Regulatory Story
Go to market news section View chart   Print
RNS
Action Hotels PLC  -  AHCG   

Audited Results for the year ended 31 December 16

Released 07:00 02-May-2017

RNS Number : 8455D
Action Hotels PLC
02 May 2017
 

This announcement contains inside information

 

Action Hotels PLC

("Action Hotels" with its subsidiaries the "Group") 

 

Audited Results for the year ended 31 December 2016

and Notice of Annual General Meeting

 

Action Hotels plc, a leading owner, developer and asset manager of three and four-star hotels in the Middle East and Australia, is pleased to announce its final results for the year ended 31 December 2016. 

 

All currency amounts are in US million $ unless otherwise stated.

 

2016 Key Highlights and Financial Overview

·     Opening and operation of three new hotels in three countries, taking total operational room count at year end to 2,181, a 40% increase from last year (2015: 1,561 operational rooms) and an increase of 117% since IPO.

·     Year-on-year growth in key financial performance indicators - Revenue (up 22%) and adjusted EBITDA (up 16%)

·     Net Asset Value (NAV) remained stable at $195m (2015: $196m), Net Asset Value per share USD 1.40/GBP 1.09 (2015: USD 1.40/GBP 0.95)

·     Total reported revenue increased by 22% to $53.1m (2015: $43.5m)

·     Adjusted EBITDA1 increased by 16% to $18.5m (2015: $16m)

·     Net loss before tax of $6.3m (2015: PBT of $2.9m), primarily driven by impact of pre-opening,  financing costs and depreciation of new hotels

·     LTV of 51%  (2015: 49%)

·     Final dividend increase of 2.0% to GBP 1.50 pence per share, bringing the total dividend for the year to GBP 2.26 pence per share (2015: GBP 2.21 pence per share), a yield (as at 1 May 2017) of 6.1%

 

2016 Operational Highlights

·     Average EBITDA breakeven occupancy levels across the portfolio remained low at 37% (2015: 35%)

·     Opening of three new hotels, ibis Styles Brisbane Elizabeth Street, Tulip Inn Ras Al Khaimah and Mercure Sohar increased the number of operational rooms by 40% to 2,181 (2015: 1,561).

 

2017 Current Trading

·     Trading in Q1 2017 is solid with total revenue up c.14% over the same period as last year.

·     Stable performances continue from our mature operating hotels2, with average occupancy in line with last year 76% (Q1 2016: 77%).

 

 Commenting on the results, Alain Debare, Chief Executive Officer, Action Hotels said:

 

"We remain focused on driving performance at our operating hotels and our full year results reflect the solid performance of our mature2 hotel portfolio, as well as the encouraging success of our newest hotels as they gain traction in their respective markets. 

 

We have a solid pipeline of hotels in development with the Company's current expectation of 17 operating hotels by 2019."

 

The Annual Report will be posted to shareholders and made available on the Company's website, http://www.actionhotels.com/ at a later date and will contain a notice of the Company's Annual General Meeting, which will be held on 13 June 2017 in London, UK.

 

1 Adjusted EBITDA has been defined as operating profit before depreciation, amortisation, restructuring and listing costs, gains and losses arising from the disposal of property, plant and equipment, pre-opening costs and other non-recurring expenses.

 

2 Mature hotels consist of: Glen Waverley, Kuwait (two), Jordan, ibis Budget Melbourne Airport (acquired as an already operational hotel)  and Oman (ibis and Holiday Inn).

 

 

For more information contact:

 

Action Hotels PLC

 

Tel: +44 (0) 20 7907 9663

Alain Debare, Chief Executive Officer

 

Katie Shelton, Director of Corporate Affairs

 

 

Zeus Capital Limited (Nomad & Broker)

Tel: +44 (0) 161 831 1512

Dan Bate/Andrew Jones

Victoria Ayton 

Tel: +44 (0) 203 829 5000

 

Camarco (Press enquiries)

Tel: +44 (0) 20 3757 4994

Jennifer Renwick/Tom Huddart

 

 

 

 

Chairman's Statement 

 

I am pleased to report another year of encouraging growth at Action Hotels. As one of the first movers focused exclusively on the development and operations of three and four star hotels in prime locations across the Middle East and Australia, we maintain a dominant position in the sector.

 

Our strategy of developing and asset managing high quality, value for money, economy and midscale hotels, located in five star locations, operated by world leading hotel brands, continues to deliver results as the demand for this type of hotel accommodation materially exceeds supply.

 

With the Middle East region experiencing some macro-economic and political headwinds, we have incurred some delays in the opening of new hotels, resulting in slower growth than we anticipated. This in turn will have a knock on effect to the speed at which we are able to fully implement our strategy.   Despite these market challenges, we have seen year-on-year growth across our key metrics, revenue and EBITDA, which increased by 22% and 16% respectively on the previous year.

 

We remain committed to building upon our existing high quality hotel portfolio and pipeline, with a clear focus on active asset management and working closely with our internationally branded operators to maximise the performance of our hotels, in addition to the delivery of the announced development pipeline on time and on budget.

 

Employees

The performance and dedication of Action Hotel's employees across the six countries in which we operate impressed me again this year. I thank you all very much for your hard work and commitment during 2016 and look forward to working with you to deliver further growth in 2017.

 

In June 2016, the senior management team welcomed Andrew Lindley as Finance Director. Andrew is a Chartered Management Accountant with 20 years' experience with international companies in the UK, Middle East and Africa, and wide-ranging financial expertise across various industries.

 

Dividend

With the mature portfolio continuing to deliver stable performance and a solid commercial foundation, we are delighted to announce that the board is proposing a final dividend of GBP 1.50 pence per share for 2016, resulting in a full year dividend of GBP 2.26 pence per share (2015: GBP 2.21 pence per share). This dividend reflects the solid profits from our mature hotels and our confidence in the longer-term outlook for the business. The Board are confident of maintaining a progressive dividend policy and look forward to confirming the interim dividend for 2017 at the publication of the 2017 interim results.

