Share Name Share Symbol Market Type Share ISIN Share Description
Safestay LSE:SSTY London Ordinary Share GB00BKT0J702 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  +0.00p +0.00% 49.00p 48.00p 50.00p 49.00p 49.00p 49.00p 1,758 06:39:32
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Travel & Leisure 7.4 -0.5 -1.5 - 16.77

Safestay PLC Half-year Report

25/09/2017 7:00am

UK Regulatory (RNS & others)


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TIDMSSTY

RNS Number : 6321R

Safestay PLC

25 September 2017

The information contained within this announcement is deemed by the Group to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR")

STRICTLY EMBARGOED UNTIL 7am: 25 September 2017

Safestay plc

("Safestay" or "the Company" or "the Group")

Interim Results

For the Six Months to 30 June 2017

Safestay (AIM: SSTY), the owner and operator of an international brand of contemporary hostels, announces its unaudited interim results for the six months ended 30 June 2017

H1 Financial Highlights

-- Strong H1 performance with demand for Safestay's unique contemporary hostel offer generating a 23% increase in revenues to GBP4.1m (2016: GBP3.3m)

   --     62% increase in EBITDA GBP1.3m (2016: GBP0.8m) 

-- Reduced loss before tax of GBP0.4m (2016: GBP0.6m), in line with the development of the business and a profit before tax of GBP0.1m if one-off costs of acquisition (GBP0.1m) and refinancing (GBP0.4m) are eliminated

-- Successful financing transactions in respect of the Elephant & Castle and Edinburgh hostels, raising GBP12.6m

-- New GBP18.4m bank facility with HSBC replaces previous bank facility and two convertible loans, significantly reducing interest expense

H1 Operating Highlights

-- Average occupancy across the four UK hostels increased to 71.6% (period to 30 June 2016: 63.7%)

   --     18.4% increase in the bed nights sold on a like-for-like basis 

-- Kensington Holland Park hostel has been transformed, producing like for like revenue growth of 31.3%, with occupancy increasing by 14.3 percentage points compared with the previous year to date and looks set to continue to deliver on its potential

   --     Good performance too from Edinburgh, Elephant & Castle and York hostels 

-- Expansion of Elephant & Castle to add a further 80 beds. Work will commence imminently with estimated completion in October 2018

-- Operational changes have been effective in driving increased revenues from established Safestay hostels and building on the investment made in 2016 in direct booking channels, property management systems and online capabilities

Acquisitions

-- Hostel portfolio transformed with the acquisition during H1 of 7 new European hostels increasing the number of sites from 4 to 11 and number of beds from 1,526 to 2,574 plus 34 apartments

   --     New hostel locations in Paris, Prague, Barcelona x2, Madrid x2 and Lisbon 
   --     5 new operating hostels all performing well and trading ahead of budget 
   --     Madrid apartments to be completed in H1 2018 and the Paris hostel due to open in 2019 

Larry Lipman, Chairman of Safestay, said:

"This has clearly been a transformational period for the business in many ways. I would point to the improvement in performance at our Kensington Holland Park hostel as a key factor for taking real confidence from our trading performance, as it means all four of our UK hostels are trading to plan and we still have significant untapped potential in our Kensington Holland Park and Edinburgh sites. This, together with our plans to expand Elephant & Castle, means the UK base is well placed to develop further.

In addition, the refinancing clearly demonstrated the underlying value within our portfolio and enabled the acquisition of 7 new hostels. It is exciting that those which are operating are performing ahead of plan and we look forward to further integrating them into the Group.

The outlook for the business is extremely positive."

Enquiries

 
 Safestay plc                       +44 (0) 20 8815 1600 
 Larry Lipman 
 
 Canaccord Genuity Limited 
  (Nominated Adviser and Broker)    +44 (0) 20 7523 8000 
 Bruce Garrow 
 Chris Connors 
  Ben Griffiths 
 
 Novella                            +44 (0) 20 3151 7008 
 Tim Robertson 
 Toby Andrews 
 

For more information visit: www.safestay.com

Chairman's statement

Introduction

I am very pleased to present the results for the six months to 30 June 2017 which clearly show the substantial progress that the business has made both in terms of the trading performance and in expanding our network of Safestay hostels from 4 to 11, and into key cities in a total of five countries.

There is a sense of momentum building within the business as the Group refines its practices in all areas of building a portfolio of modern, contemporary hostels. The substantially improved performance of our Kensington Holland Park hostel is perhaps the best example of this. This hostel has increased like-for-like occupancy by 14.3 percentage points although there is still significant opportunity for further growth.

The 5 new operating sites which were acquired during the course of the first six months of 2017 have integrated well and our focus is on completing their rebranding as Safestay hostels and looking to develop the crossover of customers throughout the network. The apartments in Madrid are expected to open in the first half of 2018 and the development of the Paris hostel is expected to complete in 2019.

