TIDMSSTY
RNS Number : 2668C
Safestay PLC
09 June 2023
Safestay plc
("Safestay", the "Company" or the "Group")
Final Results for the year Ended 31 December 2022
Safestay (AIM: SSTY), the owner and operator of an international
brand of contemporary hostels, is pleased to announce its audited
Final Results for the 12 months to 31 December 2022.
2022 Financial highlights
-- Total revenues increased to GBP19.1million reflecting a
return to near normal trading (2021: GBP6.4 million)
-- 20% increase in average bed rate to GBP23.63 (2021: GBP19.70)
-- EBITDA fell to GBP5.5m (2021 profit: GBP7.2m due to the sale
of Barcelona Sea and Edinburgh hostels)
-- Adjusted EBITDA increased to GBP5.9 million (2021 loss: GBP1.0 million)
-- Loss after tax of GBP0.3m (2021: loss of 0.6m)
-- Loss per share of 0.44p (2021: loss of 0.93p)
-- Available cash balances of GBP5.2 million (2021: GBP4.5 million)
2022 Operational highlights
-- Occupancy was 63%, still low compared to pre-covid levels of 77% (2019)
-- Trading broadly uninterrupted with our 16 premium hostels open for 97% of the year
-- Guest profile mostly made up of young travellers with large
bookings from schools and colleges still relatively low against
historic levels but showing signs of recovery
-- Business overall more efficient and cost effective as a
result of practices and efficiencies adopted during the covid
period
Outlook
-- Trading in the first four months of 2023 is significantly
ahead of our budget showing the resilience of the travel market
sectors in which Safestay operates
-- Prospects for 2023 are encouraging on the basis that the hostels are:
o Sustaining average room rate at or above 2022 levels
o Benefiting from the return of large school and college
bookings
o Continuing to move occupancy back to historic levels
Larry Lipman, Chairman of the Company, commenting on the results
said:
"2022 was our first near normal trading year since the start of
the pandemic and it was therefore very pleasing to see that when
allowed to trade, our hostels immediately attracted back a high
level of guests. Looking ahead, if occupancy continues to grow into
2023, which we believe it will, and we are able to maintain our
average bed rate levels, then the business is in a strong position.
Overall, I believe we are a better business having weathered the
pandemic and we are now back into growth mode from a stronger base
both financially and operationally".
Enquiries:
Safestay plc Tel: +44 (0) 20 8815 1600
Larry Lipman
Liberum (Nomad & Joint Broker) Tel: +44 (0) 20 3100 2000
Andrew Godber / Edward Thomas
Novella Tel: +44 (0) 20 3151 7008
Tim Robertson / Safia Colebrook
CHAIRMAN'S STATEMENT
Introduction
2022 was a good year for the business and marked the return to
near normal trading. For the first time in two years, the portfolio
was allowed to trade freely with all 16 premium hostels open for
97% of the year. The response from guests was immediate and
positive, reflecting some pent-up demand but also a return to
normal travelling patterns. Revenues increased threefold to GBP19.1
million and with a 20% increase in average bed rate, the Group
recorded EBITDA of GBP5.5 million, down from GBP7.2 million in the
prior year. The Group recorded adjusted EBITDA of GBP5.9 million up
from a GBP1.0 million loss in the prior year.
We have a mature and well-established hostel portfolio all
located in central parts of Europe's best known cities which
collectively attract millions of young visitors every year. The
pandemic did not change people's desire to visit and experience
these cities, it only limited their ability to do so. Now that
travel restrictions are lifted, we are seeing a return to normal
trading with young travellers and other groups, such as families
and commercial travellers, taking advantage of Safestay's network
to stay centrally, economically and safely in Europe's leading
cities.
Importantly, we entered 2022 in a good financial position having
reduced debt and increased liquidity with the disposal of our
Edinburgh and Barcelona Sea hostels during 2021. This resulted in
gearing reducing to 54% and a strengthened financial position. In
addition, the Group still has a valuable property portfolio with a
mix of freehold and leaseholds across the 16 strong hostel
portfolio.
2023 has begun well with trading in the first four months
significantly ahead of budget. The Group is well placed to continue
to build on the performance of the past twelve months, expanding
its visitor base supported by investment in developing a new
website and membership scheme both aimed at increasing the level of
direct sales.
Financial Results
Revenue
Group revenue for the financial year ended 31 December 2022,
increased to GBP19.1 million, above both the prior year and the
last year before the pandemic with just one more hostel than in
2019 (2021: GBP6.4m; 2019: GBP18.4 million).
Room revenue grew to GBP17.1 million (2021: GBP4.9 million) and
food & beverage revenue together with ancillary revenue was
GBP2.0 million (2021: GBP1.3 million).
Adjusted EBITDA
The Directors consider that an adjusted EBITDA provides a key
measure of performance since it removes the impact of the profit on
disposal of the properties, which is not a trading activity, along
with the benefit of rent concessions received. Adjusted EBITDA for
the year to December 2022 was a GBP5.9 million profit (2021:
GBP1.0m loss). Adjusted EBITDA represents earnings before interest,
tax, depreciation, amortisation and exceptional items. Following
the introduction of IFRS16 from 1 January 2019, rent charges are no
longer included in EBITDA as they are shown in lease finance and
right-of-use depreciation.
2022 2021
GBP'000 GBP'000
Adjusted EBITDA is as follows:
Operating Profit after exceptional expenses 1,766 3,393
Add back:
Depreciation 1,363 1,434
Right of Use Depreciation 2,210 2,243
Amortisation 150 96
Actual EBITDA 5,488 7,166
Impairment - -
Profit on disposal - Edinburgh - (7,511)
Loss on disposal - Barcelona Sea - 554
Exceptional expenses 369 -
Rent concessions - (1,275)
Share based payment expense 42 72
------- -------
Adjusted EBITDA 5,900 (994)
------- -------
Finance Costs
Finance costs in 2022 were GBP2.6 million (2021: GBP2.7 million)
as follows:
2022 2021
Lease finance 1,404 1,741
Property financing
costs 191 197
HSBC debt facility
interests 853 695
Other finance charges 111 68
----- -----
Finance costs 2,559 2,701
The Group has a ongoing loan facility with HSBC UK Bank plc,
which ends in January 2025. The value of the loan at 31 December
2022 was GBP12.7m. The Group also has a GBP5.0 million government
backed CBILS loan secured for 6 years on 16 December 2020, with
repayments commencing 16 April 2022 reducing the balance to GBP4.25
million at 31 December 2022.
In addition, the Group has a government backed loan in Austria
(GBP0.1 million). Since the introduction of IFRS 16 from 1 January
2019, our hostel leases have been accounted for as lease
liabilities. At the lease commencement date, the Group recognises a
right-of-use asset and a lease liability on the statement of
financial position. The rental charge is replaced with interest and
depreciation. In 2022, the finance costs include GBP1.4 million of
lease interest (2021: GBP1.7 million). The GBP0 (2021: GBP1.3
million) reduction negotiated with our landlords was treated as
rent concessions in administrative expenses in full in the prior
year.
Earnings per Share
Basic loss per share for the year ended 31 December 2022 was
0.44p (2021: loss 0.93p) based on the weighted average number of
shares, 64,679,014 (2021: 64,679,014) in issue during the year.
The Group made a GBP0.3 million net loss in 2022 (2021 loss:
GBP0.6 million).
Cash flow, capital expenditure and debt
Net cash generated from operations was GBP6.3 million (2021:
(GBP1.3) million).
The Group had cash balances of GBP5.2 million at 31 December
2022 (2021: GBP4.5 million).
Outstanding bank debt at 31 December 2022 was GBP17 million
(2021: GBP18 million). This includes a GBP12.7 million loan with
HSBC (2021: GBP12.7 million), minus the GBP0.1 million amortised
loan fees (2021: GBP0.1 million), the GBP5.0 million government
backed CBILS loan received in December 2020 reduced by GBP0.75
million in 2022, and the Austrian loan GBP0.1 million. The lease
liabilities amount to GBP33 million (2021: GBP33 million).
The gearing ratio (exclusive of lease liabilities) is 54%.
Net asset value per share fell to 46p (2021: 47p).
The value of freehold and long leasehold properties has not
materially changed in the period.
Operational Review
The business had to relaunch a number of times during the
pandemic according to when governments allowed the hospitality
industry to trade and this varied from country to country. In 2022,
the hostels were open for close to 100% of the year during which
momentum built without interruption, resulting in a strong summer
period and better than expected trading in the traditionally weaker
months. It is hard to decipher to what extent demand in 2022
relates to pent up frustration from those unable to travel during
the pandemic and how much is down to trading returning to normal.
However, given occupancy is still well below historic averages, we
believe the business is simply returning to normal market
conditions.
The business had to be re-set for Covid, with the operational
cost base significantly reduced alongside the sale of two hostels
in Edinburgh and Barcelona which ensured the Group's financial
security. Furthermore, on 11 March 2022, the landlord of the
Holland Park hostel agreed to a reduction in the base rent of
GBP0.25m per year.
Currently, the portfolio is made up 16 premium hostels, 4 in the
UK and 12 on the continent, together selling 725,778 beds at an
average price of GBP23.63 per night in 2022.
From nearly a standing start, the hostels performed well overall
in 2022, with the European sites representing 64% of sales and the
UK representing 36%. Elephant & Castle and Glasgow performed
well in the UK with Pisa and Lisbon also being particularly strong
performers on the continent. For the hostel in Brussels, another
strong performer, negotiations around a new lease are about to
commence and there is the potential to take on extra areas in the
building.
The majority of guests have been young travellers with large
groups from colleges and schools only making up 10% of
accommodation revenue whereas historically these made up around 28%
of this revenue. There is a reasonable likelihood group bookings
will improve significantly in 2023 as colleges and schools were
perhaps more cautious to return and take longer to prepare for
trips. In addition, there has been good custom from young families
and single commercial travellers.
Our marketing policy is primarily focused on the digital space
and we intend to launch a new website in June. This is expected to
further drive traffic and direct bookings, particularly from
individual travellers. Currently, our website is responsible for
14% of overall sales. The balance of bookings come from Groups and
Online Travel Agencies ('OTAs').
