REG - PPHE Hotel Grp Ltd - Interim Results
31/08/2023 07:00
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RNS Number : 8661K PPHE Hotel Group Limited 31 August 2023
31 August 2023
PPHE Hotel Group Limited
("PPHE" or the "Group")
Unaudited Interim Results for the six months ended 30 June 2023
Strong Group performance across main markets
PPHE Hotel Group, the international hospitality real estate group which
develops, owns and operates hotels and resorts, announces its unaudited
interim results for the six months ended 30 June 2023 (the "Period").
Commenting on the results, Boris Ivesha, President and Chief Executive
Officer, PPHE Hotel Group said:
"We are very pleased to report a strong performance for the Group across our
main markets, with record revenues following significant increases on last
year and the pre-pandemic period. This momentum has continued into the second
half, giving us confidence in our full-year outlook and longer-term growth.
Our strong performance also enables us to reward our shareholders for their
continued trust and support by returning to our historical capital returns
policy of distributing approximately 30% of adjusted EPRA earnings, whilst
also continuing to support investment in future growth opportunities.
We are now entering a very exciting time for the Group, with our £300+
million pipeline nearing completion. New property openings are afoot in the
next nine months, in Belgrade, Zagreb, Rome and London Hoxton and, upon
stabilisation of trading, these new hotels are targeted to generate at least
£25 million of EBITDA for the Group.
We are encouraged by the strong trading seen over the summer period and are
thankful to our teams for delivering such exemplary results and providing our
guests with great hospitality across all our destinations."
Financial highlights
· Total revenue was up 59.0% year-on-year at £180.0 million (H1 2022:
£113.2 million) and up 15.9% on the pre-pandemic levels (H1 2019: £155.3
million) with strong quarter-on-quarter momentum in the Period.
· Revenue growth was led by strong room rate growth. Average room rate
was £159.6, up 13.1% compared with H1 2022 and up 31.2% on H1 2019.
· The recovery in occupancy rates continues, with H1 occupancy up to
69.1% compared with 48.0% in H1 2022 and 76.8% in H1 2019.
· RevPAR at £110.3, materially above pre-pandemic levels (H1 2019:
£93.4) and last year (H1 2022:
£67.8).
· EBITDA of £45.2 million, up 165.7% versus H1 2022 (H1 2022: £17.0
million), and in line with H1 2019 levels (H1 2019: £45.7 million) with
margins improving.
· EPRA NRV per share* at 30 June 2023 was flat at £25.05 (31 December
2022: £25.17), driven entirely by the change in the GBP/EUR currency
conversion rate. Revaluations will be completed at the year end, as per usual
course of business.
· Adjusted EPRA Earnings of 106 pence for the twelve months ended 30
June 2023 was up by 112% versus 2022 (31 December 2022: 50 pence).
· Given the strength of trading and confidence in outlook, the Board
believes the Company is now in a position to return to its historical capital
returns policy of distributing approximately 30% of adjusted EPRA earnings
(reported at £1.06 in the twelve month period to 30 June 2023), while
continuing to support investment in future growth opportunities. In light of
the continued significant share price discount (c60% as at 31 August 2023)
relative to EPRA NRV per share, the Board intends to consult with shareholders
regarding the most appropriate and effective mechanism for such distributions
to take place, including dividends, share buybacks, tender offers or a
combination thereof. The Board looks forward to updating the market on this
capital return policy in the near future.
( )
((*)) EPRA NRV and EPRA NRV per share were calculated based on the independent
external valuations prepared in December 2022.
Operational highlights
· Strong growth in the Group's key markets - the United Kingdom and the
Netherlands - driven by international corporate, leisure and meetings demand
and a particularly strong London events calendar, even before the benefit of
the coronation of King Charles III.
· The Croatian summer season has enjoyed a solid start and the Group
expect to derive further benefits from recently refurbished and relaunched
properties. In the smallest region, Germany, trading at the Group's properties
started to improve from Q2 onwards.
Strategic highlights
· February saw the full opening of the first art'otel in the UK,
art'otel London Battersea Power Station, which is operated by the Group's
hospitality management platform.
· Significant progress with the development pipeline, and on track to
open four properties between October 2023 and H1 2024.
o The fourth quarter 2023 will see the opening of the Radisson RED Belgrade
in Serbia, which is the second hotel to open under the recently extended
partnership with Radisson and the first Radisson RED to be operated by the
Group.
o Three premium lifestyle art'otel properties are set to open, starting with
art'otel Zagreb in October 2023, then art'otel London Hoxton in Q1 2024 and
art'otel Rome in H1 2024.
· Regulatory approvals were obtained for the new €250 million
European Hospitality Real Estate Fund, taking advantage of the Group's
flexible and scalable in-house hospitality management platform. The Fund
enables the Group to capture attractive acquisition opportunities via the use
of non-dilutive third-party capital as well as increasing the number of assets
managed on our platform.
ESG highlights
· The Company has taken several measures to increase transparency and
stakeholder accountability for its ESG strategy. Management has increased its
focus on the Group's strategic approach to sustainability and responsible
business, with a view to publication of its strategy, targets and KPIs in the
2023 Annual Report and Accounts. This includes dedicated increased resources
including staff hires to ESG as well as retaining external specialist
consultancies to advise on carbon foot-printing and reporting to stakeholders.
· Reporting on ESG in a way that is most useful for investors and
customers is an ongoing priority. The Group has submitted its annual CDP data
for 2023, which CDP expect to publish at year-end, and which will allow
year-on-year progress-tracking on ESG. Globally recognised and standardised
reporting channels such as CDP allow stakeholders to engage with all
businesses on ESG.
· The Group completed a full carbon footprint for scopes 1, 2 and 3.
This is for the purpose of analysis of the tonnage of carbon dioxide
equivalent (CO2e) emitted both in operations and in the supply chain, and
design actions for carbon reduction.
· The Company is in the process of reviewing its water consumption and
waste outputs. The objective is to ensure robust data collection on water
usage, benchmarking consumption against comparators, and identifying strategic
targets and KPIs for minimising consumption and consequent contribution to
water stress.
Current trading and outlook
· Entering the strongest half of the year, the previously announced
strong trading conditions have been maintained through Q2 and into Q3 across
all main market segments of leisure, corporate travel and meetings and events.
· Continued focus on maintaining and driving room rates, to cover
inflationary pressures, while continuing to rebuild occupancy.
· The Board remains confident in the Group's longer-term growth,
underpinned by the persistent strength of consumer leisure demand
internationally, its quality assets, fully-funded development pipeline and
strong financial position.
· As previously announced, the Group expects to deliver FY 2023
revenue of at least £400 million and EBITDA of at least £120 million.
· Entering an exciting time for the Group as £300+ million
pipeline nears completion, with four new openings afoot in the next nine
months, targeted to generate at least £25 million EBITDA on stabilised
trading.
Enquiries:
PPHE Hotel Group Limited
Daniel Kos,
Chief Financial Officer & Executive Director
Robert Henke Tel: +31 (0)20 717 8600
Executive Vice President of Commercial Affairs
Hudson Sandler
Wendy Baker / Charlotte Cobb / India Laidlaw Tel: +44 (0)20 7796 4133
Email: pphe@hudsonsandler.com
Notes to Editors
PPHE Hotel Group is an international hospitality real estate company, with
a £2.0 billion portfolio, valued as at December 2022 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)
BUSINESS & FINANCIAL REVIEW
BUSINESS REVIEW
The first six months of 2023 saw continued strong trading conditions and
positive forward booking momentum across the Group's property portfolio and
regions and across all market segments of leisure, corporate travel and
meetings and events. This enabled the Group to achieve record H1 revenue and a
full recovery in EBITDA. When we look at the key metrics of room rate and
RevPAR, the Group is now trading consistently and materially above
pre-pandemic levels, whilst occupancy continues to recover strongly. We now
believe the worst effects of the pandemic have been successfully overcome.
Strategically, the Group continued to take a disciplined rates-led approach
across its portfolio, which helped mitigate industry-wide cost inflation and
further illustrated the strong international demand for our hotels. In the
Period, average room rates were up 13.1% compared with H1 2022, and up 31.2%
on pre-pandemic levels reported in H1 2019. Notably, the average room rate in
all our operating regions exceeded those achieved in 2019, with average room
rates during Q1 up 24.6% and in Q2 up 35.6% on the same period in 2019.