Financial review

For the period under review, the Group generated a 23% increase in revenues to GBP4.1 million (2016: GBP3.3 million) including a contribution of GBP0.2m from acquisitions. This led to the Group recording a 62% increase in EBITDA to GBP1.3m (2016: GBP0.8m) and a smaller loss before tax of GBP0.4m (2016: loss of GBP0.6m). As a consequence, the Company recorded a loss per share of 1.08p compared with a loss of 1.43p per share in the first half of 2016. The Group generated an underlying profit before tax of GBP0.1m if one-off costs of acquisition (GBP0.1m) and refinancing (GBP0.4m) are eliminated.

During the period, the Group refinanced its borrowings with a new 5-year GBP18.4 million secured bank facility with HSBC which enabled it to repay all previous borrowings including two convertible loans and therefore significantly reducing ongoing interest costs for the remainder of 2017 and beyond.

Net asset value per share remained broadly constant at 57p per share (2016: 58p per share).

Property valuation

In March, the Company completed a geared ground rent financing transaction on the Edinburgh and Elephant & Castle hostels raising gross cash proceeds of GBP12.6 million. Importantly, the Group retains a long-term operational interest in the properties following the sale and leaseback. The two hostels were valued for the refinancing as leaseholds on 14 March 2017 at GBP30.3 million. As a result, the Company has been able to extract GBP12.6 million from the property portfolio without significantly changing the book value of the assets. Net debt increased to GBP39.3m (2016: GBP28.5m).

Operating review

Following a year of consolidation in 2016, the first six months of 2017 delivered significant growth. Excluding the recent acquisitions, Safestay sold 157,984 bed nights compared to 133,444 in the same period in 2016 from its four hostels which combined have 1,526 beds, an increase of 18.4%. Average occupancy was 71.6% compared to 63.7% in the prior year to date demonstrating both the progress made and the scope for further growth. Gross margin improved in large part due to the outsourcing of revenue management which has had a positive impact performance achieved.

Elephant & Castle, the Company's first hostel, has been a consistent performer for the business. Ideally located in the heart of London, this hostel generated revenue of GBP1.3 million (2016: GBP1.3 million) and EBITDA of GBP0.7 million (2016: GBP0.6 million). Demand certainly exceeds supply at regular points during the year and full planning permission and listed building consent has been granted to develop an additional 80 beds over four floors and rework the lower ground floor food and beverage areas. Work is expected to start imminently and take the hostel's total bed count to 493.

The York hostel improved in 2016 and during the first six months of 2017 it continued to build on the progress made. While occupancy is high for all weekends, there still remains further opportunity to increase midweek custom.

Kensington Holland Park hostel with its unique location in the very centre of the park offers accommodation that cannot be matched by many other hostels worldwide. The site opened under the Safestay brand in August 2015 after extensive refurbishment and made a slower than expected start. However, momentum has built as people have become aware of the opportunity to stay in this historic Grade 1 listed building. Revenues from Holland Park increased by 31.3% to GBP0.8 million (2016: GBP0.6 million) and this led to recording EBITDA of GBP0.3 million (2016: GBP0.1 million). The focus is now on continuing this momentum and increasing on current still relatively low levels of occupancy given the potential of the site.

Edinburgh has again performed well, generating revenues of GBP1.4 million (2016: GBP1.2 million) and EBITDA of GBP0.5 million (2016: GBP0.4 million). The balance between offering beds for students during the academic year and then having full capacity available for the lucrative summer period works well and this site has proved to be a very good acquisition for the Group.

Importantly, we have also seen resilience in both London and Barcelona to the recent terror attacks and the impact has, so far, been short term.

Acquisitions

During the period, the Group made the following acquisitions:

-- On 22 May, for EUR3.0m the Group acquired a 228-bed luxury hostel in Madrid, an apartment block adjacent to the hostel in Madrid with 34 apartments currently under refurbishment and a 2,300 sqm building in central Paris with planning for conversion into a 266-bed hostel.

-- On 31 May, for EUR3.6m, the Group acquired a 150-bed hostel in Prague, a 110-bed hostel in Barcelona and a 150-bed hostel in Lisbon. The transaction completed on 29 June.

-- Effective 29 June , for EUR2.0m, the Group completed the acquisition of 144-bed hostel in Barcelona

All seven sites are progressing well and the five that are open are all trading ahead of budget.

Outlook

Since the period end, the Group has enjoyed a good summer with good performances from the new hostels and a strong performance from Edinburgh during August in particular. Importantly, the UK-based hostels have continued the trading momentum from H1 into H2.

The combination of all this means the Company is well placed to achieve a good result for the year as a whole.

