TIDMSSTY
RNS Number : 5442N
Safestay PLC
25 September 2019
The information contained within this announcement is deemed by
the Group to constitute inside information as stipulated under the
Market Abuse Regulations (EU) No. 596/2014 ("MAR")
25 September 2019
Safestay plc
("Safestay" or "the Company" or "the Group")
Interim Results
For the Six Months to 30 June 2019
Safestay (AIM: SSTY), the owner and operator of an international
brand of contemporary hostels, announces its unaudited interim
results for the six months ended 30 June 2019
Trading Highlights
-- Safestay now has 16 hostels with approximately 4,000 beds
(including hostels in Glasgow, Paris and Venice currently under
development) across 9 European and 4 UK cities
-- Total revenues increased by 24% to GBP8.1 million (2018:
GBP6.5 million) with like for like sales up 4%
-- Average Bed Rate increased by 6%* to GBP19.5 (2018: GBP18.4)
-- Adjusted EBITDA (pre IFRS 16 adjustment) is GBP1.4 million (2018: GBP1.3 million)
-- As at 30 June 2019 the Company had GBP8.3 million cash in the bank
-- The freehold 161 bed Pisa hostel site acquired for GBP3.0
million in June 2019 has traded strongly
-- F&B sales increased by 31%
-- New restaurant in Barcelona Passeig de Gracia hostel and
completion of the 73-bed extension in Elephant & Castle hostel
with a full renovation of the bar area
*Excludes Vienna and Brussels which are currently operating as
Hotels and as a result have higher bed rates
H2 2019 and beyond
-- Positive summer trading positions the Company well and the
Board expects revenues for the current year to exceed GBP17.0
million and adjusted EBITDA (pre IFRS 16 adjustment) to be in the
region of GBP3.8 million
-- 18 September, announced the acquisition of a freehold site in
Glasgow for GBP3.15 million currently operating as a 52 bed hotel
with the potential to be converted into a 200 bed Safestay hostel
following the completion of the purchase in October 2019
-- 23 September, Elephant & Castle hostel was revalued
following the 73 bed extension at GBP26.8 million, an increase of
GBP10.8 million over the last valuation in 2017, which equates to
an NAV increase of 16.7p per share
-- 24 September, announced the execution of an agreement to
acquire a 50 per cent stake in a site in Venice which will be
converted into a 660 bed hostel, our biggest hostel so far, and
operated by Safestay upon completion in 2021
-- Good prospects for further complementary acquisitions to be funded from existing resources
Larry Lipman, Chairman of Safestay, said:
"2019 has to date been good for trading seen in the 24% increase
in sales for H1 and for expansion with the acquisition of three new
hostels which once completed will add 1,000 beds increasing the
portfolio by nearly one third. Alongside this, our platform is now
established, and we can therefore add to our portfolio without
materially adding to our structure or central costs so that our
economies of scale will increasingly come into play as we move to
our 2020 target of operating 20 hostels.
From a trading perspective, we have yet to see the full benefit
from our acquisitions in Vienna, Brussels, Pisa and more recently
Glasgow together with the medium-term potential of Paris and
Venice. We have also shown the underlying value within our property
portfolio with the revaluation of Elephant & Castle to GBP26.8
million, an increase of 67% since 2017.
Safestay is therefore in an enviable position to continue its
positive growth trajectory, building a portfolio of well positioned
hostels under a premium, contemporary hostel brand"
Safestay plc +44 (0) 20 8815 1600
Larry Lipman
Canaccord
(Nominated Adviser and Broker) +44 (0) 20 7523 8150
Bobbie Hilliam
Novella +44 (0) 20 3151 7008
Tim Robertson
Fergus Young
For more information visit our:
Website
Vox Markets page
https://www.voxmarkets.co.uk/company/SSTY/news/
Instagram page www.instagram.com/safestayhostels/
Chairman's statement
Introduction
I am very pleased to present these results for the six months to
30 June 2019 which clearly show our success in maintaining strong
operational standards whilst continuing to expand our portfolio and
significantly grow our turnover. Alongside this, we have continued
to invest to maintain and improve the premium positioning of our
hostels.
