REG - Safestay PLC - Half-year Report
29/09/2022 07:00
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RNS Number : 0735B Safestay PLC 29 September 2022
29 September 2022
Safestay plc
("Safestay", the "Company" or the "Group")
Interim Results
Safestay (AIM: SSTY), the owner and operator of an international brand of
contemporary hostels, is pleased to announce its Interim Results for the 6
months to 30 June 2022.
H1 Financial Highlights
· All 16 hostels remained largely open for the first time since early
2020 and demonstrated that their customer appeal remains strong
· Revenues built during the period to £7.3 million (2021: £1.0
million) a good performance moving back toward pre-pandemic levels (2019:
£8.1 million)
· Delivered with an Occupancy rate of only 51% (2019: 71%) showing
there remains significant upside
· Average bed rate (ABR) was sustained at £21.5 (2019: £19.5)
· Cost base coming back in line with increased trading
· Generated EBITDA of £2.5 million (2021 loss of £1.09 million and
2019 profit of £2.2 million) and a loss before tax of £0.3 million (2021:
profit of £3.6 million including gains from property disposals and 2019 loss
of £0.9 million).
· Cash at bank of £5.2 million as at 30 June 2022
· As at 30 June 2022, net asset value per share was 44.6p (30 June
2021: 47.6p per share(restated)) reflecting the underlying value of the
property portfolio
H2 Trading
· Good start to the key summer months with trading in both July and
August ahead of budget
· Sales currently coming mostly from young travellers, Group bookings
from schools, colleges and universities starting to come back but well below
where they are expected, although forward group bookings for the latter part
of 2022 are encouraging.
· On track to complete a successful year
Larry Lipman, Chairman of the Company, commenting on the results said:
"It is difficult to predict how quickly a business will recover, so we are
very pleased to present these results which show Safestay coming back rapidly
towards pre-pandemic levels of trading and beyond. As we always felt, if
allowed to travel, our customers would again opt to stay in our premium
portfolio of hostels all of which are well located in the major and most
visited cities across Europe. Our trading is naturally second half weighted
over the summer months and we have enjoyed a strong July and August and have
done so with college groups around 14.8% of room revenue at this stage but is
expected to build back to historical levels of 30-40%. It is important to
remain cautious, especially given the current economic backdrop, but the
business is well funded, demand is rising and we are well placed to deliver a
trading result for the year that is comfortably ahead of our expectations at
the outset of 2022.
Enquiries
Safestay plc +44 (0) 20 8815 1600
Larry Lipman
Liberum Capital Limited
(Nominated Adviser and Broker) +44 (0) 20 3100 2000
Andrew Godber/Edward Thomas
Novella +44 (0) 20 3151 7008
Tim Robertson
Safia Colebrook
For more information visit our:
Website www.safestay.com (http://www.safestay.com)
Vox Markets page https://www.voxmarkets.co.uk/company/SSTY/news/
(https://www.voxmarkets.co.uk/company/SSTY/news/)
Instagram page www.instagram.com/safestayhostels/
(http://www.instagram.com/safestayhostels/)
Chairman's Statement
Introduction
I am pleased to present these results which demonstrate the continued
popularity of the Safestay portfolio of premium hostels. This was the first
6-month trading period in the last two years where we have been able to remain
largely open with very little interruption and our customers have been free
from travel restrictions to visit each of the 12 countries where we operate.
We have come out of the pandemic with 16 high quality hostels and a
strengthened balance sheet, following the two hostel sales last year, to
support the return of the Group to full trading. These results show the Group
is close to being level with the H1 performance in 2019 and given this was
achieved with occupancy at just 51% there is certainly scope for further
improvement.
We have started the key second half of the financial year well and we look
forward to delivering a good result for the year as a whole.
Financial review
The Group generated revenues of £7.3 million (2021: £1.0 million), leading
to EBITDA of £2.5 million (2021: Loss of £1.09 million). The EBITDA
calculation is disclosed in note 2.
With the portfolio now open and less likely to face further closures, the cost
base, which was successfully pared back during the pandemic, is now coming
back up to support the trading prospects of the hostels. There was no
government support for the Group in the period and the rental agreements are
also normalising after several landlords acted supportively during the
pandemic. In addition, the rent on Holland Park has been reduced by 38% or
£250,000 following successful rent negotiations.
The Group recorded a loss before tax of £0.3 million (2021: profit of £3.6
million), in the prior year, the Group benefited from the sale of the
Edinburgh hostel and recorded a loss per share of 0.5p (2021: profit of 5.6p).
Group borrowings as at 30 June 2022 were £24.8 million with cash at bank of
£5.2 million. The value of the Group's portfolio of properties further
underpins the Group's finances and while it is not valued on an annual basis,
the most recent valuation for just the Elephant & Castle site as at 31
December 2021 was £26.8 million.
