REG - Safestay PLC - Half-year Report
26/09/2023 07:00
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RNS Number : 5854N Safestay PLC 26 September 2023
26 September 2023
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 2023.
'Strong demand from not only young travellers but also families and business
travellers'
H1 Highlights
· Recorded strong revenues of £10.5 million (2022: £7.3 million)
outperforming pre-pandemic levels (2019: £8.1 million)
· Delivered with an occupancy rate of 68.5% (2022: 51%), still lower
than historic levels pre-COVID, but REVPAB is £16.06 (2022: £11.77) compared
to £15.47 in 2019.
· Significant increase in average bed rate (ABR) to £23.44 (2022:
£21.5)
· Generated EBITDA of £2.6 million (2022: £2.5 million) held back by
a one-off payroll increase and abnormally high energy costs.
· Cash at bank of £7.3 million as at 30 June 2023 (2022: £5.2
million)
· As at 30 June 2023, accounting net asset value per share was 41.6p
(30 June 2022: 44.6p per share). This was casued by the loss after tax and
unrealised foreign exchange losses but is not reflective of market valuations
for property assets which remain firm.
H2 Trading & Outlook
· Strong summer with sales in July and August up 11% and 16%
respectively on 2022 and forward bookings for the remainder of 2023
significantly ahead of last year
· Diversifying mix of customers as families and business travellers
choose hostels for greater value accommodation
· Focus on driving organic growth across the business, established a
new office in Warsaw to focus solely on attracting group bookings from
colleges, schools and universities
· Launch of new website in July 2023 set to drive direct sales
· Continuing to seek earnings enhancing acquisitions
Larry Lipman, Chairman of the Group, commenting on the results said:
"It was difficult to know if our strong performance in 2022 was due to a
one-off bounce back from the pandemic or the return to normal trading. Based
on our performance so far in 2023, it is clear we have returned to a healthy
market with some key points of difference. Having been through the pandemic,
we have re-emerged as a leaner, financially stronger business with an
excellent portfolio of premium hostels in prime locations. Added to this,
demand has been strong and pricing has improved by c.20% since 2019 which has
enabled us to generate new sales records. With occupancy still below 2019 and
school and college groups still to come back to historic levels, there remains
plenty of scope for further growth."
Enquries
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
The business has come back strongly since the pandemic and these results for
the six months to 30(th) June 2023 show the business delivering, with a
particularly good sales performance, up by 44% against 2022 and by 30% against
2019. This reflects our customers' desire to continue to travel and visit the
famous cities of Europe, where our premium hostels in city centre locations
are proving attractive, especially in these economically challenging times.
Good demand continued into the key summer months of July and August during
which the Group achieved occupancy levels of 85%. Overall, the Group is
comfortably placed to achieve market expectations for the current year.
Financial review
The Group generated revenues of £10.5 million (2022: £7.3 million), leading
to EBITDA of £2.6 million (2022: £2.5 million). EBITDA margin was 25% (2022:
34%) reduced by an increase in payroll costs and higher energy costs. Payroll
costs in 2022 were abnormally low due to the difficult recruitment market, so
this is a one-off post pandemic inflationary impact on payroll costs that has
now stabilised. Also, new two year UK electricity contracts have now reduced
annual energy bills by £0.2 million. Rental agreements with landlords have
normalised and overall, the cost base is steady.
The Group recorded a loss before tax of £1.0 million (2022: loss of £0.3
million) and a loss per share of 1.4p (2021: loss of 0.5p), primarily
reflecting the recent interest rate increases. As always, the majority of
income is generated in the second half of the year.
Group bank borrowings as at 30 June 2023 were £16.6 million with cash at bank
of £7.3 million. The primary loan is due for renewal in January 2025 and the
refinancing process for this is now in progress. The directors expect to
obtain at least similar terms to the current facility. The value of the
Group's portfolio of properties further underpins the Group's finances. The
Directors believe that the valuations of both the Elephant & Castle site
of £26.8m and the combined Glasgow, Pisa and York freehold sites of £11.9
million have not changed since the December 2022 accounts.
