Easyhotel : 2016 Final results

29 November 2016

easyHotel plc

easyHotel plc ("easyHotel") (AIM:EZH) the owner, developer, operator and franchisor of "super budget" branded hotels today announces its final results for the year ended 30 September 2016.

 Total system sales1 up 6.8% to £21.32m (2015: £19.95m)

 Total revenue up 8.7% to £6.02m (2015: £5.54m)

• Like for like owned hotels revenue growth of 13%

   Adjusted EBITDA2up 6.5% to £1.55m (2015: £1.46m)

• Profit before tax up 38.4% to £1.09m (2015: 0.79m)

• Basic earnings per share of 1.4p (2015: 1.0p)

• Proposed final dividend of 0.22p per share on the enlarged share base (2015: 0.33p per share), making the total dividend for the year 0.33p per share (2015: 0.33p per share)

  Business highlights

• On track to deliver development strategy announced in September 2016

• Significantly accelerated development pipeline with 1,527 rooms now in development

  • Five new owned hotel projects will add 576 rooms by early 2018

  • 951 new franchise rooms currently in the pipeline will increase brand presence without direct capital investment

    Post year end events

• Placing of 38,000,000 new ordinary shares raising £38.0m (£36.7m after expenses), to fund owned hotel expansion strategy

• Completed refinancing of £7.2m bank facility. New 5-year facility of £12.0m secured

• Two new franchise hotels opened in Brussels and Amsterdam, and a new franchise agreement signed for easyHotel in Reading

• Completed acquisition of the Barcelona hotel development

Explanatory footnotes:

1 Total system sales is the full amount that the customer pays for owned and franchised hotels, including initial sign-on fees paid by franchisees to the Company

2 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 non-recurring items

"We are on track to deliver the development plans we announced in September 2016.

2015/2016 was a transformational year for easyHotel, with excellent operational progress made across the business and a significant acceleration of both our owned and franchise hotel development pipelines.

The Board remains confident that by exploiting the strength of the brand, easyHotel will continue to outperform the budget hotel sector as consumers seek out the best value for money.

With the experienced team we now have in place and the proceeds of our recent fundraising, we are in an excellent position to expand the easyHotel brand and deliver improving returns for our shareholders"

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 three owned hotels currently comprise 390 rooms, and it has a further 19 franchised hotels with 1,643 rooms.

Old Street (London), Glasgow, Croydon.

Belgium (Brussels), Bulgaria (Sofia), Germany (Berlin, Frankfurt), Hungary (Budapest), The Netherlands (Amsterdam, Rotterdam, The Hague), Switzerland (Basel, Zurich), UAE (Dubai), United Kingdom (Edinburgh, London Heathrow, Central London, Luton).

Hotel development pipeline

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

United Kingdom (Liverpool, Manchester, Birmingham, Ipswich), Spain (Barcelona)

The Netherlands (Amsterdam-Zaandam), UAE (Dubai), Germany (Bernkastel-Kues), Portugal (Lisbon), Turkey (Istanbul), UK (Reading)

Website: www.easyHotel.com

I am pleased to report that easyHotel continued to trade in line with the Board's expectations during the year under review. Our owned hotels traded particularly strongly, with like for like revenues up by 13% when compared with the prior year.

The Group's growth strategy focuses on the continued development and rollout of owned hotels, primarily in the UK, that the Board believes will offer sustained earnings per share enhancing returns. Alongside growth of the owned hotel portfolio, our franchise network will continue to be expanded mostly outside the UK which increases our network without direct capital investment from the Group.

Our successful share placing, since the year end on 17 October 2016, raised £38.0m (£36.7m after expenses) of additional equity capital. Alongside the refinancing of an existing bank facility shortly after the year end, sufficient capital has been secured to finance further growth in the Group's identified hotel pipeline in line with the Board's strategy.

The operational foundations necessary to achieve the Group's exciting ambitions are now firmly in place. Moreover, the Board is confident that these plans will be delivered consistent with the values that distinguish the easyHotel brand from other providers in the sector - we make things simple; we're always the best value for money; we do what we say; we care for you.