The Group's hotels in the UK and The Netherlands remained the strongest
performing across the portfolio, driven by a combination of continuing rate
growth and occupancy recovery. Occupancy levels further improved, tracking
closer to 2019 levels in the UK and The Netherlands. Meanwhile, the Group's
hotel and camping assets in Croatia experienced a solid start to the summer
season, supporting confidence in the Group's wider full year outlook. As
previously announced, while the German region had a slower start to the year
it has seen an improving trend in bookings through Q2 and into Q3.
Additionally, the Group continued to make excellent progress with its
development projects with four new hotels scheduled to open during H2 2023 and
H1 2024, consisting of two repositioned properties and two new hotels.
As a result, total revenue in the Period increased by 59.0% to £180.0
million, representing an improved performance of 15.9% versus pre-pandemic
levels (H1 2022: £113.2m, H1 2019: £155.3m). RevPAR was £110.3 (H1 2022:
£67.8, H1 2019: £93.4).
Despite macroeconomic challenges and inflationary pressures, the Group
achieved enhanced operational profit in H1 2023 with EBITDA at £45.2 million,
compared with £17.0 million in H1 2022. EBITDA was in line with the
pre-pandemic H1 2019 of £45.7 million.
Alongside maintaining its disciplined rates-led strategy and growing
occupancy, the Group successfully mitigated a number of inflationary and
sector-specific issues through the implementation of innovative solutions and
forward planning focused on enhancing its sustainability and energy
efficiency. For example, staffing is much less of a constraint for the Group
due to its proactive approach to investment in people, automation and employer
brand. Furthermore, the Group's utility cost hedging has been important in
mitigating energy cost increases, alongside a multitude of internal
innovations and efforts to reduce energy consumption across our operations.
Given the strength of trading and confidence in outlook, the Board believes
the Company is now in a position to return to its historical capital returns
policy of distributing approximately 30% of adjusted EPRA earnings (reported
at £1.06 in the twelve month period to 30 June 2023), while continuing to
support investment in future growth opportunities. In light of the continued
significant share price discount (c60% as at 31 August 2023) relative to EPRA
NRV per share, the Board intends to consult with shareholders regarding the
most appropriate and effective mechanism for such distributions to take place,
including dividends, share buybacks, tender offers or a combination thereof.
The Board looks forward to updating the market on this capital return policy
in the near future.
Strategic progress and development pipeline
Reflecting its strong track record in developing, launching and operating
hospitality properties, the Group remained focused on its consistent strategic
investment in its portfolio of premium assets.
In London, the art'otel London Battersea Power Station fully opened to
critical acclaim in February 2023, operated by PPHE under a management
agreement through its hospitality management platform, and initial trading has
been strong.
In Croatia, recently completed repositioning projects have supported the
initial strong start to peak trading in the region. Grand Hotel Brioni in Pula
will trade through its first summer season fully open as a Radisson Collection
Hotel under the expanded strategic partnership with Radisson Hotel Group
("RHG"), following an extensive repositioning project completed in 2022,
alongside the improvements made to properties at Arena Stoja Campsite (luxury
mobile homes) in Pula. In Austria, Arena FRANZ Ferdinand hotel in Nassfeld
benefited from development investment in enhanced facilities, including a pool
and spa facilities.
At the International Hospitality Investment Forum in May 2023, PPHE further
cemented its expanded partnership with RHG with a commitment to continue to
grow and leverage the brands of each company's portfolio internationally. RHG
integrated the art'otel brand as its tenth brand to be operated and marketed
under one overarching Radisson Hotel Group umbrella.
Further evidence of the significant opportunity that remains in the Group's
£300+ million development pipeline includes the ongoing conversion of an
iconic office building in the centre of Zagreb into Croatia's first art'otel
(opening H2 2023), the repositioning of a new art'otel in Rome (reopening H1
2024), and construction of art'otel London Hoxton (opening Q1 2024) which is
progressing well following the appointment of globally recognised British
contemporary street artist D*Face as its Signature Artist during the Period.
As ever, the Company continues to invest in its development pipeline to both
expand the portfolio and deliver attractive shareholder returns.
The second half of 2023 and early 2024 will be exceptionally busy for our
teams as we prepare to open a number of further premium hotels
internationally. In addition to the three new art'otels, the pipeline includes
a Radisson RED in Belgrade, Serbia. Previously branded Arena 88 Rooms Hotel,
the property is being refurbished to re-open as an upscale Radisson RED hotel.
European Hospitality Real Estate Fund
As part of the Group's long-term growth ambitions, regulatory approvals for PPHE's inaugural European Hospitality Real Estate Fund ("the Fund") were secured during the Period following its launch in March 2023. The Fund of up to €250 million equity enables the Group to further accelerate its strategy of identifying, acquiring and developing attractive hotel assets across a range of key European markets. Hotels acquired by the Fund will be operated by PPHE's hospitality management platform, building further scale in the platform.
PPHE has committed to participate in the Fund for an amount up to €50
million in cash and/or assets. In March 2023, the Group announced Clal
Insurance as the Fund's cornerstone investor, which has committed to invest up
to €75 million. In March, our property in Rome (soon to open as art'otel
Rome) was contributed as a seed asset.
Following receipt of regulatory approvals, with full equity subscription and
combined with a targeted 50% bank leverage, the investment potential of the
Fund will be around €500 million.
The Fund is consistent with PPHE's longstanding approach to building
shareholder value through the careful stewardship of its own balance sheet and
partnership with third-party capital providers, and we look forward to sharing
further progress over coming months.
The Board
The composition of the Board and its diversity remains critical to the Group's
approach to governance. As previously announced, Kevin McAuliffe,
Non-Executive Chairman resigned from the Board at the conclusion of the 2023
Annual General Meeting (AGM). The Board has distributed his responsibilities
to other non-executive directors.
In addition, following more than a decade with the Group, Greg Hegarty, Deputy
Chief Executive Officer & Chief Operating Officer, was appointed as an
Executive Director of the Company and joined the Board, effective from the
conclusion of the AGM. The Directors believe that Greg's appointment will
enhance the leadership attributes of the Board by strengthening its strategic
capacity, whilst also providing invaluable operational expertise of the
Group's day-to-day business and grassroot implementation of its strategy. Greg
has significant experience in investor relations and is keen to meet with
investors on a regular basis. This appointment forms part of the Group's wider
commitment to periodically refresh the Board and is also in keeping with its
internal talent management strategy of promoting intra-group mobility.
The Company continues to take every step to engage with shareholders both
before and after the AGM, however it does recognise that shareholders
expressed concerns on some elements of the Group's corporate governance. The
feedback session held after the AGM in April 2023 provided very useful
information regarding investor priorities, and our work to meet investor
expectations is ongoing.
Environmental, Social and Governance ("ESG")
Stakeholder engagement:
The Group has taken a number of steps to increase resources within its ESG
function. The Group's Corporate & Legal team has been expanded to ensure
that the Group's ESG strategy implementation is appropriately resourced,
including to enable ongoing reporting against KPIs and ensure greater
transparency for all stakeholders. The Company completed further CDP
reporting, and will further expand into the Global Reporting Initiative (GRI)
and Workforce Disclosure Initiative (WDI) reporting. This will allow investors
and customers alike to compare ESG scores across standardised metrics. Company
disclosures made in line with UK requirements arising from the Task Force on
Climate-related Financial Disclosures (TCFD) in 2021 and 2022 shall be updated
in 2023. Additionally, we anticipate the introduction of new IFRS S1 and S2
reporting standards from 2024 onwards, and will be taking steps to report in
the required manner when the new requirements are implemented.
People:
The Group reviewed its 'pulse' survey feedback and identified ESG as a target
area for greater transparency and communications with the wider workforce. We
therefore introduced new ESG communication methods, including a dedicated
learning and development calendar for ESG issues such as diversity, equity and
inclusion. We also identified grass-roots initiatives to support career
development and local communities, and are implementing targets to ensure that
the social value of these are correctly measured and communicated.
Carbon & energy:
During the Period, we completed a full Group-wide carbon footprint exercise
covering all regions over the last 12 months. This is the first time our full
footprint including our supply chain ("scope 3 emissions") has been mapped in
its entirety. The data will be used for benchmarking the business and
prioritising carbon reduction activities in order to confirm the Group's
Carbon Net Zero target. This will allow us to ask the Science-Based Targets
Initiative (SBTi) to verify our target, and for us to publish it alongside
other ESG targets at year end in the Annual Report and Accounts.
Governance:
Details of Board changes in the Period are detailed above. We have also moved
ahead with adopting ESG targets, to which we can be held publicly accountable
moving forwards, and are looking ahead to new corporate governance
requirements which will affect our reporting in the future. Our year end
Annual Report and Accounts will contain full details.
