PPHE LFL EBITDA growth of 5.7% in H1, RevPAR outperformance in London

05 September 2019

PPHE Hotel Group has reported a good first half performance, with continued revenue growth and Group like-for-like EBITDA up 5.7%, for the six months ended 30 June 2019. This reflects an increase in all of their key operating metrics, with good growth in occupancy and average room rate both contributing to strong RevPAR growth, as well as the strength of the portfolio. This performance has been driven by a solid operating performance from the UK hotel portfolio.

PPHE said it's real estate investment programme has progressed well, and they were "delighted" with the completion of several significant repositioning projects which have transformed the portfolio. Going into the second half of the year, all of their hotels are now fully operational.

Commenting on the results, Boris Ivesha, President and Chief Executive Officer, PPHE Hotel Group said: "We are pleased to report a good first half performance, with continued revenue growth and Group like for like EBITDA up 5.7%. This reflects an increase in all of our key operating metrics, with good growth in occupancy and average room rate both contributing to strong RevPAR growth, as well as the strength of our portfolio. This performance has been driven by a solid operating performance from our UK hotel portfolio. Our real estate investment programme has progressed well, and we are delighted with the completion of several significant repositioning projects which have transformed our portfolio. Going into the second half of the year, all of our hotels are now fully operational.

"We remain committed to delivering future growth. Our current pipeline is strong, and the Group expects to spend approximately £300 million on exciting developments such as art otel London Hoxton. We also remain open to asset acquisitions to broaden our portfolio and deliver our target returns on investment.

"PPHE's proven development strategy is to target real estate in prime locations and attractive geographies where we believe there is significant upside potential to drive growth and long term value through both the property portfolio and operations. The recent independent
valuations of our properties represent an EPRA NAV per share of £25.52, up 3.9% from 31 December 2018. We continue to expect PPHE s full year performance to be in line with previous expectations."

Financial highlights and EPRA reporting
On a like-for-like1 basis, total revenue increased by 6.3% to £155.2 million (H1 2018: £146.0 million). Reported total revenue increased by 4.3% to £155.3 million (H1 2018: £148.8 million).

On a like-for-like basis1, EBITDA increased 5.7% to £43.1 million (H1 2018: £40.8 million) Reported EBITDA increased by 12.5% to £45.7 million (H1 2018: £40.6 million), benefiting from the adoption of IFRS 16.

Like-for-like1 RevPAR increased by 7.5% to £93.4 (H1 2018: £86.9). Reported RevPAR increased by 9.0% to £93.4 (H1 2018: £85.7). In the UK, like-for-like and reported RevPAR increased by 9.3% to £122.3 (H1 2018: £112.0).

Normalised profit before tax2 increased by 7.5% to £5.5 million (H1 2018: £5.1 million) In H1 2018 reported profit before tax benefited from a one-off revaluation resulting in an H1 2019 reported profit before tax decrease to £4.3 million (H1 2018: £16.4 million).

Normalised EPS3 was £0.16 (H1 2018: £0.15), reported EPS was £0.16 (H1 2018: £0.42).

Last 12 months (LTM) adjusted EPRA earnings per share to 30 June 2019 increased by 4.7% to £1.20 per share (12 months ending 31 December 2018: £1.15).

Interim ordinary dividend of 17 pence per share, up 6.3% from last year (H1 2018: 16.0pence per share), which is in line with the Company’s progressive dividend policy

Following a recent independent valuation of the portfolio, the Group’s total assets now amount to £1.7 billion which translates to an EPRA NAV of £25.52 per share as at 30 June 2019, reflecting a 3.9% increase since 31 December 2018 (£24.57 per share).

Business & financial review
Corporate activity and operational highlights

Completion of a multiyear extensive £100 million+ hotel investment programme aimed at repositioning and further upgrading property portfolio in the UK and Netherlands.

Successful reopening of Holmes Hotel London, which received a £9.0million investment to reposition the property.

Good progress also made with repositioning projects at Park Plaza Vondelpark, Amsterdam and Park Plaza Utrecht with soft openings at both properties.

Site works progressing at the Group’s 100% owned art’otel london hoxton, with improved planning consent. Works are also underway at art’otel london battersea power station, which will be managed by the Group on completion of the construction.

Entry into the United States for our 100% owned art’otel brand with a joint venture agreement to develop a prime site located in Manhattan, New York.

Arena Hospitality Group (Arena) has agreed to acquire the 88 Rooms Hotel in Belgrade, Serbia, for HRK 47 million (approximately £5.7 million), subject to certain conditions being fulfilled.

Second major repositioning project for 2019 unveiled as Arena completed a multi-million-pound repositioning of the Arena Kažela Campsite including brand-new luxury camping homes.

Financial performance
The Group is pleased to report a good first half performance delivering like-for-like1 growth in both revenue and EBITDA. This was largely driven by a strong RevPAR performance in London contributing to like-for-like1 Group RevPAR growth of 7.5% supported by a 4.8% like-for-like1 increase in average room rate and 200bps like-for-like1 increase in occupancy.

Trading has continued to mature across new hotels opening in 2017 and 2018 further driving the Group’s first half performance.

Total revenue increased by 4.3% to £155.3 million (H1 2018: £148.8 million), driven by maturing performance of new openings among other factors. On a like-for-like basis1, revenue increased by 6.3% to £155.2 million (H1 2018: £146.0 million).

Group EBITDA increased by 12.5% to £45.7 million (H1 2018: £40.6 million). On a like-for-like1 basis, EBITDA increased by 5.7% to £43.1 million (H1 2018: £40.8 million); Like-for-like1 EBITDA margin decreased by 10bps to 27.8% (H1 2018: 27.9%).

The increase in like-for-like EBITDA was largely due to strong Group RevPAR growth of 7.5% supported by a 4.8% increase in average room rate and 200bps increase in occupancy alongside the maturing of our 2017 and 2018 openings in the Netherlands and United Kingdom.

Current trading and outlook:
The second half of the year is usually the stronger trading period in all of PPHE’s markets. While in 2019 Croatia is experiencing competitive market conditions, London and the Netherlands continue to trade well. Overall, trading since 30 June 2019 is in line with expectations.