Alongside the launch of the new website, the Group is planning a
significant marketing campaign, in part to maximise the investment
in the website, but also to promote a new membership scheme,
encouraging members to take advantage of member only discounts
available across the portfolio. Sarah Whiddett, our new
Non-Executive Director, with her extensive marketing leadership
experience will make a significant contribution to this.
Safestay is positioned at the premium end of the hostel market.
In order to maintain our premium positioning, it is critical that
we invest in maintaining a premium level of quality and feel across
the portfolio. To this end, from 1 January 2023, we have allocated
3% of total revenues in order to maintain these high standards in
our hostels.
We have also decided to brand the Group as Safestay Hostels and
Hotels to be able to attract premium customers to some of our
properties that have superior accommodation equivalent to hotel
rooms. This will allow us to expand our market reach and price
points.
We are currently formulating a COVID 19 business interruption
insurance claim, as we believe our policy wording is similar to
some recent successful outcomes for insured parties in our
industry. Whilst a successful claim may result in a material payout
to the Group, at this stage, there can be no certainty of any
financially beneficial outcome.
The Board
Paul Hingston joined the board as CFO and Company Secretary on
21 February 2022. Paul has extensive leisure and travel sector
experience, most recently he was Group Finance Director for
Starboard Hotels Ltd. Nuno Sacramento resigned from his position as
Chief Operating Officer on 17 June 2022. In November 2022, Peter
Zielke was appointed as Chief Operating Officer and took up the
role on 1 February 2023. Peter is a highly experienced operator
with extensive industry experience. Since the year end, in April
2023, Sarah Whiddett was appointed as a Non-Executive Director and
has over 17 years' marketing leadership experience.
Outlook
2022 was a good year for our business as it demonstrated the
continued customer appeal of our portfolio of premium hostels. Our
trading results reflected this, with significant increases in sales
and the average price per bed night. The current year has started
strongly, with trading in the first four months significantly ahead
of budget, and this together with careful revenue management and
increased occupancy should result in a good outcome for this
year.
Larry Lipman
Chairman
8 June 2023
STRATEGIC REPORT
Principal activity
The principal activity of the Group comprises the operation and
development of high-quality traveller accommodation under the
Safestay brand in properties that are either owned or occupied on
leasehold.
The Business Model
The Safestay business model is to develop and operate a brand of
contemporary hostels in the UK and key tourist cities in Europe.
The Safestay brand is positioned at the premium end of the hostel
spectrum appealing to a broad range of guests. Core elements of the
model are:
-- Development: Identifying potential properties in target
cities, acquiring the leasehold or freehold in the properties and
their contemporary, stylish refurbishment to fit with the brand
-- Operational: Deploying a strong hostel expertise and cost
control to achieve best in class operating margins
-- Brand: Building the Safestay brand value
-- Scale: Building the platform to efficiently add further hostels to the Group
-- People: Investing in the right people where automation cannot be adopted
-- Guest experience: Providing a comfortable, safe and enjoyable
stay in our hostels for a reasonable price with a focus on customer
satisfaction, a strong community experience and repeat stays.
Section 172(1) statement
The directors understand the importance of their section 172
duty and the need to act in a way the directors consider, in good
faith, would be most likely to promote the success of the Group for
the benefit of its members, and in doing so have regard, amongst
other matters to:
-- the likely consequences of any decisions in the long term;
-- the interests of employees;
-- the need to foster business relationships with suppliers, customers and others;
-- the impact of operations on the community and environment;
-- the desirability of maintaining a reputation for high
standards of business conduct; and
-- the need to act fairly as between members of the Group.
This duty underpins the Board's decision-making processes and
the Group's strategic direction, with due consideration given to
the long-term impact of its decisions on shareholders, employees,
customers and wider stakeholders. Practical measures that the Board
takes to ensure the interests of these stakeholders are reflected
in the Board's decision-making process are as follows:
-- Customers
Customer engagement levels is a key performance indicator of our
business. We use this customer feedback to continuously improve our
product and level of service in the hostels. The Group also
directly engages with customers via social media to share
information and collect further feedback. This communication
channel was used throughout the pandemic to maintain a close
connection with our customers when the hostels were closed during
the Pandemic.
-- Employees
Employees are at the heart of the hospitality industry and the
directors know that the long-term success of the Group and its
ability to continue to extend its unique pan-European hostel
network will rely on a strong Group culture, employees' wellbeing,
and efficient succession planning. Some Board Meetings take place
in hostels to encourage direct contact between the Board and the
operational teams. Bi-annual meetings are organised with all
managers to share best practice, Group information and help build a
positive culture amongst the teams.
-- Suppliers
Where possible, the Group forms long-term relationships with
suppliers, so that the Group and its suppliers have a more certain
environment in which to operate. This also applies to landlords of
the 12 hostels operated by the Group under lease agreements.
-- Shareholders
In addition to the Annual General Meeting, the directors hold
meetings with institutional shareholders following the release of
year end and interim results and remain available for ad hoc
meetings throughout the year. In addition, the executive directors
have participated in shareholder conferences to present their
business and strategy and obtain live and direct feedback from
non-institutional shareholders. The Group website includes an
investor section where shareholders can find all relevant
information and reports.
The Board believes communication with stakeholders helps to
shape and adapt the Group's strategy and ultimately contributes to
maintaining a high standard of business conduct. The directors will
always assess the consequences of any decision over the long term.
For example, decisions over whether to acquire or develop new
properties follows a rigorous process involving long term financial
assessment and commercial study, all in conjunction with the
funding capabilities of the Group. Similarly, the Group uses
customer satisfaction reports to help allocate the way funds are
deployed under an annual capex improvement programme to enhance the
experience of customers and ultimately safeguard brand equity.
The Group complies with the UK's Quoted Companies Alliance
Corporate Governance code for Small and Mid-Size Quoted Companies
(the "QCA Code") and further information is publicised in the
investor section of the Group website.
https://www.safestay.com/investors/
-- Engagement with the wider community
The board ensures that decisions made are responsible and
ethical by taking into consideration the wider society external to
the organisation. The Group is committed to contributing to the
community in which it operates as a business. The Group is using
its footprint in each country to encourage local initiatives via
the local management and staff.
-- Anti-bribery
The Group is committed to the prevention of bribery by those
employed and associated with it and is committed to carrying out
business fairly, honestly and openly, with zero-tolerance towards
bribery. All employees have a responsibility to prevent, detect and
report all instances of bribery as stated in our employee
handbook.
Review of business and future prospects
Key Metric
2022 2021 2019
Occupancy % 63.0% 35.0% 77.3%
Average Bed Rate GBP23.63 GBP19.70 GBP21.40
Room Revenues (GBP'000) 17,150 4,901 15,115
Total Revenues (GBP'000) 19,146 6,423 18,379
Net cash (used in)/generated from
operations (GBP'000) 6,263 (1,323) 5,228
Net assets per share 46p 47p 55p
The occupancy is calculated by dividing the number of beds sold
over the period with the number of beds available when the hostels
were opened during the same period. It means that in 2022 and 2021
the occupancy was calculated specifically for those days when the
hostels were not closed due to the COVID-19 pandemic. The
underlying business generated revenues of GBP19.1 million (2021:
GBP6.4 million; 2019: GBP18.4 million).
Operating profit was GBP1.8 million (2021: GBP3.4 million
profit) and an underlying adjusted EBITDA of GBP5.9 million (2021:
GBP1.0 million loss) for the year to 31 December 2022. Actual
EBITDA is GBP5.5 million (2021: GBP7.2 million) and Loss before Tax
is GBP0.7 million (2021: profit of GBP0.7 million). The comparisons
are difficult due to the pandemic leading to the hostels only able
to trade on a limited basis.
2022 was a successful year for the business demonstrating the
continued customer demand for the premium hostel portfolio. Whilst
still yet to return to pre-covid occupancy levels, the financial
trading performance was very encouraging with sales increasing
above 2019, albeit with one more hostel in 2022.
The financial position of the business is sound benefiting from
the disposal of two hostels in 2021. The Barcelona Sea hostel was
sold in February 2021 for a GBP0.7 million consideration, and the
Edinburgh hostel was sold for GBP16 million in June 2021. The
combination of these disposals and cost saving measures, has meant
the Group had cash balances of GBP5.2 million, as at 31 December
2022.
The Group is currently not committed to any future acquisition
projects or development. However, the Group is hoping to capitalise
on this position to seize opportunities and aggregate a fragmented
market.
Social matters
Safestay provided jobs for 226 for people in 2022.
The Group operates in 12 different countries and has established
local operating entities in each of the countries where our hostels
are located. This gives us the ability to hire employees locally
and offer them employment contracts and social benefits in full
compliance with each relevant jurisdiction. This also includes the
relevant level of hospitality training as well as mandatory
training courses.
Maintaining a reputation for high standards of business
conduct
The Board is mindful that the continued growth and success of
the Group is dependent upon maintaining high standards of business
conduct, including:
-- The ability to successfully compete within the market, to
attract and retain clients, and to service these clients to a high
standard;
-- The ability to attract and retain high quality employees;
-- The ability to attract investors and to meet their
expectations of good governance and sound business conduct;
-- The ability to meet the Group's regulatory obligations, and
to meet the expectations of relevant regulatory bodies.
This mindset underpins the formulation of the Group's strategy
and is evident throughout the Board's decision-making process.
Ensuring that members of the Company are treated fairly
The Board ensures that the Group's shareholders are treated
equally and fairly, regardless of the size of their shareholding or
their status as a private or institutional shareholder. The Group
provides clear and timely communications to all shareholders in
their chosen communication medium, as well as via the Group's
website and via a Regulatory News Service. All holders of Ordinary
shares are able to vote at general meetings of the Group.
Environment
The Group is mindful of the importance of reducing environmental
impact wherever possible and has implemented several initiatives to
achieve a sustainable future. The Group intends to continuously
review and increase its efforts in this area. As an example, in all
Safestay properties, we minimise the use of plastics wherever
possible seeking more sustainable alternatives. This enables us to
reduce our environmental footprint and helps us build a reputation
with our guests as it meets their environmental expectations. We
reuse and recycle the plastic we do use.
