Action Hotels PLC Interim Financial Statements

Action Hotels plc (LON:AHCG), the leading owner, developer and asset manager of branded three and four-star hotels in the Middle East and Australia, announced today its unaudited results for the six months ended 30 June 2017.

Key Highlights and Financial Overview

Year-on-year growth in key financial performance indicators – Revenue (up 10%) and Gross profit (up 6%)

Total reported revenue increased to $28.1m (30 June 2016: $25.6m), driven by new hotel rooms

Gross profit increased to $19.5m (30 June 2016: $18.4m)

Adjusted EBITDA1 decreased by 6.3% to $6.8m (30 June 2016: $7.2m), mainly due to the full year effect of non-operating expenses in the newly opened hotels as they grow through the maturity stage

Net loss before tax of $5.3m (30 June 2016: Net loss of $3.9m), as expected and primarily driven by the impact of increased financing costs to develop the pipeline and the impact of depreciation newly opened hotels

LTV of 55% (2016: 51%)

Property asset values have increased by $35m to $493m since 31 Dec 2016, resulting in a net asset value (NAV) of $192m at 30 June 2017 (31 December 2016: $195 m)

Adjusted NAV (adding back deferred tax liability and assets) is $201m compared to $206m as at year end.

Adjusted NAV per share was USD 1.36/GBP 1.06 (2016: USD 1.40/GBP 1.09)

Interim dividend of GBP 0.77p, a 1.3% increase on the same period last year

Operational Highlights

2,181 operating rooms at the end of June, a 13% increase from H1 2016 (30 June 2016: 1,928) with the openings of Tulip Inn, Ras Al Khaimah (September 2016) and Mercure Sohar (December 2016)

Strong occupancy levels from our mature hotels2, being maintained on a like-for-like basis at 72.7% (30 June 2016: 74.7%)

Average EBITDA breakeven occupancy levels across the portfolio remain low at c. 37% (30 June 2016: 35%)

Continued strong operational and financial performances from the two hotels in Kuwait, ibis Salmiya and ibis Sharq, with both hotels operating over 80% occupancy

Ibis Budget Melbourne Airport also continues to perform strongly with at 90% occupancy (30 June 2016: 91%)

On 2 August 2017 Action’s thirteenth hotel, ibis Styles Diplomatic Area, Manama Bahrain with 95 rooms opened, taking the total of operational rooms to 2,276.

Current Trading and Portfolio update

The Board confirms that, current trading remains on track with market expectations, despite certain markets in the Middle East facing headwinds impacting the performance of businesses throughout the region. Growth comes from the newly opened rooms and the occupancy of the Groups seven mature hotels2 at 72.7% underpins Action’s resilient business model in the economy and midmarket hotel sector, with low break-even levels and the recently opened hotels delivering growth.

After a thorough review of the pipeline, and to efficiently manage the Company’s cash and debt position, the board have decided to slightly delay the openings of two of its leasehold hotels in Saudi Arabia, Tulip Inn Modon Jeddah and Mercure Riyadh Olaya. These hotels, which are currently under development, were due to be substantially completed by the end of 2017 but will now be opened towards the end of H1 2018. This minimally impacts the 2017 forecast which is expected to improve the net loss position slightly with the concurrent delay of two hotel pre-opening costs in the region of $0.5-1.0m.

The Board has also taken the decision to remove the 112-key leasehold hotel, Staybridge Suites Abu Dhabi from the pipeline, choosing instead to focus Management’s resources on projects offering a better return on capital employed, such as Novotel Melbourne South Wharf, due to open in H1 2018.

Alain Debare, Action Hotels Group CEO said: “We are pleased to update the market on a solid first half, with a good performance across the Action Hotels portfolio. We are seeing good growth from the new rooms, with trading impacted by some headwinds in the Middle East whilst Australia continues to perform strongly. We remain focused on delivering the pipeline and working with our Hotel partners to drive performance at our operating hotels with a special focus on ensuring the early success of our recently opened hotels as they grow within their markets and consolidating the solid performance from our mature hotel portfolio. ”

Commenting on the results, Sheikh Mubarak A.M. Al Sabah, Founder and Chairman of Action Hotels said: “It is my pleasure to announce another six months of growth for Action Hotels on the back of a very positive performance in 2016. We continue to meet the increasing demand for quality, internationally branded economy and mid-market hotels and have outperformed expectations set out at IPO with regards to the number of rooms operating and in pipeline with rooms totaling 3,090.

We remain committed to growing our portfolio and are continuously exploring new hotel opportunities on both a freehold and leasehold basis. In May, we announced our partnership with AccorHotels on our second Novotel branded hotel in Melbourne South Wharf, Action’s fourth hotel in Australia and being developed on the largest convention center in the Southern hemisphere. We look forward to updating the market on other further developments to our pipeline in due course.”

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