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RNS
easyHotel PLC   -  EZH   

Interim Results

Released 07:00 29-May-2019

RNS Number : 3884A
easyHotel PLC
29 May 2019
 

29th May 2019

easyHotel plc

easyHotel plc

("easyHotel", "the Group" or "the Company")

 

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2019

NETWORK GROWTH AND CONTINUED MARKET OUTPERFORMANCE

easyHotel, the owner, developer and operator of super budget branded hotels, today announces its results for the six months ended 31 March 2019 ("the period").

Financial Highlights

Six Months Ended 31 March (£m)

2019

2018

 

Total system sales[1]

20.2

16.1

+25.3 %

Revenue

7.26

4.76

+52.6 %

Adjusted EBITDAR[2]

1.80

1.12

+60.7%

Adjusted EBITDAR margin

24.8%

23.6%

+1.2 ppts

Adjusted EBITDA

1.46

0.98

+48.2 %

(Loss)/Profit before tax

(0.12)

0.09

(237)%

Basic earnings per share (pence)

Interim dividend per share (pence)

(0.1)

0.08p

0.1

0.07p

(0.1)

 

 

·   

Adjusted EBITDA growth of +48.2% reflects strength of proposition and continued market outperformance.

·   

Adjusted EBITDAR margin increased by +1.2 ppts to 24.8% (2018: 23.6%) from central costs representing a lower percentage of total revenue.

·   

Loss before tax of £0.12m (2018: profit of £0.09m) impacted by the temporary closure of Old Street and higher depreciation from new hotels.

·   

£14.2m invested in new hotel development with £30.3m of cash and £33.9m of bank financing headroom (committed and uncommitted facilities) to continue to expand hotel estate.

·   

Our newly developed self-contained office accommodation (15,500 sq. ft) at our property at Old Street, London (3rd - 5th floors), has been pre-let to a single tenant.

 

Business Highlights

Fourth Year Market Outperformance Across Owned Hotels

·   

Owned hotel RevPAR up 10.1%, outperforming the market[3] by 9.7 ppts

·   

Franchise like-for-like RevPAR down 3.5%, driven primarily by the hotels in the Benelux region.

Continued Network Expansion - 9% increase in total continuing rooms during first half of the year

·   

Three new hotels totalling 290 rooms opened during the period and trading in-line with expectations.

·   

Five new hotels totalling 517 rooms due to open during the second half and a further nine new owned hotels (1,096 rooms) planned to open in next 24 months.

·   

354 owned hotel rooms added to the development pipeline, including the Group's first owned hotel in France.

 

Commenting, Guy Parsons, CEO of easyHotel plc, said:

"easyHotel has delivered a market outperformance and good profitable growth in the first half of the year against a challenging market. The tactical decisions taken early in the period to drive market share through our OTA strategy has underpinned this, and we have continued to benefit from the impact of our ambitious opening programme.

"Over the course of the last two years we have added a total of 18 hotels to our portfolio, significantly expanding our network in key business and tourist destinations across the UK and Europe. Our most recent openings have not only traded in line with our expectations but have also tracked the good performance seen from our new hotels opened in the prior year, which in the current trading environment is very encouraging. Our UK network of owned hotels is already well established, with a strong opening programme in place for the next two years. The Group is now focussed on replicating this success across Europe.

"The hotel market outlook remains uncertain, particularly in the UK where the ongoing Brexit negotiations continue to dampen consumer confidence. We are by no means immune, but the maturing profile of our hotels and our strong development pipeline will support continued growth and enhance our earnings profile. Combined with the careful control of our central costs, these efforts give the Board confidence in meeting its expectations for the year ending 30 September 2019."

 

A conference call for analysts will be held today, 29 May 2019 at 09.30 am. Dial-in details are below. A presentation is available to download at https://ir.easyhotel.com/ 

 

Analyst Call Dial in Details:

United Kingdom Toll-Free: 0800 358 9473 PIN: 69725984#
United Kingdom Toll: +44 3333000804 PIN:69725984#

For international dial in details please contact Houston PR

 

Enquiries:

 

easyHotel plc

 

Guy Parsons, Chief Executive Officer

www.easyhotel.com

Gary Burton, Chief Financial Officer

http://ir.easyhotel.com

 

 

Investec (Nominated Adviser and Broker)

+44 (0) 20 7597 5970

David Anderson

 

 

Houston PR (Financial PR)

+44 (0) 20 3701 7660

Kate Hoare / Laura Stewart

 

 

 

 

Notes to Editors:

www.easyhotel.com http://ir.easyhotel.com 

easyHotel is the owner, developer, operator and franchisor of branded hotels. Its strategy is to target the super budget segment of the hotel industry by marketing "clean, comfortable and safe" hotel rooms to its customers.

Operating hotels

easyHotel's eleven owned hotels currently comprise 1,216 rooms, and it has a further 25 franchised hotels with 2,139 rooms.

Owned hotels:

United Kingdom: Old Street (London), Glasgow, Croydon, Birmingham, Manchester, Liverpool, Newcastle*, Leeds, Sheffield and Ipswich.

Spain: Barcelona

Franchise locations:

United Kingdom: Edinburgh, London Heathrow, Central London, Luton, Reading and Belfast.

Europe: Belgium (Brussels), Bulgaria (Sofia), Germany (Berlin, Frankfurt, Bernkastel-Kues), Hungary (Budapest), The Netherlands (Amsterdam: City, Arena & Zaandam, Rotterdam, The Hague, The Hague Scheveningen Beach, Maastricht), Portugal (Lisbon), Switzerland (Basel, Zurich).

International: UAE (Dubai).

