REG - PPHE Hotel Grp Ltd - Annual Results & Publication of Annual Report
29/02/2024 07:00
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RNS Number : 8644E PPHE Hotel Group Limited 29 February 2024
29 February 2024
PPHE Hotel Group Limited
("PPHE Hotel Group", "PPHE, or the "Group")
Audited Annual Results for the financial year ended 31 December 2023
Publication of Annual Report & Accounts
Record revenue and EBITDA performance, and significant increase in dividend
PPHE Hotel Group, the international hospitality real estate group which
develops, owns and operates hotels and resorts, is pleased to announce its
audited annual results for the financial year ended 31 December 2023.
Summary
Reported in GBP (£)
Year ended Year ended Variance
31 December 2023
31 December 2022
Total revenue £414.6 million £330.1 million +25.6%
EBITDA £128.2 million £94.6 million +35.5%
EPRA NRV per share £26.72 £25.17 +6.2%
Adjusted EPRA earnings per share 118p 50p +136.0%
Dividend per share 36p 15p +140.0%
Occupancy 72.4% 60.0% +1,240 bps
Average room rate £166.8 £160.4 +4.0%
RevPAR £120.7 £96.2 +25.5%
Commenting on the results, Boris Ivesha, President & Chief Executive
Officer, PPHE Hotel Group said:
"PPHE continues to deliver significant growth and value creation through the
hard work and dedication of our teams. In 2023, we achieved record levels of
revenue and EBITDA, with EPRA earnings and NRV per share above 2022 levels,
enabling us to propose a significantly enhanced dividend for shareholders.
Meanwhile, we continued to deliver on our highly anticipated development
pipeline, growing both our proprietary art'otel brand and our Radisson branded
hotels, as well as delivering meaningful EBITDA upside.
2024 is set to be a very exciting year for the Group, as we are set to open
our art'otel London Hoxton and art'otel Rome Piazza Sallustio, and we are able
to welcome ever-increasing numbers of guests. The new year has started well
and has seen a continuation of our strong momentum, which supports the Board's
confidence in the Group's outlook."
Financial highlights
· Total revenue increased by 25.6% to a record £414.6 million
(2022: £330.1 million).
· EBITDA increased by 35.5% to £128.2 million, a record for the
Group (2022: £94.6 million).
· Improved EBITDA margin of 30.9% (2022: 28.7%), due to the
successful mitigation of inflationary and sector-specific costs through
proactive investments in energy efficiency and our people.
· EPRA NRV per share increased by 6.2% to £26.72 (2022: £25.17),
with our December 2023 external property valuations showing further growth
over 2022. Despite higher interest rates, valuations have risen due to the
benefit of improved trading and upgraded outlook.
· Adjusted EPRA earnings per share improved by 136.0% to 118 pence
(2022: 50 pence).
· The Group continued to rebuild occupancy, whilst increasing
average room rates:
· Occupancy increased to 72.4%, reflecting sustained growth
throughout the year (2022: 60.0%).
· Average room rate continued to increase, by 4.0% to £166.8
(2022: £160.4).
· RevPAR was up 25.5% at £120.7 (2022: £96.2).
· The UK and The Netherlands performed well across all segments,
driving occupancy and rate growth alike. Operations in Croatia also saw solid
demand including during the peak summer period, with Grand Hotel Brioni Pula
trading its first full year.
· Enhanced shareholder returns, with a final proposed dividend of
20p per share which, including the 16p interim dividend paid, would deliver a
total dividend for 2023 of 36p per share (2022: 15p per share). The Group
re-instated its progressive dividend policy, whereby the prospective dividend
should be approximately 30% of adjusted EPRA earnings.
Strategic highlights
· On track with £300+ million pipeline which is nearing completion
in H1 2024:
· Fully opened premium lifestyle art'otel London Battersea Power
Station (February 2023) and soft launched art'otel Zagreb (October 2023).
· Signed first Radisson RED branded property which opened in
Belgrade, Serbia (February 2024), following an extensive repositioning.
· Highly anticipated art'otel properties in Hoxton, London and
Rome, Italy will launch in H1 2024.
· Other exciting projects planned for 2024 and beyond include:
· Park Plaza Berlin Kudamm (set to reopen Q2 2024 following
extensive renovation works) as the Radisson RED Berlin Kudamm, the Group's
second Radisson RED property, and third under its expanded partnership with
Radisson Hotel Group.
· Detailed planning is underway to develop a 179-room hotel in a
predominantly subterranean space of our Park Plaza Victoria London property.
This new hotel is expected to have its own brand concept with a dedicated
entrance and facilities and services.
· The European Hospitality Fund launched in March 2023 to support
the Group's future pipeline and is set to close to new investors in March
2024. Following this, it is anticipated to become a joint venture with
cornerstone investor Clal Insurance, with a total potential value of around
€300m (with 50% leverage), including the contribution of our 'seed' asset in
Rome.
· Continued to progress and enhance ESG initiatives and
credentials, overseen by the Board, to support the future prospects of the
Group and our assets, including:
· Investments in the availability and use of renewable energy in
our hotels;
· Energy efficiency programme launched last year to achieve a
baseload reduction in power consumption;
· The achievement or otherwise ambition of BREEAM certifications
for our properties; and
· An intensive emissions mapping process including for Scope 3 to
create our ESG targets. We continue to work with the SBTi (Science-Based
Targets initiative) to set and verify our formal net zero target.
Post-Period end
· Appointed Greg Hegarty to Co-CEO, to be responsible for
day-to-day managing of the Group and implementing the long-term strategy.
Outlook
· Continued momentum into 2024, with overall forward booking levels
consistent with those at this point in 2023.
· As previously reported, the mix of corporate and leisure bookings
has begun to normalise, with growing demand for meetings and events and an
emphasis on rebuilding occupancy. On account of this mix and the rapid growth
in average room rate throughout the past three years, we expect average room
rate to stabilise during 2024.
· Upon stablisation of trading, new openings are together targeted
to deliver at least £25 million of incremental EBITDA to the Group.
· The Board anticipates that cost inflation will remain in 2024,
but will continue to be manageable. Utility cost hedges are expected to
positively impact margins and the Group continues to manage labour-related
cost pressures, particularly recently announced minimum wage increases, to
ensure limited impact on margins. Hedges are also already in place to mitigate
the impact of rising interest rates, with most loans fixed to 2028, and no
significant loans to refinance before 2026.
· All of the above supports the Board's confidence in its future
prospects. Although it is still early in the new financial year, the good
start made by the Group underpins confidence that FY2024 performance will be
in line with current market consensus(1).
1 As at 28 February 2024, PPHE complied analysts' consensus forecast range
for FY 2024 showed a revenue range of £435.5 million to £466.9 million, with
a consensus mean of £450.0m, and an EBITDA range of £135.3 million to
£150.9 million, with a consensus mean of £142.7m.
Key financial statistics
Reported in GBP (£)
Year ended Year ended
31 December 2023
31 December 2022
Total revenue £414.6 million £330.1 million
EBITDAR £130.5 million £97.0 million
EBITDA £128.2 million £94.6 million
EBITDA margin 30.9% 28.7%
Reported PBT £28.8 million £11.5 million
Normalised PBT £37.5 million £8.3 million
Reported EPS 53p 24p
Adjusted EPRA earnings per share 118p 50p
EPRA NRV per share £26.72 £25.17p
Occupancy 72.4% 60.0%
Average room rate £166.8 £160.4
RevPAR £120.7 £96.2
Room revenue £300.1 million £237.8 million
Publication of Annual Report & Accounts
PPHE Hotel Group Limited will publish later today its annual report and
accounts for the financial year ended 31 December 2023 (the "Annual Report").
This document shall be available today on the Company's website: www.pphe.com
(http://www.pphe.com/)
Pursuant to UK Listing Rule 9.6.1, copies of the Annual Report shall be
submitted later today to the National Storage Mechanism and will shortly be
available for inspection
at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
In accordance with Disclosure Guidance and Transparency Rule 6.3.5, the
information in the attached Appendix consisting of a Directors' Responsibility
Statement, principal risks and uncertainties and related party transactions
has been extracted unedited from the Annual Report & Accounts for the
financial year ended 31 December 2023. This material is not a substitute for
reading the full Annual Report.
This announcement contains inside information. The person responsible for
arranging the release of this announcement on behalf of the Company is Daniel
Kos, Chief Financial Officer & Executive Director.
- Ends -
Enquiries:
PPHE Hotel Group Limited Tel: +31 (0)20 717 8600
Greg Hegarty, Co-Chief Executive Officer & Executive Director
Daniel Kos, Chief Financial Officer & Executive Director
Robert Henke, Executive Vice President of Commercial Affairs
Hudson Sandler Tel: +44 (0)20 7796 4133
Wendy Baker / Charlotte Cobb / India Laidlaw pphe@hudsonsandler.com (mailto:pphe@hudsonsandler.com)
Notes to Editors:
PPHE Hotel Group is an international hospitality real estate company, with a
£2.2 billion portfolio, valued as at December 2023 by Savills and Zagreb
nekretnine Ltd (ZANE), of primarily prime freehold and long leasehold assets
in Europe.
Through its subsidiaries, jointly controlled entities and associates it owns,
co-owns, develops, leases, operates and franchises hospitality real estate.
Its portfolio includes full-service upscale, upper upscale and lifestyle
hotels in major gateway cities and regional centres, as well as hotel, resort
and campsite properties in select resort destinations. The Group's strategy is
to grow its portfolio of core upper upscale city centre hotels, leisure and
outdoor hospitality and hospitality management platform.
PPHE Hotel Group benefits from having an exclusive and perpetual licence from
the Radisson Hotel Group, one of the world's largest hotel groups, to develop
and operate Park Plaza® branded hotels and resorts in Europe, the Middle East
and Africa. In addition, PPHE Hotel Group wholly owns, and operates under, the
art'otel® brand and its Croatian subsidiary owns, and operates under, the
Arena Hotels & Apartments® and Arena Campsites® brands.
PPHE Hotel Group is a Guernsey registered company with shares listed on the
London Stock Exchange. PPHE Hotel Group also holds a controlling ownership
interest in Arena Hospitality Group, whose shares are listed on the Prime
market of the Zagreb Stock Exchange.
Company websites: www.pphe.com (http://www.pphe.com) |
www.arenahospitalitygroup.com (http://www.arenahospitalitygroup.com)
For reservations:
www.parkplaza.com (http://www.parkplaza.com) | www.artotel.com
(http://www.artotel.com) | www.arenahotels.com (http://www.arenahotels.com) |
www.arenacampsites.com (http://www.arenacampsites.com)
CHAIRMAN'S STATEMENT
Introduction
2023 was an important year of financial and strategic progress for the Group.
We delivered a full recovery to pre-pandemic levels, driven by continued
strong room rates and improving occupancy rates across our portfolio of
well-invested hotels, resorts and campsites. We also entered a very exciting
phase, as we near completion of our extensive development pipeline. Together,
these provide extremely strong foundations for our performance and future
growth going into 2024 and beyond.
Throughout the year, we acted where possible to manage the impact of ongoing
macro-economic, geo-political and wider cost pressures on our business. The
2023 performance is a testament to this and our team members, who remain at
the heart of everything we do. Their dedication to delivering memorable guest
experiences is steadfast.
PPHE's unique 'Buy, Build, Operate' business model is also central to our
success, positioning the Group strongly across its key markets and segments,
and supporting our growth strategy, strong financial performance and our
outlook upgrade at the half-year point of 2023. Furthermore, our long-standing
relationship with Radisson Hotel Group, and the recent extension of our
partnership, support our multi-brand approach and our future growth and
opportunities.
Extensive pipeline nears completion
Many years of hard work on construction and refurbishment projects in our
£300+ million development pipeline are coming to fruition. In 2023, we opened
two contemporary upper upscale lifestyle hotels - art'otel London Battersea
Power Station and art'otel Zagreb, Croatia.
In February 2024, we opened our first Radisson RED in Belgrade, representing
our second hotel under our extended partnership with Radisson Hotel Group. A
further repositioning and rebranding programme is underway in Berlin, and we
plan to launch Radisson RED Berlin Kudamm in Q2 2024.
The highlight of 2024 will be the opening of our much anticipated and highly
impressive art'otel London Hoxton development, following three years of
construction. This will increase our presence in the attractive London market,
bringing the total number of rooms we operate in the capital to over 3,700. In
addition, our new art'otel in Rome, marking our entry in Italy, will open in
H1 2024. These recent and upcoming openings in Belgrade, Zagreb, London Hoxton
and Rome are targeted to generate at least £25 million of EBITDA for the
Group upon stabilisation of trading.
Sustainability in focus
During the year, our sustainability-dedicated teams expanded further, and we
worked with retained external specialist consultancies to advise on carbon
footprint and reporting to stakeholders, to ramp up our efforts in this
important area. This included measures to increase transparency and
stakeholder accountability for our Sustainability Strategy, including
informing the Science-Based Targets initiative of our work to set robust net
zero targets, and be held accountable to them. We are pushing to gather more
data in various areas including water consumption, waste and creation of
social value by monetary, work-hour and in-kind donations. This will allow us
to set baselines, and set targets with the kind of robust metrics that allow
stakeholder accountability.
Further details around our new strategy, targets and KPIs are set out in the
Strategy and Key Performance Indicator sections of our 2023 Annual Report.
The Board
We were delighted to welcome Greg Hegarty to the Board in May. His appointment
provides important operational expertise given his tenure with the Group to
date. It is also in line with the Board's commitment to refreshing its
expertise while developing and preserving internal talent. Further enhancing
our succession planning, Greg was promoted to a Co-CEO role in February 2024,
being responsible for creating and implementing the Group's operational
strategies, including Operations, People & Culture and Commercial, while
driving PPHE's corporate vision and growth strategy. In December 2023, the
Board appointed Ken Bradley, as a Deputy Chairman, providing an independent
view and support on the governance duties of the Board. The Board remains
focused on engaging with shareholders and implementing best-practice corporate
governance to secure the best possible future for the Group.