Larry Lipman

Chairman

22 September 2017

 
 Condensed consolidated income 
  statement                                      Unaudited     Unaudited        Audited 
                                                  6 months      6 months        Year to 
                                                to 30 June    to 30 June    31 December 
                                                      2017          2016           2016 
                                        Note        GBP000        GBP000         GBP000 
                                              ------------  ------------  ------------- 
 
 Revenue 6                                           4,058         3,288          7,411 
 Cost of sales                                       (513)         (413)        (1,022) 
 Gross profit                                        3,545         2,875          6,389 
 Administrative expenses                           (2,769)       (2,685)        (5,242) 
                                              ------------  ------------  ------------- 
 Operating profit before exceptional 
  expenses                                             776           190          1,147 
  EBIT 
-------------------------------------  -----  ------------  ------------  ------------- 
 EBITDA*                                             1,268           783          2,188 
 Depreciation and amortisation                       (492)         (593)        (1,041) 
                                              ------------  ------------  ------------- 
 Operating profit                                      776           190          1,147 
-------------------------------------  -----  ------------  ------------  ------------- 
 
 Exceptional expenses                      3         (100)             -          (152) 
                                              ------------  ------------  ------------- 
 Operating profit after exceptional 
  expenses                                             676           190            995 
 
 Finance costs                                     (1,046)         (789)        (1,463) 
 Loss before tax                                     (370)         (599)          (468) 
 Tax                                                     -           107           (43) 
                                              ------------  ------------  ------------- 
 Loss for the financial period 
  attributable to owners of the 
  parent company                                     (370)         (492)          (511) 
                                              ============  ============  ============= 
 
 Basic loss per share in pence             2       (1.08p)       (1.43p)        (1.49p) 
 Diluted loss per share in pence           2       (1.08p)       (1.43p)        (1.49p) 
 

The revenue and operating result for each period is derived from acquired and continuing operations as follows:

 
                      GBP000   GBP000   GBP000 
                     -------  -------  ------- 
 Revenue 
 United Kingdom        3,868    3,288    7,411 
 Other Europe            190        -        - 
                     -------  -------  ------- 
                       4,058    3,288    7,411 
                     -------  -------  ------- 
 Operating profit 
 United Kingdom          651      190      995 
 Other Europe             25        -        - 
                     -------  -------  ------- 
                         676      190      995 
                     -------  -------  ------- 
 

* Earnings before exceptional items, interest, tax, depreciation and amortisation

 
 Condensed consolidated statement 
  of comprehensive income                  Unaudited      Unaudited        Audited 
                                            6 months       6 months        Year to 
                                          to 30 June     to 30 June    31 December 
                                                2017           2016           2016 
                                              GBP000         GBP000         GBP000 
                                       -------------  -------------  ------------- 
 
 Loss for the period                           (370)          (492)          (511) 
 Other comprehensive income 
 Items that will not be reclassified 
  to profit and loss: 
 Revaluation of freehold land and 
  buildings                                        -          3,876          3,860 
                                       -------------  -------------  ------------- 
 Total comprehensive income for the 
  period attributable to owners of 
  the parent company                           (370)          3,384          3,349 
                                       =============  =============  ============= 
 
 
 Condensed consolidated statement 
  of 
  financial position                           Unaudited   Unaudited       Audited 
                                                 30 June     30 June   31 December 
                                                    2017        2016          2016 
                                        Note      GBP000      GBP000        GBP000 
                                              ----------  ----------  ------------ 
 Non-current assets 
 Property, plant and equipment             5      46,381      45,959        45,771 
 Intangible assets                         6       8,492       1,282         1,212 
 Goodwill                                            525         525           525 
 Deferred tax                                          -         209             - 
                                              ----------  ----------  ------------ 
 Total non-current assets                         55,398      47,975        47,508 
                                              ----------  ----------  ------------ 
 
 Current assets 
 Stock                                                97          94            23 
 Trade and other receivables                         854         932           491 
 Derivative financial instruments                      9          13            13 
 Cash and cash equivalents                         4,195       1,398           737 
 Total current assets                              5,155       2,437         1,264 
                                              ----------  ----------  ------------ 
 
 Total assets                                     60,553      50,412        48,772 
 
 Current liabilities 
 Borrowings                                7         100         689         3,489 
 Finance lease obligations                 8          36          32            34 
 Trade and other payables                          1,697       1,929         1,261 
 Derivative financial instruments                      -           -            45 
 Total current liabilities                         1,833       2,650         4,829 
                                              ----------  ----------  ------------ 
 
 Non-current liabilities 
 Borrowings                                7      28,982      17,467        13,906 
 Finance lease obligations                 8      10,222      10,283        10,195 
 Deferred tax                                          -         102             5 
 Derivative financial instruments                     33          60             - 
                                              ----------  ----------  ------------ 
 Total non-current liabilities                    39,237      27,912        24,106 
                                              ----------  ----------  ------------ 
 
 Total liabilities                                41,070      30,562        28,935 
                                              ----------  ----------  ------------ 
 
 Net assets                                       19,483      19,850        19,837 
                                              ----------  ----------  ------------ 
 
 Equity 
                                          10 
 Share capital                            10         342         342           342 
 Share premium account                            14,504      14,504        14,504 
 Merger reserve                                    1,772       1,772         1,772 
 Share-based payment reserve                          73          35            57 
 Revaluation reserve                               4,218       4,234         4,218 
 Retained earnings                               (1,426)     (1,037)       (1,056) 
                                              ----------  ----------  ------------ 
 Total equity attributable to owners 
  of the parent company                           19,483      19,850        19,837 
                                              ==========  ==========  ============ 
 

Condensed consolidated statement of changes in equity

For the six months to 30 June 2017 (unaudited)