Hotel development pipeline

The Company's committed development pipeline of owned and franchised hotels currently consists of:

Owned hotels:

United Kingdom: Milton Keynes, Chester, Cardiff, Oxford*, Blackpool. Subject to planning consent: Cambridge* and Bristol.

Europe: Subject to planning consent: Ireland (Dublin), France (Paris-Charles de Gaulle Airport*).

 

Franchise hotels:

Europe: Spain (Malaga), Switzerland (Zurich, Basel), Netherlands (Amsterdam Schiphol Airport).

International: Iran, Sri Lanka, Turkey (Istanbul), UAE (Dubai).

*Hotels under an operating lease.

 

 

BUSINESS REVIEW

Trading Overview

The Group has continued to outperform its hotel markets in the UK and across Europe during the period, despite a weakening trading environment.

Ongoing political and economic uncertainty in the UK has continued to dampen consumer sentiment over the last six months, resulting in a softening hotel market, where demand weakened quarter-on-quarter. RevPAR across the wider UK hotel market grew by just 0.4% during the period (STR MSE UK) with relatively strong market demand in London off-set by a weakening regional market.  Whilst European markets have generally outperformed the UK, overall demand across Europe has softened in 2019.

Against this backdrop, the strength of the easyHotel brand as a leader in super budget sleep segment, underpinned by our growing network of hotels in key international tourist destinations, drove a fourth year of market outperformance across the Group's owned hotels.  This resulted in a strong performance across the platform, delivering a 25.3% growth in system sales to £20.2m (H1 2018: £16.1m).

On a like-for-like basis, owned hotel RevPAR for the period was up 10.1% increasing to £36.3 (H1 2018: £33.0). Occupancy rates reduced to 82.1% (2018: 84.4%) reflecting the more challenging market but ADR increased by 13.1% to £44.2 (2018: £39.1).

Like-for-like RevPAR from franchised hotels fell by 3.5% to £38.7 (2018: £40.0) with occupancy rates reducing to 77.9% (2018: 80.5%) and ADR decreasing slightly to £49.64 (2018: £49.72). The Group's European franchised hotels performed less strongly than those in the UK, despite European hotel markets generally outperforming the UK. Trading was mixed on a country by country basis. Our Benelux franchise hotels underperformed the market, and this is expected to continue to year-end.

New Hotel Openings

During the period the Group expanded its portfolio of super budget hotels across the UK and Europe. Openings included a new owned hotel in Ipswich (89-rooms) and two further franchised hotels in Lisbon (101-rooms) and Bernkastel-Kues (100-rooms), with all three hotels already trading in line with management's expectations.

Combined, these openings add a further 290 rooms to the network bringing the Group's total portfolio at the period end to 1,216 owned hotel rooms and 2,139 franchised hotel rooms.

Development Pipeline

In line with its ambitious growth strategy, easyHotel continues to target carefully selected locations to expand its portfolio of owned and franchised hotels. We believe the opportunity to develop our portfolio in key European cities is significant and the Group's newly established European development team has been focussed on pursuing opportunities in these markets. For owned hotels, the Group believes there is potential for approximately 12,000 easyHotel rooms primarily in the UK, France and Spain with an additional opportunity for approximately 15,000 franchised easyHotel rooms across the UK, Europe and the Middle East.

Owned Hotel Development

The Group continued to expand its pipeline of owned hotels during the period. In the UK, this includes a 145-bedroom easyHotel Bristol development (subject to planning permission). In Europe, the Group is pleased to have secured its first hotel in France, the 209 room easyHotel at Paris-Charles de Gaulle Airport, for which a planning decision is expected shortly.

New hotels in Oxford (180 bedrooms) and Blackpool (104 rooms) both received planning permission during the period and are expected to open in the 2020/21 financial year. Other new owned hotel projects currently in development include Cardiff (120 rooms) which is due to open during the next financial year and Cambridge (100 rooms), Chester (109 rooms), and Dublin (130 rooms) which are anticipated to open in the Group's 2020/2021 financial year.

easyHotel Milton Keynes (124 bedrooms) and our refurbished Old Street hotel (89 rooms) are well advanced.  Both hotels are expected to open in June 2019, earlier than originally expected.

The Group currently has a total of 1,221 owned hotel rooms in its development pipeline.

Old Street Offices

Our newly developed self-contained office accommodation (15,500 sq. ft) at our property at 80 Old Street, London (3rd - 5th floors), has been pre-let to a single tenant.  This is on a ten-year FRI (fully repairing and insuring) lease at an annual rent of £59.50 per sq. ft with an upward only rent review at year five. There is an initial rent-free period. The new tenant, Knotel, is a global flexible office operator that currently manages approximately 3 million sq. ft of space across 200 locations spanning New York, San Francisco, Los Angeles, Sao Paolo, Berlin as well as London.

Franchised Hotel Development

Franchised hotel openings for the current financial year include Zurich (71 rooms, across two hotels) and Amsterdam Schiphol Airport (154 rooms) expected to open in the next financial year.

The Group currently has a total of 1,450 franchised hotel rooms in its committed pipeline.

STRATEGIC PROGRESS

The Group continues to make good progress against its strategic priorities. The growing strength of the brand's simple "no frills" super budget offer is well aligned to the needs of today's discerning and value conscious traveller and the long-term structural growth drivers in the international branded budget hotel sector remain strong.