 

Outlook

Whilst travel and tourism has been adversely impacted by global economic and political uncertainties, our investment strategy of focusing exclusively on the economy and midscale hotel sector in key gateway locations is delivering resilient returns and also presenting opportunities as increasing numbers of business travellers are becoming more budget-conscious and staying in economy and midscale hotels rather than luxury equivalents.

 

 

Sheikh Mubarak A M Al Sabah

Chairman
 

Chief Executive Officer's review

 

2016 was another busy year for Action Hotels in which significant milestones were achieved.  Our mature estate of hotels has delivered a robust performance and we continue to progress our development pipeline, which saw the opening of three new hotels during the year, taking our total number of operational hotels to 12.

 

Reported total revenue grew by 22% to USD 53.1 million (2015: USD 43.5 million) and EBITDA increased by 16% to USD 18.5 million (2015: USD 16 million). This growth was driven mainly by the contribution from new hotel openings (+620 new rooms) and continued stable performance at our existing operating hotels. Although this growth was lower than anticipated, it still represents real progress over the prior year and demonstrates the effectiveness of the Group's business model.

 

As we are continuing to grow the business and execute our development plans,  the business is still in its development phase.  Whilst we are seeing material year-on-year growth in revenue and EBITDA, our net profit position is impacted by the start-up costs of new hotels with pre-opening expenses, the impact of depreciation and increasing financing costs. Reported loss before tax was USD 5.9 million (2015: profit before tax USD 2.8 million). Reporting a net loss is to be expected during our development years, as we fulfil our pipeline. Until that time, our focus is on ensuring the continued performance of our operating hotels and the more relevant measures of delivering growth in revenue and EBITDA. Total assets increased by 14% to USD 480m from the delivery of the new hotels, the associated development uplift and revaluations from the existing operational hotels, resulting in Net Asset Value (NAV) for 2016 of USD 194.8m (2015 USD 195.9m).

 

Operational Performance - Continued Growth

Despite challenging market conditions across the Middle East as a result of global macro-economic and political uncertainty, we delivered solid performances across our trading hotels, underpinning the resilience of our focused strategy on the economy and mid-market hotel sectors.

 

Reported RevPAR decreased to USD 61.5 (2015: USD 71.1), a result of the introduction of the new hotels into the portfolio and pricing strategy to maintain high occupancy.

 

We continue to work closely with our hotel brands on the day-to-day asset management of the hotels, overseeing performance, driving revenue generation and maintaining efficient cost control to ensure that our hotel investments are operating at their maximum potential and resulting in accelerated traction in each market. The Ibis Budget at Melbourne Airport, which we acquired in October 2015 and which is now a mature hotel, is a testament to this, with year-on-year revenue  and operating profit increasing by 5.5% and 9.2% respectively.

 

New Hotels

Three new hotels were opened in 2016 (2016: 620 rooms, 2015: 545 rooms) and we made solid progress on the pipeline and a major addition to the pipeline, the 347 room Novotel Melbourne South Wharf at Melbourne Convention and Exhibition Centre (a further increase of 30 rooms over the original 317 rooms previously announced for this hotel).

 

The opening of the 367 room ibis Styles Brisbane, our largest hotel, was inaugurated by our Founder and Chairman Sheikh Mubarak A M Al Sabah in March 2016. The hotel has been designed to the brand's highest specifications. Feedback has been very positive and we believe it will be a major contributor to the Group's growth going forward.

 

The opening of Tulip Inn Ras Al Khaimah (August 2016) and Mercure Sohar (December 2016) have added a further 252 rooms with encouraging early business enquiries.

 

Development Pipeline

The Group's expansion continues to progress and we expect at least another 3 hotel completions during 2017, Ibis Styles Bahrain and our first two hotels in Saudi Arabia, adding a further 354 rooms to the portfolio.

 

Construction has started at Novotel Dubai Creek with the hotel expected to open during 2019 and we are progressing construction at Novotel Melbourne South Wharf, with opening planned during early 2018.

 

Since our IPO just over three years ago, we have continued to secure new and exciting development opportunities as we grow our portfolio. To date we have added 696 rooms (+27.6%) over what we promised at the time of IPO, with a current total of 3,214 rooms without the need to raise additional equity finance. Whilst our focus is now on completing the announced pipeline, we are always on the lookout for attractive opportunities in the Middle East and Australia.

 

Debt Refinancing

During the year, we welcomed Andrew Lindley to the management team as Finance Director, who has successfully completed the restructuring of several long-term and short-term financing facilities.

 

Our business model requires significant capital investment, which the Group leverages by borrowing from well-known regional banks within a 50%-65% loan-to-value ratio. The Group also relies on its extensive experience and relationships for refinancing its assets, even when met with challenging market conditions.

 

Our balance sheet remains robust as we continue to invest in our pipeline as well as looking for further growth opportunities. With an LTV at 51% we are comfortable with the management of debt as we continue to grow the portfolio.

 

Current Trading and Outlook

It has been a busy year and regional and industry changes have presented both opportunities and challenges.  We believe that our focus on delivering continued strong performance at our hotels will deliver revenue, EBITDA and NAV growth in the future.

 

As we benefit from our new room inventory, revenues are expected to strengthen significantly over 2017 and 2018. We have revised down our expectations for the period based on the levels achieved for 2016.  In the longer term we expect to reach the same levels of profitability, albeit between one and two years later than previously anticipated.

 

For the first quarter of 2017, trading for year to date is in line with our expectations. Our hotels continue to trade well against some pressure on travel and tourism, especially in the Middle East. We continue, however, to target locations and enter new markets where the demand for economy and midscale hotel accommodation significantly exceeds supply.

 

Longer term, demand is expected to continue to grow, with the emergence of regional travel and the diversification of regional economies away from oil and gas. This increasing demand combined with our proven low cost hotel operation model and working with leading hotel operating brands, continues to deliver highly profitable hotels in a short time from opening.

 

We remain focused and committed to the delivery of shareholder value by becoming the leading hotel company in the economy and mid-market hotels sector in the Middle East and Australia.