As at 30 June 2022, net asset value per share was 44.6p per share (30 June
2021: 47.6p per share(restated)).
Operational review
Following the disposal in 2021 of the Barcelona (Sea) and Edinburgh Hostels
for £16.7 million, Safestay now operates 16 hostels with approximately 3,242
beds across 11 European and 3 UK cities. Like many operators in the
hospitality sector, the last two years have presented significant challenges
to every part of the business. The Group has had to adapt quickly but has now
re-emerged in 2022 a leaner, more financially secure business with the
capability to recover all lost ground and move forward again. The first six
months have clearly shown good demand which has continued into the second half
of the year.
Demand at this stage has primarily come from young people exploring Europe who
have been the first to respond to the ability to travel freely and once again
visit the attractions of Europe's principal cities. Whereas group bookings by
colleges, schools and universities who typically make up between 30-40% of the
annual room revenue have been slower to come back post pandemic, responsible
for just 14.8% of the H1 room revenue. Demand has increased from this segment
in H2 but the Group expects it will be in 2023 that the group bookings market
returns in earnest.
Occupancy was 51% in H1, a figure that is building back towards pre-pandemic
levels of 71%, recorded for the same H1 period in 2019. The return of group
bookings to previous levels will be an important factor and increasing
confidence amongst all customer segments will support a return to normal
trading.
Operationally the Group is building back the teams in each hostel, new staff
are being recruited in line with increasing demand. Recruitment in this market
is challenging and competition for good staff may lead to higher payroll costs
but as yet there has been no need for a significant shift. The management team
are also very mindful of potential inflationary pressures on other parts of
the business. In terms of energy costs, the Group has fixed electricity prices
in the UK to September 2023 providing certainty during this period.
Ultimately, if required bed prices would be increased.
Overall, the business has made a good return to trading, always placing the
safety of guests first and looking to build momentum and trust in the business
over the coming months. The core offer of a comfortable and safe stay in
beautiful, often iconic buildings that are centrally located, in well-known
and popular cities but still with a bed rate of around just £20, is
unchanged. Importantly, a good proportion of the bookings received were direct
to the Group's website, in total 25.1% of non-groups room revenue, which
delivers a higher margin.
Capex has been kept at a minimum over the last two years given cash
constraints. During H1 while capex spend levels were still relatively low
where required the business invested behind ensuring the fabric and quality of
the buildings was maintained. Reflecting the uncertainty of the market
environment, new development projects remain on hold. The focus for now is
solely on improving the marketing and revenue management strategies to
optimise performance and supporting customer return to pre-pandemic levels.
In February, Paul Hingston joined the Group as Chief financial Officer
replacing Peter Harvey. In June, Nuno Sacramento, Chief Operating Officer left
the Group and a search for his successor is well advanced.
Outlook
This has been a good performance by Safestay, certainly better than we had
originally forecast. Most importantly, when our customers were allowed to
visit, they did, proving the ongoing appeal of our venues. The sale of the two
hostels last year for £16.7 million, helped refinance the business and place
us in a good position to move forward positively. There will no doubt be
further cost pressures, but we may also benefit from being a value offer in a
market where consumers are more cash constrained. Overall, we feel confident
in our business and its prospects are steadily returning.
Larry Lipman
Chairman
28 September 2022
Condensed consolidated statement of comprehensive income (restated) Audited
Unaudited
Unaudited
6 months to 30 June 6 months to 30 June Year to 31 December 2021
2022 2021
Note £000 £000 £000
Revenue 3 7,286 407 5,810
Cost of sales (906) (42) (1,160)
Gross profit 6,380 365 4,650
Administrative expenses (5,759) (2,836) (9,867)
Operating profit / (loss) before exceptional expenses 620 (2,471) (5,217)
EBIT
Exceptional items - profit on sale of assets - -
Exceptional items - other operating income - 336 1,737
Exception items - loss on disposal -
Exceptional items - costs - (20) -
Operating profit / (loss) after exceptional expenses 3 620 (2,155) (3,480)
Interest received 1 - -
Finance costs (960) (1,196) (2,627)