The Company has traded well across the all-important summer
period which means we are on track to deliver a good result for the
year with revenues expected to exceed GBP17.0 million and adjusted
EBITDA (pre IFRS 16 adjustment) to be in the region of GBP3.8
million.
Financial review
For the period under review, the Group generated a 24% increase
in revenues to GBP8.1 million (2018: GBP6.5 million) with GBP2.0
million of revenue coming from acquisitions made in 2018 and 2019.
Revenue from non-UK hostels now represent 47% of our total revenue
(2018: 39%) and 81% of the revenue is coming from accommodation
(2018: 82%) with the balance coming from F&B and ancillary
activities.
Adjusted EBITDA (pre IFRS 16 adjustment) increased to GBP1.4
million (2018: GBP1.3 million). EBITDA from hostels (excluding
central costs) was stable at GBP2.4 million. The additional
contribution from like for like hostels and from the Vienna and
Brussels hostels, acquired in Q4 2018, were offset by increases in
property related costs including a rise in energy prices and the
seasonality of the Barcelona Passeig de Gracia property acquired in
April after the quieter season in 2018.
Following investments made in the head office in 2018, the
central costs have remained stable in 2019 at GBP1.1 million
despite the addition of 3 properties during the same period. The
central platform is now established in terms of personnel and
systems and we believe is capable of supporting 20 hostels with
little incremental cost.
The Group has also implemented the newly introduced IFRS 16
standard (Lease accounting) and decided to opt for the modified
approach which does not require restatement of comparative periods.
The introduction of the standard means that we are changing the way
we report the charges in relation to leaseholds in our consolidated
statement of income. The rental expense (GBP1.1 million) is
replaced with an interest charge (GBP0.6 million) and depreciation
of the leased asset (GBP0.8 million). Consequently, loss before tax
of GBP0.9 million (2018: -GBP0.8 million) includes a loss of GBP0.3
million in relation to the introduction of the IFRS 16 standard. It
also includes GBP0.3 of exceptional costs in relation to expansion
projects. The Company recorded a loss per share of 1.40p (2018:
-2.30p per share).
The introduction of IFRS 16 also has an impact on the balance
sheet where we recognise a GBP17.8 million right of use asset from
1 January 2019, and lease liability for a similar amount.
As at 30 June 2019 the Company had GBP8.3 million of cash in the
bank ensuring the Group can both continue to make selective
acquisitions as well as drive operational improvements.
Net asset value per share was 41.8p per share (2018: 53.2p per
share) following the issue of 30,459,880 new shares in December
2018 as a result of the successful GBP10.3 million placing.
Operating review
Safestay now operates 3,051 beds in 13 properties across 7
European and 3 UK cities, pending the completion of the Glasgow
hotel acquisition in October 2019, and the opening of the Paris and
Venice hostels. Revenues increased by 24% in the first 6 months of
2019 with an underlying like for like growth rate of 4%. Safestay
has reported an 86% CAGR (Compound Annual Growth Rate) since it was
listed in 2014.
Since January 2018 Safestay has opened 4 hostels (Barcelona
Passeig de Gracia in April 2018, Vienna and Brussels in October
2018 and Pisa in June 2019). These 4 hostels contributed GBP2.0
million in the first half of 2019 to Group revenues.
The Average Bed Rate (ABR) increased by 16% to GBP21.70 (2018:
GBP18.70), however, this includes the Brussels and Vienna sites
acquired in 2018 which are not yet fully converted from hotels to
hostels and where the average rate is naturally higher than in the
rest of the portfolio. Without these two sites, ABR increased by 6%
to GBP19.50 (2018: GBP18.40) with similar growth in Europe (+6.1%)
and UK (+5.1%) following investment in the revenue management team
and system since 2018.
The increase in the bed rates was accompanied with a first half
reduction in like for like occupancy rate to 71.1% (2018: 77.1%)
reflecting a deliberate yield management decision to favor rates
over volume in the UK and Spanish properties and also a softer
market in Lisbon and Prague. Importantly, the Company anticipates
reversing this trend with occupancy for the full year to be similar
to the prior year. In total for H1 the Group sold 302,000 nights up
7% (2018: 284,000).
