Action Hotels : Related Party Transaction and Trading Update

The information contained within this announcement is deemed by the Company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014. Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

22 December 2017

Action Hotels plc

Related Party Transaction and Trading Update

Related Party Transaction

Action Hotels plc ('Action Hotels', the 'Group' or the 'Company'); a leading owner, developer, and asset manager of branded three and four-star hotels in the Middle East and Australia, advises that it has obtained a rent waiver from a subsidiary of its major shareholder, Action Group Holding Company (K.S.C.C), which constitutes a related party transaction under the AIM Rules, along with an update on trading for the year ending 31 December 2017.

The Company has agreed a rent waiver of USD$1.2m with the owner of the ibis Salmiya Hotel ('ibis Salmiya') in Kuwait for the six-month period 1 July 2017 to 31 December 2017 (the 'Rent Waiver'). The owner of ibis Salmiya is Action Real Estate Co. K.S.C.C. ('AREC'), which Sheikh Mubarak A. M. Al Sabah (a director of the Company) is a director and a major shareholder of. The leasehold agreement between the Company and AREC with regards to ibis Salmiya was signed in April 2013 and fully disclosed as a Related Party transaction at the time of the IPO. This waiver is being treated as a one-off occurrence and further details of the impact of this waiver are set out below in the trading update.

By reason of Sheikh Mubarak A. M. Al Sabah being a director of, and shareholder in Action Hotels, as well as being a director of, and shareholder of AREC, the Rent Waiver constitutes a related party transaction under AIM Rule 13 of the AIM Rules for Companies. The independent directors of the Company (being the directors of the Company excluding Sheikh Mubarak A. M. Al Sabah and Rawaf Bourisli), having consulted with the Company's nominated adviser, Zeus Capital Limited, consider that the terms of the Rent Waiver are fair and reasonable insofar as its shareholders are concerned.

Trading update

The Middle East and North Africa (MENA) Hospitality Market as a whole is currently experiencing static economic conditions largely driven by lower oil prices, reduced government and private sector spending leading to muted growth demand resulting in a drop in Revenue Per Available Room (RevPAR).

Action Hotels has a resilient business model, focusing on the economy and mid-scale hotel market, and as a result has seen less of decline in RevPAR from its Middle East hotels compared to many of the luxury and upper upscale hotels in the region. However, given the current climate, it has taken appropriate actions with regards to its cost base to balance out the lower than expected revenue from these hotels. One of these steps has been reviewing and renegotiating terms with the hotel owners on their leasehold properties in addition to monitoring the running costs by working closely with the hotel operators.

The Rent Waiver will deliver a cost reduction of USD $1.2m in the year to the 31 December 2017. This will assist in offsetting the expected 7% underperformance in 2017 revenue against market expectations. Adjusted EBITDA is now expected to be in the region of $15.6m.

2018 update

Given the current conditions in the Middle East, the Board has also taken the decision to delay the opening of Mercure Riyadh Hotel which is its first in the Kingdom of Saudi Arabia, to Q1 2019. The Board will then prioritise these resources to concentrate on the 347 room, Novotel South Wharf, Melbourne Convention Centre hotel, which is expected to open in April 2018. The Australian market remains buoyant and is not seeing any slowdown in growth and the Company's Australian portfolio is providing a good balance. The Company is currently reforecasting its 2018 expectations to reflect these changes.

Despite the numerous challenges facing the hotel industry, the Middle East, particularly the Gulf Cooperation Council (GCC), remains one of the fastest growing markets in the world. The market leading research for the hotel industry, STRG, forecast that most markets will either bottom out or slowly start recovering as oil prices stabilise, key infrastructure projects come online, and new tourism strategies take effect during the coming years.

For more information, contact:

Victoria Ayton Tel: +44 (0) 20 3829 5000

Notes to Editors

Action Hotels PLC

Action Hotels PLC is a leading owner, developer and asset manager of branded three and four star hotels in the Middle East and Australia. Established in 2005, Action Hotels currently has 13 completed hotels with 2,276 rooms in aggregate across the Middle East and Australia, with further properties in development in both regions.

More information is available at http://www.actionhotels.com/