 
                          Share     Share    Merger  Share-based  Revaluation   Retained    Total 
                        capital   premium   reserve      payment      reserve   earnings   equity 
                         GBP000   account    GBP000      reserve       GBP000     GBP000   GBP000 
                                   GBP000                 GBP000 
                       --------  --------  --------  -----------  -----------  ---------  ------- 
Balance at 1 January 
 2017                       342    14,504     1,772           57        4,218    (1,056)   19,837 
                            342    14,504     1,772           57        4,218    (1,056)   19,837 
Comprehensive income 
Loss for the period           -         -         -            -            -      (370)    (370) 
Other comprehensive           -         -         -            -            -          -        - 
 income 
                       --------  --------  --------  -----------  -----------  ---------  ------- 
Total comprehensive 
 income                       -         -         -            -            -      (370)    (370) 
                       --------  --------  --------  -----------  -----------  ---------  ------- 
 
Transactions with 
 owners 
Share-based payment 
 charge for the 
 period                       -         -         -           16            -          -       16 
                       --------  --------  --------  -----------  -----------  ---------  ------- 
Balance at 30 June 
 2017                       342    14,504     1,772           73        4,218    (1,426)   19,483 
                       ========  ========  ========  ===========  ===========  =========  ======= 
 

For the six months to 30 June 2016 (unaudited)

 
                          Share     Share    Merger  Share-based  Revaluation   Retained    Total 
                        capital   premium   reserve      payment      reserve   earnings   equity 
                         GBP000   account    GBP000      reserve       GBP000     GBP000   GBP000 
                                   GBP000                 GBP000 
                       --------  --------  --------  -----------  -----------  ---------  ------- 
Balance at 1 January 
 2016                       342    14,504     1,772           23          358      (545)   16,454 
                            342    14,504     1,772           57        4,218    (1,056)   19,837 
Comprehensive income 
Loss for the period           -         -         -            -            -      (492)    (492) 
Other comprehensive 
 income                       -         -         -            -        3,876          -    3,876 
                       --------  --------  --------  -----------  -----------  ---------  ------- 
Total comprehensive 
 income                       -         -         -            -        3,876      (492)    3,384 
                       --------  --------  --------  -----------  -----------  ---------  ------- 
 
Transactions with 
 owners 
Share-based payment 
 charge for the 
 period                       -         -         -           12            -          -       12 
                       --------  --------  --------  -----------  -----------  ---------  ------- 
Balance at 30 June 
 2016                       342    14,504     1,772           35        4,234    (1,037)   19,850 
                       ========  ========  ========  ===========  ===========  =========  ======= 
 

For the year ended 31 December 2016 (audited)

 
                            Share     Share    Merger  Share-based  Revaluation   Retained     Total 
                          Capital   premium   Reserve      payment      Reserve   earnings    equity 
                          GBP'000   account   GBP'000      reserve      GBP'000    GBP'000   GBP'000 
                                    GBP'000                GBP'000 
                         --------  --------  --------  -----------  -----------  ---------  -------- 
Balance at 1 January 
 2016                         342    14,504     1,772           23          358      (545)    16,454 
Comprehensive income 
Loss for the year               -         -         -            -            -      (511)     (511) 
Other comprehensive 
 income                         -         -         -            -        3,860          -     3,860 
                         --------  --------  --------  -----------  -----------  ---------  -------- 
Total comprehensive 
 income                         -         -         -            -        3,860      (511)     3,349 
                         --------  --------  --------  -----------  -----------  ---------  -------- 
 
Transactions with 
 owners 
Share-based payment 
 charge for the 
 year                           -         -         -           34            -          -        34 
                         --------  --------  --------  -----------  -----------  ---------  -------- 
Balance at 31 December 
 2016                         342    14,504     1,772           57        4,218    (1,056)    19,837 
                         ========  ========  ========  ===========  ===========  =========  ======== 
 
 
 Condensed consolidated statement 
  of cash flows                                     Unaudited     Unaudited        Audited 
                                           Note      6 months      6 months        Year to 
                                                   to 30 June    to 30 June    31 December 
                                                         2017          2016           2016 
                                                       GBP000        GBP000         GBP000 
                                                 ------------  ------------  ------------- 
 
 Operating activities 
 Cash generated from operations              12           851         1,544          2,308 
                                                 ------------  ------------  ------------- 
 Net cash generated from operating 
  activities                                              851         1,544          2,308 
                                                 ------------  ------------  ------------- 
 
 Investing activities 
 Purchase of property, plant and 
  equipment                                           (1,032)         (279)          (484) 
 Purchase of intangible assets                        (7,350)             -              - 
                                                 ------------  ------------  ------------- 
 Net cash outflow from investing 
  activities                                          (8,382)         (279)          (484) 
                                                 ------------  ------------  ------------- 
 
 Cash flows from financing activities 
 Proceeds from borrowings                              29,445             -          (660) 
 Repayment of borrowings                             (17,600)         (523)          (755) 
 Interest paid                                          (856)         (404)          (732) 
                                                 ------------  ------------  ------------- 
                                                       10,989         (927)        (2,147) 
                                                 ------------  ------------  ------------- 
 
 Cash and cash equivalents at beginning 
  of period                                               737         1,060          1,060 
 Net increase/(decrease) in cash 
  and cash equivalents                                  3,458           338          (323) 
                                                 ------------  ------------  ------------- 
 Cash and cash equivalents at end 
  of period                                             4,195         1,398            737 
                                                 ============  ============  ============= 
 
 
   1.    Basis of preparation and principal accounting policies 

The condensed interim consolidated financial statements of the Company and its subsidiaries ("the Group") for the six months to 30 June 2017 ("the period") have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted by the European Union. The financial information presented above does not constitute statutory financial statements as defined by section 435 of the Companies Act 2006.

