TIDMSSTY

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 GBP7.3 million (2021: GBP1.0 million) a good performance moving back toward pre-pandemic levels (2019: GBP8.1 million)

-- Delivered with an Occupancy rate of only 51% (2019: 71%) showing there remains significant upside

   --    Average bed rate (ABR) was sustained at GBP21.5 (2019: GBP19.5) 
   --    Cost base coming back in line with increased trading 

-- Generated EBITDA of GBP2.5 million (2021 loss of GBP1.09 million and 2019 profit of GBP2.2 million) and a loss before tax of GBP0.3 million (2021: profit of GBP3.6 million including gains from property disposals and 2019 loss of GBP0.9 million).

   --    Cash at bank of GBP5.2 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

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

Instagram page 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 GBP7.3 million (2021: GBP1.0 million), leading to EBITDA of GBP2.5 million (2021: Loss of GBP1.09 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 GBP250,000 following successful rent negotiations.

The Group recorded a loss before tax of GBP0.3 million (2021: profit of GBP3.6 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 GBP24.8 million with cash at bank of GBP5.2 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 GBP26.8 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 GBP16.7 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 GBP20, 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 GBP16.7 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                               (restated) 
  of comprehensive income                          Unaudited     Unaudited        Audited 
                                                    6 months      6 months        Year to 
                                                  to 30 June    to 30 June    31 December 
                                                        2022          2021           2021 
                                          Note        GBP000        GBP000         GBP000 
                                                ------------  ------------  ------------- 
 
 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 the parent company                      (343)         3,947      (599) 
                                                ============  ============  ============= 
 Basic profit/(loss) per share                       (0.53p)          6.1p        (0.93p) 
                                                ============  ============  ============= 
 
 
 
 Condensed consolidated statement 
  of                                                         Unaudited 
  financial position                           Unaudited    (restated)        Audited 
                                                 30 June       30 June    31 December 
                                                    2022          2021           2021 
                                                  GBP000        GBP000         GBP000 
                                              ----------  ------------  ------------- 
 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                            10         647           647            647 
 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  Retained earnings   Total 
                           capital   premium account      of Equity                         equity 
 
                                              GBP000       GBP000             GBP000 
                            GBP000                                                          GBP000 
                          --------  ----------------  ----------------  -----------------  ------- 
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)         3,769 
                          --------  ----------------  ----------------  -----------------  ------- 
 
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  Retained earnings   Total 
                           capital   premium account      of Equity                         equity 
 
                                         GBP000            GBP000             GBP000 
                           GBP000                                                           GBP000 
                          --------  ----------------  ----------------  -----------------  ------- 
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 
 
  Loss for the year             -     -         -       (599)      (599) 
 
  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      6 months        Year to 
                                                      to 30 June    to 30 June    31 December 
                                                            2022          2021           2021 
                                                          GBP000        GBP000         GBP000 
                                                    ------------  ------------  ------------- 
 
 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 GBP440,000, a decrease in accruals of GBP598,000 and a decrease in rent (increase in retained earnings brought forward) of GBP158,000.

Overall, the 2020 loss decreased and consequently the 2021 retained earnings brought forward has increased by GBP158,000, plus the net assets has increased by GBP158,000.

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 GBP1,758,000 and increased the deferred tax liability by GBP1,758,000. This has reduced net assets by GBP1,758,000 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      6 months        Year to 
                               to 30 June    to 30 June    31 December 
                                     2022          2021           2021 
                                   GBP000        GBP000         GBP000 
                             ------------  ------------  ------------- 
 
   Hostel accommodation             6,564           507          4,901 
 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      Shared      Total 
   2022                                               of Europe    services 
                                 GBP000     GBP000       GBP000      GBP000     GBP000 
 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 
                              ---------  ---------  -----------  ----------  --------- 
                               ( 11,653   ( 13,916                 ( 26,796   ( 65,052 
 Total liabilities                    )          )     (12,687)           )          ) 
                              ---------  ---------  -----------  ----------  --------- 
 

AUDITED 12 MONTHS TO 31 DECEMBER 2021

 
                                           UK       Spain      Europe      Shared      Total 
   2021                                                                  services 
                                       GBP000      GBP000      GBP000      GBP000     GBP000 
 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      6 months        Year to 
                                                         to 30 June    to 30 June    31 December 
                                                               2022          2021           2021 
                                                             GBP000        GBP000         GBP000 
                                                     --------------  ------------  ------------- 
 
 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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