We are also constantly reviewing our CO2 emissions. We are
committed to reducing Scope 1 and 2 emissions - for example, in the
future, we would like to incorporate water-saving products in our
showers to encourage our guests to be mindful of water wastage. We
will also look to reduce Scope 3 emissions working only with
trusted suppliers. Additionally, we are exploring the possibility
of working with train and other public transport companies to
reduce the carbon footprint of our guests.
We have a unique carbon impact tool which we offer to our
guests. This gives them the opportunity to test their carbon impact
by using an online carbon calculator on our website with the aim to
increase the overall awareness and desire to act responsively
during their journey.
More information is available on our website at
https://www.safestay.com/corporate-social-responsibility/ .
Employee diversity
The Group is committed to diverse representation at all levels.
We are mindful that there is still work to be done to achieve these
goals and are looking to make significant progress in our
recruitment, retention and promotion strategies as we emerge from
the pandemic.
The following table reports on the gender diversity of the
Group's employees at 31 December 2022:
Male Female
Directors 5 0
Senior Managers 2 4
Employment of disabled people
It is the policy of the Group to employ disabled persons in the
job suited to their aptitudes, abilities and qualifications
whenever practicable, endeavour to continue to employ those who
become disabled whilst in the Group's employment and to provide
disabled employees with the same opportunities for promotion,
career development and training as those afforded to other
employees.
Human rights
The Group is committed to respecting human rights within our
business by complying with all relevant laws and regulations. We
prohibit any form of discrimination, forced, trafficked or child
labour and are committed to safe and healthy working conditions for
all individuals, whether employed by the Group directly or by a
supplier in our supply chain.
Legal and ethical conduct
The Group has comprehensive measures to meet its statutory
requirements across all areas of its operation, and those expected
by our customers and employees, as necessary, for the long-term
success of the business. Risks in this area can occur from
corruption, bribery, and human rights abuses, including
discrimination, harassment, and bullying. The Group has training
programmes for all employees. We take a zero-tolerance approach to
bribery and are committed to acting professionally, fairly and with
integrity in all our business dealings and relationships wherever
we operate and implementing and enforcing effective procedures to
counter bribery as documented in the Group anti bribery policy
signed by the directors.
Principal risks and uncertainties
Management has completed a full review of the risks which may
arise from within or outside the business and may have an impact on
the Group.
The impact of the environment on the Group's operations has been
assessed and there is a strategy to reduce this risk as explained
in the Environment Section above. No other emerging risks have been
identified at this point. There has been no identified change in
the principal risks and uncertainties.
The principal risks and uncertainties that could potentially
have a material impact on the Group's performance are presented
below.
Business risks
Safestay operates in the hospitality industry which, over the
years, has experienced fluctuations in trading performance.
Traditionally, the hotel sector's performance has tracked
macro-economic trends, feeling the strain during the economic
downturn, and becoming more buoyant during recovery. The hostel
sector, which leans more heavily on leisure travellers and has a
lower price point, has proved more resilient and has delivered more
robust cash flows through the economic cycle and has quickly
recovered from isolated terror acts which may limit travel in the
short term. The hospitality sector in the UK continues to face a
number of cost headwinds from the National Living Wage, commodity
price inflation, foreign exchange rate fluctuations and the
hangovers from the UK's departure from the European Union and the
consequences of that.
A proportion of Safestay's business in the UK comes from Europe,
including several school groups. In addition, over 60% of the
turnover is coming from hostels located in mainland Europe. The
business is therefore highly vulnerable to changes in the source
market, schools' education, travel policies and any fluctuations
arising in the market from the 'Brexit' process and travel
restrictions implemented by the governments, or the school
governance bodies.
Conversely, this balance between the UK and mainland Europe
offers a natural hedging against fluctuations of each local market
and currency where Safestay operates.
Post COVID-19 crisis, the demand in Safestay's markets has
strengthened, as we expect that the existing supply within the
competitor set will temporarily reduce, until the industry expands
again. However, provision of new supply will increase again with
the opportunity for real estate owners to repurpose and convert
existing buildings previously used for retail or offices.
Safestay's defence to such threats is the combination of our
premium locations and high standard of accommodation and
operations. As supply increases, the business's focus on revenue,
customer service, and sales and marketing activity is key to
protect and grow market share, brand loyalty and reputation.
There is also the risk of higher energy and other supply costs,
but a new utility broker is helping to identify opportunities for
reducing consumption and the growth in the average bed rate has
shown that cost increases can be offset. Also, the cost pressure on
consumers can result in a desire to stay in hostels rather than
budget hotels.
IT and system risks
Safestay's property management and accounting systems are
deployed via SaaS (software as a service). As such, the Group is
dependent on robust internet connectivity and the resilience of the
provider's third-party data centre and back-up protocols to
operate. Whilst the arrangement carries risks, these are deemed to
be reduced when compared to an in-house option which would lead to
higher management overhead costs for the business. Management
believes this current arrangement is more suitable to the business
needs as well as being more cost effective due to the small size of
our business. The other systems used are not deemed to be business
critical.
The Group contracts the maintenance of the IT infrastructure
with an external provider and has a cloud based back up system to
secure all data which are not already covered via other SaaS
suppliers. This is a more robust and flexible option compared to an
in-house solution.
Expansion and regulatory risks
Accessing expansion opportunities at the right price and in the
right locations is, by its nature, an opportunistic exercise.
Whilst the leadership team has a track record in securing
properties to support business growth, and the fact that the market
should offer more real estate opportunities in the coming years,
there is no guarantee that future opportunities can be secured,
even if it is expected that the market will offer real estate
opportunities when emerging from the COVID-19 crisis and existing
property owners look for alternatives to office and retail asset
classes.
Expansion in new jurisdictions and changes in regulation in
countries where Safestay already operates is creating an
environment where it is more likely to be in regulatory breach
compared to a group which would only trade in one country. Safestay
plc is a listed business and as such is bound to a very high level
of compliance. The Board is composed of seven experienced
non-executive and executive directors who all have a proven
experience in hospitality and strong understanding of regulatory
and compliance topics. Moreover, the Group works with local law
firms in each country where it operates to gain access to the local
expertise and guarantee full local compliance, notably via the
obtention of relevant licenses. As opposed to other hospitality
sectors, such as sharing economy or private rental, the hostel
sector is built on strong regulation plus existing fundamentals and
trade licences, which makes it less likely to require the
introduction of more strict regulations.
Financial risk
The main GBP12.7 million facility with HSBC ends in January
2025. In December 2020, the Group received a GBP5.0 million CBILS
(Coronavirus Business Interruption Loan Scheme) via HSBC. The CBILS
is being repaid at a rate of GBP1.0 million per year from April
2022 until April 2027. The main GBP12.7 million facility is
interest only from July 2021 following a GBP10.2 million repayment
after the completion of the Edinburgh hostel disposal on 30 June
2021. These loans provide an efficient base from which to grow the
business at a reduced 2.95% margin over SONIA for the main facility
and 3.99% margin over base rate from year 2 for the CBILS. The
CBILS was interest free in the first year.
Any increases in SONIA or base rate will increase the cost of
these loans and therefore impact the net profit of the business (a
0.5% change in interest rate would impact the net profit before tax
by GBP83,000 (2021: GBP89,000)). Strict financial controls are in
place to ensure that monies cannot be expended above the available
limits or to breach any banking covenants.
A proportion of Safestay's business comprises group bookings and
there is a risk of booking cancellations which will leave the
hostel with unforeseen beds to sell at relatively short notice. To
offset this risk, all group bookings require a non-refundable
deposit of 10% at time of confirmation and staged payments in
advance of the group arrivals.
Except for a small number of credit sales for which applied
credit limits are verified through external sources, Safestay has a
policy of full payment upfront for guests staying which is the norm
for hostels. As such there are negligible trade receivable
risks.
Safestay Plc are in the process of starting to refinance the
loan facility, and the Directors are confident of achieving similar
terms on a new facility.
Approved by the Board of Directors and signed on behalf of the
Board.
Larry Lipman
Chairman
8 June 2023
Consolidated Income Statement for the Period Ended 31 December
2022
Note 2022 2021 2021 2021
Continuing Discontinued Total
operations operations
GBP'000 GBP'000 GBP'000 GBP'000
Revenue 2 19,146 5,810 613 6,423
Cost of sales 3 (3,142) (1,160) (132) (1,292)
-------- ----------- ------------ --------
Gross profit 16,004 4,650 481 5,131
Administrative expenses:
Administrative expenses 5 (13,801) (9,867) (565) (10,432)
-------- ----------- ------------ --------
Exceptional items - other operating
income 5 - 1,737 - 1,737
Exceptional items - profit on disposal 5 - - 7,511 7,511
Exceptional items - loss on disposal 5 - - (554) (554)
Exceptional items - costs 5 (369) - - -
Total administrative expenses (14,170) (8,130) 6,392 (1,738)
-------- ----------- ------------ --------
Operating profit 1,834 (3,480) 6,873 3,393
Finance costs 6 (2,557) (2,627) (74) (2,701)
-------- ----------- ------------ --------
Profit/(loss) before tax (723) (6,107) 6,799 692
Tax 8 441 218 (1,509) (1,291)
-------- ----------- ------------ --------
Profit/(loss) for the financial year
attributable to owners of the parent
company (282) (5,889) 5,290 (599)
======== =========== ============ ========
Basic (loss) per share 9 (0.44p) (0.93p)
Consolidated Statement of Comprehensive Income
Year ended 31 December 2022
2022 2021
GBP'000 GBP'000
(Loss) for the year (282) (599)
Items that may be reclassified to profit or loss
Exchange differences on translating foreign operations 134 169
------- -------
Total items that may be reclassified to profit
or loss 134 169
------- -------
Items that will not be reclassified to profit
or loss
Property revaluation - 5,039
Deferred tax on property revaluation - (1,399)
------- -------
Total items that will not be reclassified to profit
or loss - 3,640
------- -------
Total comprehensive (loss) for the year attributable
to owners of the parent company (148) 3,210
======= =======
The accompanying accounting policies and notes form an integral
part of these financial statements.