Copies of this announcement are available from the Company's registered office at 1a Kingsley Way, London N2 0FW and on its website, www.safestay.com.

These condensed interim financial statements have not been audited, do not include all of 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 2016. While the financial figures included within this interim report have been computed in accordance with IFRS applicable to interim periods, this report does not contain sufficient information to constitute an interim financial report as set out in International Accounting Standard 34 Interim Financial Reporting.

Revenue

Revenue is stated net of VAT and comprises revenues from overnight hostel accommodation, income from the rental of student accommodation during the academic year and the sale of ancillary goods and services. Accommodation and the sale of ancillary goods and services is recognised when provided. Income from the rent of student accommodation is recognised on a straight-line basis over the academic year to which the rent relates.

The sale of ancillary goods comprises sales of food, beverages and merchandise.

Deferred income comprises deposits received from customers to guarantee future bookings of accommodation. This is recognised as revenue once the bed has been occupied.

Leases

The Group as lessor:

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

The Group as lessee:

Assets held under finance leases are recognised as assets of the Group at the present value of the lease payments at the inception of the lease. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.

Lease payments are apportioned between finance expenses and reduction in lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance expenses are recognised immediately in the profit and loss account.

All other leases are classified as operating leases. Operating leases are recognised in the income statement on a straight-line basis over the life of the lease.

Property, plant and equipment

Freehold property is stated at fair value and revalued annually. Valuation surpluses and deficits arising in the period are included in other comprehensive income. Fixtures, fittings and equipment are stated at cost less depreciation and are depreciated over their estimated useful lives. The applicable estimated useful lives are as follows:

   Fixtures, fittings and equipment              3 years 
   Freehold properties                                       50 years 
   Leasehold properties                                    50 years 

Assets held as finance leases are depreciated over the shorter of the lease term and their expected useful lives on the same basis as owned assets.

Intangible assets

Intangible assets are initially recognised and measured at fair market value.

Where an intangible asset has a determinable finite useful life, the intangible asset is amortised on a straight-line basis over that useful life. Where the intangible asset is closely associated with a lease of premises, the related intangible asset is amortised over the remaining life of the associated lease, also taking into account any renewal options in respect of the associated lease where the Group intends to exercise its right to renew the associated lease.

Borrowings

Borrowings other than bank overdrafts are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in the income statement over the period of the borrowings, using the effective interest method.

Financial instruments issued by the Group comprise convertible loan notes that can either be repaid in cash, or be converted to a fixed number of shares at the option of the loan note holder. These financial instruments are recognised in liabilities.

Loan notes with no option to be converted to share capital and that will be repaid in cash are recognised in liabilities.

Loan arrangement fees

Loan arrangement fees are amortised over the term of the loan to which they relate.

Exceptional items

The Group separately discloses on the face of the Income Statement items of income or expense which are material and their nature and amount would, without separate disclosure, distort the reporting of the underlying business.

 
 2. Loss per share                           Unaudited     Unaudited        Audited 
                                              6 months      6 months        Year to 
                                            to 30 June    to 30 June    31 December 
                                                  2017          2016           2016 
                                                GBP000        GBP000         GBP000 
                                          ------------  ------------  ------------- 
 
 Loss for the period attributable 
  to equity holders of the company               (370)         (492)          (511) 
                                          ============  ============  ============= 
 
                                                Number        Number         Number 
                                                  '000          '000           '000 
 Weighted average number of ordinary 
  shares for the purposes of basic 
  loss per share                                34,219        34,219         34,219 
 Effect of dilutive potential ordinary 
  shares                                            36         7,488          2,264 
                                          ------------  ------------  ------------- 
 Weighted average number of ordinary 
  shares for the purposes of diluted 
  loss per share ('000s)                        34,255        41,707         36,483 
                                          ------------  ------------  ------------- 
 Basicloss per share                           (1.08p)       (1.43p)        (1.49p) 
                                          ------------  ------------  ------------- 
 Diluted loss per share                        (1.08p)       (1.43p)        (1.49p) 
                                          ------------  ------------  ------------- 
 
 
 3. Exceptional expenses 
 
 The following costs are separately disclosed on the Condensed 
  Consolidated Income Statement as exceptional and outside the 
  underlying trading of the hostels: 
                                        Unaudited     Unaudited        Audited 
                                         6 months      6 months        Year to 
                                       to 30 June    to 30 June    31 December 
                                             2017          2016           2016 
                                           GBP000        GBP000         GBP000 
                                     ------------  ------------  ------------- 
 Administration costs relating to 
  the unsuccessful acquisition of 
  a property in Dublin                          -             -            152 
 Administration costs relating to 
  the acquisition of businesses               100             -              - 
                                     ------------  ------------  ------------- 
                                              100             -            152 
                                     ------------  ------------  ------------- 
 
 
      4. Dividend 
 
 No interim dividend has been declared in the period (30 June 
  2016: nil, 31 December 2016: nil). No dividends have been paid 
  in the period. 
 