As at 30 June 2023, accounting net asset value per share was 41.6p per share
(30 June 2022: 44.6p per share), which is not reflective of freehold
valuations which remain firm as can be seen from the examples above.
Operational review
Safestay operates 16 sites, offering 3,251 beds across 11 European and 3 UK
cities. The first six months have clearly shown that the business is again
moving forward with good prospects to grow both organically and via
acquisition.
Growth depends on increasing demand and this continues to be driven largely by
young people looking to explore Europe's principal cities, and wishing to stay
in clean, centrally located and attractive surroundings for a reasonable
price. These young people are made up of Millennials, Generation Z and
organised groups coming from schools and universities. They are typically
technologically savvy, working to short decision time frames, socially active
and price conscious. Safestay looks to match these characteristics, with
significantly improved online marketing across social media platforms and the
group website, showcasing the unique portfolio and making booking easy for
stays in single or multiple hostels. These features are decreasing the Group's
reliance on online travel agents.
One area of difference post pandemic has been the volume of group bookings.
Pre-pandemic, group bookings made up 38% of room revenue in 2019 whereas group
bookings in the period under review were 13%. There is therefore an
opportunity to re-build group bookings and in August, a new office was opened
in Warsaw dedicated to targeting group sales.
Occupancy was 68.5% in H1, against 51% last year, a very good performance
especially when combined with an average room rate of £23.44 and as shown by
a REVPAB of £16.06 Occupancy naturally increases over the summer and so the
average for the year will be higher, but still below the average achieved in
2019 of 71%, which provides a good indication of the headroom for further
growth. Average bed rate has increased by c. 20% since 2019 and is a key
driver of growth, in part due to the successful application of dynamic pricing
under the PricePoint system which re-calculates pricing based on demand every
two minutes. Business on the books is significantly higher at this point than
2022 and it is expected that it will be approximately £1m higher at the year
end than 2022.
Under the guidance of our Chief Operating Officer, Peter Zielke, who joined
the Group in February 2023, a primary aim has been to lift all operational
standards across the portfolio and create unique experiences for our guests.
Amongst areas of focus are customer engagement, area management reviews,
health & safety and HR. Each of these has received specific attention with
the Group importing proven systems, which in general have been used previously
by the Management, to track performance and digitalise tasks where
appropriate.
Since 1 January 2023, the Group has returned to an annual capex budget
equivalent to 3% of annual turnover. This is essential to maintaining the
Group's reputation as a leading premium hostel operator and to protecting
the quality of the portfolio by ensuring that the buildings themselves and
the contents within remain in excellent condition.
Safestay is an experienced acquirer of hostels and well- positioned to take
advantage of current market conditions as the supply of hostels and other
buildings capable of being converted to hostels come to the market, but only
if all internal criteria are met.
Overall, 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 £23, is unchanged. This combination
remains the main driver of our business and the focus of our marketing
efforts.
Outlook
We are very pleased with the progression of the business since we were allowed
to re-open post pandemic. Arguably, the Group is better positioned than
before, having had to rebuild the business and done so with the benefit of
doing something for the second time. Our trading results for the first half of
the year and the first two months of the summer show we are comfortably on
track for the year and that we are well placed to continue to increase
occupancy and average bed rate into 2024.