Consolidated Statement of Financial
Position
31 December 2022
2022 2021
Note GBP'000 GBP'000
Non-current assets
Property, plant and equipment (including
right of use asset) 11 72,059 73,609
Intangible assets 12 9 18
Goodwill 12 12,014 12,146
Lease assets 17 453 562
Deferred tax asset 18 1,379 1,122
-------- --------
Total non-current assets 85,914 87,457
-------- --------
Current assets
Stock 25 35
Trade and other receivables 13 1,121 1,227
Lease assets 17 139 78
Current tax asset 65 199
Cash and cash equivalents 14 5,226 4,482
-------- --------
Total current assets 6,576 6,021
-------- --------
Total assets 92,490 93,478
-------- --------
Current liabilities
Borrowings 16 (925) (926)
Lease liabilities 17 (1,764) (1,922)
Trade and other payables 15 (3,128) (2,062)
Current liabilities (5,817) (4,910)
-------- --------
Non-current liabilities
Borrowings 16 (23,101) (24,028)
Lease liabilities 17 (30,450) (31,086)
Trade and other payables due in more
than one year 15 - (7)
Deferred tax liabilities 18 (3,364) (3,314)
Total non-current liabilities (56,915) (58,435)
-------- --------
Total liabilities (62,732) (63,345)
-------- --------
Net assets 29,758 30,133
======== ========
Equity
Share capital 19 647 647
Share premium account 19 23,904 23,904
Other components of equity 19 18,417 18,510
Retained earnings (13,210) (12,928)
-------- --------
Total equity attributable to owners
of the parent company 29,758 30,133
======== ========
The accompanying accounting policies and notes form an integral
part of these financial statements.
These financial statements were approved by the Board of
Directors and authorised for issue on 31 May 2023.
Signed on behalf of the Board of Directors
Larry Lipman
Consolidated Statement of Changes in Equity
31 December 2022
Share Share Other Retained earnings Total
Capital premium account Components GBP'000 equity
of
GBP'000 GBP'000 Equity GBP'000
GBP'000
------- --------------- ---------- ----------------- -------
Balance as at 1 January 2021 647 23,904 14,629 (12,329) 26,851
Comprehensive income
Loss for the year - - - (599) (599)
Other comprehensive income
Property revaluation - - 5,039 - 5,039
Deferred tax on property revaluation - - (1,399) - (1,399)
Movement in translation reserve - - 169 - 169
------- --------------- ---------- ----------------- -------
Total comprehensive income - - 3,809 (599) 3,210
------- --------------- ---------- ----------------- -------
Transactions with owners
Share based payment charge for
the period - - 72 - 72
Balance at 31 December 2021 647 23,904 18,510 (12,928) 30,133
------- --------------- ---------- ----------------- -------
Profit for the year - - - (282) (282)
Other comprehensive income
Movement in translation reserve - - (134) - (134)
------- --------------- ---------- ----------------- -------
Total comprehensive income - - (134) (282) (416)
Transactions with owners
Share based payment charge for
the period - - 42 - 42
Balance at 31 December 2022 647 23,904 18,417 (13,210) 29,758
======= =============== ========== ================= =======
Consolidated Statement of Cash Flows
31 December 2022
Note 2022 2021
GBP'000 GBP'000
Operating activities
Cash generated from operations 21 6,130 (1,272)
Income tax received/(paid) 133 (51)
------- --------
Net cash generated/(used in) from operations 6,263 (1,323)
------- --------
Investing activities
Purchases of property, plant and equipment (365) (307)
Purchases of intangible assets (5) -
Proceeds on sale of fixed assets - 16,658
------- --------
Net cash (used in)/generated from investing
activities (370) 16,351
------- --------
Financing activities
Bank loans redeemed - (10,373)
Principal elements of lease payments (3,495) (1,810)
Interest paid (656) (488)
Loan repayments (997) -
Net cash used in financing activities (5,148) (12,671)
------- --------
Cash and cash equivalents at beginning
of year 4,482 2,125
Net increase in cash and cash equivalents 744 2,357
Cash and cash equivalents at end of year 14 5,226 4,482
======= ========
Notes to the Consolidated Financial Statements
1 Accounting policies for the group and company FINANCIAL STATEMENTS
Safestay plc is listed on the AIM of the London Stock Exchange
and was incorporated and is domiciled in the UK.
The Group and Company financial statements have been prepared in
accordance with UK-adopted International Accounting Standards in
conformity with the requirements of the Company Act 2006.
The financial statements have been presented in sterling,
prepared under the historical cost convention, except for the
revaluation of freehold properties and right of use assets.
The accounting policies have been applied consistently
throughout all periods presented in these financial statements.
These accounting policies comply with each IFRS that is mandatory
for accounting periods ending on 31 December 2022 .
The financial information set out in this Preliminary
Announcement does not constitute the Group's statutory financial
statements for the years ended 31 December 2022 or 2021. The
financial information has been extracted from the Group's statutory
financial statements for the years ended 31 December 2022 and 2021.
The auditors have reported on the 2022 financial statements; their
report was unqualified, did not include references to any matters
to which the auditors drew attention by way of emphasis and did not
contain a statement under Section 498(2) or (3) of the Companies
Act 2006.
The statutory accounts for the year ended 31 December 2022 will
be filed with the Registrar of Companies before the deadline of 30
June 2023. The statutory accounts for the year ended 31 December
2021 have been filed with the Registrar of Companies. New standards
and interpretations effective in the year
New standards, amendments and interpretations not yet
effective
IAS 12 "Income Taxes" and subsequent amendments have been
endorsed by the IASB, EU and the UK. IAS 12, as amended, is
effective for accounting periods beginning on or after 1 January
2023.
The amendments to IAS 12 outline that in certain instances,
which may include the initial recognition of a lease or a
decommissioning provision, IFRS requires simultaneous recognition
of an asset and liability and consequently, there may be also
offsetting temporary differences.
The impact of the changes above on the Group's reportable
segments will depend largely on the extent to which timing
differences arise at different rates on Right of Use assets and
Lease Liabilities. The combined impact of the changes is not
expected to materially increase or decrease the profit or loss
after tax, with deferred tax assets and liabilities generated on
leasehold agreements expected to largely offset one another.
Going concern
The Group is reporting an Adjusted EBITDA profit of GBP5.9
million in 2022 as the business has recovered strongly from the
pandemic and the hostels have been open for 97% of the year.
The Group started to generate cash from its operations in 2022
to finish with an available cash balance of GBP5.2 million at 31
December 2022.
The Group received GBP16.0 million proceeds from the disposal of
the Edinburgh hostel which completed on 30 June 2021. Following
completion, the GBP1 million overdraft facility was removed, and
GBP10.2 million of HSBC debt was repaid. This means the Group now
has a low gearing of 54%.
Management updates and adjusts the cash forecast for the next 18
months on a monthly basis. The most recent forecast prepared in
April 2023 for the period to 31 December 2024, assumes as a prudent
base case that the sales will gradually climb through the summer
months. Sales for the first 4 months of the year are significantly
ahead of 2022.
All the covenants of the debt facility for the past year have
been satisfied based on interest cover and loan to value with
significant headroom.
Safestay plc are in the process of starting to refinance the
loan facility of GBP12.7m that is due to be renewed in January
2025. The Directors have considered the impact of this and are
confident of achieving similar terms on a new facility on the basis
of the excellent current trading performance and the strong cash
flow resulting from this that is projected to continue for at least
the next two years.
Additionally, the significant headroom on both of the covenants
supports this view of the Directors.
Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision makers (CODM), who are responsible for
allocating resources and assessing performance of the operating
segments, have been identified as the executive directors.
Currently the operating segments are the operation of hostel
accommodation in the UK and Europe. An additional geographical area
has been identified in respect of Spain as disclosed in note 2.
Revenue
To determine whether to recognise revenue, the Group follows a
5-step process in accordance with IFRS 15
- Identifying the contract with a customer
- Identifying the performance obligations
- Determining the transaction price
- Allocating the transaction price to the performance obligations
- Recognising revenue when/as performance obligation(s) are satisfied.
Revenue is stated net of VAT and is gross of travel agency
commission with the Group being the principal in all third party
booking arrangements. It comprises revenues from overnight hostel
accommodation, the sale of ancillary goods and services such as
food & beverage and merchandise.
Accommodation and the sale of ancillary goods and services is
recognised when provided.
Income from the rent of student accommodation is recognised on a
straight-line basis over the academic year to which the rent
relates. In accordance with IFRS 16, the group accounts for its
subleases as operating leases as they do not transfer substantially
all the risks and rewards of ownership to the lessee.
The group recognises income from lease payments from operating
leases as income on a straight-line basis over the term of the
contract.
The sale of ancillary goods comprises sales of food, beverages,
and merchandise.
Deferred income comprises deposits received from customers to
guarantee future bookings of accommodation. This is recognised as
revenue once the bed has been occupied.
There are no significant judgements or estimations made in
calculating and recognising revenue.
Revenue is not materially accrued or deferred between one
accounting period and the next.
Government Grants
Monetary resources transferred to the Group by government,
government agencies or similar bodies are recognised at fair value,
when the Group is certain that the grant will be received. Grants
will be recognised in the profit and loss account on a systematic
basis, over the same period during which the expenses, for which
the grant was intended to compensate, are recognised.
Grants relating to employee costs are disclosed in Staff Costs,
note 10 of the accounts.
Exceptional Items
The Group separately discloses on the face of the Income
Statement items of income or expense which the nature of or amount
would, without separate disclosure, distort the reporting of the
underlying business.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax. The tax currently payable is based on taxable
profit for the year. Taxable profit differs from net profit as
reported in the income statement because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated based on tax rates
that have been enacted or substantively enacted by the statement of
financial position date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit and is accounted for using the
statement of financial position liability method. Deferred tax
liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised.
The carrying amount of deferred tax assets are reviewed at each
statement of financial position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled, or the asset is
realised based on tax losses enacted or substantively enacted at
the statement of financial position date. Deferred tax is charged
or credited in the income statement, except when it relates to
items charged or credited in other comprehensive income, in which
case the deferred tax is also dealt with in other comprehensive
income.
Foreign currency translation
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ('the functional
currency'). The consolidated financial statements are presented in
Sterling which is the Group's functional currency.
Foreign currency transactions are translated into the functional
currency using the exchange rates at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation of monetary assets and
liabilities denominated in foreign currencies are generally
recognised in the income statement.