 

 

Alain Debare

Chief Executive Officer and Director

 

 

Finance Review

Key Financial Highlights and Introduction

·     Total Revenue increased by 22% to $53.1m (2015: $43.5m)

·     Total Adjusted EBITDA increased by 16% to $18.5m (2015: $16.0m)

·     Net loss before tax of $6.3m (2015: PBT of $2.9m), primarily driven by impact of pre-opening,  financing costs and depreciation of new hotels

·     Total fixed assets grew by $62m to $459m (2015: $397m)

·     Total debt increased by $39m (20%) as a result of the accelerating pipeline of hotels

·     Adjusted Net Asset Value remains stable at $206m

·     The "mature" hotels are stable, generating consistent revenue and continue to deliver underlying net profitability

·     Our "newly opened" hotels are progressing swiftly through their maturity cycle, contributing early revenues and typically achieving operational break-even in the first 3 months of operation

·     Continued investment in the Development hotels and pipeline projects which gather positive momentum as they approach their openings and will add to the portfolio in due course

 

After joining Action Hotels in June 2016, I undertook a thorough review of the operational, financial structure and future projects and I am enthusiastic about the outlook for the Group.

 

During 2016, Action Hotels experienced another year of growth across its key financial indicators, Revenue and Adjusted EBITDA, as a result of continued growth and maturity across the hotel portfolio and in particular the first full year of contribution from the three hotels opened or acquired in 2015, and a partial year contribution from those opened during the current financial year.

 

 

 

Year ended

Year ended

 

31 December

31 December

 

2016

2015

 

 

USD'000

USD'000

 

 

 

 

Revenue

53,096

43,461

 

 

 

 

 

Adjusted EBITDA1

18,508

16,021

 

Operating profit

6,430

8,781

 

 

 

 

 

(Loss)/Profit before tax

(6,344)

2,992

 

 

 

 

 

Tax gain/(charge)

452

(173)

 

 

 

 

(Loss)/Profit for the year attributable to owners of the company

(5,892)

2,819

 

 

 

 

 

 

Revenue

 

Reported total revenue for the year increased by 22% to USD $53.1m (2015: USD $43.5m) with USD $9.3m coming from the openings of the new hotels Tulip Inn, Ras Al Khamiah, Mercure Sohar, Oman and our largest hotel ibis Styles Brisbane, Australia.

 

Mature Hotel Portfolio2

 

The mature hotels are expected to provide a stable performance from year to year with little or no growth as they have reached their optimum operational capability. The seven mature hotels across Action's portfolio, which includes the recently acquired (2015), already operational, ibis Budget Melbourne Airport saw an increase in revenue of 1% and contributing a stable Operating profit on 2015, down 6% on 2015 mainly due to the full year effect of depreciation on the property revaluation in 2015.

 

 

Year ended

Year ended

% variation

 

31 December

31 December

 

 

 

2016

2015

 

 

 

USD

USD

 

 

 

 

 

 

 

$38.5m

$38.1m

+1%

 

 

 

 

 

 

Adjusted EBITDA1

$13.7m

$13.9m

-1.4%

 

 

 

 

 

 

Operating profit

$8.9m

$9.5m

-6.3%

 

 

 

 

 

 

Total Asset Value

$197m

$187m

5.3%

 

 

 

 

 

 

 

 

Newly Opened Hotel Portfolio3

 

As we are in a period of accelerated growth, having opened six new hotels over the past 24 months, the main driver of revenue increase is from this group of hotels. Our newly opened hotels increased revenue by 275%.

 

 

 

Year ended

Year ended

% variation

 

31 December

31 December

 

 

 

2016

2015

 

 

 

USD

USD

 

 

 

 

 

 

 

$14.6m

$5.3m

275%

 

 

 

 

 

 

Adjusted EBITDA1

$1.5m

$0.2m

722%

 

 

 

 

 

 

Operating Loss

($5.3m)

($2.6m)

104%

 

 

 

 

 

 

Total Asset Value

$184m

$76m

242%

 

 

 

 

 

 

 

Total portfolio

 

The opening of the 367 room ibis Styles Brisbane Elizabeth Street and a full year trading from the acquired, ibis Budget Melbourne Airport increased the percentage of revenue from Australia which accounted for 27% (2015: 14%) of total revenue.

 

Occupancy and average room rate ('ADR') for the total portfolio saw declines by 4% and 9% respectively resulting in a RevPAR reduction of 14%. However, these declines were less than the market demonstrating the resilience of the economy and midscale brands to absorb market pressure and still outperform even with tourism being impacted adversely by global economic and political uncertainty.

 

1 Adjusted EBITDA has been defined as operating profit before depreciation, amortisation, restructuring and listing costs, gains and losses arising from the disposal of property, plant and equipment, pre-opening costs and other non-recurring expenses.

 

2 Mature hotels consist of: Glenn Waverly, Kuwait (two), Jordan, ibis Budget Melbourne Airport (acquired as an already operational hotel)

 

3 Newly opened hotels consist of (1) in 2015: ibis Seef and Al Majaz Sharjah and (2) in 2016: newly opened in 2015 plus ibis Styles Brisbane, Tulip Inn Ras Al Khaimah and Mercure Sohar.

 

 

Operating profit and Adjusted EBITDA

 

Operating profit decreased by USD $2.4m to USD $6.4m and Adjusted EBITDA increased by 16% to USD $18.5m, driven by new hotel additions along with strong performances from our existing hotels.

 

 

Year ended

Year ended

 

 

31 December

31 December

 

 

2016

2015

 

 

USD'000

USD'000

 

Adjusted EBITDA

 

18,508

 

16,021

Depreciation and amortisation

 

(9,236)

 

(6,135)

Pre-opening expenses

 

(2,014)

 

(1,099)

Other expenses - net

 

(828)

 

(6)

Operating profit

 

6,430

 

8,781

             

 

2015 and 2016 were years of accelerated hotel development, increasing our number of operational rooms by 46.6%, (2014: 1,488 operational rooms, 2016: 2,181 operational rooms). Whilst the opening of new hotels brings positive contribution to revenue, and with our low average break even occupancy bringing early contribution to EBITDA, there are various charges to the Consolidated Income Statement, which occur below the EBITDA line that must be applied.  These charges do heavily impact the Operating Profit position. The material costs associated with opening the hotels, namely pre-opening costs of USD $2.0m (2015: USD $1.1m), depreciation charges and finance costs are applied as if the hotel is operating at a more mature capacity. The negative  impact of these charges  on reported profit are disproportional during the hotels development towards full maturity. Pre-opening costs (such as; costs of Senior Management (General Manager and Financial Controller) and other hotel operational employees preparing the hotel for operational readiness, final cleaning, stationary, marketing and sales preparation costs) average around USD $0.6m per hotel opening (depending on the number of rooms). Depreciation and amortisation are charged from the day the hotel is capable of operating.