Larry Lipman
Chairman
26 September 2023
Condensed consolidated statement of comprehensive income
Unaudited 6 months to 30 June 2023 Unaudited 6 months to 30 June 2022 Audited Year to 31 December 2022
Note £000s £000s £000s
Revenue 2 10,472 7,286 19,146
Cost of sales (1,882) (906) (3,142)
Gross profit 8,589 6,380 16,004
Administrative expenses (7,948) (5,759) (13,801)
Exceptional Costs - - (369)
Total administrative expenses (7,948) (5,759) (14,170)
Operating profit / (loss) after exceptional expenses 3 642 620 1,834
Interest received 11 1 2
Finance costs (1,655) (960) (2,559)
Loss before tax (1,002) (339) (723)
Tax 119 (5) 441
Loss after tax (883) (344) (282)
Exchange differences on translating foreign operations (1,901) (969) 134
Total comprehensive profit / (loss) for the period attributable to owners of (2,784) (1,313) (148)
the parent company
Basic / diluted loss per share (1.36p) (0.53p) (0.44p)
Condensed consolidated statement of Unaudited Unaudited Audited
financial position
30 June 30 June 31 December
2023 2022 2022
£000 £000 £000
Non-current assets
Property, plant and equipment 68,309 73,974 72,059
Intangible assets 9 11 9
Goodwill 11,663 12,145 12,014
Lease assets 440 500 453
Deferred tax asset 1,814 1,126 1,379
Total non-current assets 82,235 87,755 85,914
Current assets
Stock 26 44 25
Trade and other receivables 707 605 1,121
Lease assets 135 105 139
Current tax asset 49 199 65
Cash and cash equivalents 7,261 5,215 5,226
Total current assets 8,176 6,168 6,576
Total assets 90,411 93,923 92,490
Current liabilities
Borrowings 1,108 574 925
Lease liabilities 1,810 2,033 1,764
Trade and other payables 5,535 2,236 3,128
Total current liabilities 8,453 4,843 5,817
Non-current liabilities
Borrowings 22,554 24,140 23,101
Lease liabilities 29,030 32,783 30,450
Deferred tax 3,347 3,287 3,364
Total non-current liabilities 54,931 60,210 56,915
Total liabilities 63,384 65,052 62,732
-
Net assets 27,027 28,871 29,758
Equity
Share capital 649 647 647
Share premium account 23,959 23,904 23,904
Other components of equity 16,513 17,590 18,417
Retained earnings (14,093) (13,271) (13,210)
Total equity attributable to owners of the parent company 27,027 28,871 29,758
Condensed consolidated statement of changes in equity
For the six months to 30 June 2023
Share Capital Share premium account Other Components of Equity Retained earnings Total Equity
£000 £000 £000 £000 £000
Balance at 1 January 2023 647 23,904 18,417 (13,210) 29,758
Comprehensive income
(Loss) for the period - - - (883) (883)
Movement in translation reserve - - (1,901) - (1,901)
Total comprehensive income - - (1,901) (883) (2,784)
Transactions with owners
Share Issue 2 54 (24) - 32
Share-based payment charge for the period - - 21 - 21
Balance at 30 June 2023 649 23,959 16,513 (14,093) 27,027
Share Capital Share premium account Other Components of Equity Retained earnings Total 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)
Total comprehensive income - - (969) (343) (1,312)
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
Share Capital Share premium account Other Components of Equity Retained earnings Total Equity
£000 £000 £000 £000 £000
Balance at 1 January 2022 647 23,904 18,510 (12,928) 30,133
Loss for the year - - - (282) (282)
Other comprehensive income
Movement in translation reserve - - (134) - (134)
Total comprehensive loss - - (134) (282) (416)
Transactions with owners
Share based payment charge for the period - - 42 - 42
Balance at 31 December 2022 647 23,904 18,417 (13,210) 29,758
Condensed consolidated statement of cash flows Unaudited Unaudited Audited
Note 6 months to 30 June 2023 6 months to 30 June 2022 Year to 31 December 2022
£000 £000 £000
Operating activities
Cash generated from operations 3 4,969 2,939 6,130
Income tax paid 28 4 133
Net cash generated from operating activities 4,997 2,943 6,263
Investing activities
Purchase of property, plant and equipment (183) (176) (365)
Purchase of intangible assets - - (5)
Net cash outflow from investing activities (183) (176) (370)
Cash flows from financing activities
Repayment of bank loans (500) (250) (997)
Principal elements of lease payments (1,505) (1,678) (3,495)
Interest paid (775) (106) (656)
(2,780) (2,034) (5,148)
Cash and cash equivalents at beginning of period 5,226 4,482 4,482
Net increase in cash and cash equivalents 2,035 733 744
Cash and cash equivalents at end of period 7,261 5,215 5,226
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 UK-adopted International Accounting Standards
Financial information contained in this document does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006 ("the
Act"). The statutory accounts for the year ended 31 December 2022 have been
filed with the Registrar of Companies. The report of the auditors on those
statutory accounts was unqualified, and did not contain a statement under
section 498(2) or (3) of the Act.