With the Group now in its fourth year of market out-performance, we continue to drive improvements in our revenue management strategy in order to maximise sales. Over the period the Group has worked with its OTA partners to drive revenues in a softening hotel market.  Whilst the OTAs remain an important part of our strategy the Group is taking steps to strengthen its percentage of direct bookings through the roll out of a new PMS system in 2019 with planned enhancements to build direct revenue share.  This will enable us to improve our customer booking experience even further and will be supported by investment in our CRM platform to drive improved returns from our more targeted marketing activity.

With a current portfolio of 36 hotels across 30 cities, the Board is focussed on the accelerated expansion of the easyHotel brand through both owned hotel and franchised hotel development, to take advantage of the significant opportunity across the UK, Continental Europe and Middle Eastern markets.

In the UK, where the Group already has significant established owned hotel presence and a strong committed pipeline to deliver seven further hotels by the 2021 financial year end, the Group intends to focus further owned hotel development on primary city targets, refocussing its wider UK expansion plans on franchised development.

In Continental Europe, the Group's newly appointed European Development Team are pursuing a number of owned and franchised development opportunities. The Group intends to expand its European owned hotel network in key primary and secondary tourist destinations with a focus on France and Spain. The Group's strong balance sheet and cash generation underpins the funding for future owned hotel growth in these markets.

Further expansion across mainland Europe and the Middle East will be led through an increased focus on franchised development, enabling the Group to broaden its presence, without the need for direct capital investment.

 

FINANCIAL REVIEW

Revenue

Total Group revenue grew by 52.6% to £7.26m (H1 2018: £4.76m).

Owned hotel revenues, including other income, increased by 63.3% during the period to £6.46m (H1 2018: £3.96m), reflecting the contribution from new hotel openings in 2018: Leeds (August), Sheffield (September) and Barcelona (September), and a new hotel in Ipswich in January 2019. These openings more than offset the impact from the full closure of Old Street in December 2018, that is planned to re-open in June 2019.

Owned hotel RevPAR was up 10.1% to £36.3 (H1 2018: £33.0) which outperformed the wider UK MSE sector by 9.7% pts.

Total franchise revenue was broadly flat at £0.80m (H1 2018: £0.80m). Like-for-like franchise revenue decreased by 3.1% as a result of challenging trading conditions in some locations. This was offset by the positive impact of new hotel openings in 2018: The Hague-Scheveningen (March), Maastricht (July), Belfast (August), Reading (September) and Lisbon (October) and Bernkastel-Kues (January 2019).

Adjusted EBITDA and Profit Before Tax

Adjusted EBITDA was up 48.2% at £1.46m (H1 2018: £0.98m), driven by new hotel openings and strong trading across owned hotels. This was impacted by the temporary closure of Old Street (refurbishing the hotel and developing a lettable office), use of OTAs (driving revenues in a softening hotel market) and investment in central resources (to support our future growth).

Adjusted EBITDAR margin of 24.8% (H1 2018: 23.6%) was up +1.2% pts.

Rent during the period was £0.34m (H1 2018: £0.14m) reflecting a full six months of our Newcastle operating lease and six months of central office lease cost.

Depreciation and amortisation costs rose to £1.21m (H1 2018: £0.71m) relating to the investment made in the Company's owned hotel development strategy. Net finance income was £0.01m (H1 2018: net finance income of £0.03m) reflecting interest received on the Group's cash balance and interest paid on debt facilities during the period.

Adjusted profit before tax, stated before share-based payments, pre-opening costs and other adjusting items decreased slightly to £0.26m (H1 2018: £0.30).

Reported loss before tax was £0.12m (H1 2018: profit of £0.09m). Adjusting for the temporary closure of Old Street would have resulted in an (estimated) £0.3m increase to the Group's reported profit before tax for the period.

Cash Flows and Balance Sheet

During the first half of the year, cash and cash equivalents decreased by £11.1m to £30.3m (30 September 2018: £41.4m), due to cash used in investing activities of £14.1m partially offset by net cash generated from operations of £1.93m and bank financing of £1.08m.

The Group's committed bank facilities were £28.6m with total borrowings, at the end of the period, of £17.7m. Net cash, being the cash balance reduced by drawn debt, at the end of the period was £12.6m (30 September 2018: £24.9m).

The Board does not undertake valuations of the Group's hotels, therefore, records the value of its hotel assets on the balance sheet at cost.  Were the Board to undertake a formal valuation of its hotels it expects that the value would exceed that recorded on the Group's balance sheet. Total non-current assets increased to £109.1m (30 September 2018: £98.1m).

Earnings Per Share and Interim Dividend

Basic earnings per share during the period was a loss of 0.08p (H1 2018: profit 0.06p).

The Board has announced an interim dividend of 0.08p per ordinary share (H1 2018: 0.07p). The interim dividend will be paid on 28 June 2019 to those shareholders on the register at the close of business on 7 June 2019. The shares will go ex-dividend on 6 June 2019.

 

OUTLOOK

The hotel market outlook remains uncertain, particularly in the UK where the ongoing Brexit negotiations continue to dampen consumer confidence. We are by no means immune, but the maturing profile of our hotels and strong development pipeline will support continued growth and enhance our earnings profile. Combined with the careful control of our central costs, these efforts give the Board confidence in meeting its expectations for the year ending 30 September 2019.