Foreign exchange gains and losses that relate to borrowings are
presented in the statement of income statement and the within
finance costs. All other exchange gains and losses are presented in
the statement of profit or loss within administrative expenses.
Non-monetary items that are measured at fair-value in a foreign
currency are translated using the exchange rates at the date when
fair-value was determined. Translation differences on assets or
liabilities carried at fair-value are reported as part of the
fair-value gain or loss.
The results and financial position of foreign operations that
have a functional currency different to the presentation currency
are translated into the presentation currency as follows:
-- assets and liabilities for each statement of financial
position are translated using the closing rate at the date of that
statement of financial position.
-- income and expenses for each statement of profit or loss and
statement of comprehensive income are translated at average
exchange rates.
-- All resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair-value adjustments arising on the acquisition
of a foreign operation are treated as the assets and liabilities of
the foreign operation and translated at the closing rate.
Business combinations
Acquisitions of subsidiaries and businesses are accounted using
the acquisition method. The consideration transferred in a business
combination is measured at fair value, which is calculated as the
sum of the acquisition-date fair values of assets transferred by
the Group, liabilities incurred by the Group to former owners of
the acquiree and the equity interest issued by the Group in
exchange for control of the acquire. Acquisition costs are expensed
as incurred.
At the acquisition date, the identifiable assets acquired, and
liabilities assumed are recognised at their fair value at the
acquisition date.
Deferred Consideration
Deferred payments made in relation to acquisitions of
subsidiaries and business are accounted for their discounted value
in trade and other payable. Any difference between the discounted
value and the cash consideration at the time of the payment, is
recognised as an interest charge in the income statement.
Property, plant and equipment
Freehold property and Lease assets are stated at fair value and
revalued periodically in accordance with IAS 16 Property Plant and
Equipment. Valuation surpluses and deficits arising in the period
are included in the statement of Comprehensive Income. All other
property, plant and equipment are recognised at historical cost
less depreciation and are depreciated over their useful lives. The
applicable useful lives are as follows:
Fixtures, fittings and equipment 3-5 years
Freehold properties 50 years
Leasehold properties 50 years or term of lease if shorter
Land is not depreciated.
Leasehold land and buildings relate to Property from financing
transactions related to Safestay Elephant and Castle. The sale of
the property in 2017 was agreed with an institutional buyer in
exchange for 150 year geared ground rent leases. The significant
risks and rewards of ownership were retained, and the exercise to
repurchase these properties is "almost certain". The contract took
the legal form of the sale and leasebacks. However, the economic
substance of the original transactions in 2017 meant that the lease
has historically been treated as owned by Safestay. Therefore, the
transactions are classified as leasehold land and buildings.
Impairment of property, plant and equipment
At each statement of financial position date, the Group reviews
the carrying amounts of its property, plant and equipment to
determine whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists, the
recoverable amount of the asset is estimated to determine the
extent of the impairment loss (if any).
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have been adjusted. If the
recoverable amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the carrying amount
of the asset (cash-generating unit) is reduced to its recoverable
amount.
An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a revalued amount, in which
case the impairment loss is treated as a revaluation decrease, but
a negative revaluation reserve is not created.
For revalued assets, where an impairment loss subsequently
reverses, the carrying amount of the asset (cash-generating unit)
is increased to the revised estimate of its recoverable amount, but
so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been
recognised for the asset (cash-generating unit) in prior years. Any
remaining balance of the reversal of an impairment loss is
recognised in the income statement. For assets carried at cost, any
reversals of impairments are recognised in the income
statement.
Goodwill
Goodwill represents the future economic benefits arising from a
business combination, measured as the excess of the sum of the
consideration transferred over the net of the acquisition-date
amounts of the identifiable assets acquired and the liabilities
assumed. Goodwill is carried at cost less accumulated impairment
losses. A review of the carrying value of goodwill is carried out
annually.
For the purpose of impairment testing, goodwill acquired in a
business combination is allocated to each of the cash-generating
units (CGUs), or groups of CGUs, that is expected to benefit from
the synergies of the combination. The Directors consider each
individual hostel to be a separate cash generating unit for
impairment purposes and, as explained in note 12 to the financial
statements, each unit or group of units to which the goodwill is
allocated represents the lowest level within the entity at which
the goodwill is monitored for internal management purposes.
Goodwill impairment reviews are undertaken annually or more
frequently if events or changes in circumstances indicate a
potential impairment. The carrying value of the CGU containing the
goodwill is compared to the recoverable amount, which is the higher
of value in use and the fair value less costs of disposal. Any
impairment is recognised immediately as an expense and is not
subsequently reversed.
Intangible assets
Costs that are directly attributable to a project's development
phase, including capitalised internally developed software, are
recognised as intangible assets using the cost model, provided they
meet all of the following recognised:
-- the development costs can be measured reliably
-- the project is technically and commercially feasible
-- the Group intends to and has sufficient resources to complete
the project
-- the Group has the ability to use or sell the software,
and
-- the software will generate probable future economic
benefits.
Intangible assets acquired in a business combination are
recognised at fair value at the acquisition date, which is deemed
to be the cost going forward.
The leasehold rights and tenancy subleases relate to intangible
assets acquired in a business combination as outlined in note
12.
Assets with a finite useful life are carried at cost less
accumulated amortisation. Amortisation is calculated using the
straight-line method to allocate the cost of trademarks and
licences over their estimated useful lives as set out above.
The following useful lives are applied:
- 10 years for the life of the interest in the head lease
- 13 years for tenancy sublease
- 3 years for website development.
Residual values and useful lives are reviewed at each reporting
date.
Assets that are subject to amortisation are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset's fair value less costs of disposal and value in
use. For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are largely independent cash
inflows (CGUs). Prior impairments of non-financial assets (other
than goodwill) are reviewed for possible reversal at each reporting
date.
Stock
Stock is stated at the lower of cost and net realisable value.
Cost is calculated using the weighted average method. Net
realisable value represents the estimated selling price.
Financial assets measured at amortised cost
Financial assets held at amortised costs are non-derivative
financial assets with fixed or determinable payments which are not
quoted in an active market. They are included in current assets,
except for maturities greater than 12 months after the statement of
financial position date. These are classified as non-current
assets.
-- Cash and cash equivalents
Cash and cash equivalents comprise cash balances, deposits held
at call wit h banks and other short-term highly liquid investments
with original maturities of three months or less. Bank overdrafts
that are repayable on demand and which form an integral part of the
Group's cash management are included as a component of cash and
cash equivalents for the purpose of the statement of cash
flows.
-- Trade and other receivables
Trade and other receivables are measured at initial recognition
at transaction price plus transaction costs and are subsequently
measured at amortised cost using the effective interest rate
method. The Group recognises lifetime ECL for trade receivables and
amounts due on contracts with customers. The expected credit losses
on these financial assets are estimated based on the Group's
historical credit loss experience, adjusted for factors that are
specific to the debtors. Management have considered the ECL for
trade receivables as immaterial given the majority of sale receipts
are obtained prior to the stay.
Credit risk
The Group assesses impairment on a forward-looking basis using
the expected credit loss method and has applied the simplified
approach which uses the lifetime expected loss provision for all
trade and other receivables. The Group has no significant history
of non-payment; as a result, the expected credit losses on
financial assets are not material.
Financial liabilities
The Group classifies its financial liabilities as other
financial liabilities. Other financial liabilities are measured at
fair value on initial recognition and subsequently measured at
amortised cost, using the effective-interest method.
-- Borrowings
Borrowings other than bank overdrafts are recognised initially
at fair value less attributable transaction costs. Subsequent to
initial recognition, borrowings are stated at amortised cost with
any difference between the amount initially recognised and
redemption value being recognised in the income statement over the
period of the borrowings, using the effective interest method.
Where there are extension options, management have made an
accounting policy choice that these are loan commitments from the
holder of the debt instrument that does not need to be separately
accounted for.
-- Loan arrangement fees
The loan arrangement fees are offset against the loan balance
and amortised over the term of the loan to which they relate as
part of the effective interest rate calculation.
-- Trade and other payables
Trade and other payables are initially measured at fair value
and are subsequently measured at amortised cost using the effective
interest rate method.
-- Leases
The Group has leases for hostels across Europe. With the
exception of short-term leases and leases of low-value underlying
assets, each lease is reflected on the statement of financial
position as a right-of-use asset and a lease liability. Leases of
property generally have a lease term ranging from 5 years to 50
years.
For any new property asset contracts entered on or after 1
January 2019, the Group considers whether a contract is, or
contains a lease. A lease is defined as 'a contract, or part of a
contract, that conveys the right to use an asset (the underlying
asset) for a period of time in exchange for consideration'. To
apply this definition the Group assesses whether the contract meets
three key evaluations which are whether:
-- the contract contains an identified asset, which is either
explicitly identified in the contract or implicitly specified by
being identified at the time the asset is made available to the
Group
-- the Group has the right to obtain substantially all of the
economic benefits from use of the identified asset throughout the
period of use, considering its rights within the defined scope of
the contract the Group has the right to direct the use of the
identified asset throughout the period of use; and
-- The Group has the right to direct the use of the asset. The
Group has this right when it has the decision-making rights that
are most relevant to changing how and for what purposes the asset
is used. In rare cases where all the decisions about how and for
what purpose the asset is used are predetermined, the Group has the
right to direct the use of the asset if either:
- The Group has the right to operate the asset; or
- The Group designed the asset in a way that predetermines how
and for what purpose it will be used.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use
asset and a lease liability on the statement of financial position.
The right-of-use asset is measured at cost, which is made up of the
initial measurement of the lease liability, any initial direct
costs incurred by the Group, an estimate of any costs to dismantle
and remove the asset at the end of the lease, and any lease
payments made in advance of the lease commencement date (net of any
incentives received). The Group depreciates the right-of-use assets
on a straight-line basis from the lease commencement date to the
earlier of the end of the useful life of the right-of-use asset or
the end of the lease term. The Group also assesses the right-of-use
asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability
at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that
rate is readily available or the Group's incremental borrowing
rate.
Lease payments included in the measurement of the lease
liability are made up of fixed payments (including in substance
fixed), variable payments based on an index or rate, amounts
expected to be payable under a residual value guarantee and
payments arising from options reasonably certain to be
exercised.