An interim dividend of 0.11p per ordinary share was paid on 1 July 2016. The Board is now pleased to recommend to shareholders the payment of a final dividend of 0.22p per share on the basis of our enlarged share capital. Subject to shareholder approval at our forthcoming AGM, this dividend will be paid on 16 February 2017 to shareholders on the register on 13 January 2017.

This has been the first full financial year under the management of Guy Parsons, Chief Executive Officer, and Marc Vieilledent, Chief Financial Officer, both of whom were appointed in 2015. The Group has benefited from their substantial budget hotel sector experience, commercial skills, hard work and the changes they have made to strengthen their team, operational processes and controls. Their insight into the industry, complemented by the property, financial and plc experience of the Non-Executive Directors, means the Board's collective knowledge provides a strong basis for sound governance of the business. I am particularly grateful to my co-Director, Scott Christie, who has continued to play an exceptional role during a period of considerable activity.

easyHotel has an excellent team working hard to advance this ambitious business. On behalf of the Board, I would like to thank them for all their efforts and continued support.

The outlook for the business is most encouraging. With the right team now in place, a broader shareholder base and significant institutional support, the Group has an exciting opportunity ahead. We will continue to update shareholders regularly on our progress.

2015/16 was a transformational year for easyHotel with excellent progress achieved.

High levels of staff engagement across both our owned and franchised hotels together with improving customer satisfaction, have driven impressive like for like sales growth. This, together with our focus on reducing costs, improving efficiencies and maximising the returns from our investments has produced a significant increase in our profits.

Our pipeline of new hotels is accelerating. The equity fundraise in October 2016 will enable us to develop and open more owned hotels, and such investment in the brand and estate should encourage more franchisees to join the brand. With the experienced team we now have in place, we are in an excellent position to expand the easyHotel brand and deliver improving returns for our shareholders.

In 2015/16 total system sales grew by 6.8% to £21.3m, and our company revenues by 8.7% to £6.0m. This was achieved by an increase in like for like owned hotel sales of 13% and the maturing of Croydon and Frankfurt.

Occupancy for owned and franchised hotels was 76.2% (2015: 75.0%).

Our strong sales performance led to a 6.5% increase in adjusted EBITDA to £1.55m.

Following the sale of the restaurant asset at our Liverpool development site, our profit before tax increased by 38.4% to £1.1m.

Owned hotels

Despite a softening UK hotel market, particularly in London, revenue grew on a like for like basis by 13% as a result of the new revenue management and dynamic pricing strategy implemented during the year. This, together with a decision to start selling a limited allocation of rooms via selected on-line travel agencies (OTA's) resulted in all three owned hotels significantly outperforming their competitive set (as measured by STR) from November 2015 onwards.

As previously announced, the retrospective planning permission submission for 78 of the 162 rooms at the Old Street hotel was refused by Islington Council. A formal appeal will be lodged in December 2016 and a decision is expected during 2017. The remaining 84 rooms at Old Street, which already have planning permission in place, are unaffected.

Franchise partners

Like for like revenue at our franchised hotels increased by 1% during the financial year, reflecting the unique market conditions in which the hotels operate. The hotels in continental Europe performed particularly strongly whereas the UK hotels traded in line with the UK market.

There were 17 franchise hotels operating at the end of the financial year, following the termination of the franchise agreement in Prague.

Market outlook

The UK hotel market performed strongly in the post Brexit period, as a result of weaker Sterling (vs. the US Dollar and Euro) resulting in an increase in staycations and in-bound tourism.

The Board remains confident that despite any uncertainties surrounding the imminent Brexit negotiations, the easyHotel brand will continue to outperform the hotel sector as consumers seek out the best value for money.

Development of owned hotels

We have a growing pipeline of hotels under development.

We completed the acquisition of the Manchester hotel in January 2016 (which had originally been purchased subject to planning permission) and both the hotels in Manchester and Liverpool are under construction and will open in early 2017.