 

EBITDA margin for the year reduced by 2% on last year to 35% (2015: 37%) mainly due to a drop of 3% at the Gross operating Profit level flowing through to EBITDA.

 

Our investment land in Dubai Media City, acquired in February 2016, improved Adjusted EBITDA by USD $4.5m as a result of the increase in its value to USD $14.7m (Acquisition cost: USD $10.2m) as part of the annual assessment by independent valuers Hamptons. This acquisition underpins our strategy of acquiring land and property in prime locations and the ability of Action Hotels to access such attractive opportunities. We will continue to hold this land for investment until a suitable opportunity is presented, assessed, and approved by the Board of Directors.

 

 

Profit/(Loss) after Tax

 

 

Year ended

Year ended

31 December

31 December

2016

2015

USD'000

USD'000

Operating profit

 

6,430

 

8,781

 

Finance income

 

270

 

218

 

Finance costs

 

(13,044)

 

(6,007)

 

Finance costs - net

 

(12,774)

 

(5,789)

 

(Loss)/Profit before income tax

 

(6,344)

 

2,992

 

Income tax expense

 

(144)

 

(151)

 

Deferred tax income / (expense)

 

596

 

(22)

 

(Loss)/Profit for the year

 

(5,892)

 

2,819

 

             

 

 

Finance costs have increased as the Company has, as planned, utilised debt facilities to fund the pipeline of hotels with the opening of ibis Styles Brisbane, Tulip Inn Ras Al Khaimah and the Mercure in Sohar plus a full year effect of hotels opened in the latter half of 2015 this has contributed to the  net loss for the year of USD $5.9m.

 

Dividends

 

In line with the Board's intentions to pay a progressive dividend to shareholders, it proposes a final dividend in respect of the year ended 31 December 2016 of GBP 1.50 pence sterling per share, taking the total dividend for the year to GBP 2.26 pence sterling per share. The dividend is expected to be paid on 15 June 2017, subject to the approval of the dividend at the Company's annual general meeting, which is expected to occur on 13 June 2017. It is expected that the Company's ordinary shares will marked ex-entitlement to such dividend on 25 May 2017, and the dividend will be payable to all shareholders on the Company's share register at the close of business on 26 May 2017.

 

Financial Position

 

Due to the material investment and acceleration of the pipeline during the year, total bank debt as at 31 December 2016 increased to USD $228 million (2015: USD $194 million) with cash and cash equivalents at USD $4.5 million. Total gearing at the year-end was 117% (2015: 94%) and Loan to Value ("LTV") was 51% (2015: 49%).

 

 

Year ended

Year ended

 

31 December

31 December

 

2016

2015

 

USD'000

USD'000

 

 

 

Bank loans

228,430

193,576

Loans due to related party

4,287

-

 

 

 

Less: Cash and bank balances

4,526

9,541

 

 

 

Net debt

228,191

184,035

 

 

 

Total equity

194,788

195,889

 

 

 

Total capital resources

422,979

379,924

 

 

 

Net debt to equity ratio

117%

94%

 

 

 

Loan to Value (LTV)1

51%

49%

 

1      Loan to Value is defined as total debt as a percentage of non-current assets

 

Property revaluations

 

Independent property valuations were prepared by CBRE on our Middle Eastern properties, Jones Lang LaSalle and CBRE on our Australian properties and Hamptons International on our investment land.

 

The valuations of the operational freehold hotels are included in the Consolidated Statement of Financial Position at fair value, which is assessed and revalued annually.

 

Net Asset Value and adjusted Net Assets

 

Reported Net Asset Value for the Group remained flat at USD $195 million as we continued to progress our hotel pipeline. Adjusted Net Asset Value is the net asset value of the Group adjusted for the deferred tax provisions on the revaluation on our properties. The deferred tax provisions at the year-end amounted to USD $12.3 million and would only become payable if these revalued assets were sold.

 

As at 31 December 2016 the Adjusted net asset value was USD $206.3 million, (2015: USD $206.3 million) and an adjusted net asset value per share of GBP 1.09 pence per share (2015: GBP 0.95 pence Sterling per share).

 

 

 

2016

2015

 

USD'000

USD'000

 

 

 

Net assets

194,788

195,889

Deferred tax liabilities - net

11,469

10,457

 

 

 

Adjusted net asset value

206,257

206,346

 

 

 

Number of shares

147,637

147,637

Adjusted net asset value per share ($)

1.40

1.40

 

 

 

 

Looking ahead

 

The first quarter of 2017 has started in line with expectations with revenue for the quarter up 14% on the same period last year, as our new hotels mature.

 

We look forward to updating on financial progress at our 2017 interim results later this year.