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

 

for the six months ended 31 March 2019

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

 

Note

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

£

£ 

 

System sales*

 

20,176,898

16,103,636

37,313,925

 

 

 

 

 

 

 

Revenue

3

7,259,901

4,758,081

11,253,872

 

Cost of sales

 

(3,876,134)

(2,219,160)

(5,231,963)

 

Gross profit

 

3,383,767

2,538,921

6,021,909

 

Administrative expenses

 

(3,518,949)

(2,473,848)

(5,337,832)

 

Operating (loss)/ profit

4

(135,182)

65,073

684,077

 

Analysed as:

 

 

 

 

 

Adjusted EBITDA **

 

1,456,364

982,690

2,958,733

 

Depreciation and amortisation

 

(1,206,806)

(706,028)

(1,502,313)

 

Hotel pre-opening and development costs

 

(124,729)

(47,920)

(246,971)

 

Share based payments

 

68,041

(129,944)

(276,565)

 

Other Adjusting Items

4

(328,052)

(33,725)

(248,807)

 

 

 

(135,182)

65,073

684,077

 

Finance income

8

126,570

93,283

304,893

 

Finance expense

9

(115,143)

(68,237)

(116,808)

 

(Loss)/ Profit before taxation

 

(123,755)

90,119

872,162

 

Taxation

 

9,461

(22,529)

(225,658)

 

(Loss)/ Profit for the year attributable to equity holders of the Company

 

(114,294)

67,590

646,504

 

Exchange gain/ (loss) arising on retranslation of foreign operations

 

(621,038)

(22,368)

63,323

 

Total Comprehensive income/ (loss) attributable to equity holders of the Company

 

(735,332)

45,222

709,827

 

Earnings per share for profit/(loss) attributable to the ordinary equity holders of the Company

 

 

 

 

 

Basic (pence)

6

(0.1)

0.1

0.5

 

Diluted (pence)

6

(0.1)

0.0

0.5

 

 

 

 

 

 

 

*      System sales is a non-statutory measure and represents the full amount that the customer pays for our owned and operated hotels, as well as in respect of franchisee-owned and operated hotels (excluding VAT and similar taxes). It also includes initial sign-on fees paid by franchisees to the Company.

 

 

 

**   Adjusted EBITDA represents earnings before interest, taxation, depreciation and amortisation adjusted for pre-opening costs related to the development of hotels, organisational restructuring costs, share based payments and other adjusting items. Adjusted EBITDA is shown on the face of the consolidated statement of comprehensive income as it reflects the profits from underlying operations only and is the best indicator of easyHotel's financial performance.

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

as at 31 March 2019

 

 

 

 

Company number 09035738

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

 

 

 

 

Note

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

£

£

£

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

 

107,364,489

62,355,070

96,259,366

Intangible assets

 

1,164,173

1,065,856

1,151,131

Long-term deposits

 

620,851

634,770

643,080

Total non-current assets

 

109,149,513

64,055,696

98,053,577

Current assets

 

 

 

 

Trade and other receivables

10

3,181,872

2,423,797

4,022,560

Cash and cash equivalents

 

30,255,648

71,262,688

41,390,018

Total current assets

 

33,437,520

73,686,485

45,412,578

Total assets

 

142,587,033

137,742,181

143,466,155

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Trade and other payables

7

735,091

 

756,826

Bank borrowings

 

16,944,938

12,768,304

15,749,566

Deferred tax liability

 

459,823

334,197

418,349

Total non-current liabilities

 

18,139,852

13,102,501

16,924,741

Current liabilities

 

 

 

 

Trade and other payables

7

4,995,286

5,343,148

6,057,925

Bank borrowings

 

712,888

360,000

710,413

Corporate taxation

 

118,107

 

131,560

Total current liabilities

 

5,826,281

5,703,148

6,899,898

Total liabilities

 

23,966,133

18,805,649

23,824,639

Total net assets

 

118,620,898

118,936,532

119,641,516

Equity

 

 

 

 

Equity attributable to owners of the Company

 

 

 

 

Share capital

 

1,459,545

1,459,545

1,459,545

Share premium

 

113,114,938

113,119,801

113,114,938

Merger reserve

 

2,750,001

2,750,001

2,750,001

Employee Benefit Trust (EBT) reserve

 

(1,067,405)

(1,067,405)

(1,067,405)

Currency translation reserve

 

(636,673)

(101,326)

(15,635)

Retained earnings

 

3,000,493

2,775,916

3,400,072

Total equity

 

118,620,898

118,936,532

119,641,516

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

 

 

for the six months ended 31 March 2019

 

 

 

 

Unaudited

Unaudited

Audited

 

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

£

£

£

Cash flows from operating activities

 

 

 

(Loss) / Profit before taxation for the year

(123,755)

90,119

872,162

Adjustments for:

 

 

 

Depreciation and amortisation

1,206,828

706,028

1,502,313

Share based payment charge/ (credit)

(68,041)

129,944

276,565

Finance income

(126,570)

(93,283)

(304,893)

Finance expense

115,143

59,762

116,808

Operating cash flows before movements in working capital

1,003,605

892,570

2,462,955

(Increase) / decrease in trade and other receivables

270,182

(436,950)

183,560

Increase / (decrease) in trade and other payables

761,259

(794,895)

214,702

Cash generated from operations

2,035,046

(339,275)

2,861,217

Corporation tax received/ (paid)

50,934

(69,323)

(71,123)

Net cash flows from / (used in) operating activities

2,085,980

(408,598)

2,790,094

Interest received

129,885

93,283

346,627

Interest paid

(286,230)

(176,596)

(488,049)

Net cash generated from/ (used in) operations

1,929,635

(491,911)

2,648,671

Investing activities

 

 

 

Purchase of property, plant and equipment

(14,223,264)

(10,738,954)

(46,379,646)

VAT on investing activities

119,158

(389,533)

(1,017,152)

Net cash used in investing activities

(14,104,106)

(11,128,487)

(47,396,798)

Financing activities

 

 

 

Proceeds from issue of ordinary share capital

-

50,000,000

50,000,000

Capitalised costs related to issue of ordinary share capital

-

(1,201,447)