Enhanced shareholder value
The Board has a long-standing commitment to shareholder value. We completed
our £3.7 million share buy-back programme in March 2023, which enhanced
capital returns to shareholders. Our strong financial performance and the
business momentum during H1 enabled the Board to announce a return to its
historic capital return policy of distributing approximately 30% of adjusted
EPRA earnings. This resulted in a total dividend for the year of 36 pence per
share.
The Board continues to prioritise its progressive dividend policy, and we look
forward to continuing to deliver consistent shareholder returns.
A future of great promise
We started 2024 with positive trading momentum and a significant amount of
confidence for the future. Leisure and business travel continue to be in
demand across our key markets, and while headwinds persist globally, we do not
see this demand changing materially going forward.
The Group will continue to focus on pulling the strategic levers it can and
build on the successes it achieved over the last year. We look forward to
updating all stakeholders further on our progress in the coming months and
years.
Eli Papouchado
Chairman
PRESIDENT & CEO'S REVIEW
A full recovery
We are very pleased to have delivered a full recovery across the business in
2023 with a financial performance significantly ahead of that expected at the
outset of the year, achieved despite the macro headwinds experienced across
the sector during the year.
This was thanks to a combination of our strong financial and strategic
progress, due to the hard work and dedication of our team members across our
markets.
2023 in review
The positive momentum in 2022 following the ongoing international easing of
previous pandemic-related restrictions on travel, continued into the 2023
financial year and was sustained throughout 2023. Our teams should be proud of
the progress made across all of the markets and segments in which we operate.
Our outperformance versus expectations enabled us to upgrade our outlook
during the year, resulting in FY 2023 revenue of £414.6 million and EBITDA of
£128.2 million.
Initially, we saw strong rate growth across the leisure segment in particular.
This helped us to part mitigate the well-documented inflationary cost
pressures, and was followed by an ongoing narrowing of the occupancy gap
versus 2019 levels, as we focused on building this back up to pre-COVID
levels. We saw this most notably in the UK and the Netherlands, which were the
first of our markets to reopen fully in 2022.
Elsewhere, our assets in Croatia delivered a solid performance, including
throughout the peak summer season, following significant investments in recent
years to upgrade many of our unique hotels and campsites there. Our new Grand
Hotel Brioni Pula traded its first full year and made a good contribution. In
Germany, our smallest region, recovery was slower than in our other markets
but improved as the year progressed.
Our performance this year has further illustrated the strength and resilience
of our unique business model and proposition. Our confidence in our abilities
and positioning in the market continues to grow, as we own, operate and manage
a wide variety of different brands and assets that cater fully to the needs of
our valued guests.
Strong momentum delivered throughout the year
Reported total revenue increased by 25.6% to £414.6 million (2022: £330.1
million) and EBITDA improved 35.5% to £128.2 million (2022: £94.6 million),
resulting in an EBITDA margin of 30.9% (2022: 28.7%).
Revenue growth was driven by both strong rates, which increased to £166.8
(2022: £160.4) as well as improving occupancy to 72.4% (2022: 60.0%), which
was 89.8% of 2019 levels. This resulted in a 25.5% improvement in RevPAR to
£120.7 (2022: 96.2), 116.5% of 2019 levels.
Our property portfolio was predominantly valued by Savills and Zane at £2.2
billion as at 31 December 2023. EPRA NRV per share increased by 6.2% to
£26.72 per share (2022: £25.17 per share). The adjusted EPRA earnings per
share was 118 pence (2022: 50 pence).
Delivery of our £300+ million development pipeline
We are in a very exciting phase of the Group's development which will see the
culmination of many years of work to upgrade and extend our property portfolio
as well as our geographic footprint. We are now in the final stages of
delivering our £300+ million development pipeline, which has included the
construction of new hotels and the upgrade and repositioning of existing
properties.
During the year, we successfully opened two new hotels. Our first UK art'otel
at London Battersea Power Station officially opened February 2023. This hotel
is managed by our hospitality management platform under a long-term management
agreement. In October, we opened art'otel Zagreb, our first hotel in the city
centre of the Croatian capital. Radisson RED Belgrade, our first Radisson RED
hotel, opened in February 2024. Our flagship new property, art'otel London
Hoxton, started to take bookings for 2024 during Q4, and is set for a soft
opening in April 2024. Meanwhile, the new art'otel in Rome is due to open
during H1 2024 following an extensive repositioning project.
Upon stabilisation of trading, the Zagreb, Belgrade, London Hoxton and Rome
hotel openings are together targeted to generate at least £25 million EBITDA
to the Group's portfolio.
We continued to enhance our long-standing and well-established relationship
with Radisson Hotel Group, which was expanded during 2022 to enable both
companies to invest fully in and further grow the reaches of their portfolio
of brands which together include brands such as Park Plaza, art'otel, Radisson
Collection, Radisson Blu and Radisson RED. Alongside the forthcoming opening
of our first Radisson RED properties, our recently launched Grand Hotel Brioni
Pula, a Radisson Collection Hotel, traded its first full summer season in
2023, and we were very pleased with its progress, performance and feedback
from our guests.
We further cemented our partnership with Radisson at the International
Hospitality Investment Forum in May 2023, when Radisson fully incorporated
art'otel into their brand architecture, and we look forward to seeing what
more this innovative partnership can deliver for PPHE and Radisson and our
respective brand portfolios over the coming months and years.
In addition, we continue to progress three longer-term development projects in
London and one property repositioning project in Berlin, Germany.
Further details on our development pipeline are set out in the Business
Review.
Continuous investment in our teams
Our people continue to be the backbone of our operations. Having rebuilt our
teams after the pandemic, our long-term approach is centred on investing in
our people from the point of recruitment onwards, and positioning PPHE as a
best-in-class employer. This includes talent attraction and retention
initiatives and employee engagement and wellbeing programmes.
2023 saw the return of 'business as usual' for the Group, in line with the
resumption of normal operations and a strong focus on future growth. We hired
hundreds of new recruits through our partnerships with the Department for Work
and Pensions, charities, universities and colleges, as well as through our
internship and apprenticeship schemes, our 'Recommend a Friend' scheme and our
Hospitality Career Centre. For the opening of art'otel London Battersea Power
Station alone, we created 200 new jobs, and have hundreds more in the pipeline
for the opening of art'otel London Hoxton in 2024.
This meant the reactivation and in many cases upgrading of our leading
people-focused policies and practices, including new and improved benefits and
wellbeing packages, learning and development, and the amplification of
diversity and inclusion initiatives.
ESG highlights
During 2023, we doubled down on our ESG efforts, to enhance our contributions
to the environment and society around us in all our markets. We expanded our
internal resources, hiring new talent and specialist consultancies where
required, to bring in industry-leading experience and expertise.
We have submitted our notification to the Science-Based Targets Initiative
(SBTi). This sets out our intention to set robust targets for achieving net
zero by 2040. This also involves setting interim targets. We have mapped our
full carbon emissions, including working with specialists to achieve a
detailed footprint of Scope 3 emissions, which will be key to achieving
ambitious goals.
We want to have net positive impact on society as a whole, so we are looking
at how we can ensure best practice as an employer and developer of our
workforce, and a contributor to our local communities.
Further detail on our new strategy, targets and KPIs are set out in our Annual
Report and Accounts 2023, and I look forward to regularly updating all our
stakeholders on our progress against our goals over the coming months and
years.
Commitment to shareholder returns
Given our consistently strong performance during the course of 2023, we
continued to look for ways to deliver enhanced value for our shareholders.
We engaged with investors - particularly during the second half of the year -
to gauge their views as to the best mechanisms to return value to
shareholders. This resulted in a 16 pence per share interim dividend being
announced and paid following the Interim Results, which represented a 13 pence
per share increase year-on-year.
With the final dividend proposed at 20 pence per share, the total dividend
paid is 36 pence per share.
Looking ahead
We have an exciting year ahead in 2024, with highly anticipated new property
launches in Belgrade, London and Rome. We launched Radisson RED Belgrade in
February and we are launching two art'otels in Hoxton, London, and in Rome.
These new openings are targeted to deliver at least £25 million of
incremental EBITDA to the Group upon stabilised trading.
We also remain ambitious in our plans for future growth as we continue to
identify opportunity and find new, entrepreneurial ways to continue to deliver
value for our shareholders. PPHE has committed up to €50 million in cash
and/or assets to a European Hospitality Real Estate Fund founded by the Group.
The Fund's cornerstone investor, Clal Insurance ("Clal"), has committed to
invest up to €75 million, however, capped at any time at 49% of the
contributed equity. Throughout the year, the Group engaged with investment
bankers to raise the remaining equity for the European Hospitality Real Estate
Fund ("the Fund"), however the significant changes in the interest rate market
during this period meant that the Group was not successful in signing up new
investors up to the date of these results. If further investors haven't joined
the Fund by 13 March 2024 (unless mutually extended), the Fund will carry on
as a joint venture with Clal. The Group may top up its own equity contribution
(currently at up to €50 million) to €78 million, representing 51%, to give
the total joint venture a c.€150 million equity value.
With full equity subscription combined with a targeted 50% bank leverage, the
investment potential of the joint venture will then be around €300 million.
The Fund has an investment period of 24 months from March 2023, which can be
extended by an additional 12 months (subject to consent).
The booking demand experienced in 2023 has continued momentum into 2024, with
overall forward booking levels consistent with those at this point in 2023. As
previously reported, the mix of corporate and leisure bookings has begun to
normalise, with growing demand for meetings and events and an emphasis on
rebuilding occupancy.
We anticipate that cost inflation will remain in 2024, but will continue to be
manageable. Utility cost hedges are expected to positively impact margins and
the Group continues to manage labour-related cost pressures. Hedges are also
already in place to mitigate any impact of rising interest rates.
Based on the above, we are confident in the Group's future prospects for what
is expected to be milestone year in our history and beyond.
Boris Ivesha
President & Chief Executive Officer
FINANCIAL REVIEW
Overview of 2023
2023 ended on a high, reporting fully recovered, record results and strong
performance across our main markets. Since 2019, results of the Group have
been distorted with the impacts of COVID-19 restrictions around the world, and
2023 marked the first year since with a normal trading pattern. 2023 kicked
off with strong RevPAR increases compared to 2019, slightly above inflation
reported over the four-year period that passed. Inflation did also affect many
of our cost lines, most noticeably in the costs of utilities and labour.
The Group successfully mitigated a number of inflationary and sector-specific
issues through the implementation of innovative solutions and forward
planning. We have invested in enhancing our energy efficiency, and staffing is
also much less of a constraint for the Group due to its proactive approach to
investment in people, automation and employer branding.
We reported EBITDA margins that are behind on 2019, however lower utility
hedges in the near future are expected to positively impact margin recovery.
We keep focusing on managing the continued cost pressures we see on the labour
side, due to minimum wage increases in all our territories.
Although 2023 showed sharp interest rate increases, the Group's results were
not affected by this as all our loans are near fully hedged on fixed interest
rates. These hedges limit the majority of exposure to interest rate risk on
average to 2028. Furthermore, there are no significant loans up for refinance
before 2026.
The elevated interest rate environment also impacts the discount rates used in
property valuations, but despite increased rates, valuations have again shown
a small improvement as improved trading and outlooks more than offset yield
expansion.
Throughout the year, we spent approximately £126 million on capital
expenditure, and the Group is now nearing completion of a heavy development
cycle, where a record pipeline of more than £300 million will begin to
contribute for the first time. This pipeline is estimated to grow EBITDA by at
least £25 million once fully stabilised.
Operational performance
Revenue
Total revenue was up 25.6% at £414.6 million and was 15.9% ahead of 2019
levels. RevPAR was £120.7, up 25.5%, and was 16.5% ahead of 2019 levels. This
reflected some further growth in average room rate, up 4.0% versus 2022 and
29.8% versus 2019, alongside a consistent recovery in occupancy levels to
72.4%, compared with 60.0% in 2022 and 80.6% in 2019.
Overall, RevPAR levels led to a total room revenue of £300.1 million, up
26.2% versus 2022 and up 19.7% of room revenue in 2019. The 2023 trading
comparison with 2022 normalised month-on-month throughout the year. Where the
first comparative quarter of 2022 was still heavily impacted by COVID-19 (thus
showing significant year-on-year growth), the latter part of 2022 actually
showed a fully recovered and strong trading comparable.
Financial results
Key financial statistics for the financial year ended 31 December 2023.
Year ended Year ended Year ended
31 December 2023 31 December 2022 31 December 2019
Total revenue £414.6 million £330.1 million £357.7 million
Room revenue £300.1 million £237.8 million £250.6 million
EBITDAR £130.5 million £97.0 million £124.7 million
EBITDA £128.2 million £94.6 million £122.9 million
EBITDA margin 30.9% 28.7% 34.4%
Reported PBT £28.8 million £11.5 million £38.5 million
Normalised PBT £37.5 million £8.3 million £40.7 million
Reported EPS 53p 24p 80p
Occupancy 72.4% 60.0% 80.6%
Average room rate £166.8 £160.4 £128.5
RevPAR £120.7 £96.2 £103.6
EPRA NRV per share £26.72 £25.17 £25.93
Adjusted EPRA earnings per share 118p 50p 128p
Q1 2023 saw a strengthening of demand for leisure, corporate travel and
meeting events across all our markets. Our rate-led strategy supported topline
growth which helped to mitigate inflationary headwinds, with average room rate
up 15.9% versus Q1 2022 and 24.6% ahead of Q1 2019 levels. Occupancy levels
continued to improve and track closer to 2019 levels in the UK and the
Netherlands, with slower recovery in Germany. Overall, Q1 2023 occupancy was
950 bps behind Q1 2019.
This momentum continued into the second quarter, supported by the Coronation,
taking place in London, where total revenue was up 36.9% year-on-year and up
19.8% versus Q2 2019. Average room rate grew by 14.8% versus Q2 2022 and was
up 35.6% versus Q2 2019. Occupancy continued to rebuild to 70.8% (58.8% in Q2
2022 and 77.1% in Q2 2019).
