Source - LSE Regulatory
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

Vox Markets page https://www.voxmarkets.co.uk/company/SSTY/news/

Instagram page 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 30th 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 the parent company

 

(2,784)

(1,313)

(148)

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

 

 

 

Unaudited 6 months to 30 June 2023

UK

Spain

Europe

Shared services

Total

£'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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