 

Andrew Lindley

Finance Director

 

 

 

Consolidated Income Statement

 

 

 

Year ended 31 December

 

 

 

2016

 

2015

 

 

USD'000

 

USD'000

 

 

 

 

 

Revenue

 

53,096

 

43,461

Cost of sales

 

(15,562)

 

(11,282)

Gross profit

 

37,534

 

32,179

General and administrative expenses

 

(31,104)

 

(23,398)

Operating profit

 

 

6,430

 

 

8,781

 

Adjusted EBITDA

 

18,508

 

16,021

Depreciation and amortisation

 

(9,236)

 

(6,135)

Pre-opening expenses

 

(2,014)

 

(1,099)

Other expenses - net

 

(828)

 

(6)

Operating profit

 

6,430

 

8,781

 

Finance income

 

270

 

218

Finance costs

 

(13,044)

 

(6,007)

Finance costs - net

 

(12,774)

 

(5,789)

(Loss)/Profit before income tax

 

(6,344)

 

2,992

Income tax expense

 

(144)

 

(151)

Deferred tax income / (expense)

 

596

 

(22)

(Loss)/Profit for the year

 

(5,892)

 

2,819

(Loss)/Profit is attributable to:

 

 

 

 

Owners of Action Hotels plc

 

(5,184)

 

1,452

Non-controlling interests

 

(708)

 

1,367

 

 

(5,892)

 

2,819

Earnings per share attributable to equity holders of the company:

 

 

 

 

Basic (loss)/earnings per share

 

(3.5) c

 

0.9 c

Diluted (loss)/earnings per share

 

(3.5) c

 

0.9 c

 

 

 

 

 

Earnings per share attributable to the Group:

 

 

 

 

Basic (loss)/earnings per share

 

(4.0) c

 

1.9 c

Diluted (loss)/earnings per share

 

(4.0) c

 

1.9 c

           

 

 

 

All operations were continuing throughout the years.

 

 

Consolidated Statement of Financial Position 

 

 

 

Year ended 31 December

 

 

2016

 

2015

 

 

USD'000

 

USD'000

ASSETS

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

 

15,382

 

15,343

Investment properties

 

14,725

 

33,440

Property and equipment

 

427,561

 

343,335

Deferred tax assets

 

809

 

-

Cash and bank balances

 

175  

 

176

Other receivables

 

-   

 

4,812

 

 

458,652

 

397,106

Current assets

 

 

 

 

Cash and bank balances

 

4,351

 

9,365

Trade and other receivables

 

8,182

 

13,814

Due from related parties

 

8,720

 

708

Inventories

 

247

 

172

 

 

21,500

 

24,059

Total assets

 

480,152

 

421,165

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

LIABILITIES

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

24,167

 

19,912

Due to related parties

 

4,344

 

529

Borrowings

 

75,939

 

19,716

Loan due to related parties

 

4,287

 

-

Finance lease liabilities

 

544

 

-

 

 

109,281

 

40,157

Net current liabilities

 

(87,781)

 

(16,098)

 

 

 

 

 

Non-current liabilities

 

 

 

 

Borrowings

 

152,491

 

173,860

Other payables

 

1,703

 

-

Provision for end of service benefits

 

999

 

802

Deferred tax liabilities

 

12,278

 

10,457

Finance lease liabilities

 

8,612

 

-

 

 

176,083

 

185,119

Total liabilities

 

285,364

 

225,276

Net assets

 

194,788

 

195,889

 

 

 

 

 

EQUITY

 

 

 

 

Share capital

 

24,102

 

24,102

Share premium

 

24,479

 

124,479

Revaluation reserve

 

84,123

 

73,946

Merger and other reserves

 

(9,417)

 

(10,293)

Retained earnings/(accumulated losses)

 

55,861

 

(32,895)

Net equity attributable to owners of Action Hotels plc

 

179,148

 

179,339

Non-controlling interests

 

15,640

 

16,550

Net equity

 

194,788

 

195,889

 

 

 

 

Consolidated statement of cash flows

 

 

 

Year ended 31 December

 

 

2016

 

2015

 

 

USD'000

 

USD'000

Cash flows from operating activities:

 

 

 

 

(Loss)/profit for the year before tax

 

(6,344)

 

2,992

Adjustments for:

 

 

 

 

Finance costs

 

13,044

 

6,007

Finance income

 

(270)

 

(218)

Provision for impairment of trade receivables

 

(22)

 

39

Depreciation of property and equipment

 

8,702

 

5,626

Amortisation of intangible assets

 

534

 

509

Provision for end of service benefits

 

513

 

497

Net gain from fair valuation of investment property

 

(4,506)

 

(3,358)

Operating cash flows before payments of employees' end of service benefits and changes in working capital and tax paid

 

11,651

 

12,094

Payment of employees end of service benefits

 

(317)

 

(301)

Changes in working capital:

 

 

 

 

Trade and other receivables

 

10,443

 

(14,856)

Due from related parties

 

(8,103)

 

2,739

Inventories

 

(74)

 

(43)

Trade and other payables

 

6,068

 

10,804

Due to related parties

 

3,816

 

332

Cash generated from operations

 

23,484

 

10,769

Tax paid

 

(205)

 

(40)

Net cash generated from operating activities

 

23,279

 

10,729

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Interest received

 

270

 

218

Proceeds from sale of investment property

 

13,623

 

-

Purchase of investment property

 

(10,619)

 

-

Movements in deposit with original maturity of more than three months

 

261

 

(436)

Capital expenditure from restricted cash

 

2,416

 

1,237

Transfers to restricted cash

 

(1,436)

 

(1,272)

Amount paid for acquisition of subsidiary

 

-

 

(8,261)

Increase in lease liabilities

 

8,721

 

-

Purchase of intangible assets

 

(701)

 

-

Purchase of property and equipment

 

(63,774)

 

(74,919)

Net cash used in investing activities

 

(51,239)

 

(100,485)

 

 

 

Consolidated statement of cash flows

 

 

 

Year ended 31 December

 

 

2016

 

2015

 

 

 

USD'000

 

USD'000

 

 

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

 

Repayment of borrowings

 

(29,392)

 

(45,090)

 

Drawdown of borrowings

 

65,484

 

132,656

 

Contribution from non-controlling interest

 

-

 

15,183

 

Loan due to related parties

 

4,424

 

-

 

Finance costs paid

 

(11,676)

 

(5,920)

 

Dividends paid

 

(4,559)

 

(4,944)

 

Net cash generated from financing activities

 

24,281

 

91,885

 

 

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

(3,679)

 

2,129

 

Cash and bank balances at the beginning of the year

 

7,365

 

4,975

 

Effect of exchange rate changes

 

(91)

 

261

 

Unrestricted cash and cash equivalents at end of the year

 

3,595

 

7,365

 

Restricted cash and cash equivalents

 

756

 

1,740

 

Cash and cash equivalents at the end of the year

 

4,351

 

9,105

 

 

 

 

Notes:

 

1        Revenue

 

 

2016

 

2015

 

USD'000

 

USD'000

 

 

 

 

Rooms

42,861

 

35,116

Food and beverage

8,476

 

6,982

Others

1,759

 

1,363

 

53,096

 

43,461

 

The Group's revenue arises from hotel operations, including the rental of rooms, food and beverage sales and other services from owned and leased hotels.