In Q3, a quarter heavily impacted by the seasonal trading in Croatia, total
revenue was up 8.8% versus Q3 2022 and up 16.5% versus Q3 2019, driven
primarily by strong occupancy growth to 77.5% (Q3 2022: 70.8%). Average room
rate remained solid, up 0.8% versus Q3 2022, despite the strong comparative
performance in Q3 2022 which was boosted by a record summer 2022 trading in
Croatia and several significant events in London, including the State Funeral
of Her Majesty The Queen.
The performance in Q4 continued to be solid, with further occupancy recovery.
Compared to Q4 2022 revenue was up 7.2% (up 15% versus Q4 2019). Room rate was
marginally down on Q4 2022 and up 25.1% versus Q4 2019. Occupancy increased to
72.8% (Q4 2022: 72.1%).
Normalised profit
£million 12 months ended 12 months ended
31 December 2023
31 December 2022
Reported profit before tax 28.8 11.5
Loss on buy-back of units in Park Plaza Westminster Bridge London from private 3.3 1.5
investors
Non-cash revaluation of finance lease 3.9 3.7
Non-cash changes in fair value of Park Plaza County Hall London Income Units (1.6) (0.3)
Pre-opening expenses and other non-recurring expenses 1.4 1.4
Capital loss on disposal of fixed assets and inventory - 0.1
Non-cash changes in fair value of financial instruments 1.7 (9.6)
Normalised profit before tax 37.5 8.3
EBITDA, profit and earnings per share
The Group reported EBITDA of £128.2 million (2022: £94.6 million and 2019:
£122.9 million). The EBITDA margin continued to improve year-on-year to
30.9%, compared with 28.7% in 2022 and 34.4% in 2019. Broader cost inflation,
particularly for utilities and labour, impacted full pre-COVID margin recovery
over the last 12 months. The Board anticipates that cost inflation will remain
topical in 2024, particularly with the recently announced minimum wage
increases, however forward energy cost hedges will start flowing through at
substantially lower levels than those fixed for 2023.
Normalised profit before tax improved to £37.5 million (2022: £8.3 million).
Reported profit before tax improved by £17.3 million to £28.8 million (2022:
£11.5 million). Reported profit before tax was negatively affected by
non-cash revaluations of - amongst others - hedging derivatives and lease
liabilities. A table of normalisation adjustments is provided above.
Reported basic/diluted earnings per share for the period were 53 pence (2022:
24 pence). Depreciation in the year was £45.1 million (2022: £40.0 million).
Depreciation is recorded in accordance with IFRS, however, internally we
consider the Group's ongoing average capital expenditure (CAPEX) over the
lifespan of our hotels as a more relevant measure in determining profit, which
in the hospitality industry is calculated as approximately 4% of total
revenue. Our EPRA earnings number is calculated using the 4% rate instead of
the reported non-cash depreciation charge (see EPRA Earnings table below).
Real estate performance
Valuations
The Group is an integrated developer, owner and operator of hotels, resorts
and campsites and its business model is real estate driven. We generate
returns and drive increased value for all our stakeholders by developing the
assets that we own and operating our properties to their full potential.
Certain EPRA performance measurements are disclosed to aid investors in
analysing the Group's performance and understanding the value of its assets
and earnings from a property perspective.
In December 2023, the Group's properties (with the exception of operating
leases and managed and franchised properties) were once again independently
valued predominantly by Savills (in respect of properties in the Netherlands,
UK and Germany) and by Zagreb nekretnine Ltd (Zane) (in respect of properties
in Croatia).
Based on their valuations, we have calculated the Group's EPRA NRV, EPRA NTA
and EPRA NDV. The EPRA NRV as at 31 December 2023, set out in the EPRA
Performance Measurement section below, amounts to £1,136.4 million (2022:
£1,078.7 million), which equates to £26.72 per share (2022: £25.17 per
share).
The EPRA NRV was positively impacted by the profit in the year of £22.4
million and positively impacted by marginally increased property valuations of
£50.8 million (based on constant currency). This year the valuations were
negatively affected by an increase in the discount rates used, mainly as a
result of the higher interest rate environment. The value effect of these
increased rates, however, were more than offset by the increased underlying
results of the hotels used in the valuations, with expectations on improving
margin embedded in the profit forecasts.
The table below provides additional information regarding the discount and cap
rates used.
Actualised trading versus assumption in 2023 valuations
Discount rates Cap rates
2023 Valuations 2022 Valuations 2023 Valuations 2022 Valuations
United Kingdom 7.75%-10.50% 7.75%-10.50% 5.25%-8.00% 5.25%-8.00%
The Netherlands 8.25%-9.75% 7.75%-9.50% 5.75%-7.25% 5.25%-7.00%
Germany 8.25%-9.25% 8.00%-9.25% 5.75%-6.75% 5.50%-6.75%
Croatia 8.00%-11.00% 8.00%-11.00% 6.00%-9.00% 6.00%-9.00%
Valuation Comparison
2023 versus 2022 valuation - Total portfolio +2.3%
United Kingdom +2.0%
The Netherlands +5.5%
Germany -6.5%
Croatia +4.0%
Cash flow and EPRA earnings
In 2023, the Group had a positive operational cash flow of £126.1 million,
due to its record fully recovered trading. Cash used for debt service
increased to £82.2 million (2022: £68.0 million), of which £46.4 million
(2022: £41.8 million) is due to interest expenses, £31.7 million (2022:
£21.3 million) due to loan amortisations and £4.1 million (2022: £4.9
million) due to lease amortisations.
Investment cash flows reported an outflow of £121.5 million, of which about
86.5% was due to development projects and £15.0 million regarding our usual
maintenance CAPEX projects. Most noticeable was the £80.6 million CAPEX
related to our development projects in Hoxton London and art'otel Rome Piazza
Sallustio. These hotels are due to open in the current financial year, hence
construction CAPEX is expected to significantly decrease from the third
quarter onwards.
The Group has a healthy balance sheet, no significant refinancing until 2026
and a total cash position of £150.4 million, with access to a further £30
million of undrawn facilities.
The Group reported adjusted EPRA earnings of £50.1 million, up 137% (2022:
£21.2 million), and adjusted EPRA earnings per share of 118 pence, up 136%
(2022: 50 pence, 2019: 128 pence per share).
EPRA Performance measurement
EPRA summary
Summary of EPRA Performance indicators
Year ended 31 December 2023 Year ended 31 December 2022
£ million Per Share £ million Per Share
EPRA NRV (Net Reinstatement Value) 1,136.4 £26.72 1,078.7 £25.17
EPRA NTA (Net Tangible Assets) 1,106.6 £26.02 1,047.2 £24.44
EPRA NDV (Net Disposal Value) 1,070.4 £25.17 1,030.9 £24.06
EPRA earnings 59.0 139p 32.7 77p
Adjusted EPRA earnings 50.1 118p 21.1 50p
EPRA NRV
31 December 2023 31 December 2022
£ million EPRA NRV EPRA NTA EPRA NDV EPRA NRV EPRA NTA (4) EPRA NDV
(4)
NAV per the financial statements 314.6 314.6 314.6 315.1 315.1 315.1
Effect of exercise of options - - - 3.0 3.0 3.0
Diluted NAV, after the exercise of options(1) 314.6 314.6 314.6 318.1 318.1 318.1
Includes:
Revaluation of owned properties in operation (net of non-controlling 794.6 794.6 794.6 746.9 746.9 746.9
interest)(2)
Revaluation of the joint venture interest held in two German properties (net 6.1 6.1 6.1 6.8 6.8 6.8
of non-controlling interest)
Fair value of fixed interest rate debt - - (5.9) - - (9.2)
Deferred tax on revaluation of properties - - (39.0) - - (31.7)
Real estate transfer tax(3) 19.1 - - 18.7 - -
Excludes:
Fair value of financial instruments 14.2 14.2 - 21.1 21.1 -
Deferred tax (16.2) (16.2) - (9.3) (9.3) -
Intangibles as per the IFRS balance sheet - 10.7 - - 12.8 -
NAV 1,136.4 1,106.6 1,070.4 1,078.7 1,047.2 1,030.9
Fully diluted number of shares (in thousands)(1) 42,527 42,527 42,527 42,846 42,846 42,846
NAV per share (in £) 26.72 26.02 25.17 25.17 24.44 24.06
1 The fully diluted number of shares excludes treasury shares but
includes 163,221 outstanding dilutive options (as at 31 December 2022:
150,223).
2 The fair values of the properties were determined on the basis of
independent external valuations prepared in December 2023.
3 EPRA NTA and EPRA NDV reflect fair value net of transfer costs.
Transfer costs are added back when calculating EPRA NRV.
4 NTA is calculated under the assumption that the Group does not
intend to sell any of its properties in the long run.
EPRA earnings
12 months ended 12 months ended
31 December 2023 31 December 2022
£ million £ million
Earnings attributed to equity holders of the parent company 22.4 10.2
Reported depreciation and amortisation 45.1 40.0
Revaluation of Park Plaza County Hall London Income Units (1.6) (0.3)
Changes in fair value of financial instruments 1.7 (9.6)
Non-controlling interests in respect of the above(3) (8.6) (7.6)
EPRA Earnings 59.0 32.7
Weighted average number of ordinary shares outstanding 42,541,186 42,522,523
EPRA Earnings per Share (in pence) 139 77
Company specific adjustments:(1)
Capital loss on buy-back of Income Units in Park Plaza Westminster Bridge 3.3 1.5
London
Remeasurement of lease liability(4) 3.9 3.7
Disposals and Other non-recurring expenses (including pre-opening expenses)(7) 1.4 1.5
Adjustment of lease payments(5) (2.3) (2.2)
One-off tax adjustments(6) (2.5) (5.8)
Maintenance CAPEX(2) (16.6) (13.2)
Non-controlling interests in respect of Maintenance CAPEX and the adjustments 3.9 3.0
above(3)
Company Adjusted EPRA Earnings(1) 50.1 21.2
Company Adjusted EPRA Earnings per Share (in pence) 118 50
Reconciliation Company adjusted EPRA earnings to normalised PBT:
Company Adjusted EPRA Earnings(1) 50.1 21.2
Reported depreciation and amortisation (45.1) (40.0)
Non-controlling interest in respect of reported depreciation(3) 8.6 7.6
Maintenance CAPEX(2) 16.6 13.2
Non-controlling interests in respect of Maintenance CAPEX and the adjustments (3.9) (3.0)
above(3)
Adjustment of lease payments(5) 2.3 2.2
One-off tax adjustments(6) 2.5 5.8
Profit attributable to non-controlling interests(3) 4.7 4.7
Reported tax 1.7 (3.4)
Normalised profit before tax 37.5 8.3
1 The 'Company specific adjustments' represent adjustments of non-recurring
or non-trading items.
2 Calculated as 4% of revenues, which represents the expected average
maintenance capital expenditure required in the operating properties.
3 Non-controlling interests include the non-controlling shareholders in
Arena, third party investors in Income Units of Park Plaza Westminster Bridge
London and the non-controlling shareholders in the partnership with Clal that
was entered into in June 2021 and March 2023.
4 Non-cash revaluation of finance lease liability relating to minimum future
CPI/RPI increases.
5 Lease cash payments which are not recorded as an expense in the Group's
income statement due to the implementation of IFRS 16.
6 Mainly relates to deferred tax asset on carry forward losses recorded in
2023.
7 Mainly relates to pre-opening expense and net profit and loss on disposal
of property, plant and equipment.
Other EPRA measurements
Given that the Group's asset portfolio is comprised of hotels, resorts and
campsites which are also operated by the Group, a few of EPRA's performance
measurements, which are relevant to real estate companies with passive rental
income, have not been disclosed as they are not relevant or non-existent.
Those EPRA performance measurements include EPRA Net Initial Yield (NIY), EPRA
'Topped-up' NIY, EPRA Vacancy Rate and EPRA Cost Ratios.
Capital structure
Call impact minorities and future
As part of our strategy, we unlock capital on the back of our assets in many
different ways. We do this by raising debt, raising equity through several
different forms of partnerships or sometimes by entering into 100+ year ground
rent structures. This funding strategy gives us access to capital on the back
of the fair value of our assets and also balances the liquidity and interest
rate risk attached to our capital structure.
Our partnerships, such as the third party unit holders in Park Plaza
Westminster Bridge London, the third party shareholders in our listed Croatian
subsidiary or the individual professional partners we work with on several
assets, provide us with long-term equity and therewith sharing of the risks
and returns on each asset.
The 100+ year ground rent structures give us long-term access to capital, with
no covenants, no recourse to the Group and no refinance risk or interest rate
exposure. These structures are typically linked to inflation, although, these
are often capped at around 4-5% annually.
Finally, our asset-backed mortgages are mostly entered into with long-standing
banking partners, with a five- to ten-year maturity and with a fixed rate or a
variable rate with hedging arrangements. Our mortgages have covenants around
the value of assets (Loan to Value) and trading (interest or debt service
cover ratios). The level of debt raised on trading assets is typically around
50% of the value of these assets and appropriate buffers are kept towards the
covenants on the loan. Furthermore, most of our loans are amortised annually
around 2.5% of the nominal amount over the term. The current net bank debt
leverage (EPRA LTV) percentage is 33.4%.
Although our mortgages are exposed to interest rate risks, most of these were
entered into years ago, averaging at 3.5% interest (98% fixed) and with an
average remaining maturity of 4.0 years. In early 2022, the Group entered into
multiple forward starting hedges (starting when loans roll over or refinance
in 2024 and 2026) for approximately £380 million, around 1.4%-1.9% swap rate,
significantly below current market levels. The loans on trading assets are
non-recourse.