 
      5. Property, plant and equipment 
 
    For the period from 1 January 2017 to 30 June 2017 (unaudited) 
                                            Freehold    Leasehold        Fixtures, 
                                            land and     land and         fittings 
                                           buildings    buildings    and equipment    Total 
                                              GBP000       GBP000           GBP000   GBP000 
                                         -----------  -----------  ---------------  ------- 
    Cost or valuation 
    At 1 January 2017                         32,460       13,122            1,253   46,835 
    Additions                                     18          709               58      785 
    Acquired in business combination               -            -              247      247 
    Transfer                                (29,777)       29,777                -        - 
    At 30 June 2017                            2,701       43,608            1,558   47,867 
                                         -----------  -----------  ---------------  ------- 
 
    Depreciation 
    At 1 January 2017                            153          333              578    1,064 
    Charge for the period                         68          159              195      422 
    Transfer                                   (178)          178                -        - 
    At 30 June 2017                               43          670              773    1,486 
                                         -----------  -----------  ---------------  ------- 
 
    Net book value 
    30 June 2017                               2,658       42,938              785   46,381 
                                         -----------  -----------  ---------------  ------- 
 
 
    For the period from 1 January 2016 to 30 June 2016 (unaudited) 
                               Freehold    Leasehold        Fixtures, 
                               land and     land and         fittings 
                              buildings    buildings    and equipment    Total 
                                 GBP000       GBP000           GBP000   GBP000 
                            -----------  -----------  ---------------  ------- 
    Cost or valuation 
    At 1 January 2016            28,764       12,793            1,055   42,612 
    Additions                       128            -              151      279 
    Revaluations                  3,740            -                -    3,740 
                            -----------  -----------  ---------------  ------- 
    At 30 June 2016              32,632       12,793            1,206   46,631 
                            -----------  -----------  ---------------  ------- 
 
    Depreciation 
    At 1 January 2016                 -           71              215      286 
    Charge for the period           141          126              255      522 
    Revaluations                  (136)            -                -    (136) 
                            -----------  -----------  ---------------  ------- 
    At 30 June 2016                   5          197              470      672 
                            -----------  -----------  ---------------  ------- 
 
    Net book value 
    30 June 2016                 32,627       12,596              736   45,959 
                            ===========  ===========  ===============  ======= 
 
 
 
 
    For the period from 1 January 2016 to 31 December 2016 (audited) 
                               Freehold    Leasehold        Fixtures, 
                               land and     land and         fittings 
                              buildings    buildings    and equipment    Total 
                                 GBP000       GBP000           GBP000   GBP000 
                            -----------  -----------  ---------------  ------- 
    Cost or valuation 
    At 1 January 2016            28,764       12,793            1,055   42,612 
    Transfer                      (267)          267                -        - 
    Additions                       224           62              198      484 
    Revaluation                   3,739            -                -    3,739 
                            -----------  -----------  ---------------  ------- 
    At 31 December 2016          32,460       13,122            1,253   46,835 
                            -----------  -----------  ---------------  ------- 
 
    Depreciation 
    At 1 January 2016                 -           71              214      285 
    Charge for the period           275          262              364      901 
    Revaluation                   (122)            -                -    (122) 
                            -----------  -----------  ---------------  ------- 
    At 31 December 2016             153          333              578    1,064 
                            -----------  -----------  ---------------  ------- 
 
    Net book value 
    At 31 December 2016          32,307       12,789              675   45,771 
                            ===========  ===========  ===============  ======= 
 

At 30 June 2017, the carrying value of the Group's freehold and leasehold property including fixtures and fittings was GBP46,835,000 (30 June 2016: GBP45,959,000, 31 December 2016: GBP45,771,000).

The directors based their valuation of the freehold properties using external valuations as at 14 March 2017 prepared by Cushman and Wakefield on behalf of HSBC (the Group's bankers) as part of the security for the Group's bank financing.

Leasehold land and buildings additions comprise the capitalised finance lease plus refurbishment costs incurred on the Holland Park hostel and the Group properties transferred from freehold land and buildings following the finance transactions in respect of its hostels in Edinburgh and Elephant & Castle which completed on 31 March 2017.

The newly-created leaseholds for both properties were also independently valued on 14 March 2017 at GBP30.3 million by Cushman and Wakefield on behalf of HSBC (the Group's bankers). The Group has accounted for the finance transactions as interest-bearing borrowings secured on the original properties held. There were no recognised gains or losses arising in respect of these transactions.