 

2      Operating profit and adjusted EBITDA

 

 

2016

 

2015

 

USD'000

 

USD'000

 

 

 

 

 

 

 

 

Operating profit for the period is stated after charging/(crediting):

 

 

 

Depreciation of property and equipment

8,702

 

5,626

Amortisation of intangible assets

534

 

509

Pre-opening expenses

2,014

 

1,099

Share-based payments

136

 

76

Operating lease rentals

2,738

 

2,597

Gain on disposal of investment property

(1,000)

 

-

Unrealised gain on investment properties

(4,506)

 

(3,358)

Legal expenses for potential acquisition

1,000

 

-

Employee costs

13,130

 

10,493

 

The adjusted EBITDA for the year is derived as follows:

 

 

2016

 

2015

 

USD'000

 

USD'000

 

 

 

 

Operating profit

6,430

 

8,781

Depreciation of property, plant and equipment

8,702

 

5,626

Amortisation of intangible assets

534

 

509

Pre-opening expenses

2,014

 

1,099

Other net non-recurring expenses

828

 

6

Adjusted EBITDA

18,508

 

16,021

 

Pre-opening expenses include staff costs and related expenses, administration expenses and marketing expenses incurred as part of the pre-opening and soft opening phase of the hotel. The soft opening phase can last for a period of up to 6 months depending on the size of the hotel and agreed opening strategy. Following this, expenses are included within general and administrative expenses.

 

 

3      Segment information

 

The Board of Directors of the Group is the Group's chief operating decision-maker. Management has determined the operating segments based on the information reviewed by the Board for the purposes of allocating resources and assessing performance of the Group.

 

The Group is organised within two geographical regions, Middle East and Australia excluding central functions. These geographical regions along with hotels under construction and undeveloped land sites comprise the Group's four reportable segments. No operating segments have been aggregated to form these reportable segments.

 

Central management costs represent the head office and management costs incurred at the Group level, which have not been subsequently allocated to any particular operating segment. Each of the geographical segments derives its revenue from the ownership and management of hotel operations.

 

The Board of Directors use a measure of adjusted EBITDA to assess performance.

 

(a)     Segmental revenue and results

 

The following is an analysis of the Group's revenue and results by reportable segments:

 

 

Middle East

 

Australia

 

Total

 

USD'000

 

USD'000

 

USD'000

2016

 

 

 

 

 

Revenue

38,841

 

14,255

 

53,096

Adjusted EBITDA - hotel operations

16,554

 

5,449

 

22,003

Central management and other costs

 

 

 

 

(15,573)

Operating profit

 

 

 

 

6,430

Finance income

 

 

 

 

270

Finance costs

 

 

 

 

(13,044)

Loss before tax

 

 

 

 

(6,344)

 

 

 

 

 

 

 

Middle East

 

Australia

 

Total

 

USD'000

 

USD'000

 

USD'000

2015

 

 

 

 

 

Revenue

37,138

 

6,323

 

43,461

Adjusted EBITDA - hotel operations

14,695

 

2,277

 

16,972

Central management and other costs

 

 

 

 

(8,191)

Operating profit

 

 

 

 

8,781

Finance income

 

 

 

 

218

Finance costs

 

 

 

 

(6,007)

Profit before tax

 

 

 

 

2,992

 

The revenue of each segment for each period arises wholly from external sales.

Adjusted EBITDA for hotel operations represent the profit earned by each segment without allocation of central administration costs including Directors' salaries, pre-opening costs, investment revenue and finance costs, and tax.

 

 (b)   Segmental assets

 

 

2016

 

2015

 

USD'000

 

USD'000

 

 

 

 

Middle East hotel operations

287,585

 

234,268

Australia hotel operations

110,636

 

111,289

Hotels under construction

57,585

 

26,229

Undeveloped land sites

14,725

 

33,045

Not allocated

9,621

 

16,334

 

480,152

 

421,165

 

For the purposes of monitoring segment performance and allocating resources between segments, the Group's management monitor the tangible, intangible and financial assets attributable to each segment. Assets classed as not allocated represent the current assets attributable to the central management function of the business and mainly relate to head office cash balances and certain balances with related parties.

 

 

Other segmental information

 

 

2016

 

2015

 

USD'000

 

USD'000

 

 

 

 

Additions and contributions to property and equipment

 

 

 

Middle East hotel operations

23,954

 

9,522

Australia hotel operations

1,443

 

49,249

Hotels under construction

58,699

 

19,117

 

84,096

 

77,888

 

(c)      Geographical information - Revenue

 

The country of domicile for the Group's head office is United Arab Emirates (UAE); the table below shows the revenue from external customers split between those attributed to the country of domicile and all other foreign countries.

 

 

2016

 

2015

 

USD'000

 

USD'000

 

 

 

 

UAE

2,932

 

536

Kuwait

13,678

 

13,980

Oman

12,912

 

13,991

Bahrain

5,661

 

4,798

Jordan

3,658

 

3,833

Australia

14,255

 

6,323

 

53,096

 

43,461

 

 

 

 

(d)      Geographical information - Non-current assets

 

The country of domicile for the Group's head office is United Arab Emirates (UAE); the table below shows the non-current asset split between those attributed to the country of domicile and all foreign countries.