(1,206,308)

Dividends paid

(217,244)

(218,625)

(320,006)

Proceeds in bank loan

1,551,133

1,252,240

4,769,921

Repayment of bank loan

(259,040)

(180,000)

(360,000)

Net cash generated from / (utilised by) financing activities

1,074,849

49,652,168

52,883,607

Net increase / (decrease) in cash and cash equivalents

(11,099,622)

38,031,770

8,135,480

Cash and cash equivalents at the beginning of the year

41,390,018

33,255,253

33,255,253

Exchange gains on cash and cash equivalents

(34,748)

(24,335)

(715)

Cash and cash equivalents at the end of the year

30,255,648

71,262,688

41,390,018

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

 

 

 

for the six months ended 31 March 2019

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

6 months ended 31 March 2018 Unaudited

Share

Share

Merger

EBT

translation

Retained

 

capital

premium

reserve

reserve

reserve

earnings

Total

£

£

£

£

£

£

£

At 30 September 2017

1,005,000

64,775,791

2,750,001

(1,067,405)

(78,958)

2,797,009

70,181,438

Profit

-

-

-

-

-

67,588

67,588

Other comprehensive income

-

-

-

-

(22,368)

-

(22,368)

Total comprehensive income for the period

-

-

-

-

(22,368)

67,588

45,220

Share based payment charge

-

-

-

-

-

129,944

129,944

Dividends paid

-

-

-

-

-

(218,625)

(218,625)

Issue of shares

454,545

48,344,010

-

-

-

-

48,798,555

Balance at 31 March 2018

1,459,545

113,119,801

2,750,001

(1,067,405)

(101,326)

2,775,916

118,936,532

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

year ended 30 September 2018 Audited

Share

Share

Merger

EBT

translation

Retained

 

capital

premium

reserve

reserve

reserve

earnings

Total

£

£

£

£

£

£

£

At 30 September 2017

1,005,000

64,775,791

2,750,001

(1,067,405)

(78,958)

2,797,009

70,181,438

Profit

-

-

-

-

-

646,504

646,504

FX Translation Movement

 

 

 

 

63,323

 

63,323

Total comprehensive income for the period

0

0

0

0

63,323

646,504

709,827

Share based payment charge

-

-

-

-

-

276,565

276,565

Dividends paid

-

-

-

-

-

(320,006)

(320,006)

Issue of shares

454,545

48,339,147

-

-

-

-

48,793,692

Balance at 30 September 2018

1,459,545

113,114,938

2,750,001

(1,067,405)

(15,635)

3,400,072

119,641,516

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

year ended 31 March 2019 Unaudited

Share

Share

Merger

EBT

translation

Retained

 

capital

premium

reserve

reserve

reserve

earnings

Total

£

£

£

£

£

£

£

At 30 September 2018

1,459,545

113,114,938

2,750,001

(1,067,405)

(15,635)

3,400,072

119,641,516

Profit/ (Loss)

-

-

-

-

-

(114,294)

(114,294)

FX Translation Movement

-

-

-

-

(621,038)

-

(621,038)

Total comprehensive income for the period

0

0

0

0

(621,038)

(114,294)

(735,332)

Share based payment charge

-

-

-

-

-

(68,041)

(68,041)

Dividends paid

-

-

-

-

-

(217,244)

(217,244)

Balance at 31 March 2019

1,459,545

113,114,938

2,750,001

(1,067,405)

(636,673)

3,000,493

118,620,898

 

 

 

NOTES FORMING PART OF THE FINANCIAL STATEMENTS

for the six months ended 31 March 2019

 

1 Statement of compliance

easyHotel plc (the "Company"), and its wholly owned subsidiaries (easyHotel UK Ltd, easyHotel Spain S.L.U. and easyHotel Ireland Ltd), is an international owner, developer, operator and franchisor of "easyHotel" branded hotels. The Company is a public limited company whose shares are listed on AIM under the ticker symbol EZH and is incorporated and domiciled in the United Kingdom. The address of the registered office is 52 Grosvenor Gardens, London SW1W 0AU, United Kingdom.

The interim financial information set out in this interim report has been prepared under the recognition and measurement requirements of IFRS as adopted by the European Union but does not contain all of the disclosures that are required under these standards, taking into account International Financial Reporting Interpretations Committee (IFRIC) interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. Based on these adopted IFRSs, the Directors have applied the accounting policies which they expect to apply when the annual IFRS financial statements are prepared for the year ended 30 September 2019.

The group's accounting policies remain as stated in the group's full annual accounts for the year ended 30 September 2018, apart from those later in the report.

 

2 Significant accounting policies

Basis of preparation

The accounts are prepared based on the historical cost convention. The accounting policies set out below have been applied consistently to all years presented in these accounts, unless otherwise stated.

After making appropriate enquiries and having reviewed the Group's expenditure commitments, current financial projections and future cash flows, together with available cash resources and undrawn committed borrowing facilities, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For these reasons, the Directors continue to adopt the going concern basis in preparing these interim results.

All amounts are presented in Pound Sterling (GBP, £), except where otherwise indicated.

In accordance with s 435 of the Companies Act, these accounts are non-statutory. Statutory accounts dealing with the financial year ending 30 September 2018 have been submitted to Companies House. The auditor's report has been made on the company's statutory accounts for the year ended 30 September 2018, the report was unqualified.

Basis of consolidation

The consolidated accounts incorporate those of easyHotel plc and its subsidiaries for the year ended 30 September 2018 and the six months ended 31 March 2019. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. On acquisition of its subsidiary, easyHotel UK Ltd, merger accounting was the basis of consolidation.

