London-focused hotelier PPHE Hotel (PPH) has managed to defy the uncertainty created by terrorism, political instability and elections with an 11.8% rise in reported revenue to €302.5 million in 2015.
This growth has been driven by favourable foreign exchange rates – revenue is up 4.4% on a constant currency basis – as well as an increase in the average room rate from €135.60 to €150.90.
PPHE’s investment in a new purchasing system and labour scheduling system has helped boost its margin to 36.6%, pushing normalised pre-tax profit 25.5% higher to €41.2 million. The strong set of results sends the shares up 11% to 720p.
Chen Moravsky, deputy chief executive and chief financial officer at PPHE, says the London hotel market is likely to cool down in 2016 as part of its natural cycle, but this will be offset by continuing strong growth in Continental Europe, particularly The Netherlands.
The group is carrying out some extensive renovations this year but Moravsky says any impact on results will be for a maximum of one or two quarters. He claims the opening of three new hotels and the relaunch of the extended Park Plaza Riverbank London will offset the disruption. PPHE is adding 1,067 rooms this year, boosting its portfolio by 13%.
PPHE reckons the book value of its properties is €507 million below their fair market value. This is significantly different to the €168 million gap previously estimated by analysts at FinnCap, which has consequently upgraded its target price from 880p to £10.80, implying 50% upside.