The lease liability is measured at amortised cost using the
effective interest method. It is remeasured when there is a change
in future lease payments arising from a change in an index or rate,
or if the Group changes its assessment of whether it will exercise
an extension or termination option.
The Group has elected to take the exemption not to recognise
right-of-use assets and lease liabilities for short-term lease of
machinery that have a lease term of 12 months or less and leases of
low-value assets. The Group defines leases of low value assets as
being any lease agreement where the total value of payments made
across the lease term is less than GBP10,000. The Group recognises
the lease payments associated with these leases as an expense on a
straight-line basis over the lease.
On the statement of financial position, right-of-use assets have
been included in property, plant and equipment and lease
liabilities have been included in trade and other payables.
Measurement of the Right-of-use Assets
Right-of-use assets are generally depreciated over the shorter
of the asset's useful life and the lease term on a straight-line
basis.
The Group as a lessor
As a lessor the Group classifies its leases as either operating
or finance leases.
A lease is classified as a finance lease if it transfers
substantially all the risks and rewards incidental to ownership of
the underlying asset and classified as an operating lease if it
does not.
The Group accounts for its sub leases as finance leases with
reference to the right-of-use asset arising from the head lease.
The Group has not offset the assets and liabilities of the head
lease and sub lease, nor the income and expenditure arising from
these contracts. A lease receivable is recognised in the statement
of financial position in respect of the net investment in the sub
lease. The net investment in the sub lease is assessed annually for
any indicators of impairment.
Equity
The total equity attributable to the equity holders of the
parent comprises the following:
-- Share Capital
Share capital represents the nominal value of shares issued.
-- Retained earnings
Retained earnings represent undistributed cumulative
earnings.
-- Equity Instruments
Equity instruments issued by the Group are recorded at the
proceeds received, net of direct issue costs.
Other Components of Equity
-- Share premium account
Share premium represents amounts subscribed for share capital in
excess of nominal value less the related costs of share issues.
-- Merger reserve
Merger reserve represents amounts subscribed for share capital
in excess of nominal value exchanged for the shares in the
acquisition of a subsidiary company.
-- Revaluation reserve
Revaluation reserves represent the increase in fair value of
freehold property and leasehold assets over the value at which it
was previously carried on the statement of financial position. Any
gain from a revaluation is taken to the revaluation reserve. Where
it reverses a previous impairment, the impairment is reversed, but
any surplus in excess of the amount of the impairment is added to
the revaluation reserve.
-- Translation Reserve
Translation Reserve comprises foreign currency translation
differences arising from the translation of financial statements of
the Group's foreign entities into presentational currency.
-- Share based payment reserve
The equity settled share-based payment reserve arises as the
expense of issuing share-based payments is recognised over time.
The reserve will fall as share options vest and are exercised but
the reserve may equally rise or might see any reduction offset, as
new potentially dilutive share options are issued. Balances
relating to share options that lapse after they vest are
transferred to retained fair value of employee services determined
by reference to transfer of instruments granted.
The Group has applied the requirements of IFRS 2 Share based
payment to share options. The fair value of the share options is
determined at the grant date and are expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
shares that will eventually vest and adjusted for the effect of
non-market-based vesting conditions.
Fair value is measured by use of the Black Scholes model. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects on non-transferability,
exercise restrictions and behavioural considerations.
Dividends
Dividend distributions payable to equity shareholders are
included in other liabilities when the dividends have been approved
in a general meeting prior to the reporting date.
Critical accounting judgements and key sources of estimation and
uncertainty
The fair value of the Group's property is the main area within
the financial information where the directors have exercised
significant estimates.
Judgements
-- The Group has identified certain costs and income as
exceptional in nature in that, without separate disclosure, would
distort the reporting of the underlying business. A degree of
judgement is required in determining whether certain transactions
merit separate presentation to allow shareholders to better
understand financial performance in the year, when compared with
that of previous years and trends This is set out in note 5.
-- Extension options for leases: In accordance with IFRS 16,
when the entity has the option to extend a lease, management uses
its judgement to determine whether or not an option would be
reasonably certain to be exercised. Management considers all facts
and circumstances including their past practice and any cost that
will be incurred to change the asset if an option to extend is not
taken, to help them determine the lease term. Management generally
includes extensions when the option to extend can be unilaterally
exercised by the tenant provided the hostel under lease is expected
to continue to be profitable for the Group after the extension is
exercised.
-- The Group has incurred tax losses, and therefore a material
deferred tax asset has been recognised as these can be carried
forward indefinitely and offset against probable future taxable
profits after the market recovers in 2022 and the Group is expected
to generate net profits from 2023 under his forecast model.
Estimates
-- The fair-value of the assets and liabilities recognised on
the acquisition of an operation or entity is determined using both
external valuations and directors' valuations. Details of the fair
values are set out in the note 24.
-- Assessment of impairment of goodwill requires estimation of
future cash flows, which are uncertain, discounted to present value
which also requires estimation by management. The key assumptions
used to calculate the value in use (VIU) to test the goodwill for
each cash generating units (CGUs) are detailed in note 12. A
Pre-tax discount rate of 9.7% (2021: 11.1%) has been calculated
using weighted average cost of capital. An assessment was made on
the differing risks between countries in which the hostels operate
based on country risks. Based on the assessment it was concluded
that the differences between discount rates between each CGU is not
material. The assets are similar in nature, with all CGUs providing
the provision of hostel accommodation and therefore similar
cashflows and therefore the risk associated with the assets is
considered to be consistent between CGUs. As such one discount rate
has been utilised for the purposes of performing an impairment
review.
-- As outlined in the accounting policy, the financial
statements have been prepared under the historical cost convention
except for the revaluation of the freehold properties and lease
assets (in respect of Elephant and Castle). The Group is required
to value property on a sufficiently regular basis by using open
market values to ensure that the carrying value does not differ
significantly from the fair value. The valuation, performed by
qualified valuers is based on market observations and estimates on
the selling price in an arms-length transaction, and includes
estimates of future income levels and trading potential for each
hostel as other factors including location and tenure. See note 11.
The Group has used external valuations on freehold properties and
leased assets under financing transactions, as outlined in note 11.
Based on the market data assessed and internal assessment of each
property, management does not consider that the fair value differs
materially from the carrying value. Management is confident that
the carrying value is deemed reasonable at 31(st) December
2022.
Notes to the Consolidated Financial Statements
2. Segmental analysis
An analysis of the Group's revenue from external customers for
each major product and service category (excluding revenue from
discontinued operations) is as follows:
2022 2021
GBP'000 GBP'000
Hostel accommodation 17,150 4,901
Food and Beverages
sales 1,109 725
Other income 517 550
Rental income 370 247
------- -------
Total Income 19,146 6,423
------- -------
Like-for-like income 19,146 5,810
======= =======
Like-for-like income relates to all turnover less turnover
associated with the discontinued operating segments.
The Group recognises income from lease payments from operating
leases as income on a straight-line basis over the term of the
contract.
Operating segments are reporting in a manner consistent with the
internal reporting provided to the Chief Operating Decision Maker
(CODM). The CODMs, who monitor the performance of these operating
segments as well as deciding on the allocation of resources to
them, have been identified as the executive directors. Currently
the operating segments are the operation of hostel accommodation in
the UK and Europe.
An additional material geographical area has been identified in
respect of Spain to meet the disclosure requirements of IFRS 8 due
to its significance to group.
Management considers the like-for-like income only for
acquisitions and continuing operations that have been operational
12 consecutive months in the prior year.
The Group provides a shared services function to its operating
segments and reports these activities separately. Management does
not consider there to be any other material reporting segments.
Management revisit this at each period end.
The most important measures used to evaluate the performance of
the business are revenue, EBIDTA and adjusted EBITDA, which is the
operating profit after excluding depreciation and amortisation, and
removing non-recurring expenditure which would otherwise distort
the cash generating nature of the segment.
Pre-IFRS 16 EBITDA was calculated in the prior period segmental
analysis such that the accounts can be understood on a comparable
basis and included for information purposes. As this is the second
year since transition, pre-IFRS 16 adjusted EBIDTA is not
considered in the current year.
2022 UK Spain Europe Shared services Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 6,864 4,464 7,818 - 19,146
-------- -------- -------- --------------- --------
Profit/(loss) before
tax 2,574 278 1,007 (4,583) (724)
Finance costs 191 1 59 2,306 2,558
Depreciation &
Amortisation 253 1,045 1,370 987 3,654
-------- -------- -------- --------------- --------
EBITDA 3,018 1,324 2,436 (1,290) 5,488
Exceptional & Share
based payment expense - - - 411 411
Rent concessions - - - - -
Adjusted EBITDA 3,018 1,324 2,436 (878) 5,900
-------- -------- -------- --------------- --------
Total assets 36,539 16,570 25,233 14,147 92,490
-------- -------- -------- --------------- --------
Total liabilities (9,164) (12,088) (12,672) (28,808) (62,732)
-------- -------- -------- --------------- --------
2021 UK Spain Europe Shared services Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 2,422 1,363 2,638 - 6,423
-------- -------- -------- --------------- --------
Profit/(loss) before
tax 6,689 (2,279) (1,169) (2,549) 692
Finance costs 271 618 539 1,273 2,701
Depreciation &
Amortisation 1,028 1,076 1,274 395 3,773
-------- -------- -------- --------------- --------
EBITDA 7,988 (585) 644 (881) 7,166
Exceptional & Share
based payment expense (7,511) 554 - 72 (6,885)
Rent concessions (595) (227) (453) - (1,275)
Adjusted EBITDA (118) (258) 191 (809) (994)
-------- -------- -------- --------------- --------
Total assets 34,975 19,144 25,024 14,335 93,478
-------- -------- -------- --------------- --------
Total liabilities (10,731) (13,432) (12,461) (26,721) (63,345)
-------- -------- -------- --------------- --------
The Group's non-current assets (other than financial instruments
and deferred tax assets) are located into the following geographic
regions:
2022 2021
GBP'000 GBP'000
UK 36,005 35,862
Spain 15,636 18,102
Rest of Europe 22,733 23,164
Shared services 11,540 10,329
------- -------
Total 85,914 87,457
------- -------
3 COST OF SALES
2022 2021
GBP'000 GBP'000
Food and drinks 449 341
Direct room supplies and sales commissions 2,692 951
Total 3,142 1,292
======= =======
4 DISCONTINUED OPERATIONS
The Group completed on the disposal of two hostels in 2021. The
Barcelona Sea hostel was sold in February 2021 for a loss of
GBP554k and the Edinburgh hostel was sold in June 2021 for a profit
of GBP7,511k. The Barcelona Sea hostel was in the operating segment
of Spain and the Edinburgh hostel was in the operating segment of
UK.