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

Intragroup balances and transactions and any unrealised gains and losses arising from intragroup transactions are eliminated in preparing the consolidated accounts.

Investment in subsidiary

easyHotel plc has an investment in easyHotel UK Ltd (a wholly owned subsidiary) of £3,825,683 (2017: £3,825,683). This investment is held at cost less any reasonable provisions for impairment against the investment of which there are currently none.

easyHotel UK Ltd has an investment in easyHotel Spain S.L.U. (a wholly owned subsidiary) of £7,583,664 (2017: £7,583,664). This investment is held within easyHotel UK Ltd at cost less any reasonable provisions for impairment against the investment of which there are currently none.

easyHotel UK Ltd has an investment in easyHotel Ireland Ltd (a wholly owned subsidiary) of £8,243,453 (2018: £1). This investment is held within easyHotel UK Ltd at cost less any reasonable provisions for impairment against the investment of which there are currently none.

 

Employee Benefit Trust (EBT)

The EBT's assets (other than investments in the Company's shares), liabilities, income and expenses are included on a line-by-line basis in the consolidated financial statements, and its investment in the Company's shares is deducted from equity in the consolidated statement of financial position as if they were treasury shares.

The EBT is not consolidated in the Company's own financial statements but the Company recognises any transactions between itself and the EBT in accordance with the relevant accounting policy.

Foreign currency

The primary economic environment in which a subsidiary operates determines its functional currency. The consolidated accounts of easyHotel are presented in Sterling, which is the Company's functional currency and the Group's presentation currency.

Transactions arising in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into Sterling using the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the income statement. Non-monetary assets and liabilities denominated in foreign currencies are translated into Sterling at foreign exchange rates ruling at the dates the transactions were effected.

On consolidation the results of overseas operations are translated into Sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income and accumulated in the currency translation reserve.

Revenue

Revenue from contracts with customers is recognised when control of the services are transferred to the customer at an amount that reflects the consideration to which the company expects to be entitled in exchange for those services.

Provided the amount, if applicable, can be measured reliably and it is probable that the Company will receive the consideration, revenue for services is recognised as follows:

Owned - primarily derived from hotel operations, including the rental of rooms and ad hoc utility services sales from owned hotels operated under the "easy" brand name. Revenue is recognised when rooms are occupied, and ad hoc utility services are provided.

Franchise fees - received in connection with the licence of the Company's brand name, usually under long-term contracts with the hotel owner. The Company charges franchise royalty fees and processing fees as a percentage of room revenue and in some cases receives an upfront fee on the grant of a franchise. Revenue is earned and recognised when the customer has occupied the room at the franchisee's operated hotel accommodation. Upfront fees are generally recognised immediately as an initial sign-on income, with portions relating to legal, contractual, marketing or similar items recognised over the period from signing to opening. Where upfront fees specifically relate to exclusivity, these fees are recognised over the franchisee exclusivity period.

Consideration received in advance for which the revenue recognition criteria above have not been satisfied are deferred until such time as the revenue recognition criteria have been satisfied.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

Investment income earned on the temporary investment of specific borrowings, if any, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

 

 Provisions

Provisions are recognised for liabilities of uncertain timing or amounts that have arisen as a result of past transactions and are discounted at a pre-tax rate reflecting current market assessments of the time value of money and the risks specific to the liability.

 

Changes in Accounting Policies

a) New standards, interpretations and amendments effective during the period

New standards impacting the group that have been adopted for the interim accounts

·     IFRS 9: Financial Instruments (replacing IAS 39)

·     IFRS 15: Revenue from contracts with customers (replaces IAS 18)

 

IFRS 9 brings together all three aspects of accounting for financial instruments: classification and measurement, impairment and hedge accounting. The accounting policy for financial assets and liabilities were updated to comply with IFRS 9, the introduction of the new standard was assessed and its impact is deemed immaterial on financial instruments of the group as previously reported.

IFRS 15 applies to all revenue arising from contracts with customers, unless those contracts are in scope of other standards. The new standard establishes a five steps model to account for revenue arising from contracts with customers. Under IFRS 15, revenue is recognised when the control of services are transferred to the customer at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring services to a customer.

The standard requires entities to exercise judgement, taking into consideration all of the relevant facts and circumstances when applying each step of the model for contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract.

Based on the assessment, the accounting policy for Revenue was updated to comply with IFRS 15 and there was no material impact of introduction of this new standard on revenue recognition of the group as previously reported.

Adoption of IFRS 16 will result in the group recognising right of use assets and lease liabilities for all contracts that are, or contain, a lease. For leases currently classified as operating leases, under current accounting requirements the group does not recognise assets or liabilities, and instead spreads the lease payments on a straight-line basis over the lease term, disclosing in its annual financial statements the total commitment.

The Board has decided it will apply the modified retrospective method of adoption of IFRS 16, and therefore will only recognise leases on the balance sheet as at 1 October 2018. In addition, it has decided to measure right of-use-assets by reference to the measurement of the lease liability on that date.

Instead of recognising an operating expense for its operating lease payments, the group will instead recognise interest on its lease liabilities and amortisation on its right-of-use assets.

The directors anticipate that the adoption of IFRS 16 in future periods may have an impact on the results and net assets of the Company, however, the board continues to assess and will quantify at year end. The directors anticipate that the adoption of other Standards and interpretations that are not yet effective in future periods will only have an impact on the presentation in the financial statements of the Company.

Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Impairment of assets

The Group is required to consider assets for impairment where such indicators exist using value in use calculations or fair value estimates. The use of these methods may require the estimation of future cash flows and the choice of a discount rate in order to calculate the value in use or fair value.