 
      6. Intangible assets              Unaudited     Unaudited        Audited 
                                         6 months      6 months        Year to 
                                       to 30 June    to 30 June    31 December 
                                             2017          2016           2016 
                                           GBP000        GBP000         GBP000 
                                     ------------  ------------  ------------- 
 Cost 
 At beginning of period                     1,400         1,400      1,400 
 Acquired in business combination           7,350             -              - 
  (note 9) 
                                     ------------  ------------  ------------- 
 At end of period                           8,750         1,400          1,400 
                                     ------------  ------------  ------------- 
 
 Amortisation 
 At beginning of period                       188            48             48 
 Charge for the period                         70            70            140 
                                     ------------  ------------  ------------- 
 At end of period                             258           118            188 
                                     ------------  ------------  ------------- 
 
 Net book value 
 At end of period                           8,492         1,282          1,212 
                                     ============  ============  ============= 
 

Intangible assets comprise a lease with the University of Edinburgh at a cost of GBP1,400,000 less amortisation of GBP258,000, together with 'right-of-use' leased assets following the acquisition of U Hostels on 22 May 2017, provisionally valued at GBP2,573,000, and leased properties following the acquisition of four sites from Equity Point on 29 June 2017, provisionally valued at GBP4,777,000. See also note 9.

 
      7. Borrowings                  Unaudited   Unaudited       Audited 
                                       30 June     30 June   31 December 
                                          2017        2016          2016 
                                        GBP000      GBP000        GBP000 
                                    ----------  ----------  ------------ 
 At amortised cost 
 Bank loans                             18,400      14,586        13,794 
 Convertible loan notes                      -       3,800         3,800 
 Lease obligations                      11,420           -             - 
                                        29,820      18,386        17,594 
 Unamortised borrowing costs             (738)       (230)         (199) 
                                    ----------  ----------  ------------ 
                                        29,082      18,156        17,395 
                                    ----------  ----------  ------------ 
 
 Loans repayable within one year           100         689         3,489 
 Loans repayable after more than 
  one year                              28,982      17,467        13,906 
                                    ----------  ----------  ------------ 
                                        29,082      18,156        17,395 
                                    ----------  ----------  ------------ 
 

The repayment profiles of the loans as at 30 June 2017, 30 June 2016 and 31 December 2016 were as follows:

 
 For the period ended 30 June 2017 (unaudited) 
                                Lease obligations   Bank loans    Total 
                                           GBP000       GBP000   GBP000 
                               ------------------  -----------  ------- 
 Due within one year                           10           90      100 
 Between one and two years                     10          270      280 
 Between two and five years                    35       18,040   18,075 
 After more than five years                11,365            -   11,365 
                               ------------------  -----------  ------- 
 Balance at 30 June 2017                   11,420       18,400   29,820 
                               ------------------  -----------  ------- 
 
 
 For the period ended 30 June 2016 (unaudited) 
                                Convertible 
                                 loan notes   Bank loans    Total 
                                     GBP000       GBP000   GBP000 
                               ------------  -----------  ------- 
 Due within one year                  2,800          755    3,555 
 Between one and two years            1,000          755    1,755 
 Between two and five years               -       13,076   13,076 
 After more than five years               -            -        - 
                               ------------  -----------  ------- 
 Balance at 30 June 2015              3,800       14,586   18,386 
                               ------------  -----------  ------- 
 
 
 For the year ended 31 December 2016 (audited) 
                                Convertible 
                                 loan notes   Bank loans    Total 
                                     GBP000       GBP000   GBP000 
                               ------------  -----------  ------- 
 Due within one year                  2,800          755    3,555 
 Between one and two years            1,000          755    1,755 
 Between two and five years               -       12,284   12,284 
 After more than five years               -            -        - 
                               ------------  -----------  ------- 
 Balance at 30 June 2015              3,800       13,794   17,594 
                               ------------  -----------  ------- 
 

On 31 March 2017, the Group completed an GBP18.4 million refinancing, replacing the previous convertible and bank debt with a single banking facility with HSBC. The facility has a five-year term, variable interest payable based on LIBOR and is in pounds sterling. The HSBC facility is secured by fixed and floating charges over the assets of the Group in favour of HSBC Bank plc.

On 17 May 2017, the Group received GBP11.42 million before expenses in relation to the sale and leaseback of the Elephant & Castle and Edinburgh properties where the titles of the freehold premises were sold and long-term operating leases based upon the ground rents were entered into, with the Group holding options to reacquire the freeholds with 25 years. The transactions have been accounted for as secured debt transactions. As disclosed in note 5, these freehold assets have been reclassified as long-leasehold properties. The expenses of the transaction are being amortised over 25 years.

 
      8. Obligations under finance 
       leases                          Unaudited   Unaudited       Audited 
                                         30 June     30 June   31 December 
                                            2017        2016          2016 
                                          GBP000      GBP000        GBP000 
                                      ----------  ----------  ------------ 
 Amounts payable under finance 
  leases: 
 Within one year                              36          32            34 
 In the second to fifth years 
  inclusive                                  168         169           157 
 After five years                         10,054      10,114        10,038 
                                      ----------  ----------  ------------ 
 Present value of future lease 
  obligations                             10,258      10,315        10,229 
                                      ==========  ==========  ============ 
 

The Group has treated the Holland Park lease as a finance lease on the basis that the present value of the lease payments constitutes the substantial part of a theoretical freehold valuation. The average effective borrowing rate was 6.55%. The lease is on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.