European Hospitality Real Estate Fund
Consistent with PPHE's long-standing approach to building shareholder value
through the careful stewardship of its own balance sheet and partnership with
third party capital providers, we launched our inaugural European Hospitality
Real Estate Fund (the 'Fund') in March 2023 to support the Group's long-term
growth ambitions. Hotels acquired by the Fund will be operated by PPHE's
hospitality management platform, building further scale in the platform. PPHE
has committed up to €50 million in cash and/or assets to the Fund and the
Fund's cornerstone investor, Clal Insurance, has committed to invest up to
€75 million (however, capped at 49% of the equity contributed at any time).
In March 2023, our property in Rome (soon to open as art'otel Rome Piazza
Sallustio) was contributed as a seed asset.
Throughout the year the Group engaged with investment bankers to raise the
remaining equity for the Fund, however, the significant changes in the
interest rate market during this period has meant that the Group was not
successful in signing up new investors.
If further investors have not joined the Fund by 13 March 2024 (unless
mutually extended), the Fund will carry on as a joint venture with Clal.
Furthermore, the Group has the option to top up its own equity contribution
(currently at up to €50 million) to €78 million to give the total joint
venture a c.€150 million equity value. With full equity subscription
combined with a targeted 50% bank leverage, the investment potential of the
joint venture will then be around €300 million. The Fund has an investment
period of 24 months from March 2023, which can be extended by an additional 12
months (subject to consent).
Net debt leverage/EPRA LTV reconciliation
Group as reported under IFRS Adjustments to arrive at EPRA Group LTV Group EPRA LTV before NCI adjustment Proportionate Consolidation (Non-controlling interest) Combined EPRA LTV
£'million £'million £'million £'million £'million
Include:
Borrowings
(short-/long-term) 893.0 - 893.0 (202.4) 690.6
Exclude:
Cash & cash equivalents and restricted cash (167.7) - (167.7) 36.6 (131.1)
Net Debt (a) 725.3 - 725.3 (165.8) 559.5
Include:
PP&E 1,412.8 762.4 2,175.2 (511.8) 1,663.4
Right-of-use assets 229.2 (229.2) - - -
Lease liabilities (277.4) 277.4 - - -
Liability to income units in Westminster Bridge hotels (114.3) 114.3 - - -
Intangible assets 10.7 - 10.7 (0.9) 9.8
Investments in Joint ventures(1) 5.4 11.4 16.8 (7.8) 9.0
Other assets and liabilities, net (9.9) (4.0) (13.9) 8.5 (5.4)
Total Property Value (b) 1,256.5 932.3 2,188.8 (512.0) 1,676.8
EPRA LTV (a/b) 57.7% - 33.1% - 33.4%
Adjustments to reported EPRA NRV:
Real estate transfer tax - 21.9 21.9 (2.8) 19.1
Total Property Value after adjustments (c) 1,256.5 954.2 2,210.7 (514.8) 1,695.9
Total Equity (c-a) 531.2 954.2 1,485.4 (349.0) 1,136.4
1 Proportionate consolidation was not applied to the Joint ventures as it is
considered as not material.
Capital Expenditure/Development pipeline update
With an expansion CAPEX of £110.6 million, we remained focused on
implementing our strategy, progressing our development pipeline, and expanding
our footprint into new, highly attractive markets.
The construction phase of our new hotel in Hoxton London (art'otel London
Hoxton) is nearing completion and handover of certain areas commenced in Q1
2024 enabling our operational teams to start preparing the hotel for its
expected opening in Q2 2024.
We opened our first art'otel in Croatia in Q3 2023, art'otel Zagreb. This was
an office-to-hotel conversion project in Zagreb city centre at a total
investment of £18 million.
Similarly, the first Radisson RED property to be operated by the Group, and
the second to open under the extended Radisson partnership, opened for
bookings in Q4 2023, following an extensive repositioning (previously known as
Arena 88 Rooms Hotel).
In Rome, the Group had embarked on a full repositioning and construction of
the former Londra & Cargill Hotel located in the city centre in July 2022.
Works are underway to reposition this hotel into a 99-room premium art'otel,
which is expected to open in the first half of 2024.
On the above £300+ million pipeline, the Group has a remaining commitment of
approximately £60 million.
We are constantly working on improving our existing portfolio and looking for
interesting opportunities to acquire further assets to broaden the Group's
portfolio. The diagram in the Financial Review section of the Annual Report
provides a summary of the investments done in the past ten years.
Dividend
The strength of trading during the first half of 2023 and the Board's
confidence in the outlook enabled it to recommend a return to the Company's
historical capital returns policy of distributing approximately 30% of
adjusted EPRA earnings while continuing to support investment in future growth
opportunities. Given the continued share price discount relative to the
Company's EPRA NRV per share, the Board consulted with shareholders about the
most appropriate and effective mechanism for such distributions to take place,
including dividends, share buy-backs, tender offers or a combination of these.
During this exercise, a broad range of opinions and preferences were expressed
by shareholders. Having listened carefully to all the viewpoints provided, the
Group took the decision to pay an interim dividend of 16 pence per share for
the period ended 30 June 2023, which represented a year-on-year increase of 13
pence per share (H1 2022: 3 pence per share).
Further to the above, and in line with the Board's confidence in the Group's
performance and the strength of its development pipeline being delivered, the
Board has proposed a final dividend payment of 20 pence per share. When
combined with the interim ordinary dividend, it will bring the total dividend
for the year to 36 pence per share.
The Board will continue to regularly review its capital returns policy.
Daniel Kos
Chief Financial Officer & Executive Director
BUSINESS REVIEW
INTRODUCTION
Demand among leisure and corporate visitors alike remained resilient and grew
consistently during 2023. This was despite persistent macro-economic
challenges and wider concerns about consumer confidence, as people around the
world sought to travel and meet in person at levels close to and in many cases
exceeding those of 2019 (which was the last full pre-pandemic year).
Our strategic progress was similarly broad-based, with openings across all of
our key markets successfully completed to plan. Our newly opened art'otel at
London Battersea Power Station was a particular highlight and has traded well
in a well-known and highly desirable destination. We were also pleased to open
art'otel Zagreb, our first city-centre hotel in Croatia, as well as our first
Radisson RED branded property in Belgrade, Serbia.
As our £300+ million development pipeline nears completion, we have continued
to find innovative ways to drive further growth and shareholder returns in the
years ahead. This includes the equity partnership with Clal, which gives us,
when leveraged, access to an investment potential of between €200 and €300
million (based on leverage assumption of 50% and including PPHE's
participation) for new property acquisitions, and an asset optimisation
including securing planning to convert subterranean space at Park Plaza
Victoria London into a 179-room hotel concept.
As activity grew throughout the year, our teams once again worked extremely
hard to deliver a memorable guest experience for all our guests, resulting in
high levels of guest satisfaction. We continued to prioritise recruitment,
learning and development, engagement and retention. Our long-term approach and
investment in our people has positioned us strongly in the market and this
remains a key focus. Our talented and dedicated teams remain critical to the
long-term success of the Group, and I would like to reiterate my gratitude to
them.
Investment in new technologies and systems remained a key priority as we
sought new ways to innovate and enhance our service offering, and create
efficiencies in our processes. This included the continued use of automation
and robotics across several business functions, alongside the implementation
of two highly regarded revenue management systems to optimise pricing and
forecasting. We also further upgraded our Digital Services suite of products,
including online check-in and digital keys, to create a more seamless guest
journey.
While leveraging the additional Radisson brands in line with our expanded
partnership, each with their distinct personas and market positioning
(Radisson RED and Radisson Collection), we continued to expand and evolve our
offering, within both our restaurant and bar concepts. During the year, we
opened a number of new destination restaurants and bars, including
Portuguese-inspired JOIA on the 15th floor at art'otel London Battersea Power
Station, following our successful collaboration with Executive Chef Henrique
Sá Pessoa at art'otel Amsterdam. TOZI Grand Café also opened on the ground
floor, inspired by the elegance of Europe's famous grand cafés and
celebrating authentic Italian dishes, and TOZI Counter - a casual outlet
specialising in fresh Italian sandwiches, pastries and specialty coffees - is
located adjacent to TOZI Grand Café. Furthermore, in November 2023 we opened
our first YEZI restaurant, at our new art'otel in Zagreb, which provides a
relaxed fine-dining experience inspired by the traditional Asian tea house.
I look forward to keeping shareholders updated on our performance and
strategic progress over the coming months. In the meantime, please read on for
our 2023 Business Review.
Greg Hegarty
Co-Chief Executive Officer & Executive Director
united kingdom
property portfolio
The Group's well-invested property portfolio consists of approximately 3,350
rooms in operation in the upper upscale segment of the London hotel market. In
addition, the Group will be soft opening the 357-room art'otel London Hoxton
in April 2024 and it has a further three development sites in London, which
could add up to over 800 rooms.
Four of the Group's London hotels are in the popular South Bank area of
London, with further properties in Victoria, Marylebone, Battersea and Park
Royal. There are also three properties located in the UK regional cities of
Nottingham, Leeds and Cardiff(2)(.)
The Group has an ownership interest in ten properties: Park Plaza Westminster
Bridge London, Park Plaza London Riverbank, Park Plaza London Waterloo, Park
Plaza County Hall London(2), Park Plaza Victoria London, Park Plaza London
Park Royal, art'otel London Hoxton, Holmes Hotel London, Park Plaza Leeds and
Park Plaza Nottingham. Park Plaza Cardiff(2) operates under a franchise
agreement. The Group operates art'otel London Battersea Power Station(2) hotel
under a long-term management agreement through its hospitality platform.
Total value of the UK property portfolio¹ £1,014m (2022: £991m)
Financial performance
Reported in Pound Sterling (£)
Year ended Year ended % change Year ended % change
31 Dec 2023 31 Dec 2022 31 Dec 2019
Total revenue £234.9m £190.1m 23.6% £207.4m 13.3%
EBITDAR £76.6m £56.8m 35.0% £71.0m 7.9%
EBITDA £76.3m £56.2m 35.7% £70.7m 7.9%
Occupancy 83.6% 67.8% 1,590 bps 87.7% (405) bps
Average room rate £190.8 £192.3 (0.8)% £152.4 25.2%
RevPAR £159.6 £130.3 22.5% £133.7 19.4%
Room revenue £183.8m £149.9m 22.6% £152.7m 20.4%
EBITDA margin 32.5% 29.6% 290 bps 34.1% (160) bps
1 Independent valuation by Savills in December 2023 and excluding the London
development sites art'otel London Hoxton and Westminster Bridge Road.
2 Revenues derived from these hotels are accounted for in Management and
Holdings, and their values and results are excluded from the data provided in
this section.
Portfolio performance
The United Kingdom remains the Group's largest region in terms of revenue
generated and property value. Throughout the year, the portfolio performed
strongly across the Group's main segments of leisure, corporate and meetings.
This was predominantly achieved through a further growth in room rate
alongside a significant recovery in occupancy. Booking activity was supported
by a number of events in London, including the Coronation of King Charles III
in May, and a return to business travel.
Total reported revenue was up 23.6% to £234.9 million (2022: £190.1
million). Reported RevPAR was £159.6 (2022: £130.3), driven by a stable
average room rate of £190.8, down 0.8% (2022: £192.3), and a further
improvement in occupancy to 83.6% (2022: 67.8%).
EBITDA was £76.3 million (2022: £56.2 million).
Development pipeline
The Group's flagship project, art'otel London Hoxton, is now in the final
stages of development ahead of soft opening in April 2024. Located in the
vibrant Shoreditch area in East London, this premium lifestyle hotel will
comprise 357 rooms and suites, five floors of 5,900m2 office space, wellness
facilities, a gym and swimming pool, and an art gallery space. The hotel's
Signature Artist is London-born British street artist D*Face, who is
recognised globally as one of his generation's most prolific contemporary
urban artists, blending art, design and graffiti. The General Manager has been
appointed along with a support function to prepare the hotel for launch.
The Group also has three longer-term development projects in London. The first
is a site adjacent to Park Plaza London Park Royal (in West London), the
second site is at 79-87 Westminster Bridge Road, close to the Group's Park
Plaza London Waterloo and Westminster Bridge properties, and the third
development project is the potential to create a 179-bedroom subterranean
hotel at the Group's Park Plaza London Victoria property. The Park Royal and
Park Plaza London Victoria sites both have planning consent.
Hospitality management platform projects
In February 2023, the Group fully opened - to critical acclaim - the UK's
first art'otel, located within the Battersea Power Station development. The
property features 164 bedrooms, a Venetian inspired Italian TOZI restaurant
and bar, a skyline destination restaurant, JOIA, and a spectacular rooftop
swimming pool. The hotel also offers a gym, spa, event facilities, and an art
gallery with regular art programmes throughout the hotel. Jaime Hayon is the
hotel's interior designer and Signature Artist, and two Michelin starred
Portuguese chef Henrique Sá Pessoa is the JOIA restaurant Concept Chef. This
hotel is managed by the Group under a long-term operating agreement and as a
result, its financial performance is not included in the performance reported
in this segment. Management fees are accounted for in the Management and
Central Services segment.
The United Kingdom hotel market*
RevPAR was up 14.5% at £92.4, driven by an 8.7% increase in average room rate
to £119.5 and a 5.3% increase in occupancy to 77.3%.
In London, RevPAR increased by 17.1% to £156.2 compared with 2022, reflecting
an 8.8% increase in occupancy to 79.8%, and a 7.6% increase in average room
rate to £195.7.
* Source STR European Hotel Review, December 2023.
THE NETHERLANDS
Property portfolio
The Group has an ownership interest in three hotels in the centre of Amsterdam
(Park Plaza Victoria Amsterdam, art'otel Amsterdam and Park Plaza Vondelpark,
Amsterdam), and a fourth property located near Schiphol Airport (Park Plaza
Amsterdam Airport). It also owns Park Plaza branded hotels in Utrecht and
Eindhoven.