5 administrative expenses
2022 2021
GBP'000 GBP'000
Staff costs (see note 10) 5,380 3,331
Legal and professional fees 895 614
Property costs 513 482
Depreciation and amortisation 3,654 3,773
Share option expenses 42 72
Other expenses 3,316 2,160
------- -------
13,800 10,432
------- -------
2022 2021
GBP'000 GBP'000
Exceptional items - other
operating income
Grant income - 462
Profit on sale of Edinburgh
Hostel - 7,511
Rent concessions - 1,275
------- -------
- 9,248
======= =======
Exceptional items - costs
Legal and other 369 -
Loss on sale of Barcelona Sea
Hostel - 554
------- -------
369 554
6 FINANCE COSTS
2022 2021
GBP'000 GBP'000
Interest on bank overdrafts and
loans 853 695
Amortised loan arrangement fees 68 68
Other interest costs 43 0
Interest expense for lease arrangements
(note 17) 1,404 1,741
Property financing costs 191 197
------- -------
2,559 2,701
------- -------
Finance income for the period totalled GBP2k (2021: GBP1k).
7 LOSS FOR THE FINANCIAL YEAR
The audit fees disclosed in 2022 represent the fees payable for
the audit for the period ended 31 December 2022 and the non-audit
fees are those incurred in the period.
2022 2021
GBP'000 GBP'000
Profit/(Loss) for the financial period is arrived at
after charging:
Depreciation on owned assets 1,363 1,434
Depreciation of assets under lease liabilities 2,210 2,243
Amortisation of intangible assets 150 96
CLA Evelyn Partners Limited Auditor's remuneration for
audit services 281 119
------- -------
Amounts payable in respect of both audit and non-audit
services are set out below:
2022 2021
GBP'000 GBP'000
Fees payable to Company's auditors for the audit of
the Parent Company and consolidated financial statements:
CLA Evelyn Partners Limited audit of the Group and Company's
annual accounts 136 90
CLA Evelyn Partners Limited additional fees relating
to first year 2021 audit. 116 0
CLA Evelyn Partners Limited audit of the subsidiaries'
annual accounts 29 29
281 119
8 Tax
The group tax charge is made up as follows:
2022 2021
GBP'000 GBP'000
Current tax
Corporation tax on profits for
the year - 103
Adjustments for corporation tax
on prior periods 48 (123)
Other local taxes (4) 116
Total current tax 44 96
Deferred tax (505) 724
Adjustments for deferred tax in
prior periods 20 559
Effect of increased tax rate on
opening balance - (88)
------- -------
Total tax charge (441) 1,291
======= =======
The charge for the year can be reconciled to the loss per the
consolidated income statement as follows:
2022 2021
GBP'000 GBP'000
Profit/(loss) before tax (724) 692
======= =======
Tax at the standard UK corporation tax
rate of 19% (2021: 19%) (137) 131
Fixed asset differences 34 54
Adjustment for tax rate differences in
foreign jurisdictions 73 (154)
Adjustments for tax on prior periods 68 (122)
Other tax adjustments, reliefs and transfers (4) 193
Remeasurement of deferred tax for changes
in tax rates (111) (148)
Deferred tax not recognised (26) 1,155
Factors affecting charge for the period
Non-deductible items and other timing
differences (284) (1,300)
Chargeable gains/(losses) - 1,482
Foreign exchange differences (54)
Depreciation in excess of capital allowances - -
Group tax charge (441) 1,291
======= =======
Remeasurement of deferred tax for changes in tax rates is as a
result of the UK tax rate being increased to 25% effective 1 April
2023.
The Group has a deferred tax liability of GBP3.364m as disclosed
in note 18 related to the potential future gain on property
revaluations.
Included within current tax are adjustments for corporation tax
on prior periods of GBP68k and relates to Group losses.
9 LOSS per share
The calculation of the basic and diluted loss per share is based
on the following data:
2022 2021
GBP'000 GBP'000
Loss for the period attributable to equity holders
of the Company (282) (599)
======= =======
2022 2021
Weighted average number of ordinary shares (000s)
for the purposes of basic loss earnings per share 64,679 64,679
Effect of dilutive potential ordinary shares (000s) 4,767 4,537
------- -------
Weighted average number of ordinary shares (000s)
for the purposes of diluted profit/(loss) per
share 69,446 69,216
------- -------
Basic profit/(loss) per share (0.44p) (0.93p)
------- -------
The total number of shares in issue as at 31 December 2022 was
64,679,014.
10 STAFF COSTS
The average monthly number of employees (including directors)
during the period was:
2022 2021
Number Number
Hostel operation 222 176
Directors 4 5
------ ------
226 181
====== ======
The costs incurred in respect of employees (including directors)
were:
2022 2021
GBP'000 GBP'000
Wages and salaries 4,680 2,925
Social security costs 670 380
Pension costs 30 26
Total staff costs 5,380 3,331
======= =======
Government grants claimed by the Group under coronavirus job
retention schemes across the Group for 2022 total GBP0k (2021:
GBP240k).
The remuneration of the directors, who are the key management
personnel of the Group, is set out below.
2022 2021
GBP'000 GBP'000
Short term employee
benefits 364 332
Pension 5 6
Share based payment
charges 42 72
411 410
======= =======
Further information about the remuneration of individual
directors is provided in the Directors' Remuneration Report.
Details of directors share options is provided in the Directors'
Remuneration Report.
11 PROPERTY, PLANT AND EQUIPMENT
Freehold Right Leasehold Leasehold Fixtures, Total
land and of Use land and improvements fittings
buildings Assets buildings and equipment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost or valuation
At 1 January 2021 8,411 42,048 41,126 5,295 3,947 100,827
Transfers 73 - - (73) - -
Additions 32 - - - 275 307
Acquired in business
combination - - - - - -
Derecognition of sub-leased
asset (640) (640)
Disposals (17) (1,610) (13,402) (201) (576) (15,806)
IFRS lease modification (2,891) (2,891)
Revaluation 1,072 3,967 5,039
Exchange movements (87) - - (54) (92) (233)
At 1 January 2022 9,484 36,907 31,691 4,967 3,554 86,603
---------- ------- ---------- ------------- -------------- --------
Transfers 2,895 - (2,895) (305) 305 -
Additions - - - 69 296 365
IFRS lease modification - (280) - - (280)
Exchange movements - 1,913 - - 24 1,937
At 31 December 2022 12,379 38,540 28,796 4,731 4,179 88,625
---------- ------- ---------- ------------- -------------- --------
Depreciation
At 1 January 2021 285 4,884 2,420 797 2,706 11,092
Transfers 1 - - (1) - -
Charge for the year 154 2,243 671 254 355 3,677
Released on disposal (1) (261) (1,094) (14) (405) (1,775)
At 1 January 2022 439 6,866 1,997 1,036 2,656 12,994
---------- ------- ---------- ------------- -------------- --------
Transfers - - - - - -
Adjustment on transition
to IFRS16 - - - - - -
Charge for the period 223 2,210 596 241 302 3,572
Released on disposal - - - - - -
At 31 December 2022 662 9,076 2,593 1,278 2,957 16,566
---------- ------- ---------- ------------- -------------- --------
Net book value:
At 31 December 2022 11,717 29,465 26,203 3,453 1,222 72,059
At 31 December 2021 9,045 30,041 29,694 3,931 898 73,609
---------- ------- ---------- ------------- -------------- --------
Fixed asset transfers
As part of an internal review into the fixed asset register, it
was identified that a number of assets had been incorrectly
classified. In order to more accurately reflect the nature of the
assets, the directors have transferred the assets to the correct
asset class.
Freehold properties
The Freehold values relates to the 3 following hostels:
-- The GBP3.5 million value of the freehold in York is based on
the external valuations as at 31 December 2021 prepared by Cushman
and Wakefield. The historic cost carrying value is GBP2.4 million
which is the acquisition price in 2014.
-- The freehold of the Glasgow property acquired in October 2019
for GBP3.2 million and which has undergone renovation for GBP0.4
million. The GBP4.9 million value of the freehold in Glasgow is
based on the external valuations as at 31 December 2021 prepared by
Cushman and Wakefield.
-- The hostel in Pisa was acquired in June 2019 for GBP3
million, of which GBP2.1 million for the freehold. The GBP3.5
million value of the freehold in Pisa is based on the external
valuations as at 31 December 2021 prepared by Cushman and
Wakefield.
Right of Use Assets
The GBP36.5 million right of use assets all relate to properties
operated by the Group as hostels.
Right of use assets as at
31 December 2021 36,907
IFRS 16 lease modification (280)
Exchange differences 1,913
Right of use assets as at
2022 38,540
------
Leasehold, land and buildings
The Group has used external valuations on Elephant & Castle.
The London Elephant & Castle leasehold was independently valued
on 31 December 2021 at GBP26.8 million. The valuation was performed
by Cushman and Wakefield. The Group has accounted for the finance
transactions as interest-bearing borrowings secured on the original
properties held.
Leasehold improvements
Leasehold improvements comprise the capitalised refurbishment
costs incurred by the Company on the leased properties.
Valuation process
Initially market values of the properties were believed to have
fallen due to the impact of COVID-19. The directors wanted to show
that the values of the properties have recovered post COVID-19 so
engaged independent external valuers to determine the market value
of all three freehold properties and the long leasehold property.
These independent external valuers hold recognised and relevant
professional qualifications and have recent experience in the
location and category of the properties being valued.
The Group provides information to valuers, including profit and
cashflow forecasts along with asset-specific business plans. The
valuers use this and other inputs including market transactions for
similar properties to produce valuations. These valuations and the
assumptions they have made are then discussed and reviewed with the
management as well as the directors. Cushman & Wakefield were
engaged to value properties now valued at GBP38.7m.