Current trading and outlook
The second half of the year is typically the Group's strongest trading period,
particularly with the onset of the summer leisure season, which leads to the
opening of our well-invested portfolio of hotel and camping assets in Croatia.
Strong forward booking momentum in Q2 has continued into Q3, and further
significant revenue contribution is expected from the recently refurbished and
relaunched properties. As previously announced, €200 million has been
invested in the Croatia region in total since 2008, with €50 million alone
invested in the last two years, so we are encouraged by the prospects in what
is now one of the Group's largest operating regions.
As announced in our Trading Update in June 2023, the Board expects EBITDA
margins to continue to improve as we continue through the second half of FY
2023, despite broader cost inflation that has been largely absorbed over the
last 12 months. The Board anticipates that this cost inflation effect will
diminish through FY 2024 and beyond, as forward energy cost hedges flow
through at substantially lower levels than those fixed for FY 2023.
The Group continues to expect to deliver FY 2023 revenue of at least £400
million and EBITDA of at least £120 million.
In the medium to longer term, the Board's confidence in the future of the
Group is stronger than ever in spite of ongoing macroeconomic uncertainties.
Given the persistent strength of consumer leisure demand internationally, the
Group's investment in its high-quality portfolio of assets and development
pipeline, and its strong financial position, PPHE remains well-positioned to
continue to take advantage of ongoing momentum in the sector and deliver
enhanced returns for shareholders.
FINANCIAL PERFORMANCE
H1 Reported in GBP (£)
Six months Six months Change(1) Six months Change(1)
ended ended ended
30 June
30 June
30 June
2023 2022 2019
Total revenue £180.0 million £113.2 million 59.0% £155.3 million 15.9%
Room revenue £133.6 million £82.0 million 63.0% £109.1 million 22.4%
EBITDAR £46.4 million £18.2 million 155.9% £46.5 million (0.1)%
EBITDA £45.2 million £17.0 million 165.7% £45.7 million (0.9)%
EBITDA margin 25.1% 15.0% 1,010 bps 29.4% (430) bps
Reported PBT £2.0 million £(26.1) million n/a £4.3 million (52.6)%
Normalised PBT £3.6 million £(23.9) million n/a £5.5 million (32.1)%
Occupancy 69.1% 48.0% 2,110 bps 76.8% (770) bps
Average room rate £159.6 £141.1 13.1% 121.7 31.2%
RevPAR £110.3 £67.8 62.6% 93.4 18.1%
(1) Percentage change figures are calculated from actual figures as opposed to
the rounded figures included in the above table.
Q2 Reported in GBP (£)
Three months Three months Change(1) Three months Change(1)
ended ended ended
30 June
30 June
30 June
2023 2022 2019
Total revenue £111.2 million £81.2 million 36.9% £92.8 million 19.8%
Room revenue £83.2 million £59.4 million 40.0% £65.7 million 26.6%
EBITDAR £40.3 million £22.6 million 78.2% £33.7 million 19.6%
EBITDA £39.7 million £22.0 million 80.6% £33.8 million 17.4%
EBITDA margin 35.7% 27.1% 860 bps 36.4% (70) bps
Occupancy 70.8% 58.8% 1,200 bps 77.1% (630) bps
Average room rate £171.0 £148.9 14.8% 126.1 35.6%
RevPAR £121.0 £87.5 38.2% 97.2 24.5%
H1 saw a strong rebound in activity across all of the Group's key markets,
particularly in the UK. This trend continued consistently through the first
half.
This recovery across our regions, driven by demand for leisure stays, helped
to deliver a reported total revenue of £180.0 million; an increase of 59.0%
compared with the prior year (H1 2022: £113.2 million).
In the first half RevPAR increased by 62.6% to £110.3, driven by a 13.1%
increase in average room rate to £159.6 (H1 2022: £141.1). Occupancy rose by
2,110 bps to 69.1% (H1 2022: 48.0%). Notably, average room rate in the Period
was 31.2% ahead of the same period pre-pandemic (H1 2019: £121.7).
In Q2 average room rate increased to £171.0; 14.8% higher than the prior year
and 35.6% higher than the rates achieved in Q2 2019. Occupancy rose by 1,200
bps to 70.8% (Q2 2022: 58.8%). This delivered Q2 RevPAR of £121.0 (Q2 2022:
£87.5, Q2 2019: £97.2).
Group reported EBITDA in the Period increased to £45.2 million (H1 2022:
£17.0 million, H1 2019: £45.7 million) and the EBITDA margin improved to
25.1% (H1 2022: 15.0%, H1 2019: 29.4%).
Reconciliation of reported profit before tax to normalised profit before tax
In £ millions Six months ended Six months ended 12 months 12 months
30 June
30 June
ended
ended
2023
2022
30 June
31 December
2023
2022
Reported profit (loss) before tax 2.0 (26.1) 39.6 11.5
Loss on buy back of units in Park Plaza Westminster Bridge London from private 1.3 0.7 2.1 1.5
investors
Revaluation of finance lease 1.9 1.8 3.8 3.7
Revaluation of Park Plaza County Hall London Income Units - - (0.3) (0.3)
Disposals and Other non-recurring expenses (including pre-opening expenses) 0.2 1.0 0.7 1.5
Revaluation of share appreciation rights (2.4) 1.4 (3.7) 0.1
Fair value IRS 0.6 (2.7) (6.4) (9.7)
Normalised profit (loss) before tax 3.6 (23.9) 35.8 8.3
Shareholder returns
Given the strength of trading and confidence in outlook, the Board believes
the Company is now in a position to return to its historical capital returns
policy of distributing approximately 30% of adjusted EPRA earnings (reported
at £1.06 in the twelvemonth period to 30 June 2023), while continuing to
support investment in future growth opportunities. In light of the continued
significant share price discount (c60% as at 31 August 2023) relative to EPRA
NRV per share, the Board intends to consult with shareholders regarding the
most appropriate and effective mechanism for such distributions to take place,
including dividends, share buybacks, tender offers or a combination thereof.
The Board looks forward to updating the market on this capital return policy
in the near future.
EPRA accounting information
The Group is a developer, owner and operator of hotels, resorts and campsites
and realises returns through both developing and owning assets as well as the
operations of those assets 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.
EPRA performance indicators
The Group's last 12 months adjusted EPRA earnings per share to 30 June 2023
increased to 106 pence per share. A summary of the Group's EPRA performance
measures is set out in the table below.
30 June 2023 31 December 2022
£ million
£ million
EPRA earnings (LTM)(1) 58.1 32.7
Adjusted EPRA earnings (LTM)(1) 44.9 21.2
EPRA NRV(2) 1,063.1 1,078.7
Per share figures: 30 June 31 December
2023
2022
£
£
EPRA Earnings per share (LTM) 1.37 0.77
Adjusted EPRA earnings per share (LTM) 1.06 0.50
EPRA NRV per share(2) 25.05 25.17
(1) EPRA earnings and adjusted EPRA earnings for 30 June 2023 are calculated
for the last 12-month period ended on 30 June 2023.
(2) EPRA NRV and EPRA NRV per share were calculated based on the independent
external valuations prepared in December 2022.
EPRA performance measures
a. EPRA net asset value
To guide investors on the market value of the Group's property portfolio and
performance, the Group has been reporting various EPRA key performance
indicators since 2018, alongside its operational metrics. Property valuations
have historically been undertaken once a year by independent external valuers,
using established and widely recognised methods including applying appropriate
discount rates to property cash flow generation and applying capitalisation
rates from precedent transactions.
In December 2022, the Group's properties (with the exception of operating
leases, managed and franchised properties) were independently valued 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
those valuations the Directors had updated the Group's EPRA NRV, EPRA NTA and
EPRA NDV for 30 June 2023. The EPRA NRV as at 30 June 2023, set out in the
table below, amounts to £1,063.1 million (2022: £1,078.7 million), which
equates to £25.05 per share (2022: £25.17). This NRV slight decline was
mainly as a result of the change in the GBP/EUR currency conversion rate and a
dividend distribution in the Period. The Group's annual revaluation will take
place in December 2023.