Total value of the Netherlands property portfolio(1) £318m (2022: £307m)
Financial performance
Reported in Pound Sterling(2) (£) Reported in local currency Euro (€)
The Netherlands Year ended 31 Dec 2023 Year ended 31 Dec % change Year ended 31 Dec % change Year ended 31 Dec Year ended 31 Dec % change Year ended 31 Dec % change
2022
2019
2022 2019 2023
Total revenue £63.3.m £41.6m 52.3% £53.8m 17.7% €72.8m €48.7m 49.6% €61.4m 18.6%
EBITDAR £19.6m £11.2m 75.2% £15.0m 30.5% €22.6m €13.1m 72.1% €17.2m 31.5%
EBITDA £19.6m £11.2m 75.4% £15.0m 30.5% €22.5m €13.1m 72.3% €17.1m 31.5%
Occupancy 82.4% 57.3% 2,510 bps 86.2% (385) bps 82.4% 57.3% 2,510 bps 86.2% (385) bps
Average room rate £149.1 £142.2 4.9% £124.8 19.5% €171.6 €166.6 3.0% €142.6 20.3%
RevPAR £122.8 £81.5 50.7% £107.6 14.1% €141.4 €95.5 48.0% €122.9 15.0%
Room revenue £48.1m £31.9m 50.7% £40.3m 19.5% €55.4 €37.4m 48.0% €46.0m 20.4%
EBITDA margin 30.9% 26.9% 410 bps 27.9% 305 bps 30.9% 26.9% 410 bps 27.9% 305 bps
1 Independent valuation by Savills in December 2023.
2 Average exchange rate from Euro to Pound Sterling for the period ended 31
December 2023 was 1.151 and for the period ended 31 December 2022 was
1.172 representing a 1.8% decrease.
Portfolio performance
As in the United Kingdom, the Group's Dutch properties performed strongly
throughout the year, driven by a combination of rate growth and occupancy
recovery.
Total revenue (in local currency) was up 49.6% at €72.8 million (2022:
€48.7 million). RevPAR increased to €141.4 (2022: €95.5), reflecting the
3.0% uplift in average room rate to €171.6 (2022: €166.6), and the
significant improvement in occupancy to 82.4% (2022: 57.3%). EBITDA improved
by €9.4 million to €22.5 million (2022: €13.1 million).
The Dutch hotel market*
RevPAR increased by 25.4% to €108.3 compared with 2022. Occupancy increased
by 13.4% to 71.3%, and the average room rate was €151.9, 10.6% higher than
in 2022.
In Amsterdam, our main market in the Netherlands, RevPAR increased by 29.3% to
€134.2. Occupancy levels increased by 16.6% to 74.8%, and the average daily
room rate increased by 10.9% to €179.4.
* Source STR European Hotel Review, December 2023.
CROATIA
Property portfolio
The Group's subsidiary, Arena Hospitality Group d.d. ('Arena'), owns and
operates a Croatian portfolio compromising more than 8,500 rooms and
accommodation units across eight hotels, six resorts and eight campsites. With
the exception of art'otel Zagreb, all these properties are located in Istria,
Croatia's most prominent tourist region. Four of these properties are Park
Plaza branded, one property is art'otel branded, and Grand Hotel Brioni is a
Radisson Collection hotel. The remainder of our portfolio operates as part of
the Arena Hotels & Apartments and Arena Campsites brands. The Group opened
its first art'otel in Zagreb in Q4 2023.
Total value of the Croatian property portfolio(1) £361m (2022: £334m)
Financial performance
Reported in Pound Sterling(2) (£) Reported in local currency Euro (€)(4)
Croatia Year ended 31 Dec 2023 Year ended 31 Dec % change Year ended 31 Dec % change Year ended 31 Dec Year ended 31 Dec % change Year ended 31 Dec % change
2022 2019 2023 2022 2019
Total revenue £78.1m £69.2m 12.8% £61.1m 27.8% €89.9m €81.3m 10.6% €70.1m 28.3%
EBITDAR £22.4m £23.3m (3.9)% £19.4m 15.2% €25.7m €27.2m (5.6)% €22.2m 16.0%
EBITDA £20.4m £21.4m (4.7)% £18.2m 12.0% €23.5m €25.1m (6.4)% €20.8m 12.8%
Occupancy(3) 52.7% 55.1% (240) bps 63.1% (1,040) bps 52.7% 55.1% (240) bps 63.1% (1,040) bps
Average room rate(3) £140.2 £123.2 13.8% £91.1 53.8% €161.3 €144.4 11.7% €104.1 54.9%
RevPAR(3) £73.8 £67.8 8.8% £57.5 28.4% €85.0 €79.5 6.9% €65.7 29.4%
Room revenue(3) £42.6m £36.1m 17.9% £33.5m 27.3% €49.0m €42.3m 15.8% €38.2m 28.2%
EBITDA margin 26.1% 30.9% (480) bps 29.8% (370) bps 26.1% 30.9% (475) bps 29.7% (360) bps
1 Independent valuation by Zagreb nekretnine Ltd in December 2023.
2 Average exchange rate from Euro to Pound Sterling for the period ended 31
December 2023 was 1.151 and for the period ended 31 December 2022 was
1.172 representing a 1.8% decrease.
3 The room revenue, average room rate, occupancy and RevPAR statistics
include all accommodation units at hotels and self-catering apartment
complexes and exclude campsites and mobile homes.
4 Since 1 January 2023, the Group's Croatian portfolio performance has been
reported in euros, following Croatia's admission to the eurozone.
Portfolio performance
The Group's Croatian operations are predominately seasonal, with most of the
properties closed during the first and last quarter of the year. From around
Easter time, business activity intensifies while hotels, resorts and campsites
are fully open and trading for the peak summer season in June, July and
August. Most properties are then closed in late September/mid-October for
winter.
The region continued to benefit from the maturing of properties following
significant repositioning investment programmes to upscale market positions
across the portfolio. Revenue growth was primarily from hotels and apartments,
especially from Grand Hotel Brioni Pula due to its first full-year trading
since it opened in May 2022. In addition, campsites performed well and
delivered year-on-year revenue growth, building on the record performance in
2022. This performance was achieved despite reduced air travel capacity to and
from Pula airport, adverse weather conditions (with torrential rains during
the summer season) and the full re-opening of other global tourist markets
compared with 2022, providing tourists with more travel options.
Total revenue (in local currency) was up 10.6% to €89.9 million (2022:
€81.3 million) and was 28.3% above revenue in 2019. This was driven by an
11.7% increase in average room rate to €161.3 (2022: €144.4) with
occupancy decreasing 240 bps to 52.7% (2022: 55.1%). Consequently, RevPAR grew
to €85.0, mainly due to the higher average room rate.
EBITDA was €23.5 million, which was 12.8% above 2019, however, it was 6.4%
lower than 2022 (2022: €25.1 million), primarily due to the impact of
significantly higher utilities costs, up 71.0% year-on-year, and increased
payroll expenses.
Asset management projects
Following phase one of renovations at Arena Stoja Campsite in 2022, phase two
was completed ahead of the 2023 summer season. This €8.3 million investment
included a new arrival and entrance area for the campsite, an extensive
renovation of its main restaurant and coffee shop, along with major
infrastructure upgrades, further strengthening the campsite's offering and
appeal.
In Croatia, we are taking a more cautious approach to new developments and
postponing larger projects, such as the conversion of the Hotel Riviera, Pula
into a premium offering, until such time that we can be sure that new
investments meet our targeted return hurdle rate. Our planned investment in
Hotel Riviera in Pula is temporarily paused due to construction cost inflation
associated with the project.
Development projects
In October 2023, the Group opened art'otel Zagreb following a €18 million
investment to convert an iconic office building in the heart of the city
centre, known to be one of the best examples of Zagreb's Art Deco
architecture. Located just off Zagreb's main square (Ban Jelačić Square),
the hotel features 110 rooms, a rooftop bar with a panoramic view of the city
(opening in 2024), pan-Asian destination restaurant and bar YEZI, four meeting
spaces, a spa and an indoor pool. The hotel's Signature Artist is the late
Boris Bućan, one of Croatia's best-known artists. His artwork is layered
within the very fabric of the hotel for guests to enjoy during their stay - it
is a poignant last collection of his life's creativity. The hotel has been
well received since its launch in October 2023, and contributed nine weeks of
performance to the results.
GERMANY
Property portfolio
The Group's portfolio includes four properties in Berlin and one hotel each in
Cologne, Nuremberg and Trier. Hotels with an ownership interest include Park
Plaza Berlin Kudamm (relaunching in Q2 2024 as Radisson RED Berlin Kudamm)(3),
Park Plaza Nuremberg, art'otel Berlin Mitte(3), Park Plaza Berlin and art'otel
Cologne. Park Plaza Wallstreet Berlin Mitte operates under an operating lease
and Park Plaza Trier(3) operates under a franchise agreement.
Total value of the German property portfolio(1) £92m (2022: £100m)
Financial performance
Reported in Pound Sterling(2) (£) Reported in local currency Euro (€)
Germany Year ended 31 Dec Year ended 31 Dec % change Year ended 31 Dec % change Year ended 31 Dec Year ended 31 Dec % change Year ended 31 Dec % change
2023 2022 2019 2023 2022 2019
Total revenue £22.8m £17.7m 28.4% £24.2m (6.1)% €26.2m €20.8m 26.0% €27.7m (5.4)%
EBITDAR £5.5m £6.4m (14.2)% £7.0m (21.6)% €6.3m €7.5m (15.7)% €8.0m (21.0)%
EBITDA £5.5m £6.4m (14.2)% £7.0m (21.6)% €6.3m €7.5m (15.7)% €8.0m (21.0)%
Occupancy 62.3% 53.0% 930 bps 79.4% (1,715) bps 62.3% 53.0% 930 bps 79.4% (1,715) bps
Average room rate £120.3 £110.3 9.0% £96.7 24.3% €138.4 €129.3 7.1% €110.5 25.2%
RevPAR £74.9 £58.4 28.2% £76.8 (2.5)% €86.2 €68.5 25.9% €87.8 (1.8)%
Room revenue £19.5m £15.2m 28.2% £20.0m (2.5)% €22.5m €17.8m 25.9% €22.9m (1.8)%
EBITDA margin 24.0% 35.9% (1,190) bps 28.8% (480) bps 24.0% 35.9% (1,190) bps 28.8% (480) bps
1 Independent valuation by Savills in December 2023.
2 Average exchange rate from Euro to Pound Sterling for the period ended 31
December 2023 was 1.151 and for the period ended 31 December 2022 was 1.172,
representing a 1.8% decrease.
3 Revenues derived from these hotels are accounted for in Management and
Central Services performance and their values and results are excluded from
the data provided in this section.
Portfolio performance
Germany is the Group's smallest region and as previously reported, operations
had a slower start to the year than other regions, with both rate and
occupancy growth impacted by market dynamics in the region. However, trading
improved as the year progressed.
Market conditions in Germany saw a continued rebuilding in guest numbers.
While this took longer than anticipated, revenue grew significantly
year-on-year as a result of an increase in occupancy and average rate. This
was supported by the various fairs and events which were hosted in Cologne,
Nuremburg and Berlin throughout the period.
Despite the improved revenue performance, the bottom line was impacted by
inflation related to rising costs in utilities, food, and service contracts,
as well as the ending of government grants for payroll and operating costs.
Total revenue (in local currency) was up 26.0% at €26.2 million (2022:
€20.8 million). Occupancy continued to recover to 62.3% (2022: 53.0%) and
average room rate grew by 7.1% to €138.4 (2022: €129.3). As a result,
RevPAR increased by 25.9% to €86.2 (2022: €68.5).
However, EBITDA was €6.3 million (2022: €7.5 million), impacted by
inflationary increases in the cost of goods and services and higher labour
costs. In 2022, EBITDA benefited from non-recurring government grants of
€2.9 million.
Asset management projects
In Berlin, Park Plaza Berlin Kudamm was closed in November 2023 for a
six-month refurbishment programme, which includes a complete refurbishment of
all public areas and guest rooms. The hotel is expected to reopen as Radisson
RED Berlin Kudamm in Q2 2024.
The German hotel market*
The German market experienced a 18.5% increase in RevPAR to €74.2, resulting
from a 11.5% improvement in occupancy to 64.8% and a 6.2% increase in average
room rate to €114.5.
In Berlin, RevPAR increased by 16.4% to €85.8 and occupancy increased by
8.3% to 71.3%. Average room rate increased 7.5% to €120.3.
* Source STR European Hotel Review, December 2023.
Other markets
Italy, Hungary, Serbia and Austria
This includes recently acquired properties in Italy, Serbia and Austria and a
hotel operated in Budapest, Hungary. The Group's properties in Austria and
Budapest were open throughout the year. However, the properties in Belgrade
(Serbia) and Rome (Italy) were closed all year due to ongoing investment
programmes to reposition these properties.
Financial performance
Reported in Pound Sterling (£)
Year ended Year ended % change
31 Dec 2023 31 Dec 2022
Total revenue £7.9m £6.3m 23.9%
EBITDAR £(0.5)m £(0.6)m n/a
EBITDA £(0.5)m £(0.6)m n/a
Occupancy 44.4% 34.3% 1,010 bps
Average room rate £129.8 £97.2 33.5%
RevPAR £57.7 £33.4 72.7%
Room revenue £6.1m £4.6m 32.3%
Nassfeld, Austria
The Arena FRANZ Ferdinand hotel in Nassfeld performed well in its first year
as a year-round operation (144 rooms). This followed recent investments to
refurbish the hotel and upgrade the amenities, such as air-conditioning
throughout the property and the addition of wellness areas, including an
indoor and outdoor swimming pool. Following completion of the investment, we
started to reposition the hotel to capture both the summer and winter seasons.
The hotel was open for almost nine months of the year, with average rates
increasing substantially year-on-year.
Rome, Italy
The multi million investment in the repositioning of the former Londra &
Cargill Hotel is nearing completion. The property, which is in a prime
location in the city of Rome, was closed in July 2022 for major refurbishment
works, including reconfiguration of the hotel layout and its interior design.
The hotel is on track to reopen during H1 2024 as the upper upscale 99-room
lifestyle art'otel Rome Piazza Sallustio.