 
      9. Business combinations (unaudited) 
 

Two businesses were acquired in the six-month period ended 30 June 2017.

The first of these was U Hostels Albergues Juveniles, S. L. ("U Hostels")

On 22 May 2017 the Group completed the acquisition of U Hostels for a total cash consideration of GBP2.9 million (EUR3.0 million before working capital adjustment).

The U Hostels portfolio includes three leasehold properties:

-- 228-bed luxury hostel located in the heart of Madrid, operating since 2013 under the U Hostels brand with a 15-year lease.

-- An apartment block situated next to the Madrid hostel. This block is made up of 14 one-bedroom and 20 two-bedroom apartments which are currently being renovated and will open in the first half of 2018. The apartments will be managed by the hostel management team.

-- A 2,300 sqm building in Montmartre, Paris with planning for conversion into a 266-bed hostel. The building is ideally located to become a Safestay hostel and has a 12+12 year lease effective from the opening of the hostel. The landlord will be investing alongside Safestay in the redevelopment of this site, expected to commence this year and open in 2019. Safestay's contribution to this redevelopment is capped at EUR2.3 million (approximately GBP2 million), which will be funded from existing cash resources.

The acquisition has been accounted for by the purchase method of accounting and the results of U Hostels are consolidated within the Group financial statements from 22 May 2017. The fair-values of the acquisition are still being evaluated although provisional fair-values of the U Hostels included for the purposes of the half-year results are set out below.

 
 Unaudited and provisional               Fair-values 
                                              GBP000 
 Non-current assets 
 Intangible assets 
 Right of use of leasehold properties          2,573 
 Tangible assets 
 Property plant and equipment                    116 
 
 Net current assets                              207 
 
 Fair-value of businesses acquired             2,896 
                                        ============ 
 

The costs of the acquisition have been expensed in the period (note 3).

The acquired businesses contributed revenues of GBP190,000 and operating profit of GBP25,000 for the period 22 May 2017 to 30 June 2017 which have been recognised in the results to 30 June 2017.

The second business acquired was Equity Point Hostels ("Equity Point")

On 29 June 2017, the Group completed the acquisition of four leasehold sites from Equity Point for a total cash consideration of GBP4.9 million (EUR5.6 million). The acquisition was in two tranches finally completing on 29 June 2017. The locations acquired are located in Lisbon, Prague and Barcelona.

The acquisition has been accounted for by the purchase method of accounting and the results of Equity Point are consolidated within the Group financial statements from 29 June 2017. The fair-values of the acquisition are still being evaluated although provisional fair-values of the Equity Point assets included for the purposes of the half-year results are set out below.

 
 Unaudited and provisional               Fair-values 
                                              GBP000 
 
 Non-current assets 
 Intangible assets 
 Right of use of leasehold properties          4,777 
 Tangible assets 
 Property plant and equipment                    131 
 
 Net current liabilities                        (22) 
 
 Fair-value of businesses acquired             4,886 
                                        ============ 
 

The costs of the acquisition have been expensed in the period (note 3).

No contribution has been recognised in the results to 30 June 2017.

 
      10. Share capital              Unaudited   Unaudited       Audited 
                                       30 June     30 June   31 December 
                                          2017        2016          2016 
                                        GBP000      GBP000        GBP000 
                                    ----------  ----------  ------------ 
 Allotted, issued and fully paid 
 34,219,135 Ordinary Shares of 
  1p each (34,219,135, 30 June 
  2016 and 31 December 2016)               342         342           342 
                                    ----------  ----------  ------------ 
 

At 30 June 2017, the Ordinary Shares rank pari passu. There have been no changes to the voting rights of the ordinary shares since 31 December 2016.

 
      11. Post-balance sheet events 
 
 On 14 July 2017, the Group granted the following nil cost options 
  under the Group's existing share option scheme exercisable at 
  60 pence per share after a period of three years from grant to 
  Persons Discharging Managerial Responsibility ("PDMRs") as listed 
  below. 
  - Larry Lipman (Chairman) - 250,000 Ordinary Shares 
  - Nuno Sacramento (Chief Operating Officer) - 500,000 Ordinary 
  Shares 
 
 
      12. 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 
                                                     2017          2016           2016 
                                                   GBP000        GBP000         GBP000 
                                             ------------  ------------  ------------- 
 
 Loss before tax                                    (370)         (599)          (468) 
 Adjustments for: 
  Depreciation 
 Depreciation of tangible assets                      422           523            901 
 Amortisation of intangible assets                     70            70            140 
 Finance costs                                      1,046           789          1,361 
 Share-based payments                                  17            12             34 
 
 Changes in working capital 
 Stock                                               (74)          (76)            (4) 
 Trade and other receivables                        (363)         (339)            205 
 Trade and other payables                             103         1,164            139 
                                             ------------  ------------  ------------- 
 Cash generated from operating activities             851         1,544          2,308 
                                             ------------  ------------  ------------- 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

IR PGUWWBUPMGRP

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September 25, 2017 02:00 ET (06:00 GMT)

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