 

 

2016

 

2015

 

USD'000

 

USD'000

 

 

 

 

UAE

79,291

 

63,119

KSA

16,512

 

-

Kuwait

49,553

 

58,965

Oman

113,141

 

93,436

Bahrain

55,406

 

53,228

Jordan

19,635

 

19,424

Australia

125,114

 

108,934

 

458,652

 

397,106

 

 

4      Earnings per share

 

 

(a)      Basic earnings per share

 

Basic earnings per share is calculated by dividing the (loss)/profit attributable to the equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

 

 

2016

 

2015

Earnings per share attributable to equity holders of the company:

 

 

 

(Loss)/profit for the year (USD'000)

(5,184)

 

1,452

Weighted average number of shares

147,637,195

 

147,637,195

Basic (loss)/earnings per share (USD)

(0.035)

 

0.009

 

 

 

 

Earnings per share attributable to the Group:

 

 

 

(Loss)/profit for the year (USD'000)

(5,892)

 

2,819

Weighted average number of shares

147,637,195

 

147,637,195

Basic (loss)/earnings per share (USD)

(0.040)

 

0.019

 

(b)         Diluted earnings per share

 

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has two categories of dilutive potential ordinary shares, share options and share warrants.

 

 

2016

 

2015

 

 

 

 

(Loss)/profit for the year (USD'000)

(5,184)

 

1,452

Weighted average number of shares used for calculating basic earnings

147,637,195

 

147,637,195

Dilution impact of share options and share warrants

-

 

-

Weighted average number of shares for calculating diluted earnings per share

147,637,195

 

147,637,195

Diluted (loss)/earnings per share (USD)

(0.035)

 

0.009

 

The 5,179,116 options (2015: 5,179,116 options) are not included in the calculation of diluted earnings per share because they are anti-dilutive for the year ended 31 December 2016 and 2015. These options could potentially dilute basic earnings per share in the future.

 

The 3,690,930 warrants (2015: 3,690,930 warrants) are not included in the calculation of diluted earnings per share because they are anti-dilutive for the year ended 31 December 2016 and 2015. These options could potentially dilute basic earnings per share in the future.

 

 

 

5        Related party balances and transactions

 

The Group has entered into various transactions with related parties in the normal course of its business concerning financing and related services. Prices and terms of payment are approved by the Group's management. All significant related party transactions and balances are listed below and are principally with entities under control of the Group's principal shareholder, Action Group Holding Co. KSCC:

 

 

2016

 

2015

 

USD'000

 

USD'000

 

 

 

 

Due from related parties

8,720

 

708

Due to related parties

(4,344)

 

(529)

 

4,376

 

179

 

Due from related parties

 

Name of related parties

Relationship

2016

 

2015

 

 

USD'000

 

USD'000

 

 

 

 

 

Action Real Estate Co. Dubai

Shareholder

7,971

 

42

Action Group Holding Company K.S.C.C

Shareholder

14

 

-

Action Realty Australia Pty Ltd

Others

456

 

418

Action Business Center Ltd

Others

274

 

158

Other

Others

5

 

90

 

 

8,720

 

708

 

Interest is charged on amounts due from related parties in Australia at a rate of 6% (2015: 6%). The total interest income was USD 124,000 (2015: USD 207,000).

 

Interest is charged on the advance paid to Action Real Estate Co. Dubai amounting to USD 3,714,000 (2015: nil) at a rate of 5% (2015: nil). The total interest income was USD 143,000 (2015: nil).

 

In 2016, the Group received rent income from related parties for leasing of premises amounting to USD 130,000 thousand (2015: USD 170,000 thousand).

 

Due to related parties

 

Name of related parties

Relationship

2016

 

2015

 

 

USD'000

 

USD'000

 

 

 

 

 

Action Group Holding Company K.S.C.C

Shareholder

284

 

326

Action Real Estate Co. K.S.C.C.

Others

1,329

 

178

Action Business Center Ltd

Others

62

 

-

Action Real Estate Co. Dubai

Shareholder

2,428

 

-

Action Group Holding Company (Oman)

Others

63

 

25

Others

Others

178

 

-

 

 

4,344

 

529

 

Related party transactions

 

During the year, the Group sold an investment property to Action Group Holding Company K.S.C.C for an amount of USD 14,650,000 (2015: Nil).

 

During the year, the Group wrote off related party balances amounting to USD 590,000 (2015: Nil).

 

During the year, Action Real Estate Co. Dubai contributed an amount of USD 7,463,000 (2015: USD 402,000) towards its share of commitments in Tulip Inn Ras Al Khaimah project.

 

Expenditure incurred on services provided by related parties:

 

 

Relationship

2016

 

2015

 

 

USD'000

 

USD'000

 

 

 

 

 

Action Group Holding Company K.S.C.C

Shareholder

454

 

98

Action Real Estate Co. K.S.C.C.

Others

4,162

 

2,824

Action Reality Australia Company

Others

-

 

68

Dr. Suad M. S. Al Sabah

Others

325

 

-

 

 

4,941

 

2,990

 

Expenditure incurred by related parties on behalf of the Group and subsequently recharged:

 

 

Relationship

2016

 

2015

 

 

USD'000

 

USD'000

 

 

 

 

 

Action Group Holding Company (Oman)

Others

63

 

18

Action Group Holding Company K.S.C.C

Shareholder

39

 

78

Action Real Estate Co. K.S.C.C.

Others

126

 

67

Action Business Center Ltd

Others

62

 

-

 

 

290

 

163

 

Expenditure incurred by the Group on behalf of the related parties and subsequently recharged:

 

 

Relationship

2016

 

2015

 

 

USD'000

 

USD'000

 

 

 

 

 

Action Group Holding Company (Oman)

Others

7

 

19

Action Group Holding Company K.S.C.C

Shareholder

14

 

-

Action Real Estate Co. K.S.C.C.

Others

90

 

32

 

 

111

 

51

 

Related party guarantees

 

Further, one of the shareholders of the Group and the ultimate owner of the shareholder have provided performance guarantees on behalf of the Group for certain borrowings. These guarantees, issued in the normal course of business, are outstanding at the year end and no outflow of resources embodying economic benefits in relation to these guarantees is expected by the Group.