Belgrade, Serbia
The former Arena 88 Rooms Hotel in Belgrade city centre was closed in March
2023 to undergo a £2.6 million refurbishment programme. This was completed
early 2024 with the hotel reopening in February 2024 as Radisson RED Belgrade,
the Group's first Radisson RED branded property and the second hotel to be
operated and marketed by the Group under its extended partnership with
Radisson. The hotel has 88 rooms and includes a gym, an all-day restaurant,
flexible event spaces, including game areas and a co-working area, and a
rooftop bar with views of the historic city centre.
Budapest, Hungary
In March 2023, the property in Budapest was rebranded Park Plaza Budapest
(formerly art'otel Budapest). This followed an investment programme in 2022 to
redesign and upgrade the public areas. The hotel continued to see an
improvement in performance during the year.
MANAGEMENT AND CENTRAL SERVICES
our performance
Revenues in this segment are primarily related to management, sales, marketing
and franchise fees, and other charges for central services. This includes
properties operated by the Group's hospitality management platform, such as
art'otel London Battersea Power Station.
These are predominantly charged within the Group and therefore eliminated upon
consolidation.
For the year ended 31 December 2023, the segment showed a significant
improvement due to the recovery.
Management, Group central services and licence, sales and marketing fees are
calculated as a percentage of revenues and profit, and therefore are affected
by underlying hotel performance.
Reported in Pound Sterling (£) Year ended 31 Dec 2023
Listed Company Development Projects Management Platform Arena Hospitality Group Total
Management revenue - - £34.2m - £34.2m
Central Services revenue - - - £14.1 m £14.1m
Revenues within the consolidated Group - - £(27.7)m £(12.9)m £(40.6)m
External and reported revenue - - £6.5m £1.2m £7.7m
EBITDA £(2.2)m £(1.0)m £12.1m £(1.9)m £7.0m
Reported in Pound Sterling (£) Year ended 31 Dec 2022
Listed Company Development Projects Management Platform Arena Hospitality Group Total
Management revenue - - £24.9m - £24.9m
Central Services revenue - - - £12.6m £12.6m
Revenues within the consolidated Group - - £(20.7)m £(11.7)m £(32.4)m
External and reported revenue - - £4.2m £0.9m £5.1m
EBITDA £(3.9)m £(0.4)m £5.5m £(1.2)m £0.0 m
Consolidated Statement of Financial Position
for the year ended 31 December 2023
2023 2022
£'000 £'000
Assets
Non-current assets:
Intangible assets 10,665 12,805
Property, plant and equipment 1,412,830 1,335,184
Right-of-use assets 229,215 225,443
Investment in joint ventures 5,438 4,961
Other non-current assets 39,646 47,245
Restricted deposits and cash 10,385 9,272
Deferred income tax asset 13,833 12,909
1,722,012 1,647,819
Current assets:
Restricted deposits and cash 6,909 9,229
Inventories 3,288 3,181
Trade receivables 17,880 18,533
Other receivables and prepayments 23,260 17,866
Cash and cash equivalents 150,416 163,589
201,753 212,398
Total assets 1,923,765 1,860,217
Equity and liabilities
Equity:
Issued capital - -
Share premium 133,469 133,177
Treasury shares (6,873) (5,472)
Foreign currency translation reserve 13,903 20,039
Hedging reserve 7,801 10,950
Accumulated earnings 166,281 156,364
Attributable to equity holders of the parent 314,581 315,058
Non-controlling interests 216,592 188,187
Total equity 531,173 503,245
Non-current liabilities:
Borrowings 845,199 817,631
Provision for concession fee on land 5,233 5,331
Financial liability in respect of Income Units sold to private investors 114,287 121,084
Other financial liabilities 280,200 265,494
Deferred income taxes 5,878 5,922
1,250,797 1,215,462
Current liabilities:
Trade payables 14,809 13,565
Other payables and accruals 79,149 80,844
Borrowings 47,837 47,101
141,795 141,510
Total liabilities 1,392,592 1,356,972
Total equity and liabilities 1,923,765 1,860,217
The accompanying notes are an integral part of the consolidated financial
statements. Date of approval of the financial statements 28 February 2024.
Signed on behalf of the Board by Boris Ivesha and Daniel Kos.
Boris Ivesha Daniel Kos
President & Chief Executive Officer Chief Financial Officer & Executive Director
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2023
As at 31 December
2023 2022
£'000 £'000
Revenues 414,598 330,091
Operating expenses (284,090) (233,087)
EBITDAR 130,508 97,004
Rental expenses (2,332) (2,421)
EBITDA 128,176 94,583
Depreciation and amortisation (45,068) (40,006)
EBIT 83,108 54,577
Financial expenses (36,145) (37,257)
Financial income 4,758 1,516
Other expenses (13,046) (6,791)
Other income 4,416 9,992
Net expenses for financial liability in respect of Income Units sold to (14,156) (10,783)
private investors
Share in results of joint ventures (113) 202
Profit before tax 28,822 11,456
Income tax (expense) benefit (1,677) 3,356
Profit for the year 27,145 14,812
Profit attributable to:
Equity holders of the parent 22,415 10,159
Non-controlling interests 4,730 4,653
27,145 14,812
Basic and diluted profit per share (in Pound Sterling) 0.53 0.24
The accompanying notes are an integral part of the consolidated financial
statements.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
As at 31 December
2023 2022
£'000 £'000
Profit for the year 27,145 14,812
Other comprehensive income (loss) to be recycled through profit and loss in
subsequent periods:(1)
Profit (loss) from cash flow hedges (5,007) 21,133
Foreign currency translation adjustments of foreign operations (8,463) 22,000
Other comprehensive income (loss) (13,470) 43,133
Total comprehensive income 13,675 57,945
Total comprehensive income (loss) attributable to:
Equity holders of the parent 13,812 37,732
Non-controlling interests (137) 20,213
13,675 57,945
1 There is no other comprehensive income that will not be reclassified to the
profit and loss in subsequent periods.
The accompanying notes are an integral part of the consolidated financial
statements.
Consolidated Statement of Changes in Equity
for the year ended 31 December 2023
In £'000 Issued capital(1) Share premium Treasury shares Foreign currency translation reserve Hedging reserve Accumulated earnings Attributable to equity holders of the parent Non-controlling interests Total equity
Balance as at 1 January 2023 - 133,177 (5,472) 20,039 10,950 156,364 315,058 188,187 503,245
Profit for the year - - - - - 22,415 22,415 4,730 27,145
Other comprehensive income (loss) for the year - - - (6,027) (2,576) - (8,603) (4,867) (13,470)
Total comprehensive income (loss) - - - (6,027) (2,576) 22,415 13,812 (137) 13,675
Share-based payments - 442 - - - 93 535 87 622
Share buy-back - - (1,621) - - - (1,621) - (1,621)
Dividend distribution(2) - - - - - (11,897) (11,897) - (11,897)
Dividend distribution by a subsidiary - - - - - - - (1,436) (1,436)
Exercise of options - (150) 220 - - - 70 - 70
Transactions with non-controlling interests - - - (109) (573) (694) (1,376) 29,891 28,515
Balance as at 31 December 2023 - 133,469 (6,873) 13,903 7,801 166,281 314,581 216,592 531,173
Balance as at 1 January 2022 - 131,229 (3,482) 3,806 (434) 147,350 278,469 168,742 447,211
Profit for the year - - - - - 10,159 10,159 4,653 14,812
Other comprehensive income for the year - - - 16,191 11,382 - 27,573 15,560 43,133
Total comprehensive income - - 16,191 11,382 10,159 37,732 20,213 57,945
Share-based payments - 2,056 - - - - 2,056 81 2,137
Share buy-back - - (2,098) - - - (2,098) - (2,098)
Dividend distribution(2) - - - - - (1,278) (1,278) - (1,278)
Exercise of options (108) 108 - - - - - -
Transactions with non-controlling interests - - - 42 2 133 177 (849) (672)
Balance as at 31 December 2022 - 133,177 (5,472) 20,039 10,950 156,364 315,058 188,187 503,245
1 No par value.
2 The dividend distribution comprises a final dividend for the year ended 31
December 2022 of 12.0 pence per share (31 December 2021: nil pence per share)
and an interim dividend of 16.0 pence per share paid in 2023 (2022: 3.0 pence
per share).
The accompanying notes are an integral part of the consolidated financial
statements.
Consolidated Statement of Cash Flows
for the year ended 31 December 2023
As at 31 December
2023 2022
£'000 £'000
Cash flows from operating activities:
Profit for the year 27,145 14,812
Adjustment to reconcile profit to cash provided by operating activities:
Financial expenses and expenses for financial liability in respect of Income 50,301 48,040
Units sold to private investors
Financial income (4,758) (1,516)
Income tax expense (benefit) 1,677 (3,356)
Loss on buy-back of Income Units sold to private investors 3,266 1,499
Re-measurement of lease liability 3,852 3,704
Revaluation of Park Plaza County Hall London Units (1,600) (300)
Capital loss on sale of fixed assets, net 29 47
Share in results of joint ventures 113 (202)
Share appreciation rights revaluation (2,816) 119
Fair value movement derivatives through profit and loss 4,553 (9,692)
Depreciation and amortisation 45,068 40,006
Share-based payments 622 2,137
100,307 80,486
Changes in operating assets and liabilities:
Increase in inventories (152) (1,228)
Increase in trade and other receivables (1,803) (16,118)
Increase in trade and other payables 1,795 20,772
(160) 3,426
Cash paid and received during the period for:
Interest paid (50,104) (43,520)
Interest received 3,721 1,728
Taxes paid (2,558) (311)
Taxes received - 87
(48,941) (42,016)
Net cash provided by operating activities 78,351 56,708
Cash flows from investing activities:
Investments in property, plant and equipment (115,090) (90,870)
Investments in intangible assets (779) (386)
Loan to joint venture (888) (403)
Decrease (increase) in restricted cash 960 (4,695)
Net cash used in investing activities (115,797) (96,354)
Cash flows from financing activities:
Proceeds from loans and borrowings 65,265 106,879
Buy-back of Income Units previously sold to private investors (5,609) (4,887)
Interest rate cap (4,080) -
Dividend payment (11,897) (1,278)
Dividend payment by a subsidiary to non-controlling shareholders (1,436) -
Repayment of loans and borrowings (31,717) (31,087)
Repayment of leases (4,095) (4,890)
Net proceeds from transactions with non-controlling interest 21,471 (672)
Purchase of treasury shares (1,621) (2,098)
Exercise of options settled in cash 70 -
Net cash provided by financing activities 26,351 61,967
Increase (decrease) in cash and cash equivalents (11,095) 22,321
Net foreign exchange differences (2,078) 4,466
Cash and cash equivalents at beginning of year 163,589 136,802
Cash and cash equivalents at end of year 150,416 163,589
Non-cash items:
Lease additions and lease re-measurement 11,166 14,499
Outstanding payable on investments in property, plant and equipment 13,934 5,786
Receivables in respect of transaction with non-controlling interests 7,044 -
The accompanying notes are an integral part of the consolidated financial
statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 December 2023
Note 1: General
a. The consolidated financial statements of PPHE Hotel Group Limited (the
'Company') and its subsidiaries (together the 'Group') for the year ended 31
December 2023 were authorised for issuance in accordance with a resolution of
the Directors on 28 February 2024.
The Company was incorporated in Guernsey on 14 June 2007 and is listed on the
Premium Listing segment of the Official List of the UK Listing Authority (the
UKLA) and the shares are traded on the Main Market for listed securities of
the London Stock Exchange.
b. Description of the Group business:
The Group is an international hospitality real estate group, which owns,
co-owns and develops hotels, resorts and campsites, operates the Park
Plaza(®) brand in EMEA and owns and operates the art'otel(®) brand.
The Group has interests in hotels in the United Kingdom, the Netherlands,
Germany, Hungary, Serbia, Italy and Austria and hotels, self-catering
apartment complexes and campsites in Croatia.
c. Assessment of going concern and liquidity:
As part of their ongoing responsibilities, the Directors have recently
undertaken a thorough review of the Group's cash flow forecast and potential
liquidity risks. Detailed budgets and cash flow projections, which take into
account the current trading environment and the industry-wide cost pressures,
have been prepared for 2024 and 2025, and show that the Group's hotel
operations are expected to be cash generative during this period. Furthermore,
under those cash flow projections it is expected that the Group will comply
with its loan covenants. Having reviewed those cash flow projections, the
Directors have determined that the Company is likely to continue in business
for at least 12 months from the date of approval of the consolidated financial
statements.
Note 2: Earnings per share
The following reflects the income and share data used in the basic earnings
per share computations:
As at 31 December
2023 2022
£'000 £'000
Profit attributable to equity holders of the parent 22,415 10,159
Weighted average number of ordinary shares outstanding (in thousands) 42,365 42,523
Potentially dilutive instruments 173,054 in 2023 had an immaterial effect on
the basic earnings per share (2022: 399,294).
Note 3: Segments
For management purposes, the Group's activities are divided into Owned Hotel
Operations and Management and Central Services Activities (for further details
see Note 12(c)(i) of the 2023 Annual Report). Owned Hotel Operations are
further divided into five reportable segments: the Netherlands, Germany,
Croatia and the United Kingdom. Other includes individual hotels in Hungary,
Serbia, Italy and Austria. The operating results of each of the aforementioned
segments are monitored separately for the purpose of resource allocations and
performance assessment. Segment performance is evaluated based on EBITDA,
which is measured on the same basis as for financial reporting purposes in the
consolidated income statement.