Since 2018, a common Property Management System (Cloudbeds) has
been introduced across all properties. Installed in all new
properties, the Cloudbeds system guarantees efficiencies and
consistency across all bookings and the collection of valuable data
analytics.
Like for like F&B revenue increased by 20% in 2019 following
the opening of a rooftop bar in Madrid in June 2018, the renovation
of the Elephant & Castle restaurant and general improvements in
all other properties. Like for like F&B spend per bed improved
by 26% versus H1 2018.
From 2019 we have decided to set aside an annual capex fund
equivalent to approximately 4% of our revenue to enhance the
quality of our hostels and maintain the standards set by the
Safestay brand. In June 2019, the renovation of the restaurant in
our Barcelona Passeig de Gracia hostel was completed, our Edinburgh
hostel has benefited from a renovation of all bedrooms and
currently all bathrooms and public areas are being refurbished in
Lisbon.
In January 2019 we also completed the 73-bedroom extension to
our Elephant & Castle hostel and took this opportunity to
revamp the F&B area. This has proved a very successful project
with revenue up 29% in the 5 months following the completion of the
extension. This is reflected in the new valuation of the hostel
which has increased by GBP10.8 million since 2017, significantly in
excess of the GBP2.4 million cost of construction of the
extension.
Acquisitions
In June 2019, we acquired a freehold hostel in Pisa for GBP3.0
million. Acquiring an existing, successful hostel has made an
immediately positive contribution to EBITDA and give us an
interesting bridgehead into Italy where there are many
opportunities for further expansion, as illustrated by the recently
announced Venice project.
In September 2019, we announced the freehold acquisition of a
52-bedroom trading hotel in Glasgow. The hotel will start trading
under the Safestay brand immediately after completion, which is
scheduled for October 2019. The full GBP0.3 million conversion into
a 200-bed hostel will take place this winter.
Outlook
The second half of the year has begun well, continuing from the
solid performance recorded across the portfolio in the second
quarter which saw a 7.6% like for like growth in revenues. As
usual, reflecting the seasonality of our business, approximately
32% of our annual turnover and 40% of EBITDA is made in the third
quarter. In addition, the Group will benefit from a full six months
contribution from the Pisa property acquired in June 2019 and two
months from Glasgow following the completion of the acquisition in
late October 2019.
The focus is on establishing a pan-European network of premium
hostels under the Safestay brand in some of the most popular cities
to visit in the world. Recognition is growing that staying in a
Safestay hostel represents a superior experience offering stylish
accommodation in safe, clean surroundings with the option to
socialise with other guests but still for only around GBP20 per
night.
We look forward to providing further news of the Group's
progress.
Larry Lipman
Chairman
25 September 2019
Condensed consolidated statement
of comprehensive income Unaudited Unaudited Audited
6 months 6 months Year to
to 30 June to 30 June 31 December
2019 2018 2018
Note GBP000 GBP000 GBP000
------------ ------------ -------------
Revenue 6 2 8,083 6,509 14,620
Cost of sales (1,223) (764) (2,228)
Gross profit 6,860 5,745 12,392
Administrative expenses (5,972) (5,303) (10,686)
------------ ------------ -------------
Operating profit before exceptional
expenses 888 442 1,706
EBIT
Exceptional expenses (336) (437) (662)
------------ ------------ -------------
Operating profit after exceptional
expenses 2 552 5 1,044
Finance costs (1,456) (795) (1,648)
Loss before tax (904) (790) (604)
Tax - - (303)
------------ ------------ -------------
Total comprehensive loss for
the period attributable to owners
of the parent company (904) (790) (907)
============ ============ =============
Condensed consolidated statement
of
financial position Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
Note GBP000 GBP000 GBP000
---------- ---------- ------------
Non-current assets
Property, plant and equipment 66,512 46,262 47,522
Intangible assets 1,244 1,325 1,268
Goodwill 11,378 9,265 10,506
Total non-current assets 79,134 56,852 59,296
---------- ---------- ------------
Current assets
Stock 44 30 45
Trade and other receivables 1,057 1,053 1,200
Derivative financial instruments - - -
Cash and cash equivalents 8,305 2,960 9,859
Total current assets 9,406 4,043 11,104
---------- ---------- ------------
Total assets7 88,540 60,895 70,400
Current liabilities
Borrowings 280 423 353
Finance lease obligations 3 2,350 27 28
Trade and other payables 3,178 2,408 1,890