Profit / (loss) before tax (338) (3,351) (6,107)
Tax (5) 1,891 218
Profit/(Loss) after tax for continuing operations (343) (1,460) (5,889)
Profit/(Loss) after tax for discontinued operations - 5.407 5,290
Total comprehensive profit / (loss) for the period attributable to owners of (343) 3,947 (599)
the parent company
Basic profit/(loss) per share (0.53p) 6.1p (0.93p)
Condensed consolidated statement of Unaudited Unaudited (restated) Audited
financial position
30 June 30 June 31 December 2021
2022 2021
£000 £000 £000
Non-current assets
Property, plant and equipment 73,974 73,780 73,609
Intangible assets 11 29 18
Goodwill 12,145 12,146 12,146
Lease assets 500 - 562
Deferred tax asset 1,126 2,693 1,122
Total non-current assets 87,755 88,648 87,457
Current assets
Stock 44 38 35
Trade and other receivables 605 1,673 1,227
Lease assets 105 - 78
Current tax asset 199 65 199
Cash and cash equivalents 5,215 16,230 4,482
Total current assets 6,168 18,006 6,021
Total assets 93,923 106,654 93,478
Current liabilities
Borrowings 574 776 926
Lease liabilities 2,033 1,854 1,922
Trade and other payables 2,236 2,310 2,062
Total current liabilities 4,843 4,940 4,910
Non-current liabilities
Borrowings 24.140 34,312 24,028
Lease liabilities 32,783 34,863 31,086
Deferred tax 3,287 1,758 3,314
Trade and other payables due in more than one year - - 7
Total non-current liabilities 60,210 70,933 58.435
Total liabilities 65,052 75,873 63,345
Net assets 28,871 30,781 30,133
Equity
Share capital 647 647 647
10
Share premium account 23,904 23,904 23,904
Other components of equity 17,590 14,613 18,510
Retained earnings (13,271) (8,383) (12,928)
Total equity attributable to owners of the parent company 28,871 30,781 30,133
Condensed consolidated statement of changes in equity
For the six months to 30 June 2022 (unaudited)
Share Share Other Components of Equity Retained earnings Total
capital premium account equity
£000
£000 £000
£000 £000
Balance at 1 January 2022 647 23,904 18,510 (12,928) 30,133
Comprehensive income
(Loss) for the period - - - (343) (343)
Movement in translation reserve - - (969) - (969)
- - (969) (343) 3,769
Total comprehensive income
Transactions with owners
Share-based payment charge for the period - - 49 - 49
Balance at 30 June 2022 647 23,904 17,590 (13,271) 28,871
Condensed consolidated statement of changes in equity
For the six months to 30 June 2021 (unaudited) (restated)
Share Share Other Components of Equity Retained earnings Total
capital premium account equity
£000
£000 £000
£000 £000
Balance at 1 January 2021 647 23,904 14,628 (12,329) 26,851
Comprehensive income
Profit for the period - - - 3,947 3,947
Movement in translation reserve - - (178) - (178)
Total comprehensive income - - (178) 3,947 (3,769)
Transactions with owners
Share-based payment charge for the period - - 162 - 162
Balance at 30 June 2021 647 23,904 14,613 (8,383) 30,781
For the year ended 31 December 2021 (audited)
Balance at 1 January 2021 (restated) 647 23,904 14,628 (12,329) 26,851
- - - (599) (599)
Loss for the year
Other comprehensive income
Property revaluation 5,039 5,039
Deferred tax on property revaluation (1,399) (1,399)
Movement in translation reserve - - 169 - 169
Total comprehensive loss - - 3,809 (599) 3,210
Transactions with owners
Share based payment charge for the period - - 72 - 72
Balance at 31 December 2021 647 23,904 18,510 (12,928) 30,133
Condensed consolidated statement of cash flows Unaudited Unaudited Audited
Note 6 months to 30 June 6 months to 30 June Year to 31 December 2021
2022 2021
£000 £000 £000
Operating activities
Cash generated from operations 4 2,939 (244) (1,272)
Income tax paid 4 - (51)
Net cash generated from operating activities 2,943 (244) (1,323)
Investing activities
Purchase of property, plant and equipment (176) (55) (307)
Purchase of intangible assets - - -
Acquisition of business - - -
Payment of deferred consideration - - -
Sale proceeds from disposals - 16,000 16,658
Net cash outflow from investing activities (176) 15,945 16,351
Cash flows from financing activities
Proceeds from refinancing transaction - - -
Fees relating to financing transaction - - -
Proceeds from property financing transaction - - -
Proceeds from Coronavirus Business Interruption loan - - -
Repayment of bank loans (250) (205) (10,373)
Principal elements of lease payments (1,678) (882) (1,810)
Property financing payments - (166) -
Fees related to borrowings - - -
Interest paid (106) (343) (488)
(2,034) (1,596) (12,671)
Cash and cash equivalents at beginning of period 4,482 2,125 2,125
Net increase/(decrease) in cash and cash equivalents 733 14,105 2,357
Cash and cash equivalents at end of period 5,215 16,230 4,482
1. ACCOUNTING POLICIES FOR THE GROUP AND COMPANY FINANCIAL STATEMENTS
Safestay plc is listed on the AIM market of the London Stock Exchange and was
incorporated and is domiciled in the UK.