30 June 2023
£ million
EPRA NRV EPRA NTA(4) EPRA NDV
(Net Reinstatement Value)
(Net Tangible Assets)
(Net Disposal Value)
NAV per the financial statements 304.7 304.7 304.7
Effect of exercise of options - - -
Diluted NAV, after the exercise of options(1) 304.7 304.7 304.7
Includes:
Revaluation of owned properties in operation (net of non-controlling 747.7 747.7 747.7
interest)(2)
Revaluation of the JV interest held in two German properties (net of 6.8 6.8 6.8
non-controlling interest) (2)
Fair value of fixed interest rate debt - - (8.3)
Deferred tax on revaluation of properties - - (31.0)
Real estate transfer tax(3) 18.5 - -
Excludes:
Fair value of financial instruments 23.1 23.1 -
Deferred tax (8.5) (8.5) -
Intangibles as per the IFRS balance sheet - 11.1 -
EPRA NAV 1,063.1 1,033.5 1,019.9
Fully diluted number of shares (in thousands)(1) 42,433 42,433 42,433
EPRA NAV per share (in £) 25.05 24.36 24.04
(1) The fully diluted number of shares excludes treasury shares but includes
132,848 outstanding dilutive options (as at 31 December 2022: 407,223).
(2) The fair values of the properties were determined on the basis of
independent external valuations prepared in December 2022. The properties
under development are measured at cost.
(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.
31 December 2022
£ million
EPRA NRV EPRA NTA(4) EPRA NDV
(Net Reinstatement Value)
(Net Tangible Assets)
(Net Disposal Value)
NAV per the financial statements 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) 318.1 318.1 318.1
Includes:
Revaluation of owned properties in operation (net of non-controlling 746.9 746.9 746.9
interest)(2)
Revaluation of the JV interest held in two German properties (net of 6.8 6.8 6.8
non-controlling interest) (2)
Fair value of fixed interest rate debt - - (9.2)
Deferred tax on revaluation of properties - - (31.7)
Real estate transfer tax(3) 18.7 - -
Excludes:
Fair value of financial instruments 21.1 21.1 -
Deferred tax (9.3) (9.3) -
Intangibles as per the IFRS balance sheet - 12.8 -
EPRA NAV 1,078.7 1,047.2 1,030.9
Fully diluted number of shares (in thousands)(1) 42,846 42,846 42,846
EPRA NAV per share (in £) 25.17 24.44 24.06
(1) The fully diluted number of shares excludes treasury shares but includes
407,223 outstanding dilutive options (as at 31 December 2021: 585,867).
(2) The fair values of the properties were determined on the basis of
independent external valuations prepared in December 2022.
(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
The basis for calculating the Company's adjusted EPRA earnings of £44.9
million for the 12 months to 30 June 2023 (12 months to 31 December 2022:
£21.2 million) and the Company's adjusted EPRA earnings per share of 106
pence for the 12 months to 30 June 2023 (12 months to 31 December 2022: 50
pence) is set out in the table below.
12 months ended 12 months ended
30 June 2023 31 December 2022
£ million £ million
Earnings attributed to equity holders of the parent company 36.1 10.2
Depreciation and amortisation expenses 40.6 40.0
Revaluation of Park Plaza County Hall London Income Units (0.3) (0.3)
Changes in fair value of financial instruments (10.1) (9.6)
Non-controlling interests in respect of the above(3) (8.2) (7.6)
EPRA earnings 58.1 32.7
Weighted average number of shares (in thousands) (LTM) 42,503 42,523
EPRA earnings per share (in pence) 137 77
Company specific adjustments(1):
Capital loss on buy-back of Income Units in Park Plaza Westminster Bridge 2.1 1.5
London
Remeasurement of lease liability(4) 3.8 3.7
Disposals and Other non-recurring expenses (including pre-opening expenses)(7) 0.7 1.5
Adjustment of lease payments(5) (2.2) (2.2)
One off tax adjustments(6) (5.9) (5.8)
Maintenance capex(2) (15.9) (13.2)
Non-controlling interests in respect of the above(3) 4.2 3.0
Company adjusted EPRA earnings(1) 44.9 21.2
Company adjusted EPRA earnings per share (in pence) 106 50
Reconciliation Company adjusted EPRA earnings to normalised reported profit
before tax
Company adjusted EPRA earnings 44.9 21.2
Reported depreciation and amortisation (40.6) (40.0)
Non-controlling interest in respect of reported depreciation and 8.2 7.6
amortisation(3)
Maintenance capex(2) 15.9 13.2
Non-controlling interest on maintenance capex and the company specific (4.2) (3.0)
adjustments(3)
Adjustment of lease payments(5) 2.2 2.2
One off tax adjustments(6) 5.9 5.8
Reported profit attributable to non-controlling interest 5.6 4.7
Reported tax (2.1) (3.4)
Normalised profit before tax 35.8 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 respectively.
(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 recorded in 2022 (see Note 22b in
the 2022 annual consolidated financial statements).
(7) Mainly relates to pre-opening expense and net profit and loss on disposal
of property, plant and equipment.
REVIEW OF OPERATIONS
United Kingdom
Hotel operations
Reported in £
Six months ended Six months ended
30 June 2023
30 June 2022
Total revenue £110.0 million £71.1 million
EBITDAR £32.0 million £16.2 million
EBITDA £31.8 million £16.1 million
Occupancy 81.7% 56.5%
Average room rate £184.3 £169.2
RevPAR £150.5 £95.6
Room revenue £85.9 million £54.6 million
Hotel portfolio performance
The United Kingdom remained our strongest performing region, driven by a
combination of growth in room rate, which continued to exceed 2019 levels, as
well as an ongoing recovery in occupancy. This was achieved throughout the
Group's main segments of leisure, corporate and meetings and events alike, as
events such as the coronation of King Charles III and a return to business
travel encouraged a good level of new bookings and activity in London.
All of the Group's UK hotels achieved or exceeded their fair market share in
occupancy terms and the majority of its London hotels also outperformed their
competitor sets in terms of average room rate(1).
Total revenue increased by 54.7% to £110.0 million (H1 2022: £71.1 million).
The Group's disciplined focus on driving rates meant that the average room
rate increased by 8.9% to £184.3 (H1 2022: £169.2), which was 28.0% higher
than the average room rate pre-pandemic (H1 2019: £144.0). Occupancy improved
to 81.7% (H1 2022: 56.5%), which resulted in RevPAR of £150.5 (H1 2022:
£95.6).
EBITDA increased by 98.1% to £31.8 million (H1 2022: £16.1 million).
In February 2023, we fully opened - to much acclaim - the UK's first art'otel,
located at Battersea Power Station. 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 24.4% at £84.8 (H1 2022: £68.2), driven by a 13.4% increase in
average room rate to £113.0 (H1 2022: £99.5) and a 9.7% increase in
occupancy to 75.0% (H1 2022: 68.5%).
In London, RevPAR increased by 34.0% to £144.1 compared with £108.1 in H1
2022, reflecting a 15.4% increase in occupancy to 76.9% (H1 2022: 66.9%) and a
16.1% increase in average room rate to £187.5 (H1 2022: £161.5).
(1) STR Hotel Benchmarking, June 2023
*STR European Hotel Review, June 2023
The Netherlands
Hotel operations
Reported in £ Reported in local currency €(1)
Six months ended Six months ended Six months ended Six months ended
30 June
30 June
30 June
30 June
2023
2022
2023
2022
Total revenue £30.2 million £14.7 million €34.6 million €17.5 million
EBITDAR £9.5 million £3.1 million €10.8 million €3.6 million
EBITDA £9.4 million £3.1 million €10.8 million €3.6 million
Occupancy 79.6% 40.9% 79.6% 40.9%
Average room rate £149.6 £139.5 €171.2 €165.3
RevPAR £119.1 £57.0 €136.3 €67.5
Room revenue £23.1 million £11.1 million €26.5 million €13.1 million
(1 Average exchange rate from Euro to Pound Sterling for the period ended 30
June 2023 was 1.144 and for the period ended 30 June 2022 was 1.185,
representing a 3.4% decrease.)
Hotel portfolio performance
The Netherlands continued to perform strongly. As in the United Kingdom, the
performance was also driven by a combination of rate growth and occupancy
recovery.
All of the Group's hotels in the Netherlands exceeded their fair market share
in occupancy terms and two out of three of its Amsterdam city centre hotels
also outperformed their competitor sets in terms of average room rate(1).
Total revenue (in local currency) increased to €34.6 million (H1 2022:
€17.5 million), which represented an increase of 16.8% on H1 2019 (€29.6
million). Average room rate increased by 3.6% to €171.2 (H1 2022: €165.3);
an increase of 18.0% compared to H1 2019: €145.0. Occupancy improved to
79.6% which, together with the improvement in average room rate, led to RevPAR
of €136.3 (H1 2022: €67.5).
EBITDA improved by €7.2 million to €10.8 million (H1 2022: €3.6
million).