Total current liabilities 5,808 2,858 2,271
---------- ---------- ------------
Non-current liabilities
Borrowings 17,545 17,655 17,772
Finance lease obligations 3 37,313 21,187 21,176
Other payables - 971 -
Deferred tax 105 - 105
Trade and other payables due in
more than one year 720 - 1,140
Total non-current liabilities 55,683 39,813 40,193
---------- ---------- ------------
Total liabilities 61,491 42,671 42,464
---------- ---------- ------------
Net assets 27,049 18,224 27,936
---------- ---------- ------------
Equity
Share capital 10 647 342 647
Share premium account 23,904 14,504 23,904
Other components of equity 6,238 6,097 6,221
Retained earnings (3,740) (2,719) (2,836)
---------- ---------- ------------
Total equity attributable to owners
of the parent company 27,049 18,224 27,936
========== ========== ============
Condensed consolidated statement of changes in equity
For the six months to 30 June 2019 (unaudited)
Share Share Other Components Retained earnings Total
capital premium account of Equity GBP000 equity
GBP000 GBP000 GBP000 GBP000
-------- ---------------- ---------------- ----------------- -------
Balance at 1 January
2019 647 23,904 6,221 (2,836) 27,936
Comprehensive income
Loss for the period - - (904) (904)
Total comprehensive
income - - - (904) (904)
-------- ---------------- ---------------- ----------------- -------
Transactions with
owners
Share-based payment
charge for the
period - - 17 - 17
-------- ---------------- ---------------- ----------------- -------
Balance at 30 June
2019 647 23,904 6,238 (3,740) 27,049
======== ================ ================ ================= =======
For the six months to 30 June 2018 (unaudited)
Share Share Other Components Retained Total
capital premium account of Equity earnings equity
GBP000 GBP000 GBP000 GBP000 GBP000
-------- ---------------- ---------------- --------- -------
Balance at 1 January
2018 342 14,504 6,081 (1,929) 18,998
342 14,504 1,772 (1,056) 19,837
Comprehensive income
Loss for the period - - - (790) (790)
Total comprehensive
income - - - (790) (790)
-------- ---------------- ---------------- --------- -------
Transactions with owners
Share-based payment
charge for the period - - 16 - 16
-------- ---------------- ---------------- --------- -------
Balance at 30 June
2018 342 14,504 6,097 (2,719) 18,224
======== ================ ================ ========= =======
Condensed consolidated statement of changes in equity
For the year ended 31 December 2018 (audited)
Share Share Other Components Retained earnings Total
Capital premium account of Equity GBP'000 equity
GBP'000 GBP'000 GBP'000 GBP'000
-------- ---------------- ---------------- ----------------- --------
Balance at 1 January
2018 342 14,504 6,081 (1,929) 18,998
-------- ---------------- ---------------- ----------------- --------
Comprehensive income
Loss for the year - - 106 (907) (801)
Total comprehensive income - - 106 (907) (801)
-------- ---------------- ---------------- ----------------- --------
Transactions with owners
Issue of shares 305 9,400 - 9,705
Share-based payment charge
for the year - - 34 - 34
-------- ---------------- ---------------- ----------------- --------
Balance at 31 December
2018 647 23,904 6,221 (2,836) 27,936
======== ================ ================ ================= ========
Condensed consolidated statement
of cash flows Unaudited Unaudited Audited
Note 6 months 6 months Year to
to 30 June to 30 June 31 December
2019 2018 2018
GBP000 GBP000 GBP000
------------ ------------ -------------
Operating activities
Cash generated from operations 5 3,538 972 1,832
------------ ------------ -------------
Net cash generated from operating
activities 3,538 972 1,832
------------ ------------ -------------
Investing activities
Purchase of property, plant and
equipment (2,774) (990) (2,510)
Purchase of intangible assets (2) (12) (24)
Acquisition of business (872) (617) (1,791)
------------ ------------ -------------
Net cash outflow from investing
activities (3,648) (1,619) (4,325)
------------ ------------ -------------
Cash flows from financing activities
Repayment of borrowings (851) (127) (304)
Proceeds from issue of share capital 17 - 10,356
Fees related to the issue of shares - - (652)
Amounts paid under finance leases (311) (480) (960)
Interest paid (299) (290) (592)
(1,444) (897) 7,848
------------ ------------ -------------
Cash and cash equivalents at beginning
of period 9,859 4,504 4,504
Net increase/(decrease) in cash
and cash equivalents (1,554) (1,544) 5,355
------------ ------------ -------------
Cash and cash equivalents at end
of period 8,305 2,960 9,859
============ ============ =============
1. ACCOUNTING POLICIES FOR THE GROUP AND COMPANY FINANCIAL STATEMENTS
Safestay plc is listed on the AIM market of the London Stock
Exchange and was incorporated and is domiciled in the UK.