(b) Useful lives of property, plant and equipment

Property, plant and equipment are depreciated over their useful lives. Useful lives are based on the management's estimates for the period that the assets will generate revenue, which, along with their estimated residual values, are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the consolidated statement of comprehensive income in specific periods.

(c) Taxation

The Group is subject to income tax and significant judgement is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognised when the Group believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgements about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.

 

 

 

 

 

 

3 Revenue

Unaudited

Unaudited

Audited

 

 

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

 

£

£

£

 

 

 

 

 

6,368,491

3,868,148

9,075,454

 

801,410

802,933

1,810,918

 

Other income

90,000

87,000

367,500

 

 

7,259,901

4,758,081

11,253,872

 

 

 

 

 

 

Geographical information

Unaudited

Unaudited

Audited

 

 

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

 

£

£

£

 

 

 

 

 

5,219,117

4,118,484

9,575,363

 

2,016,013

592,425

1,619,136

 

Rest of the world

24,771

47,172

59,372

 

 

7,259,901

4,758,081

11,253,872

 

 

 

 

 

 

4 Operating profit and adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

 

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

 

£

£

£

 

 

 

 

 

 

 

 

 

1,494,439

1,114,328

2,350,291

 

161,759

130,877

230,909

 

Staff recruitment and training

51,486

52,065

102,784

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

 

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

 

£

£

£

 

 

 

 

 

 

 

 

 

(201,001)

 -

(124,540)

 

(91,567)

 -

(124,213)

 

(35,484)

(33,671)

 -

 

 -

 -

(54)

 

 

 

 

 

 

Total non-recurring income/(costs)

(328,052)

(33,671)

(248,807)

 

 

 

 

 

 

 

 

 

 

5 Segment information

 

 

 

 

The Group has two main reportable segments:

 

 

 

 

·     Owned properties - This segment is involved in hotel operations carried out in the Group's owned hotels and properties.

 

 

·     Franchising - This segment involves the Group's franchised hotel operations, in connection with the licence of the Group's brand name.

 

Factors that management used to identify the Group's reportable segments

 

 

 

 

These segments are considered on the basis of ownership. Franchises are governed via franchise agreements and are managed independently.

 

 

Measurement of operating segment profit or loss, assets and liabilities

 

 

 

 

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

 

The Group evaluates performance on the basis of adjusted EBITDA.

 

 

 

 

Segment assets exclude tax assets. Segment liabilities exclude tax liabilities. Even though loans and borrowings arise from finance activities rather than operating activities, they are allocated to the segments based on relevant factors (e.g. funding requirements). Details are provided in the reconciliation from segment assets and liabilities to the Group position.

 

 

 

 

 

 

 

 

Owned

 

 

 

properties

Franchising

Total

 

£

£

£

 

31 March 2019

 

 

 

 

Revenue

 

 

 

 

Total revenue from external customers

6,458,491

801,410

7,259,901

 

Adjusted EBITDA

2,221,597

398,740

2,620,337

 

Profit before taxation

994,252

371,435

1,365,686

 

Segment assets

138,075,125

1,543,108

139,618,233

 

Segment liabilities

(21,763,855)

(1,095,819)

(22,859,674)

 

Other

 

 

 

 

Additions to non-current assets

11,779,567

 -

11,779,567

 

Disposals of non-current assets

 -

 -

 -

 

Finance income

126,570

 -

126,570

 

Finance cost

(115,143)

 -

(115,143)

 

Depreciation and amortisation

(1,502,313)

 -

(1,502,313)

 

31 March 2018

 

 

 

 

Revenue

 

 

 

 

Total revenue from external customers

3,955,148

802,933

4,758,081

 

Adjusted EBITDA

1,488,073

422,278

1,910,351

 

Profit before taxation

940,657

402,827

1,343,484

 

Segment assets

135,535,976

1,144,429

136,680,405

 

Segment liabilities

(16,525,473)

(1,522,978)

(18,048,451)

 

Other

 

 

 

 

Additions to non-current assets

11,751,691

209,197

11,960,888

 

Disposals of non-current assets

 -

 -

 -

 

Finance income

93,383

 -

a93,383

 

Finance cost

(59,762)

 -

(59,762)

 

Depreciation and amortisation

(580,937)

(19,451)

(600,388)

 

 30 September 2018

 

 

 

 

Revenue

 

 

 

 

Total revenue from external customers

9,442,954

1,810,918

11,253,872

 

Adjusted EBITDA

3,910,856

1,097,977

5,008,833

 

Profit before taxation

2,969,996

1,055,215

4,025,211

 

Segment assets

138,975,913

2,272,609

141,248,522

 

Segment liabilities

(21,455,702)

(1,708,099)

(23,163,801)

 

Other

 

 

 

 

Additions to non-current assets

22,244,516

 -

22,244,516

 

Disposals of non-current assets

 -

 -

 -

 

Finance income

358,074

 -

                  358,074

 

Finance cost

(141,010)

 -

(141,010)

 

Depreciation and amortisation

(1,502,313)

 -

(1,502,313)

 

 

 

 

 

 

                 
 

 

Reconciliation of reportable adjusted EBITDA, profit or loss, assets and liabilities to the Group's corresponding amounts is shown below:

 

 

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

 

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

 

£

£

£

Adjusted EBITDA of reportable segments

 

2,620,337

1,910,351

5,008,833

Adjusted EBITDA of corporate office

 

(1,163,974)

(927,661)

(2,050,100)

Total adjusted EBITDA

 

1,456,364

982,690

2,958,733

Profit before income tax

 

