquisitions 12,128 - 72 12,200
Additions 2,683 -- 2,683
Revaluations 110 - 41 151
--------------------- --------------------- --------------------- -------------------
At 31 December
2014 14,921 - 113 15,034
--------------------- --------------------- --------------------- -------------------
Depreciation
Charge for the
period 96 - 34 130
Revaluation (96) - - (96)
--------------------- --------------------- --------------------- -------------------
At 31 December
2014 - - 34 34
--------------------- --------------------- --------------------- -------------------
Net book value
At 31 December
2014 14,921 - 79 15,000
--------------------- --------------------- --------------------- -------------------
At 30 June 2015, the carrying value of the Group's freehold
properties including fixtures and fittings was GBP15,000,000 (30
June 2014: GBP14,701,000, 31 December 2014: GBP15,000,000)
The directors valued the freehold properties using external
valuations prepared by Edward Symmons LLP and the directors'
consideration of factors. The valuations are based on the
discounted cash flows technique with a capitalisation rate of 8%
and discount rate of 10.5% applied to forecasts of future earnings
before interest, taxation and depreciation (EBITDA).
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