The Dutch hotel market*
During H1 2022 RevPAR increased by 49.6% to €106.3 compared to €71.3 in H1
2022. Occupancy increased by 27.8% to 69.4% (H1 2022: 54.3%), and the average
room rate was €153.2 (H1 2022: €131.3); 17.0% higher than in H1 2022.
In Amsterdam, our main market in The Netherlands, RevPAR increased by 58.0% to
€132.0 (H1 2022: €84.1). Occupancy levels increased by 34.1% to 72.7% (H1
2022: 53.9%), and the average daily room rate increased by 17.9% to €181.5
(H1 2022: €155.9).
(1) STR Hotel Benchmarking, June 2023
*STR European Hotel Review, June 2023
Croatia
Hotel operations
Reported in £ Reported in local currency €(1)
Six months ended 30 June 2023 Six months ended 30 June 2022 Six months ended Six months ended
30 June 2023
30 June 2022(3)
Total revenue £22.1 million £16.2 million €25.3 million €19.3 million
EBITDAR £0.5 million £(0.1) million €0.6 million €(0.1) million
EBITDA £(0.4) million £(0.9) million €(0.5) million €(1.1) million
Occupancy(2) 47.2% 43.6% 47.2% 43.6%
Average room rate(2) £102.3 £84.5 €117.0 €100.2
RevPAR(2) £48.3 £36.8 €55.3 €43.6
Room revenue(2) £12.6 million £8.7 million €14.4 million €10.3 million
(1 Average exchange rate from Euro to Pound Sterling for the period ended 30
June 2023 was 1.144 and for the period ended 30 June 2022 was 1.185,
representing a 3.4% decrease.)
(2 The room revenue, average room rate, occupancy and RevPAR statistics
include all accommodation units at hotels and self-catering apartment
complexes and excludes campsite and mobile homes.)
(3. The results for June 2022, which were previously presented in HRK, were
translated to Euro using average exchange rate from HRK to EUR for the period
ended 30 June 2023 of 7.546.)
Hotel portfolio performance
The seasonality of our operations in Croatia meant that as usual, activity in
the region started to accelerate during the second quarter as our hotels,
apartments and campsites opened for the summer season. The Group saw strong
trading in the early season with ongoing booking momentum as the period
progressed.
The revenue performance for H1 showed strong growth compared with last year
and exceeded the same period pre-pandemic in 2019. Total revenue (in local
currency) increased significantly to €25.3 million (H1 2022: €19.3
million).
This performance was driven by strong rate growth across the Group's hotels,
with average room rate up 16.9% to €117.0. Occupancy improved from 43.6% in
H1 2022 to 47.2% in H1 2023. As a result, RevPAR rose significantly to €55.3
(H1 2022: €43.6); an increase of 36.3% compared with pre-pandemic levels in
2019 (H1 2019: €40.6).
Despite the strong revenue performance, EBITDA was impacted by cost inflation
for utilities, food and payroll. Overall, the EBITDA loss was reduced to
€0.5 million (H1 2022: €(1.1) million).
Since PPHE first acquired an interest in Arena Hospitality Group (AHG) in
2008, the business has been transformed through an extensive programme of new
asset acquisitions, asset repositioning, operational improvements and ongoing
capital expenditure. In total, the Group has invested approximately €200
million into the Croatian leisure assets, including approximately €50
million in the more recent relaunch of the Grand Hotel Brioni Pula and the
upcoming art'otel Zagreb, which are yet to contribute meaningfully to the
Group.
Further revenue contributed from a number of recently refurbished and
relaunched properties is also expected to be significant. Additional works
were completed at Arena Stoja Campsite, where phase two investments included
the introduction of a new reception and restaurant and bar, supporting the
2022 introduction of luxury mobile homes.
From 1 January 2023, Croatia joined the Eurozone. Consequently, from the start
of FY 2023 the financial performance for the region is reported in Euros.
Germany
Hotel operations
Reported in £ Reported in local currency €(1)
Six months ended 30 June 2023 Six months ended 30 June 2022 Six months ended 30 June 2023 Six months ended 30 June 2022
Total revenue £10.6 million £6.4 million €12.1 million €7.6 million
EBITDAR £2.3 million £2.7 million €2.6 million €3.2 million
EBITDA £2.3 million £2.7 million €2.6 million €3.2 million
Occupancy 56.1% 42.0% 56.1% 42.0%
Average room rate £125.1 £98.9 €143.1 €117.2
RevPAR £70.2 £41.5 €80.3 €49.2
Room revenue £9.1 million £5.4 million €10.4 million €6.4 million
(
1 Average exchange rate from Euro to Pound Sterling for the period ended 30
June 2023 was 1.144 and for the period ended 30 June 2022 was 1.185,
representing a 3.4% decrease.)
Hotel portfolio performance
As previously reported, the German region had a slower start to the year than
other regions, due to market dynamics impacting rate and occupancy growth.
However, the Group saw an improving trend in bookings through Q2 and expects
this to continue into Q3 and beyond.
Total revenue (in local currency) was €12.1 million, compared with €7.6
million for the same period last year. In line with our strategy to drive
rates, average room rate increased by 22.1% to €143.1 (H1 2022: €117.2)
and was 29.9% above the average room rate in H1 2019 (H1 2019: €110.2).
However, occupancy improved at a slower rate to 56.1% (H1 2022: 42.0%). As a
result, RevPAR increased to €80.3, up from €49.2.
EBITDA decreased to €2.6 million, compared to €3.2 million in the prior
year and €3.7 million in 2019. In H1 2022, our EBITDA performance included
€2.5 million in government grants to support payroll and operating costs,
demonstrating the underlying strong performance in 2023.
The German hotel market*
The German market experienced a 44.0% increase in RevPAR to €70.7 (H1 2022:
€49.4), resulting from a 24.5% improvement in occupancy to 62.2% (H1 2022:
50.1%) and a 15.7% increase in average room rate to €113.7 (H1 2022:
€98.5).
In Berlin, RevPAR increased by 44.0% to €82.1 (H1 2022: €58.6) and
occupancy increased by 19.6% to 68.9% (H1 2022: 57.6%). Average room rate
increased 17.0% to €119.1 (H1 2022: €101.8).
*STR European Hotel Review, June 2023
Other Markets: Austria, Hungary, Italy and Serbia
Hotel operations
Reported in £
Six months ended Six months ended
30 June 2023 30 June 2022
Total revenue £3.8 million £3.2 million
EBITDAR £(0.2) million £0.2 million
EBITDA £(0.2) million £0.2 million
Occupancy 36.3% 27.8%
Average room rate £140.4 £103.9
RevPAR £51.0 £28.9
Room revenue £2.9 million £2.3 million
(
)
Hotel portfolio performance
The Group's recently refurbished property in Austria, the FRANZ Ferdinand
Mountain Resort Nassfeld, performed well during the winter ski season; its
second under the Group's ownership. Since then, we have invested further in a
number of amenities to support the hotel's opening year-round, including
air-conditioning throughout the property and the creation of relaxation and
wellness areas including indoor and outdoor swimming pools.
In Hungary, following its post-pandemic reopening in 2022, our refurbished
property in Budapest also performed well, with a bedroom renovation programme
currently at planning stages.
In Italy, the repositioning of the Group's property in Rome continued apace.
The 99-room hotel in the city centre, which closed in the second half of 2022,
is set to transform into an upper upscale lifestyle art'otel. The hotel is
expected to reopen in H1 2024.
Finally, in Serbia, the repositioning of the 88 Rooms Hotel in Belgrade is
nearing completion and the hotel is scheduled to reopen as Radisson RED
Belgrade in the fourth quarter of 2023.
Total revenue was £3.8 million and EBITDA was £(0.2) million mainly as a
result of the closing of our Rome property for repositioning.
The Italian hotel market*
The Italian market experienced a 37.9% increase in RevPAR to €134.7,
resulting from a 21.2% improvement in occupancy to 68.1% and a 13.8% increase
in average room rate to €197.8.
In Rome, RevPAR increased by 50.2% to €160.3 and occupancy increased by
21.3% to 71.2%. Average room rate increased 23.8% to €225.1.
The Hungarian hotel market*
The Hungarian market experienced a 39.6% increase in RevPAR to €70.1,
resulting from a 18.8% increase in occupancy to 63.5% and a 17.5% increase in
average room rate to €110.4.
In Budapest, RevPAR increased by 39.4% to €72.5 and occupancy increased by
19.2% to 63.1%. Average room rate increased 16.9% to €115.0.
The Belgrade hotel market*
In Belgrade, RevPAR increased by 36.9% to €68.2 and occupancy increased by
16.5% to 61.9%. Average room rate increased by 17.6% to €110.2.