Year ended 31 December 2023
The Netherlands £'000 Germany £'000 United Kingdom £'000 Croatia £'000 Other(1) Management and Central Services £'000 Adjustments(2) Consolidated £'000
£'000 £'000
Revenue
Third party 63,302 22,759 234,912 78,123 7,859 7,643 - 414,598
Inter-segment - - 400 257 - 40,626 (41,283) -
Total revenue 63,302 22,759 235,312 78,380 7,859 48,269 (41,283) 414,598
Segment EBITDA 19,580 5,466 76,276 20,409 (528) 6,973 - 128,176
Depreciation, amortisation (45,068)
Financial expenses (36,145)
Financial income 4,758
Net expenses for liability in respect of Income Units sold to private (14,156)
investors
Other income (expenses), net (8,630)
Share in result of joint ventures (113)
Profit before tax 28,822
1 Includes art'otel Budapest in Hungary, 88 Rooms Hotel in Belgrade, Serbia,
Londra & Cargill Hotel in Rome, Italy, and FRANZ Ferdinand Mountain Resort
in Nassfeld, Austria.
2 Consist of inter-company eliminations.
The Netherlands £'000 Germany £'000 United Kingdom £'000 Croatia £'000 Other(1) £'000 Adjustments(2) Consolidated
£'000 £'000
Geographical information
Non-current assets(1) 190,420 72,311 1,007,301 249,910 86,306 46,462 1,652,710
1 Non-current assets for this purpose consist of property, plant and
equipment, right-of-use assets and intangible assets.
2 This includes the non-current assets of Management and Central Services.
Year ended 31 December 2022
The Netherlands £'000 Germany £'000 United Kingdom £'000 Croatia £'000 Other(1) Management and Central Services £'000 Adjustments(2) Consolidated £'000
£'000 £'000
Revenue
Third party 41,573 17,724 190,105 69,237 6,344 5,108 - 330,091
Inter-segment - 16 302 168 - 32,365 (32,851) -
Total revenue 41,573 17,740 190,407 69,405 6,344 37,473 (32,851) 330,091
Segment EBITDA 11,163 6,368 56,218 21,426 (629) 37 94,583
Depreciation, amortisation and impairment (40,006)
Financial expenses (37,257)
Financial income 1,516
Net expenses for liability in respect of Income Units sold to private (10,783)
investors
Other income (expenses), net 3,201
Share in result of joint ventures 202
Profit before tax 11,456
1 Includes art'otel Budapest in Hungary, 88 Rooms Hotel in Belgrade, Serbia,
Londra & Cargill Hotel in Rome, Italy, and FRANZ ferdinand Mountain Resort
in Nassfeld, Austria.
2 Consist of inter-company eliminations.
The Netherlands £'000 Germany £'000 United Kingdom £'000 Croatia £'000 Other Adjustments(2) Consolidated £'000
£'000
£'000
Geographical information
Non-current assets1 194,833 72,537 949,931 241,312 59,307 55,512 1,573,432
1 Non-current assets for this purpose consist of property, plant and
equipment, right-of-use assets and intangible assets.
2 This includes the non-current assets of Management and Central Services.
Note 4: Related parties
a. Balances with related parties
As at 31 December
2023 2022
£'000 £'000
Loans to joint ventures 6,515 5,573
Short-term receivables 65 100
Payable to GC Project Management Limited (75) (185)
Payable to Gear Construction UK Limited (12,445) (6,218)
b. Transactions with related parties
As at 31 December
2023 2022
£'000 £'000
Cost of transactions with GC Project Management Limited (670) (300)
Cost of transactions with Gear Construction UK Limited (55,069) (47,872)
Rent income from sub-lease of office space 56 67
Management fee revenue from jointly controlled entities 872 822
Interest income from jointly controlled entities 354 118
c. Significant other transactions with related parties
(i) Construction of the art'otel London Hoxton - Following the
approval by the independent shareholders, on 7 April 2020 the Group entered
into a building contract with Gear Construction UK Limited ('Gear') for the
design and construction of the art'otel London Hoxton hotel on a 'turn-key'
basis (the 'building contract'). Under the building contract Gear assumes the
responsibility for the design and construction of the main works for the
design and build of art'otel London Hoxton for a lump sum of £160 million
(exclusive of VAT) (the 'Contract Sum'). Of this amount, circa.£24.6 million
is based on provisional sums, primarily in respect of FF&E and fit out of
the hotel which are detailed and set out as provisional sums in the building
contract. This might cause the total amount payable to Gear UK under the
building agreement to be greater or less than the Contract Sum. On top of the
Contract Sum, the Group novated certain existing contracts relating to the
project to Gear at cost subject to a cap of £6 million (exclusive of VAT).
Gear is required to complete the works to be executed under the building
contract by 2024.
Gear makes monthly applications for payments in line with the building
contract and following construction industry contractual norms. The
applications will be valued by AECOM acting as the Employer's agent and
providing cost management services, who is appointed by the Employer but has a
duty to act fairly in accordance with the terms of the contract. The
Employer's agent will also be responsible for assessing any applications by
Gear for extensions of time, variations or additional scope of work or
additional loss and/or expense under the building agreement.
Gear's obligations and liabilities under the building contract are supported
by a corporate guarantee from Red Sea Hotels Limited, an associate of Euro
Plaza Holdings B.V. and therefore a related party of the Company, in the
amount of 10% of the Contract Sum (the 'corporate guarantee'). The corporate
guarantee expires on the later of: (i) the expiry of the two-year defects
rectification period which follows practical completion of the works; and (ii)
the issue of the latent defect insurer's approval or final technical audit
report.
(ii) Sub-lease of office space - A member of the Group has
agreed to sub-lease a small area of office space to members or affiliates of
the Red Sea Group at its County Hall corporate office in London. The rent
payable by the Red Sea Group to PPHE Hotel Group is based on the cost at which
the landlord is leasing such space to PPHE Hotel Group.
(iii) Pre-Construction and Maintenance Contract - The Group
frequently uses GC Project Management Limited (GC) to undertake preliminary
assessment services, including appraisal work, and provide initial estimates
of the construction costs. Further, GC provides ad-hoc maintenance work when
required to the Group's various sites. Accordingly, the Group has entered into
an agreement with GC for the provision of pre-construction and maintenance
services by GC to the Group for a fixed annual retainer of £60,000.
(iv) Transactions in the ordinary course of business, in
connection with the use of hotel facilities (such as overnight room stays and
food and beverages) are being charged at market prices. These transactions
occur occasionally.
(v) Londra & Cargill project management agreement - The
Group entered into a series of agreements with GC Project Management Limited
for the provision of project management services and site supervision services
to the Group in respect of the redevelopment of Hotel Londra & Cargill in
Rome, Italy, commencing in 2022 and completing in 2024 for a fee capped at
£920,000 to be paid in monthly instalments for the duration of the project.
Summary of the remuneration for Executive and Non-Executive Directors for the
year ended 31 December 2023:
Base salary and fees £'000 Bonus Pension contributions £'000 Other benefits £'000 Total
£'000
£'000
Chairman and Executive Directors 1,726 473 67 19 2,285
Non-Executive Directors 283 - - - 283
2,009 473 67 19 2,568
1 Figures Include the annual remuneration of Greg Hegarty, Deputy CEO &
COO, who joined the Board following the 2023 Annual General Meeting which was
held in May 2023.
Summary of the remuneration for Executive and Non-Executive Directors for the
year ended 31 December 2022:
Base salary and fees £'000 Bonus Pension contributions £'000 Other benefits £'000 Total
£'000
£'000
Chairman and Executive Directors 1,148 531 64 13 1,756
Non-Executive Directors 284 - - - 284
1,432 531 64 13 2,040
Directors' interests in employee share incentive plan
As at 31 December 2023, the Executive Directors held share options to purchase
121,308 ordinary shares (2022: 70,000). 50,000 options were fully exercisable
with an exercise price of £14.30 (2022: 25,000) and 27,308 options were fully
exercisable with a £nil exercise price (2022: 23,000). No share options were
granted to Non-Executive Directors of the Board.
PRINCIPAL RISKS AND UNCERTAINTIES
Our Risk Environment
With risk informed leadership we continue to perform and grow against a
backdrop of geo-political and macro-economic uncertainty. The actions taken in
recent years to reinforce our financial and operational resilience positions
have enabled the Group to succeed during challenging times and seize new
opportunities as our risk environment changes.
Our Executive Leadership continues to monitor and respond to the impact of
major global risk drivers such as ongoing geo-political tension and conflicts
which can influence economic conditions, supply chains, customer behaviours
and social cohesion.
We also recognise areas of emerging risk and opportunity such as the growing
influence of Artificial Intelligence ("AI"). While our Executive Leadership
Team embraces new technologies to improve the efficiency of our hotel
management platform and the overall guest experience, the associated risks of
using AI in business have been reviewed and actions taken to raise awareness
of these risks across the Group.
There is greater urgency in the international response to the climate crisis,
to drive radical decarbonisation of the global economy. We evaluate both the
physical and transitional climate related risks as part of our current risk
profile and assess the impact these threats could have on our existing
principal risks as they become more probable and with a greater impact. A
summary of climate related risk can be seen in our TCFD Summary (page 81 of
our Annual Report).
As well as monitoring these climate related threats, we see significant
opportunity in improving our environmental and social impact through the
delivery of our ESG strategy (see pages 66-79 of our Annual Report).
The hospitality sector has seen several high-profile cyber-attacks in 2023. We
partner with expert organisations to ensure we are well placed to prevent and
detect malicious activity. We also continue to invest in enhancing our
resilience through building our incident response and recovery capability.
In 2024 we enter an exciting period of operational growth with several new
openings across the Group. This will intensify the persistent challenge of
attracting and retaining team members which we will continue to tackle through
proactive employee engagement and wellbeing initiatives as well as programmes
to drive a diverse and inclusive culture.
Beyond these openings we are securing new capital to support the pursuit of
our ambitious long-term growth plans. We are prepared for managing the risks
that are inherent to any plans for accelerated growth.
Principal risks - at a glance
We define our principal risks as those which could have the greatest impact on
our business and represent the most significant threats to the achievement of
our objectives in the year ahead. To be considered a principal risk the
potential downside or residual impact must be assessed as 'Major' or above,
equating to a negative financial impact or falling asset values greater than
5% of annual EBITDA (under normal operating conditions).
Principal Risks for 2024 Inherent Risk Assessment Residual Risk Assessment Trend from previous year Oversight responsibility
1 Adverse economic climate High High Unchanged CFO
2 Significant development project delays or unforeseen cost increases High High Unchanged CCLO and Co-CEO
3 Difficulty in attracting, engaging and retaining a suitably skilled workforce High Medium Decreased Co-CEO
4 Technology disruption - prolonged failure of core technology High Medium Unchanged CFO
5 Funding and liquidity risk High Medium Unchanged CFO
6 Cyber threat - undetected / unrestricted cyber security incidents Very High Medium Decreased CFO
7 Data privacy - risk of data breach Very High Medium Unchanged CCLO
8 Operational disruption High Medium Unchanged Co-CEO
9 Negative stakeholder perception of the Group with regard to Environmental, High Medium Unchanged CCLO
Social and Governance (ESG) matters
10 Market dynamics - significant decline in market demand High Medium Decreased EVP Commercial Affairs
11 Serious threat to guest, team member or third party health, safety and High Medium Unchanged Co-CEO
security
During 2023 the residual risk assessment for the threat of Fraud was reduced
as the Group's internal control environment continued to mature. The residual
risk no longer meets our definition of a principal risk for disclosure and the
risk has been removed from the list above. The inherent assessment is still
considered to be high, and the risk and associated controls continue to be
monitored closely.
Our Risk-Reward Strategy
Our Risk-Reward Strategy, which articulates our risk appetite across various
business activities, is aligned to our strategic objectives. It has been
reviewed by the Board and remains unchanged. Risk appetite is cascaded
throughout the Group through our policies and procedures.
Risk Appetite Levels Definition Business Activities Key sources of value and strategic enablers
Active We will actively seek to take calculated risks in this area in pursuit of our · Acquisitions and development opportunities Diverse prime property portfolio
strategic objectives, as long as the associated benefits significantly
outweigh the risk impact and the risk remains within our tolerances. We will · Diversification of property portfolio
apply appropriate safeguards when pursuing these opportunities.
Neutral We will take on a limited increased exposure to risk in pursuit of our · Development projects (Construction) Financial strength and non-dilutive capital approach
strategic objectives if the associated benefits outweigh the risk impact and
the risk remains within our tolerances. We will apply appropriate safeguards · Working with third parties International network
when pursuing these opportunities.
· Funding Multi-brand approach
· Technological change / development
· Commercial and promotional activity
Averse We will act to protect the business from increased risk exposure in these · Environmental impact Meaningful ESG impact for the benefit of all stakeholders
areas.
· Responsible and ethical sourcing Our people and culture
· Human Rights In-house hospitality management platform
· Operational continuity
· Data privacy
· Compliance
· Financial and tax reporting
· Financial control
Our Risk Governance and Risk Management Process
GOVERNANCE
Executive Leadership - Risk Forum Audit Committee Board
· Agree the Risk Policy and Framework and formulate a risk-reward · Keep under review the effectiveness of the Group's procedures for · Ultimately responsible for risk management including approval of
strategy (risk appetite) for proposal to the Board. the identification, assessment and reporting of risks, assisting the Board in the Group risk profile; the Group Risk Policy & Framework; the Risk and
monitoring the Group's risk management systems. Reward Strategy; and the statement on risk management in the Annual Report.
· Challenge the robustness and completeness of the full-year and
half-year updates to the Group's risk registers, including key actions. · Oversee internal and external assurance requirements.
· Report PPHE Principal Risks for Board approval and inclusion in ESG Committee
the Annual Report.
· Keep under review specific ESG and Climate-related risk
· Ensure effective monitoring of emerging risk and progress against assessment.
key risk actions.
PROCESS
ENTERPRISE RISK ASSESSMENT
Consolidation of underlying functional and subsidiary risks into a single view
of risk reported to the Board. The enterprise assessment underpins the Group's
principal risk disclosure.
CURRENT RISKS EMERGING RISKS
Existing threats to the achievement of our business objectives Future threats that cannot be accurately assessed at the current time but
could have a material impact on the business in the future through either
Regular risk updates from functional management to identify, assess and heightening existing risks or becoming new stand-alone risks.
respond to current risks. Key steps include:
Horizon scanning for emerging risk is considered at each functional risk
· Assessment of the severity of each risk using the Group risk workshop and each Executive Level Risk Forum with a view to improving our
assessment criteria. Consideration is given to the effectiveness of the response plans and exploit potential opportunities. Emerging risk trends are
current controls / mitigating activity. reported alongside the current enterprise risk assessment to the Audit
Committee quarterly.