 

 

 

Total profit of reportable segments

 

1,365,686

1,343,484

4,025,211

Corporate office expenses and interest

 

(1,104,701)

(1,041,778)

(2,380,705)

Other adjusting items

 

(328,052)

(33,725)

(248,807)

Hotel pre-opening and development costs

 

(124,729)

(47,920)

(246,971)

Share based payments

 

68,041

(129,944)

(276,565)

Profit before tax per statement of comprehensive income

 

(123,755)

90,117

872,163

Assets

 

 

 

 

Total assets for reportable segments

 

139,618,233

136,680,405

141,246,929

Cash in Employee Benefit Trust

 

1,593

1,593

1,593

Corporate office assets

 

2,967,207

1,060,183

2,217,632

Total assets per statement of financial position

 

142,587,033

137,742,181

143,466,154

Liabilities

 

 

 

 

Total liabilities for reportable segments

 

(22,859,674)

(18,048,453)

(23,163,801)

Corporation tax

 

(118,107)

47,334

(131,561)

Corporate office liabilities

 

(528,529)

(423,000)

(110,929)

Deferred tax liabilities

 

(459,823)

(381,531)

(418,349)

Total liabilities per statement of financial position

 

(23,966,133)

(18,805,650)

(23,824,640)

 

 

 

 

 

Geographical information

 

Unaudited

Unaudited

Audited

 

 

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

 

£

£

£

Revenue by location

 

 

 

 

United Kingdom

 

5,219,117

4,118,484

9,575,363

Europe

 

2,016,013

592,425

1,619,136

Rest of the world

 

24,771

47,172

59,372

 

 

7,259,901

4,758,081

11,253,871

 

6 EPS

 

Basic earnings per ordinary share are calculated using the weighted average number of ordinary shares in issue during the financial period of 144,829,546 (31 March 2018: 104,120,255; 30 September 2018: 126,896,794).

 

Diluted earnings per ordinary share are calculated using the weighted average number of ordinary shares in issue during the financial period of 145,072,879 (31 March 2018: 104,200,717; 30 September 2018: 127,039,707).

 

The company has 142,913 potentially dilutive options, issued or outstanding. Earnings consist of profit/ (Loss) for the period attributable to the shareholders amounting to £(114,294) (31 March 2018: £67,590; 30 September 2018: £646,504).

 

 

 7 Trade and other payables

 

 

 

 

Unaudited

Unaudited

Audited

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

£

£

£

Trade payables

979,650

476,092

1,790,687

Other payables

317,228

85,953

341,609

Amounts payable to franchisees in future

581,823

1,308,267

1,099,645

Accruals

2,159,851

2,380,223

2,282,633

Total financial liabilities classified as financial liabilities measured at amortised cost

4,038,552

4,250,535

5,514,574

Other taxation and social security

179,216

110,331

151,958

VAT payable

-

-

-

Bookings in advance

1,317,549

743,057

963,057

Deferred income

195,060

239,225

185,162

Total trade and other payables

5,730,377

5,343,148

6,814,751

Classified as follows:

 

 

 

Non-current portion

735,091

 -

756,826

Current portion

4,995,286

5,343,148

6,057,926

 

 

 

 

 

 

 

 

 

 

 

 

8 Finance income

 

 

 

 

Unaudited

Unaudited

Audited

 

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

£

£

£

Finance income

 

 

 

Interest income on financial assets measured at amortised cost

120,978

93,283

358,074

Foreign exchange gain

5,593

 -

(53,181)

Total finance income recognised in profit or loss

126,570

93,283

304,893

 

 

 

 

 

 

 

 

9 Finance expense

 

 

 

 

Unaudited

Unaudited

Audited

 

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

£

£

£

Finance expense

 

 

 

Interest expense on financial liabilities measured at amortised cost

356,231

208,703

509,891

Amount capitalised *

(241,088)

(148,941)

(393,083)

Foreign exchange loss

 -

8,475

-

Total finance expense recognised in profit or loss

115,143

68,237

116,808

 

 

 

 

* Interest expense attributable to construction works has been capitalised to property, plant and equipment.

 

         

 

 

 10 Trade and other receivables

 

 

 

 

 

 

Unaudited

Unaudited

Audited

 

6 months ended 31/03/19

6 months ended 31/03/18

year ended 30/09/2018

 

£

£

£

Trade receivables

 

246,819

221,438

216,076

Accrued income

 

25,635

28,098

34,542

Total financial assets other than cash and cash equivalents classified as loans and receivables

 

272,454

249,536

250,618

Prepayments

 

982,961

406,742

831,363

VAT receivable

 

1,591,801

1,758,376

2,323,269

Other receivables

 

334,656

9,143

617,310

Total trade and other receivables

 

3,181,872

2,423,797

4,022,560

Classified as follows:

 

 

 

 

Current portion

 

3,181,872

2,423,797

4,022,560

 

 

 

 

 

There is no material difference between the net book value and the fair values of trade and other receivables due to their short-term nature.

 

           

 

 

[1] Total system sales a non-statutory measure that represents the full amount that the customer pays for our owned and franchised hotels, including initial sign-on fees paid by franchisees to the Company

[2] Adjusted EBITDAR is a non-statutory measure that represents earnings before interest, tax, depreciation, amortisation and rent, adjusted for pre-opening costs related to the development of hotels, share based payments and other adjusting items such as organisational restructuring costs. Adjusted EBITDA reflects Adjusted EBITDAR after rent.

[3] Market source: Midscale & Economy (MSE) segment from the UK Performance Monitor report, produced by STR Global 


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Interim Results - RNS