*Source STR European Hotel Review, June 2023
Management and Central Services
Reported in £
Six months ended Six months ended
30 June 2023 30 June 2022
Total revenue before elimination £21.5 million £13.3 million
Revenues within the consolidated Group £(18.2) million £(11.8) million
External and reported revenue £3.3 million £1.5 million
EBITDA £2.3 million £(4.0) million
( )
Our performance
Revenues in this segment are primarily management, sales, marketing and
franchise fees, and other charges for central services.
These are predominantly charged within the Group and therefore eliminated
upon consolidation. For the six months ended 30 June 2023 the segment showed
an EBITDA profit of £2.3 million, as both internally and externally charged
management fees exceed the costs in this segment (H1 2022: loss of £4.0
million).
Management, Group Central Services and licence, sales and marketing fees are
calculated as a percentage of revenues and profit, and therefore these are
affected by underlying hotel performance.
PRINCIPAL RISKS AND UNCERTAINTIES
Our proactive risk management practices and reporting ensure that key business
decisions are taken with full knowledge of both our existing risk environment
and any emerging threats which could have a notable impact on our business.
While our current risk profile is largely in line with the principal risks
detailed on pages 77-84 of the 2022 Annual Report, in some key areas we have
updated and reduced the residual risk assessments where our mitigating actions
have resulted in a more positive outlook.
Risk update
Annual Report Assessment Interim update
Principal Risks for 2023 Inherent Risk Assessment Residual Risk Assessment Inherent Risk Assessment Residual Risk Assessment Movement
1 Undetected / unrestricted cyber-attack Very High High Very High High ↔
2 Adverse economic climate High High High High ↔
3 Significant development project delays or unforeseen cost increases Very High High Very High High ↔
4 Difficulty in attracting, engaging and retaining talent High High High Medium ↓
5 Market dynamics - significant and prolonged decline in global travel and High High High Medium ↓
market demand
6 Technology disruption - prolonged failure of core technology High Medium High Medium ↔
7 Serious data privacy breach (GDPR) Very High Medium Very High Medium ↔
8 Funding and liquidity risk (including breach of debt covenants) High Medium High Medium ↔
9 Significant operational disruption High Medium High Medium ↔
10 Negative stakeholder perception of the Group with regard to Environmental, High Medium High Medium ↔
Social and Governance (ESG) matters
11 Serious threat to guest, team member or 3rd party health, safety and High Medium High Medium ↔
security
12 Fraud High Medium High Low ↓
The adverse economic climate continues to pose a threat, with uncertainty
driven by high inflation and interest rate increases. While the risk remains
high, we are well positioned to withstand these pressures and continue to
thrive in the challenging conditions.
While the labour market continues to present challenges, we are pleased that
our initiatives to tackle the difficulties in attracting and retaining talent
have seen improved results and decreased the residual risk impact. As such,
our overall assessment of this key risk area has reduced from High to Medium.
Our assessment of our market dynamics risk has also been downgraded since the
year-end as our performance to date and business on the books continues to
outperform expectations.
We have reduced our residual risk assessment for the threat of fraud as our
internal control environment has continued to mature throughout 2023. The
inherent assessment is still considered to be high, and the risk will continue
to be monitored closely.
The Group has not identified any new principal risks or emerging risks that
will impact the remaining six months of the financial year.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors confirm that, to the best of their knowledge, these interim
condensed consolidated financial statements have been prepared in accordance
with IAS 34 "Interim Financial Reporting" and give a true and fair view of the
assets, liabilities, financial position and profit or loss of the Company and
the undertakings included in the consolidation as a whole for the period ended
30 June 2023. The interim management report includes a fair review of the
information required by DTR 4.2.7 R and DTR 4.2.8 R, namely:
· An indication of important events which have occurred during the
first six months and their impact on the condensed set of financial
statements, plus a description of the principal risks and uncertainties for
the remaining six months of the financial year; and
· Material related-party transactions in the first six months and
any material changes in the related party transactions described in the last
annual report for the year ended 31 December 2022; and
· The directors of the Company are listed in the last annual report
for the year ended 31 December 2022. A current list of directors is maintained
on the website of the Company (www.pphe.com (http://www.pphe.com) ).
GOING CONCERN
The Board believes it is taking all appropriate steps to support the
sustainability and growth of the Group's activities. Detailed budgets and cash
flow projections have been prepared for 2023 and 2024 which show that the
Group's hotel operations will be cash generative during the period. The
Directors have assessed the viability of the Group over a period to 31
December 2025, as set out further on page 85 of the last annual report for the
year ended 31 December 2022. The Directors have determined that the Company is
likely to continue in business for at least 12 months from the date of this
announcement. This, taken together with their conclusions on the matters
referred to herein and in Note 1 to the consolidated financial statements, has
led the Directors to conclude that it is appropriate to prepare the half year
consolidated financial statements on a going concern basis.
INDEPENDENT REVIEW REPORT TO PPHE HOTEL GROUP LIMITED
To: The Board of Directors of PPHE Hotel Group Limited
Introduction
We have reviewed the accompanying interim condensed consolidated financial
statements of PPHE Hotel Group Limited and its subsidiaries (the Group) as of
30 June 2023 which comprise the interim consolidated statement of financial
position as of 30 June 2023 and the related interim consolidated income
statement, consolidated statements of comprehensive income, changes in equity
and cash flows statement for the six-month period then ended, and explanatory
notes.
Management is responsible for the preparation and presentation of this interim
financial information in accordance with International Accounting Standard 34
Interim Financial Reporting (IAS 34) and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on this interim financial
information based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements 2410, "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity". A review of interim financial information
consists of making inquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying interim condensed financial information is not
prepared, in all material respects, in accordance with IAS 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
Tel Aviv, Israel
30 August 2023
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 2023 31 December 2022
Audited
Unaudited
£'000
£'000
ASSETS
NON-CURRENT ASSETS:
Intangible assets 11,120 12,805
Property, plant and equipment 1,362,370 1,335,184
Right-of-use assets 228,038 225,443
Investment in joint ventures 5,715 4,961
Other non-current financial assets 52,652 47,245
Restricted deposits and cash 9,123 9,272
Deferred income tax assets 12,735 12,909
1,681,753 1,647,819
CURRENT ASSETS:
Restricted deposits and cash 2,900 9,229
Inventories 3,351 3,181
Trade receivables 23,296 18,533
Other receivables and prepayments 35,602 17,866
Cash and cash equivalents 137,765 163,589
202,914 212,398
Total assets 1,884,667 1,860,217
The accompanying notes are an integral part of the Condensed consolidated
interim financial statements.
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
30 June 2023 31 December 2022
Unaudited
Audited
£'000
£'000
EQUITY AND LIABILITIES
EQUITY:
Issued capital - -
Share premium 133,336 133,177
Treasury shares (6,888) (5,472)
Foreign currency translation reserve 10,882 20,039
Hedging reserve 13,355 10,950
Accumulated earnings 154,017 156,364
Attributable to equity holders of the parent 304,702 315,058
Non-controlling interests 213,785 188,187
Total equity 518,487 503,245
NON-CURRENT LIABILITIES:
Bank borrowings 810,884 817,631
Provision for concession fee on land 5,168 5,331
Financial liability in respect of Income Units sold to private investors 117,722 121,084
Other financial liabilities 271,296 265,494
Deferred income taxes 5,835 5,922
1,210,905 1,215,462
CURRENT LIABILITIES:
Trade payables 14,837 13,565
Other payables and accruals 94,204 80,844
Bank borrowings 46,234 47,101
155,275 141,510
Total liabilities 1,366,180 1,356,972
Total equity and liabilities 1,884,667 1,860,217
The accompanying notes are an integral part of the Condensed consolidated
interim financial statements.
INTERIM CONSOLIDATED INCOME STATEMENT
Six months ended
30 June 2023 30 June 2022
Unaudited
Unaudited
£'000
£'000
Revenues 179,971 113,191
Operating expenses (133,525) (95,040)
EBITDAR 46,446 18,151
Rental expenses (1,210) (1,129)
EBITDA 45,236 17,022
Depreciation and amortisation (20,071) (19,488)
EBIT 25,165 (2,466)
Financial expenses (18,039) (18,724)
Financial income 2,826 539
Other income 2,348 2,670
Other expenses (4,036) (4,922)
Net income (expense) for financial liability in respect of Income Units sold (6,188) (3,103)
to private investors
Share in results of associate and joint ventures (50) (95)
Profit (loss) before tax 2,026 (26,101)
Income tax benefit (tax expense) (1,082) 144
Profit (loss) for the period 944 (25,957)
Profit (loss) attributable to: 3,858 (22,110)
Equity holders of the parent
Non-controlling interests (2,914) (3,847)
944 (25,957)
Basic and diluted earnings per share (in Pound Sterling) 0.09 (0.52)
The accompanying notes are an integral part of the Condensed consolidated
interim financial statements.