The Group and Company interim financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRSs). The financial statements have also been prepared
in accordance with IFRSs adopted by the European Union and
therefore the Group financial statements comply with Article 4 of
the EU IAS regulation.
These condensed interim financial statements have not been
audited, do not include all the information required for full
annual financial statements and should be read in conjunction with
the Group's consolidated annual financial statements for the year
ended 31 December 2018.
The financial statements have been presented in sterling,
prepared under the historical cost convention, except for the
revaluation of freehold properties and certain financial
instruments.
The accounting policies have been applied consistently
throughout all periods presented in these financial statements.
These accounting policies comply with each IFRS that is mandatory
for accounting periods ending on 30 June 2019.
New standards and interpretations effective in the year
The following standards were effective from 1 January 2019:
-- IFRS 16: Leases - effective 1 January 2019
The adoption of IFRS 16, which replaces IAS 17 Leases, has a
material impact on the financial statements of the Group in future
periods. The Standard requires recognition of current operating
leases to be accounted for within the balance sheet by recognising
a new category of right-of-use asset and a liability for future
lease payments, discounted to present value. In addition, IFRS 16
replaces the straight-line operating lease expense in the income
statement with a depreciation charge for the lease asset (included
within operating costs) and an interest expense on the lease
liability (included within finance costs). As a result, the EBITDA,
as well as the Cash generated from operations reported in the
Consolidated Statement of Cash Flows statement have both been
increased by an amount equivalent to the operating lease expense
previously reported under IAS 17.
2. SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
6 months 6 months Year to
to 30 June to 30 June 31 December
2019 2018 2018
GBP000 GBP000 GBP000
------------ ------------ -------------
Revenue by location
United Kingdom 4,244 3,942 8,393
Other Europe 3,839 2,567 6,227
------------ ------------ -------------
Total Income 8,083 6,509 14,620
------------ ------------ -------------
Revenue by nature
Hostel accommodation 6,571 5,314 12,171
Food and Beverages sales 1,128 864 1,746
Other income 384 331 703
------------ ------------ -------------
Total Income 8,083 6,509 14,620
------------ ------------ -------------
Operating profit
United Kingdom 1,491 1,155 2,981
Other Europe 444 454 801
Shared Services (1,383) (1,604) (2,738)
------------ ------------ -------------
Total Operating profit 552 5 1,044
------------ ------------ -------------
The Group has two operating segments: UK and Europe. The
operating segments are organised and managed separately due to the
location of each market. The Group provides a shared services
function to its operating segments and reports these activities
separately.
Adjusted EBITDA:
Unaudited Unaudited Audited
6 months 6 months
to 30 to 30 Year to
June June 31 December
2019 2018 2018
GBP000 GBP000 GBP000
---------- ---------- -------------
Operating profit 552 5 1,044
Add back:
Depreciation & Amortisation 1,614 867 1,676
Rental charges (cancelled under
IFRS16) (1,151)
Exceptional & Share based payment
expense 353 453 696
Group Adjusted EBITDA (pre IFRS
16 adjustment) 1,368 1,325 3,416
Shared services are included within the Adjusted EBITDA.