The Group and Company interim financial statements have been prepared in
accordance with International Accounting Standards under UK-adopted IFRS.
These condensed interim financial statements have not been audited, do not
include all the information required for full annual financial statements and
should be read in conjunction with the Group's consolidated annual financial
statements for the year ended 31 December 2021.
The financial statements have been presented in sterling, prepared under the
historical cost convention, except for the revaluation of freehold properties
and right of use assets.
The accounting policies have been applied consistently throughout all periods
presented in these financial statements. These accounting policies comply with
each IFRS that is mandatory for accounting periods ending on 31 December 2022.
New standards and interpretations effective in the year
No new standards have been implemented this year that have a material impact
on the business.
2. PRIOR YEAR RESTATEMENT
IFRS 16 Adjustment
Following a review of the IFRS 16 accounting for the year to 31 December 2021,
it is noted that the classification between accruals, IFRS lease liability and
rent expense in the year to 31 December 2020 was found to be incorrect. This
has resulted in an increased lease liability of £440,000, a decrease in
accruals of £598,000 and a decrease in rent (increase in retained earnings
brought forward) of £158,000.
Overall, the 2020 loss decreased and consequently the 2021 retained earnings
brought forward has increased by £158,000, plus the net assets has increased
by £158,000.
Deferred tax liability on the 2019 Safestay (Elephant & Castle) Ltd
property revaluation
From a review of the deferred tax balances as at 31 December 2021 it is noted
that the deferred tax liability relating to the property revaluation on
Safestay (Elephant & Castle) Ltd was erroneously omitted from the
liability for the year ended 31 December 2019.
An adjustment has been made to correct this that has reduced the property
revaluation reserve by £1,758,000 and increased the deferred tax liability by
£1,758,000. This has reduced net assets by £1,758,000 and has no impact on
the trading profit in 2019.
Profit and Loss Representation
For the period ending 30 June 2021 we have restated the profit and loss
account to present the discontinued operations on a separate line. There has
been no impact on the profit and loss made for the period.
3. SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
6 months to 30 June 6 months to 30 June Year to 31 December 2021
2022 2021 £000
£000 £000
6,564 507 4,901
Hostel accommodation
Food and Beverages sales 495 364 725
Other income 227 18 550
Rental income - 131 247
Total Income 7,286 1,020 6,423
UNAUDITED 6 MONTHS TO 30 JUNE 2022
UK Spain Rest of Europe Shared services Total
2022
£000 £000 £000 £000 £000
Revenue 2,657 1,813 2,816 - 7,286
Profit/(Loss) before tax 509 403 456 (1,706) (338)
Finance costs 160 244 203 353 960
Operating Profit after exceptional items 669 648 659 (1354) 622
Depreciation, Amortisation & disposals 404 636 670 198 1,908
Exceptional & Share based payment expense 49 - - 49
Rent forgiveness - (24) - - (24)
Adjusted EBITDA 1,122 1,260 1,329 (1,156) 2,555
Total assets 34,456 20,739 26,206 12,522 93,923
Total liabilities (11,653) (13,916) (12,687) (26,796) (65,052)
AUDITED 12 MONTHS TO 31 DECEMBER 2021
UK Spain Europe Shared services Total
2021
£000 £000 £000 £000 £000
Revenue 2,422 1,363 2,625 - 6,423
Profit/(Loss) before tax 6,689 (2,278) (3,448) (2,549) 692
Finance costs 271 618 1,157 1,273 2,701
Operating Loss after exceptional items 6.960 (1,660) (2,291) (1,276) 3,393
Depreciation, Amortisation & disposals 1,028 1,076 2,350 395 3,773
Exceptional & Share based payment expense (7,511) 554 554 72 (6,885)
Rent forgiveness (595) (227) (680) - (1,275)
Adjusted EBITDA (118) (257) (67) (809) (994)
Total assets 34,975 19,144 44,168 14,335 93,478
Total liabilities (10,731) (13,432) (25,893) (26,721) (63,345)
4. NOTES TO THE CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOWS
Unaudited Unaudited Audited
6 months to 30 June 6 months to 30 June Year to 31 December 2021
2022 2021
£000 £000 £000
Loss before tax (283) 3,565 693
Adjustments for:
Depreciation of property, plant and equipment and 1,908 2,466 3,773
amortisation of intangible assets
Profit on disposal of assets - (7,074) (6,957)
Finance costs 960 1,270 2,545
Share-based payments - 162 72
Exchange movements 43 30 116
Rent concessions (24) (788) (1,275)
Changes in working capital
Decrease/(Increase) in inventory (9) 10 12
(Increase)/Decrease in trade receivables 622 218 549
Increase/(Decrease) in trade and other payables (272) (103) (800)
Cash generated from operating activities 2,939 (244) (1,272)
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