· Establishing clear actions with nominated accountability where
further mitigation is required to contain or reduce risks to a more acceptable When identifying emerging risk, we consider several drivers of change
level. including:
· Regular risk reporting to Executive Leadership to support · Shifts in market dynamics
informed decision-making and prioritisation of resources.
· Social, geo-political, macro-economic and environmental factors
· Reporting the Enterprise risk profile to the Audit Committee
quarterly. · Technological trends
· Legal and regulatory developments
FUNCTIONAL AND SUBSIDIARY RISK ASSESSMENTS
Management identifying, assessing and managing the risks and controls across
all business functions.
Emerging risk
Our executive leadership consider emerging threats and risk drivers that could
have a material impact on the business in the future, with a view to improving
our response plans and exploit potential opportunities. The near-term threats
may already influence our principal risk assessments and the prioritisation of
our risk actions.
Principal risks
The tables below detail our principal risks for the year ahead. The reported
risks are those we consider could have the greatest impact on our business and
represent the most significant threats to the achievement of our objectives.
This is not an exhaustive list of all risks identified and monitored through
our risk management process, which includes the consolidation of underlying
functional and subsidiary risk registers into a single view of risk reported
to the Board. Our risk level is decided through an assessment of the
likelihood of the risk and its impact should it materialise. Our assessments
are weighted towards impact to encourage prioritisation of high impact
risks.
Strategic Blocks Sources of value
1 Core, upper upscale, city centre hotels 4 Diverse prime property portfolio 7 International network
2 Leisure and outdoor hospitality 5 Multi-brand approach 8 Our people and culture
3 Hospitality management platform 6 In-house hospitality management platform 9 Financial strength and non-dilutive capital approach
MARKET AND MACROECONOMIC ENVIRONMENT Risk Appetite: Neutral
Principal Risk Description Residual Risk Outlook and Risk Response for 2024
Adverse economic climate High Acting to protect our margins in the face of steep inflation remained a key
focus throughout 2023. While inflation and interest rates are expected to
Economic stress fuelled by the volatile geo-political environment could mean a stabilise, we still consider an adverse economic climate to be a significant
continuation of steep inflation and unstable interest rates impacting growth risk to monitor and manage in the year ahead as several of the emerging
and profit margins. threats we have identified could influence the scale and impact of this risk
area.
Related strategic blocks:
In addition to our long established controls, 2024 will see:
1, 2, 3
· Close monitoring of economic and market forces.
Related sources of value:
· Budgetary control and frequent forecasting across all regions and
7, 8, 9 property type.
· A drive to develop process automation for labour intensive
processes, freeing resource to focus on delivering greater value to the
business.
· Projects to drive efficiency of operational teams.
· Continued focus on control of food and beverage costs.
· Energy consumption reduction initiatives.
Market dynamics - significant decline in market demand Medium Our overall residual assessment of this risk has reduced as confidence grows
due to positive booking momentum, increased occupancies and average daily
Uncertainty in future market demand could arise due to volatile macro-economic rates being maintained. Demand for Meetings and Events also looks stronger
or geo-political conditions, or significant incidents which impact global over the medium and longer term.
travel.
There will remain some uncertainty as market strength is linked to changes in
Related strategic blocks: the economic climate and geo-political environment. We are proactive in
driving demand to our properties and responding to market movements. Our key
1, 2, 3 mitigating actions include:
Related sources of value: · Fully leveraging the revenue management technologies introduced
during 2023.
4, 5
· Focussed promotional initiatives to drive demand in advance and
tactical campaigns for 'need' periods.
· Leveraging our partnerships and promotional opportunities with
third party distribution partners and booking channels.
· Continuing our close collaboration with Radisson Hotel Group and
leveraging their reach for promotional campaigns.
· Leveraging the Radisson Rewards programme which consists of 11+
million members.
· Increasing our focus on digital marketing and online advertising.
· Delivering our planned activities across key source markets and
market segments, including tradeshows, hosted events and sales missions.
FUNDING AND INVESTMENT Risk Appetite: Neutral
Principal Risk Description Residual Risk Outlook and Risk Response for 2024
Funding and liquidity risk Medium Against the backdrop of interest rate movements and general economic
pressures, our funding and liquidity risk continues to be managed to an
The impact of failing to proactively manage funding and liquidity risk could acceptable level due to the Group's strong trading performance, steady
include a breach of debt covenants, cash restrictions, loss of stakeholder property valuations and fixed rates on most of our loans.
confidence and less favourable terms when refinancing in the future.
We will continue to contain this risk with our established treasury monitoring
Related strategic blocks: and reporting controls which include:
1, 2 · Board approved treasury policy.
Related sources of value: · Monthly forward covenant testing.
7, 9 · Monthly treasury monitoring and reporting to the Board.
· Proactive and regular liaison with our lenders.
As highlighted in our emerging risk summary, the value of our property
portfolio could be impacted over time by sustainable building regulations,
unless there is sufficient investment in upgrading our assets to meet the
requirements.
Long-term capital expenditure plans have been developed to mitigate this
threat.
DEVELOPMENT PROJECTS Risk Appetite: Neutral
Principal Risk Description Residual Risk Outlook and Risk Response for 2024
Significant development project delays or unforeseen cost increases High The delivery of major projects remains a high risk area and is subject to
focused oversight from senior leadership and our in-house Technical Services
Various factors, such as supply chain disruption, labour market pressures and team, with key controls including:
steep increases in cost of materials can influence the delivery of major
construction projects resulting in additional cost or delays in new openings. · Regular project meetings with our contractors to identify and
tackle any approaching issues which could impact the overall cost, targeted
Related strategic blocks: delivery schedule or the expected quality standards.
1, 2 · Independent monitoring of projects by appointed third party
experts.
Related sources of value:
Throughout 2024 we would expect this risk to reduce as major long-term
4, 7 developments are delivered and new openings become operational.
TECHNOLOGY AND INFORMATION SECURITY Risk Appetite: Averse
Principal Risk Description Residual Risk Outlook and Risk Response for 2024
Cyber threat - undetected / Medium Although we expect the inherent risk of cyber-attack to remain very high, our
unrestricted cyber security incidents
residual risk assessment has been reduced this year to reflect the
implementation of new and enhanced security controls and the continued
The Group could be subject to a serious cyber-attack resulting in significant investment into protecting the business from this significant threat.
disruption to operations and financial loss from falling revenues, cost of
recovery, reputation loss and significant fines in the event of a related data Newly established controls in place for the year ahead and further planned
breach. progress includes:
Related strategic blocks: · Compliance to the official Payment Card Industry Data Security
Standard (PCI DSS).
1, 2, 3
· AI powered network monitoring & detecting and autonomously
Related sources of value: responding to threats.
6 · Continuous vulnerability scanning and remediation.
· Enhanced back-up and recovery solution, including ransomware
recovery.
· Focused team member awareness campaigns and training programmes.
· Increased targeted phishing training.
· Enhanced filtering of malicious phishing sites.
· Increase in external penetration testing.
· Targeted risk analysis/profiling and security incident tabletop
exercises.
Data privacy - risk of data breach Medium We remain focused on mitigating the high inherent regulatory risk associated
with the processing of personal data, which is essential to the successful
The Group could experience a serious data privacy breach which could result in operations of our business.
investigation, significant fines in accordance with the GDPR and subsequent
reputational damage. Activity planned for 2024 includes:
Related strategic blocks: · Implementation of a new governance, risk and compliance tool for
data privacy and information security.
1, 2, 3
· An internal awareness campaign and updated training programmes,
Related sources of value: as part of onboarding the new tool.
6, 8 · Review and update of documented data protection and privacy
procedures.
· Update of data inventory.
· Monitoring databases containing Personally Identifiable
Information, with data owners.
· Renewing and updating data privacy risk assessments and other
documentation required under GDPR.
Technology disruption Medium The availability and performance of our core technology is key to the success
of our business operations, and we have continued with investment into
A prolonged failure in our core technology infrastructure could present a strengthening our networks, implementing our DR solution, and improving
significant threat to the continuation of our business operations, connectivity.
particularly where failures impact hotel management and reservation systems.
In 2024 we will continue to improve our resilience through:
Related strategic blocks:
· Continued projects to enhance network resilience and security.
1, 2, 3
· Network monitoring and enhanced vulnerability scanning.
Related sources of value:
· Enhanced back-up and recovery solution.
6
· Targeted testing of back-up and recovery plans.
SAFETY & CONTINUITY Risk Appetite: Averse
Principal Risk Description Residual Risk Outlook and Risk Response for 2024
Operational Disruption Medium Our strength and resilience have been key to the continued success of our
business in recent years.
Major global events such as pandemic, war or environmental disasters could
result in widespread disruption, impacting our guests, our supply chain, and In 2024 we will continue to prepare for significant disruptive incidents
our hotel operations. through:
We could also experience more localised disruption to our operations from · Regularly training team members in our established crisis plans
incidents at our hotels or in the immediate vicinity, for example floods, and procedures.
extreme weather, social unrest, or terrorism.
· Review of our approach to Business Continuity Management to
Related strategic blocks: ensure we have prepared proportionate responses to the most significant
threats which could impact the continuity of our critical services and
1, 2, 3 operations.
Related sources of value: · Working closely with key suppliers to identify and mitigate any
potential issues which could impact the continuity of their service.
6, 7, 8
Serious Health, Safety and Security Incidents Medium In the year ahead we will continue to drive our high standards to provide a
safe stay for our guests and a safe working environment for our team members.
The Group could experience significant health and safety, food safety or
physical security incidents. Our established controls include:
A failure to take reasonable steps to prevent such incidents, or a failure to · Regular risk assessments.
respond appropriately, could impact our reputation, disrupt our operations and
result in significant loss of guest, team member and stakeholder confidence. · Security and fire safety procedures.
Related strategic blocks: · Health & Safety audit programmes.
1, 2, 3 · In-house and supplier food safety audit programme.
Related sources of value: · Team member training programmes.
6, 8 · Mental health and wellbeing training.
· Centralised incident reporting.
· Proactive gathering of intelligence and advice on potential
security risks through regular liaison with local police and security
services.
We will also monitor the ongoing consultation in respect of Martyn's Law but
are confident that our existing procedures will meet the new requirements
proposed as part of the UK's Terrorism (Protection of Premises) Bill.
PEOPLE Risk Appetite: Averse
Principal Risk Description Residual Risk Outlook and Risk Response for 2024
Difficulty in attracting, engaging and retaining a suitably skilled workforce Medium While the successful management of this risk remains fundamental to our
success, our overall residual risk assessment has reduced to Medium.
Difficulties in maintaining an engaged and suitably skilled workforce could
impact our service standards, drive up operating costs, disrupt operations and Throughout 2023 we have not experienced any staffing issues that would
impact the overall delivery of our key strategic objectives. restrict operations. Some improvement has also been noted in retention rates.
Related strategic blocks: 2024 presents new resourcing challenges with the opening of new hotels and we
will continue to manage this risk proactively with new initiatives including:
1, 2, 3
· Creation of a new Employee Experience team to develop deeper
Related sources of value: understanding of employee needs and sentiment and tasked with group
initiatives on developing retention, wellbeing, and engagement.
6, 8
· Employer value proposition development to attract candidates and
drive retention.
· Investment in new HR technology landscape, improving people
analytics.
· Creation of expanded Learning & Development team with focus
on technical skills and management development.
· Internal communication strategy and use of related technologies
for further employee voice enablement.
· Full employment policy review.
· Talent management and succession planning to promote
intra-company mobility options.
· Regular talent reviews and learning need analysis.
· Physical health and well-being initiatives and investment.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE Risk Appetite: Averse
Principal Risk Description Residual Risk Outlook and Risk Response for 2024
Negative stakeholder perception of the Group with regard to Environmental, Medium We have made considerable progress in formalising and communicating our ESG
Social and Governance matters
strategic approach and priorities.
With ESG being a key concern for our stakeholders, a perception that the Group Our report on pages 66-79 details our ESG strategic objectives which are
does not apply best practice corporate governance principles or does not act focused on the priorities of our stakeholders.
responsibly to protect the environment and the communities we operate in,
could impact our performance by damaging our appeal to customers, investors, Activity in 2024 will include:
and other business partners. It could also affect our ability to retain and
attract talent. · Work on a series of tasks aimed at delivering against our ESG
targets, which are designed to further the achievement of our published
A failure to comply with the upcoming regulatory changes to governance and ESG strategic objectives.
reporting could further heighten this area of risk.
· The ESG Manager monitoring the adoption of the ESG targets with
Related strategic blocks: the assigned owners and providing regular progress reports to the ESG
Committee.
1, 2, 3
· New ESG reporting requirements being integrated into the
Related sources of value: compliance reporting undertaken by the Head of Compliance, seeking third party
support where necessary at the request of the ESG Committee.
8
DIRECTORS' RESPONSIBILITY STATEMENT
Each of the directors named on pages 98 and 99 of the Annual Report &
Accounts 2023 as of the time of the publication, confirms to the best of his
or her knowledge that:
(i) The consolidated financial statements, which have been
prepared in accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union, give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Company and the
undertakings included in the consolidation taken as a whole.
(ii) The Strategic Report includes a fair review of the
development and performance of the business and the position of the Company
and the undertakings included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that they face,
and provides information necessary for shareholders to assess the Company's
performance business model and strategies.
(iii) The Directors consider that the Annual Report and
Accounts, taken as a whole, are fair, balanced and understandable and provide
the information necessary for shareholders to assess the Company's position
and performance, business model and strategy.
Signed on behalf of the Board by
Boris Ivesha
President & Chief Executive Officer
Daniel Kos
Chief Financial Officer & Executive Director
28 February 2024
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