3. LEASES
Lease liabilities are presented in the statement of financial
position as follows:
Unaudited Unaudited Audited
30 June 30 June 31 December
2019 2018 2018
GBP000 GBP000 GBP000
-------------------------- ----------------------- ---------------------------
Current 2,350 27 25
Non-current 37,313 21,187 21,179
Total 39,663 21,214 21,204
========================== ======================= ===========================
The Group has leases for hostels across Europe. With the exception
of short-term leases and leases of low-value underlying assets,
each lease is reflected on the balance sheet as an asset and
a lease liability. With the adoption of IFRS16, operating leases
under IAS17 are now categorised as a right-of-use asset. The
Group continues to classify its finance leases as a lease liability
and a leasehold land and buildings asset. The Group classifies
its right-of-use assets in a consistent manner to its property,
plant and equipment.
For leases classified as right-of-use assets, each lease generally
imposes a restriction that, unless there is a contractual right
for the Group to sublet the asset to another party, the right-of-use
asset can only be used by the Group. Leases are either non-cancellable
or may only be cancelled by incurring a substantive termination
fee. Some leases contain an option to extend the lease for
a further term. The Group is prohibited from selling or pledging
the underlying leased assets as security. The Group must keep
those properties in a good state of repair and return the properties
in their original condition at the end of the lease. Further,
the Group must insure items of property, plant and equipment
and incur maintenance fees on such items in accordance with
the lease contracts.
The table below describes the nature of the Group's leasing
activities by the type of right-of-use asset recognised on
the balance sheet:
Right-of-use No of Range Average No of No of No of No of
asset right-of-use of remaining leases leases leases leases
assets remaining lease with with with with
leased term term extension options variable termination
options to payments options
purchase linked
to an
index
Hostel 4 - 14
buildings 8 years 10 years 7 0 0 0
------------- ---------- ---------- ---------- --------- ---------
The lease liabilities are secured by the related underlying
assets. Future minimum lease payments
at 30 June 2019 were as follows:
Minimum lease payments due
Within 1 - 2 3 - 4 4 - 5 After
1 year years 2 - 3 years years years 5 years Total
-------- -------- ------------ ------- ------- --------- --------
30 June
2019
Lease
payments 2,329 2,361 2,368 2,368 2,303 13,338 25,066
Finance
charges (1,170) (1,087) (997) (901) (798) (2,820) (7,773)
Net present
values 1,160 1,274 1,371 1,467 1,504 10,518 17,294
The group has elected not to recognise a lease liability for
short term leases (leases with an expected term of 12 months or
less) or for leases of low value assets.
4. ACQUISITION IN ITALY
In June 2019, the Group acquired its fourteenth hostel in Pisa,
Italy, through an asset purchase with consideration of EUR2.25m and
retrospectively a business purchase with consideration of EUR1m.
The consideration was paid in full on each Closing Date.
The provisional fair values of assets and liabilities acquired,
translated to sterling at a rate of 1.135:
GBP000
-------
Property, plant and equipment 2,167
Current assets 43
Deferred revenue, trade and other payables (34)
Goodwill 872
-------
3,048
-------
5. NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF
CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months Year to
to 30 June to 30 June 31 December
2019 2018 2018
GBP000 GBP000 GBP000
------------ ------------ -------------
Loss before tax (904) (790) (604)
Adjustments for:
Depreciation of tangible assets 1,588 777 1,538
Amortisation of intangible assets 26 90 161
Finance costs 1,456 795 1,648
Loss on disposal of fixed assets - 17 74
Share-based payments 17 17 34
Exchange movements (67) 53 (112)
Changes in working capital
Stock - (7) (14)
Trade and other receivables 144 (199) (295)
Trade and other payables 1,278 219 (277)
------------ ------------ -------------
Cash generated from operating activities 3,538 972 2,056
------------ ------------ -------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
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