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended
30 June 2023 30 June 2022
Unaudited
Unaudited
£'000
£'000
Profit (loss) for the period 944 (25,957)
Other comprehensive income (loss) to be recycled
through profit and loss in subsequent periods:
Profit from cash flow hedges(1) 5,860 8,735
Foreign currency translation adjustments of foreign operations(2) (13,117) 10,005
Other comprehensive income (loss), net (7,257) 18,740
Total comprehensive loss (6,313) (7,217)
Total comprehensive income (loss) attributable to: (2,211) (9,592)
Equity holders of the parent
Non-controlling interest (4,102) 2,375
(6,313) (7,217)
1 Included in hedging reserve.
2 Included in foreign currency translation reserve.
The accompanying notes are an integral part of the Condensed consolidated
interim financial statements.
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Issued capital(1) Share premium Treasury shares Foreign currency Hedging reserve Accumulated earnings Attributable to equity Non- controlling Total
£'000
£'000
£'000
translation
£'000
£'000
holders of
interests
equity
reserve
the parent
£'000
£'000
£'000
£'000
Balance as at 1 January 2023 (audited) - 133,177 (5,472) 20,039 10,950 156,364 315,058 188,187 503,245
Profit (loss) for the period - - - - - 3,858 3,858 (2,914) 944
Other comprehensive income (loss) for the period - - - (9,047) 2,978 - (6,069) (1,188) (7,257)
Total comprehensive income (loss) - - - (9,047) 2,978 3,858 (2,211) (4,102) (6,313)
Share based payments - 293 - - - - 293 44 337
Share buy back (note 3c) - - (1,620) - - - (1,620) - (1,620)
Exercise of options - (134) 204 - - - 70 - 70
Dividend distribution(2) - - - - - (5,119) (5,119) - (5,119)
Dividend distribution by a subsidiary to non-controlling interests - - - - - - - (1,444) (1,444)
Transactions with non-controlling interests (note 3a & 3b) - - (110) (573) (1,086) (1,769) 31,100 29,331
Balance as at 30 June 2023 (unaudited) - 133,336 (6,888) 10,882 13,355 154,017 304,702 213,785 518,487
Balance as at 1 January 2022 (audited) - 131,229 (3,482) 3,806 (434) 147,350 278,469 168,742 447,211
Loss for the period - - - - - (22,110) (22,110) (3,847) (25,957)
Other comprehensive income (loss) for the period - - - 7,780 4,738 - 12,518 6,222 18,740
Total comprehensive income (loss) - - - 7,780 4,738 (22,110) (9,592) 2,375 (7,217)
Share based payments - 1,024 - - - - 1,024 37 1,061
Share buy back - - (12) (12)
(12) - - - -
Balance as at 30 June 2022 (unaudited) - 132,253 (3,494) 11,586 4,304 125,240 269,889 171,154 441,043
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.
The accompanying notes are an integral part of the Condensed consolidated
interim financial statements.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended
30 June 2023 30 June 2022
Unaudited
Unaudited
£'000
£'000
Cash flows from operating activities:
Profit (loss) for the period 944 (25,957)
Adjustments to reconcile profit (loss) to cash provided by operating
activities:
Financial expenses including expenses for financial liability in respect of 24,227 21,827
Income Units sold to private investors
Financial income (2,826) (539)
Income tax expense (tax benefit) 1,082 (144)
Gain on disposal of assets - 45
Loss on buy-back of Income Units sold to private investors 1,289 733
Share based payments 337 1,061
Revaluation of lease liability 1,914 1,841
Share in results of associate and joint ventures 50 95
Share appreciation rights revaluation (2,348) 1,350
Fair value movement derivatives through profit and loss 569 (2,670)
Depreciation and amortisation 20,071 19,488
44,365 43,087
Changes in operating assets and liabilities:
Increase in inventories (252) (940)
Increase in trade and other receivables (5,453) (9,105)
Increase in trade and other payables 7,833 25,881
2,128 15,836
Cash paid and received during the period for:
Interest paid (24,071) (18,653)
Interest received 1,128 420
Taxes paid (242) (168)
(23,185) (18,401)
Net cash flows provided by operating activities 24,252 14,565
The accompanying notes are an integral part of the Condensed consolidated
interim financial statements.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
Six months ended
30 June 2023 30 June 2022
Unaudited
Unaudited
£'000
£'000
Cash flows from investing activities:
Investments in property, plant and equipment (54,525) (46,885)
Investment in intangible assets (11) (77)
Loan to Joint Venture (912) (844)
Decrease (increase) in restricted cash, net 6,211 (776)
Net cash flows used in investing activities (49,237) (48,582)
Cash flows from financing activities:
Net proceeds from transactions with non-controlling interests 13,790 -
Proceeds from long-term loans 17,829 39,019
Repayment of long-term loans (15,483) (12,093)
Repayment of leases (2,178) (2,538)
Purchase of treasury shares (1,621) -
Exercise of options settled in cash 70 -
Interest rate cap (4,080) -
Dividend payment (5,119) -
Dividend payment by a subsidiary to non-controlling interests (1,444) -
Buy-back of Income Units previously sold to private investors - (2,231)
Net cash flows provided by financing activities 1,764 22,157
Decrease in cash and cash equivalents (23,221) (11,860)
Net foreign exchange differences (2,603) 1,065
Cash and cash equivalents at beginning of period 163,589 136,802
Cash and cash equivalents at end of period 137,765 126,007
Non-cash items:
Lease additions and lease remeasurement 6,481 4,978
Outstanding payables on investments in property, plant and equipment 12,471 4,606
Receivables in respect of transaction with non-controlling interests 15,541 -
The accompanying notes are an integral part of the Condensed consolidated
interim financial statements.
NOTES:
Note 1: General
a. PPHE Hotel Group, together with its subsidiaries (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.
b. These financial statements have been prepared in a condensed format as
of 30 June 2023 and for the six months then ended ('interim consolidated
financial statements'). These financial statements should be read in
conjunction with the Company's annual consolidated financial statements as of
31 December 2022 and for the year then ended and the accompanying notes
('annual consolidated financial statements').
c. The Company 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.
d. 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 2023 and 2024 and show that the Group's hotel
operations are expected to be cash generative during the Period. 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: Basis of preparation and changes in accounting policies
The interim consolidated financial statements have been prepared in accordance
with IAS 34 'Interim Financial Reporting'. The accounting policies adopted in
the preparation of the interim consolidated financial statements are
consistent with those followed in the preparation of the Group's annual
consolidated financial statements, except for the adoption of new standards
effective as of 1 January 2023. The Group has not early adopted any other
standard, interpretation or amendment that has been issued but is not yet
effective.
The adoption of the following new standards effective as of 1 January 2023 had
no material impact on the interim consolidated financial statements:
· Definition of Accounting Estimates - Amendments to IAS 8
· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12
Note 3: Significant events during the reported period
a. European Hospitality Real Estate Fund
In March 2023, the Group launched a new European Hospitality Real Estate Fund
("the Fund") with a target size of up to €250 million. Clal Insurance
("Clal"), one of Israel's leading insurance and long-term savings companies,
participated as a cornerstone investor, committing up to €75 million
(limited to 49% of total participation). The Group also committed to invest up
to €50 million in the Fund. Additional investors have the opportunity to
participate in the Fund for the remaining €125 million of equity.
Upon full subscription and with a targeted 50% bank leverage, the Fund's
investment potential is expected to reach approximately €500 million. The
Fund has a planned duration of seven years and aims to provide an attractive
double-digit internal rate of return (IRR) for its investors. The primary
investment focus will be on value-add opportunities, and the Fund will employ
the well-established and successful PPHE strategy.
As part of the agreement signed with Clal, it was decided to incorporate the
fund under Signature Top II Ltd ("Signature Top II"), a UK incorporated
company, with a 51% ownership by the Group and 49% by Clal, until additional
investors join.
At the inception of the fund, PPHE contributed the shares of Società
Immobiliare Alessandro De Gasperis S.r.l., the owner of the Londra &
Cargill Hotel in Rome, Italy ("Londra"), valued at €29.3 million (£25.8
million), for its 51% participation in Signature Top II. Clal made an initial
cash contribution of €28.1 million (£24.8 million), payable at the Group's
request, for its 49% participation. As of the reporting date, Clal transferred
€10 million out of the €28.1 million, with an additional €10 million
transferred after the reporting date. The outstanding €8.1 million is
expected to be received within the next few months.