The financial information for the six months ended 30 June 2023 and 30 June
2022 is unaudited.
These condensed interim financial statements 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 2022.
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 SEGMENTAL ANALYSIS
Unaudited Unaudited Audited
6 months to 30 June 6 months to 30 June Year to 31 December 2021
2023 2022 2022
£000 £000 £000
Hostel accommodation 9,463 6,564 17,150
Food and Beverages sales 697 495 1,109
Other income 312 227 517
Total Income 10,472 7,286 18,776
UK Spain Europe Shared services Total
Unaudited 6 months to 30 June 2023
£'000 £'000 £'000 £'000 £'000
Revenue 3,556 2,477 4,438 - 10,472
Profit/(loss) before tax 931 96 444 (2,473) (1,002)
Add back: Finance costs 98 - 16 1,530 1,644
Add back: Depreciation & Amortisation 298 549 615 511 1,973
EBITDA 1,327 645 1,075 (433) 2,615
Exceptional & Share based payment expense - - - 21 21
Adjusted EBITDA 1,327 645 1,075 (412) 2,636
Total assets 34,969 16,335 24,309 14,798 90,411
Total liabilities (12,227) (12,168) (12,681) (26,306) (63,384)
Unaudited 6 months to 30 June 2022 UK Spain Europe Shared services Total
£'000 £'000 £'000 £'000 £'000
Revenue 2,657 1,813 2,816 - 7,286
Profit/(loss) before tax 509 403 456 (1,706) (338)
Add back: Finance costs 160 244 203 353 960
Add back: Depreciation & Amortisation 404 636 670 198 1,908
EBITDA 1,073 1,283 1,329 (1,155) 2,530
Exceptional & Share based payment expense 49 - - - 49
Rent concessions - (24) - - (24)
Adjusted EBITDA 1,122 1,259 1,329 (1,155) 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 2022 UK Spain Europe Shared services Total
£'000 £'000 £'000 £'000 £'000
Revenue 6,864 4,464 7,818 - 19,146
Profit/(loss) before tax 2,574 278 1,007 (4,583) (724)
Add back: Finance costs 191 1 59 2,306 2,558
Add back: Depreciation & Amortisation 253 1,045 1,370 987 3,654
EBITDA 3,018 1,324 2,436 (1,290) 5,488
Exceptional & Share based payment expense 411 411
Adjusted EBITDA 3,018 1,324 2,436 (878) 5,900
Total assets 36,539 16,570 25,233 14,147 92,490
Total liabilities (9,164) (12,088) (12,672) (28,808) (62,732)
3. NOTES TO THE CASHFLOW STATEMENT
Unaudited Unaudited Audited
6 months to 30 June 2023 6 months to 30 June 2022 Year to 31 December 2022
£0 £0 £0
Loss before tax (1,002) (283) (724)
Adjustments for:
Depreciation of property, plant and equipment and 1,973 1,908 3,586
amortisation of intangible assets
Finance costs 1,644 960 2,558
Share-based payments 21 - 42
Exchange movements (506) 43 (836)
Lease Modification - - 280
Rent Concessions - (24) -
Changes in working capital
Decrease/(Increase) in inventory 1 (9) 11
(Increase)/Decrease in trade receivables 431 622 154
Increase/(Decrease) in trade and other payables 2,408 (272) 1,059
Cash generated from operating activities 4,969 2,939 6,130
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