 

 

 

Transactions and agreements with related parties

 

The Group does not have ownership of the A shares of Action Hotels Limited, its principal subsidiary, which carry the voting rights, and are held by Action Group Holding Company K.S.C.C, the principal shareholder. The Group therefore entered into the following agreements with Action Group Holding Company K.S.C.C. to safeguard its control over the subsidiary:

 

(a)      a relationship agreement dated 17 December 2013 between the Company and Action Group Holding Company K.S.C.C. (the "Relationship Agreement") pursuant to which Action Group Holding Company K.S.C.C. has agreed that:

 

(i)       the Group will be able to operate independently of Action Group Holding Company K.S.C.C. and its Associates (as defined in the Relationship Agreement). This will include a majority of the Board being independent of Action Group Holding Company K.S.C.C. at all times. For clarity, for these purposes, the concept of independence can include the executive Directors. The agreement further provides that any transactions or arrangements to be entered into between Action Group Holding Company K.S.C.C. (or its Associates) and the Group will require the approval of the Directors who are independent of Action Group Holding Company K.S.C.C.;

 

(ii)      it will not (and will procure so far as it is able that its Associates will not) compete with the business of the Group (being budget/mid-market hotels worldwide);

 

(iii)      the Group will have a 'right of first refusal' on any real estate assets held by it and which may be made available for hotels;

 

(iv)     it will transfer any property, rights, assets or services held by it (or its Associates) and intended for use or required to be used by the Group to the Group;

 

(v)      it will cooperate with the Company in the event that a restructuring is required to comply with local laws; and

     

(vi)     the agreement will terminate if Action Group Holding Company K.S.C.C.'s (and its Associates) holding in the Company drops to below 30%.

 

(b)      a call option agreement between the Company and Action Group Holding Company K.S.C.C. dated 9 December 2013 pursuant to the terms of which Action Group Holding Company K.S.C.C. has granted the Company an option to acquire the A ordinary shares in the capital of Action Hotels Limited for a nominal amount.

 

 

 

(c)      a management agreement dated 16 December 2013 between the Company, Action Hotels Limited and Action Group Holding Company K.S.C.C. pursuant to the terms of which the Company exercises management control of Action Hotels Limited. The management agreement provides that:

 

(i)       the Company has the sole right to manage Action Hotels Limited, and all operational decision-making power is vested exclusively with the Company;

 

(ii)       the Company has the sole right to appoint and replace the Directors of Action Hotels Limited;

 

(iii)      the Company has the right to receive 100% of all distributions that are declared by Action Hotels Limited including on a liquidation; and

 

(iv)      Action Group Holding Company K.S.C.C. shall not encumber (which includes creating any mortgage, charge, right to acquire or right of pre-emption) the A ordinary shares in Action Hotels Limited.

 

(d)      the Power of Attorney granted by Action Group Holding Company K.S.C.C. to the Company to exercise the voting rights attached to the A ordinary shares in Action Hotels Limited.

 

Remuneration of Key Management Personnel

 

 

2016

 

2015

 

USD'000

 

USD'000

 

 

 

 

Salaries and consultancy fees

974

 

954

Other benefits

393

 

67

Share-based payments

136

 

76

 

1,503

 

1,097

 

 

During the year, the Group entered into a conditional agreement with Sheikh Mubarak Al Sabah to purchase his interest in Action Hotels FZ-LLC. An amount of USD 3,700,000 was paid as refundable advance against this agreement. Further in December 2016, Sheikh Mubarak Al Sabah transferred his interest in Action Hotels FZ-LLC together with the advance to Action Real Estate Co. Dubai. The amount of advance paid has been included within due from related parties above.

 

Loans due to related parties

 

Relationship

2016

 

2015

 

 

USD'000

 

USD'000

 

 

 

 

 

Action Real Estate Company Kuwait

Others

1,892

 

-

Water Front Place Development Trust

Others

2,161

 

-

Action Group Australia

Others

234

 

-

 

 

4,287

 

-

 

 

During the year, the Group obtained loans amounting to USD 4,287,000 from various related parties to fund the construction of a hotel in Australia. The loans are repayable at various dates within 6 months from the date of the drawdown. The loans carry an interest rate of 9.9% (2015: nil) per annum. As at 31 December 2016, there is no material variance between the carrying value of the loans and their fair value.

 

In 2016, the Group incurred interest on these loans amounting to USD 8,900 (2015: nil).

 

 

 

6        Share capital and share premium

 

 

Number of

 

USD'000

Share capital

shares

 

 

 

 

 

 

At 1 January 2015

147,637,195

 

24,102

At 31 December 2015

147,637,195

 

24,102

At 31 December 2016

147,637,195

 

24,102

 

 

 

USD'000

Share premium

 

At 1 January 2015

124,479

At 31 December 2015

124,479

Transfer to retained earnings

(100,000)

At 31 December 2016

24,479

 

On incorporation the Company had 1,000 £1 ordinary shares, which on 8 November 2013 were split into 10,000 ordinary shares of nominal value of 10p. On 9 December 2013, the Company issued a further 99,990,000 shares and performed a share for share exchange with its shareholder in return for 100% of the beneficial interest in and voting control over the issued share capital of Action Hotels Limited.

On 23 December 2013, the Company issued 47,637,195 new ordinary shares at GBP 0.64 as part of its listing on the AIM division of the London Stock Exchange.

 

The authorised share capital of the Company is GBP 40 million divided into 400 million shares of 10 pence each. They entitle holders to participate in dividends and to share proceeds of winding up of the company in proportion to the number and of amounts paid on the shares held.

During 2016, the Shareholders authorised the transfer of USD 100,000,000 from the share premium account to accumulated losses.

 

 

7      Ultimate controlling party

 

Action Group Holding Company K.S.C.C., which is under the control of Dr. Suad Al Sabah was the principal shareholder at 31 December 2015 and 2016. It held 64.7% of Action Hotel plc's shares. In accordance with the relationship agreement with Action Group Holding Company K.S.C.C, Action Hotels plc is able to operate independently of Action Group Holding Company K.S.C.C. and its associates and hence there is no ultimate controlling party.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR GUGDUBXGBGRD
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Audited Results for the year ended 31 December 16 - RNS