The Group has assessed the transaction and determined that it exercises
control over Signature Top II. Consequently, the change in the ownership
interest of Londra does not trigger a change of control and is therefore
accounted for as an equity transaction in accordance with IFRS 10 Consolidated
Financial Statements. The excess of consideration received over the carrying
amount of the non-controlling interests (net of £0.8 million in transaction
costs) amounting to £0.4 million is recognised in the parent company's
equity. The Group has chosen to recognise this amount in accumulated earnings.
Additionally, £0.6 million was reclassified from the Foreign currency
translation reserve and hedging reserve to accumulated earnings.
b. art'otel London Hoxton Development
During the reporting period, the expected construction costs of art'otel
London Hoxton, in which Clal holds a minority interest through the joint
venture vehicle Signature Top Limited, have increased mainly due to the
interest to be incurred throughout the construction phase.
On April 27, 2023, both the Group and Clal mutually agreed that the sharing of
these cost referred to above, would be funded by 65% from the Group and 35%
from Clal. The excess consideration of £2.2 million paid by the Group is
recognised in the equity of the parent company. The Group has chosen to
recognise this amount in accumulated earnings.
c. Share buyback programme
During the reporting period, the Company completed a purchase of 138,611
shares under share buy-back programme that was approved on 18 November 2022,
for a total consideration of £1,621 thousand, representing an average price
of 1,162 pence per share. The Company re-issued 59,000 treasury shares in
connection with the exercise of options. The total number of treasury shares
as at 30 June 2023 is 1,988,653.
Note 4: Segment data
For management purposes, the Group's activities are divided into Owned Hotel
Operations and Management Activities. Owned Hotel Operations are further
divided into four 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.
Six months ended 30 June 2023 (unaudited)
The Netherlands Germany United Croatia Management and holding companies Adjustments(2) Consolidated
£'000
Kingdom
£'000
£'000
£'000
£'000
£'000
£'000
Other(1)
£'000
REVENUE
Third party 30,244 10,560 109,989 22,071 3,802 3,305 179,971
Inter-segment 200 71 18,146 (18,417)
Total revenue 30,244 10,560 110,189 22,142 3,802 21,451 (18,417) 179,971
Segment EBITDA 9,438 2,303 31,820 (402) (236) 2,313 45,236
Depreciation and amortisation (20,071)
Financial expenses (18,039)
Financial income 2,826
Net expenses for financial liability in respect of Income Units sold to (6,188)
private investors
Other income (expenses), net (1,688)
Share in results of associate and joint ventures (50)
Profit before tax 2,026
(1.) Includes Park Plaza Budapest in Hungary, 88 Rooms Hotel in Belgrade,
Serbia, Londra & Cargill Hotel in Rome, Italy, FRANZ Ferdinand Mountain
Resort in Nassfeld, Austria.
(2.) Consist of inter-company eliminations.
Six months ended 30 June 2022 (unaudited)
The Netherlands Germany United Croatia Management and holding companies Adjustments(2) Consolidated
£'000
£'000
Kingdom
£'000
£'000
£'000
£'000
£'000
Other(1)
£'000
REVENUE
Third party 14,743 6,374 71,098 16,230 3,234 1,512 113,191
Inter-segment 102 72 11,776 (11,950)
Total revenue 14,743 6,374 71,200 16,302 3,234 13,288 (11,950) 113,191
Segment EBITDA 3,050 2,700 16,061 (944) 192 (4,037) 17,022
Depreciation and amortisation (19,488)
Financial expenses (18,724)
Financial income 539
Net income for financial liability in respect of Income Units sold to private (3,103)
investors
Other income (expenses), net (2,252)
Share in results of associate and joint ventures (95)
Loss before tax (26,101)
(1.) Includes Park Plaza Budapest in Hungary, 88 Rooms Hotel in Belgrade,
Serbia, Londra & Cargill Hotel in Rome, Italy, FRANZ Ferdinand Mountain
Resort in Nassfeld, Austria.
(2.) Consist of inter-company eliminations.
Note 5: Financial instruments
Fair value of financial instruments:
The Company has entered into interest rate swap contracts with unrelated
financial institutions in order to reduce the effect of interest rate
fluctuations or risk of certain real estate investment's interest expense on
its variable rate debt. The Company is exposed to credit risk in the event of
non-performance by the counterparty to these financial instruments. Management
believes the risk of loss due to non-performance to be minimal and therefore
decided not to hedge this.
The accounting treatment for the interest rate swaps and whether they qualify
as accounting hedges under IFRS 9 is determined separately for each contract.
If the contract qualifies as accounting hedge then the unrealised gain or loss
on the contract is recorded in the consolidated statement of comprehensive
income. If the contract does not qualify as accounting hedge then the gain or
loss on the contract is recorded in the consolidated income statement. The
fair value of the interest rate swaps is determined by taking into account the
present interest rates compared to the contracted fixed rate over the life of
the contract. The valuation models incorporate various market inputs such as
interest rate curves and the fair value measurement is classified to Level 2
of the fair value hierarchy.
For the six months ended June 30, 2023, the Company recorded a loss of £0.6
million in Other expenses in the consolidated income statement and an
unrealised profit of £5.9 million in the consolidated statement of
comprehensive income representing the change in the fair value of these
interest rate swaps during the period. The aggregate fair value of the
interest rate swap contracts was £40.5 as of June 30, 2023 and is included in
Other receivables and prepayments and Other non-current financial assets on
the consolidated statements of financial position.
During the period ended 30 June 2023, there were no transfers between Level 1
and Level 2 fair value measurements, and no transfers into and out of Level 3
fair value measurements.
Note 6: Other disclosures
a. Seasonality
The Group is in an industry with seasonal variations. Sales and profits vary
by quarter and the second half of the year is generally the stronger trading
period.
b. Revenues
Six months ended Six months ended
30 June
2023 30 June
(Unaudited)
2022
£'000
(Unaudited)
£'000
Rooms 133,570 81,956
Campsites and mobile homes 4,919 3,967
Food and beverage 33,808 22,627
Minor operating 3,347 2,403
Management fee 1,412 729
Franchise and reservation fee 719 172
Marketing fee 399 214
Rent revenue 1,346 1,035
Other 451 88
Total 179,971 113,191
c. Other income
Six months ended Six months ended
30 June
2023 30 June
(Unaudited)
2022
£'000
(Unaudited)
£'000
Revaluation of interest rate swap - 2,670
Revaluation of share appreciation rights 2,348 -
Total 2,348 2,670
d. Other expenses
Six months ended 30 June 2023 Six months ended
(Unaudited)
£'000 30 June 2022
(Unaudited)
£'000
Revaluation of finance lease(1) (1,914) (1,841)
Capital loss on buy-back of income units previously sold to private investors (1,289) (733)
Revaluation of share appreciation rights - (1,350)
Revaluation of interest rate swap (569) -
Loss on disposal of property, plant and equipment - (45)
Other non-recurring expenses (including pre-opening expenses) (264) (953)
Total (4,036) (4,922)
1. Non-cash revaluation of finance lease liability
relating to minimum future CPI/RPI increases.
e. Earnings per share
The following reflects the income and share data used in the basic earnings
per share computations:
In 2023 the effect of Potentially dilutive instruments on diluted EPS is
immaterial, in 2022, Potentially dilutive instruments are not considered since
their effect is antidilutive (increase of loss per share).
Six months ended 30 June 2023 Six months ended 30 June
(Unaudited)
2022
(Unaudited)
Reported profit (loss) attributable to Equity holders of the parent (£'000) 3,858 (22,110)
Weighted average number of ordinary shares outstanding (in thousands) 42,368 42,545
f. Related parties
Balances with related parties
30 June 2023 31 December 2022
£'000
£'000
(Audited)
(Unaudited)
Loans to joint ventures 6,464 5,573
Short-term receivables 78 100
Payable to GC Project Management Limited - (185)
Payable to Gear Construction UK Limited (13,523) (6,218)
Transactions with related parties
Six months ended Six months ended
30 June
2023 30 June
(Unaudited)
2022
£'000
(Unaudited)
£'000
Cost of transactions with GC Project Management Limited (270) (60)
Cost of transaction with Gear Construction UK Limited (30,654) (27,057)
Rent income from sub lease of office space 28 39
Management fee revenue from joint ventures 419 322
Interest income from jointly controlled entities 169 59
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