Valuation fees are a fixed amount agreed between the Group and
the valuers in advance of the valuation and are not linked to the
valuation output.
Valuation methodology
The value is assessed by adopting the income approach to
valuation adopting a discounted cashflow approach. Under this
approach it is assumed that the property is held for a period of 10
years and the net present value of the earnings during this period
are added to the exit value which is discounted to present day
values. Adopting an income approach also requires the analysis of
comparable transactions in the market to assess the rates of
returns investors are prepared to accept at the date of
valuation.
The table below provides details of the assumptions used in the
valuation of the properties:
Location Discount rate Capitalisation Inflation Running Yield
rate rate
Elephant & Castle 8% 6% 2% 3.88% - 7.39%
Glasgow 11% 8.50% 2% 5.12% - 10.95%
York 10% 8% 2% 6.27% - 9.78%
Pisa 11% 8.50% 2% 6.82% - 10.77%
12 INTANGIBLE ASSETS AND GOODWILL
Website Leasehold Goodwill Total
rights
GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2021 134 1,697 15,060 16,891
Disposals - (1,697) (1,423) (3,120)
------- --------- -------- -------
At 31 December 2021 134 - 13,637 13,771
Additions 5 - - 5
Exchange differences (131) (131)
At 31 December 2022 139 - 13,504 13,645
------- --------- -------- -------
Amortisation and Impairment
At 1 January 2021 92 818 1,491 2,401
Charge for the period 24 72 - 96
On disposals - (890) - (890)
------- --------- -------- -------
At 31 December 2021 116 - 1,491 1,607
Charge for the period 14 - - 14
At 31 December 2022 130 - 1,491 1,621
------- --------- -------- -------
Net book value:
At 31 December 2022 9 - 12,014 12,023
======= ========= ======== =======
At 31 December 2021 18 0 12,146 12,164
======= ========= ======== =======
Leasehold Rights
Amortisation of leasehold rights is based on a straight-line
basis for the term of the lease. Amortisation is taken to the
statement of income statement within administrative expenses.
Goodwill
Goodwill in a business combination is allocated to the cash
generating units (CGUs) that are expected to benefit from that
business combination. The Group's CGUs have been defined as each
operating hostel. This conclusion is consistent with the approach
adopted in previous years and with the operational management of
the business.
Impairment
Goodwill is not amortised but tested annually for impairment.
The recoverable amount of each CGU is determined from value in use
(VIU) calculations based on future expected cash flows discounted
to present value using an appropriate pre-tax discount rate.
Goodwill carrying values as at the 31 December 2022 are shown
below.
CGU Goodwill carrying
value GBP'000
Madrid 2,217
Paris 11
Gothic 726
Lisbon 1,355
Prague 211
Barcelona Passeig
De Gracia 1,687
Vienna 5
Brussels 1,326
Pisa 795
Berlin 1,015
Athens 1,210
Bratislava 897
Warsaw 607
12,014
=================
No impairment has been deemed necessary by Management for the
year ended 31 December 2022.
The key assumptions used in the VIU calculations for all hostels
are based on forecasts approved by management performed for a
5-year period:
-- A Pre-tax discount rate of 11.0% (2021: 9.7%) was calculated
using weighted average cost of capital. An assessment was made on
the differing risks between countries in which the hostels operate.
Based on the assessment it was concluded that the differences
between discount rates between each CGU are not material. The
assets are similar in nature, with all CGUs providing the provision
of hostel accommodation and therefore similar cashflows and
therefore the risk associated with the assets is considered to be
consistent between CGUs. As such one discount rate has been
utilised for the purposes of performing an impairment review.
-- Estimated 2023 average bed rate per property has been used as
the basis of our assessment to which the Directors' have applied an
increase of a 7.5% in revenue and a 5% increase in cost relating to
inflation for subsequent years.
-- No hostels have a shortfall between the recoverable value and carrying value.
Sensitivity analysis
Management have reviewed all the properties and do not consider
there to be an impairment.
Headroom between the carrying and recoverable value of an asset
is dependent upon sensitivities to the following assumptions (other
than the VIU assumptions outlined above):
Discount Rate
The group calculates a WACC applying local government bond
yields and tax rates. For reference the Group WACC for Safestay plc
was 11.0% (2021: 9.7%). The discount rate applied to a CGU
represents a pre-tax rate that reflects the market assessment of
the time value of money as at 31 December 2022 and the risks
specific to the CGU.
Sensitivity analysis
A sensitivity analysis was performed for the group of CGUs and
Management have concluded that no reasonably possible change in any
of the key assumptions would result in the carrying value of the
CGUs to exceeding their recoverable amount.
13 TRADE AND OTHER RECEIVABLES
2022 2021
GBP'000 GBP'000
Trade and other receivables 620 865
Other debtors - 230
Prepayments and accrued
income 502 132
------- -------
1,122 1,227
======= =======
Credit risk is the risk that a counterparty does not settle its
financial obligation with the Group. At the year end, the Group has
assessed the credit risk on amounts due from suppliers, based on
historic experience, meaning that the expected lifetime credit loss
was immaterial. Cash and cash equivalents are also subject to the
impairment requirements of IFRS 9 - the identified impairment loss
was none.
14 CASH AND CASH EQUIVALENTS
2022 2021
GBP'000 GBP'000
Cash and cash equivalents 5,226 4,482
======= =======
The directors consider that the carrying amount of cash and cash
equivalents approximates their fair value. Cash and cash
equivalents comprise cash.
15 TRADE AND OTHER PAYABLES
2022 2021
GBP'000 GBP'000
Due in less than one
year
Trade payables 663 640
Social security and
other taxes 150 107
Other creditors 758 642
Accruals and deferred
income 1,556 673
------- -------
3,128 2,062
Due in more than one
year
Other payables - 7
------- -------
3,128 2,069
======= =======
16 BORROWINGS
2022 2021
GBP'000 GBP'000
At amortised cost
Bank Loan 17,000 18,013
Property financing loans 7,088 7,078
Loan arrangement fees (62) (137)
------- -------
24,026 24,954
======= =======
Loans repayable within one
year 925 926
Loans repayable after more
than one year 23,101 24,028
------- -------
24,026 24,954
======= =======
Included within borrowings is CBILS (Coronavirus Business
Interruption Loan Scheme) obtained via HSBC. The Government provide
lenders with a guarantee on each loan, and it may be possible that
there is a government grant in the form of the lower rate of
interest than would likely have been payable in the absence of the
government guarantee. However, in the absence of further
information the total amounts are disclosed within finance costs.
The loan will be repaid at a rate of GBP1 million per year from
April 2022 until April 2027 and the balance at 31 December 2022 is
GBP4.3m. The interest rate is 3.99% margin over base rate from year
2 onwards and is interest free in the first year.
Property financing loans relate to the sale and leaseback
arrangement entered for Elephant & Castle.
At 31(st) December 2021 a HSBC bank loan was secured against the
UK freehold and long leasehold properties. The facility ends in
January 2025 and the interest rate is 2.95% margin over SONIA.
17 LEASES
Lease assets are presented in the statement of financial
position as follows:
2022 2021
GBP'000 GBP'000
Current 139 78
Non-current 453 562
Total 592 640
======= =======
The lease asset relates fully to our contract with Casa Suecia
where the Group have outsourced, on a revenue share basis, our
Madrid food and beverage operations.
This is a contract where Safestay receives the higher of a
minimum guaranteed rent or an agreed % of the food and beverage
revenue in return for Casa Suecia receiving the profit from this
income stream by managing this part of the operation with its own
staff. This arrangement commenced in July 2021 and is for an
initial five years.
Variable lease income relating to performance of Casa Suecia
have been excluded from the initial measurement of the lease asset
and any additional consideration received is recognised through the
income statement.
2022
Minimum lease receipts due
Within 1 - 2 - 3 - 4 - After Total
1 year 2 years 3 years 4 years 5 years 5 years
------- -------- -------- -------- -------- -------- -----
Lease receipts 159 159 159 162 - - 640
Finance
income (20) (15) (9) (3) - - (48)
Net present
values 139 145 150 159 - - 592
Lease liabilities are presented in the statement of financial
position as follows:
2022 2021
GBP'000 GBP'000
Current 1,770 1,922
Non-current 30,450 31,086
Total 32,220 33,008
======= =======
Total cash outflow for leases for the year ended 31 December
2022 was GBP3.3m (2021: GBP3.3m).
The Group has leases for hostels across Europe. With the
exception of short-term leases and leases of low-value underlying
assets, each lease is reflected on the statement of financial
position as a right-of-use asset and a lease liability. Variable
lease payments which do not depend on an index or a rate (such as
lease payments based on a percentage of Group sales) are excluded
from the initial measurement of the lease liability and asset and
any additional consideration is recognised through the income
statement. The Group classifies its right-of-use assets in a
consistent manner to its property, plant and equipment (Note
11).
The hostel in London Kensington Holland Park has a term of 50
years. There is no purchase option in this lease.
Lease payments are generally linked to annual changes in an
index (either RPI or CPI). However, the Group has one lease in
Lisbon which a portion of the rentals are linked to revenue. The
variable portion of the lease in Lisbon is accounted for as a
variable rent over the period it relates to.
Each lease generally imposes a restriction that, unless there is
a contractual right for the Group to sublet the asset to another
party, the right-of-use asset can only be used by the Group. Leases
are either non-cancellable or may only be cancelled by incurring a
substantive termination fee. Some leases contain an option to
purchase the underlying leased asset outright at the end of the
lease, or to extend the lease for a further term. The Group is
prohibited from selling or pledging the underlying leased assets as
security. For leases over hostels or hotels, the Group must keep
those properties in a good state of repair and return the
properties in good condition at the end of the lease. Further, the
Group must insure items of property, plant and equipment and incur
maintenance fees on such items in accordance with the lease
contracts.
The table below describes the nature of the Group's leasing
activities by type of right-of-use asset recognised on balance
sheet:
Right-of-use No of Range Average No of No of No of leases No of
asset right-of-use of remaining remaining leases leases with variable leases
assets term lease with extension with options payments with
leased term options to purchase linked to termination
an index options
Hostel 5 - 42
buildings 11 years 12 10 0 11 0
------------- ------------- ---------- -------------- ------------- --------------
In addition to the above, there is the London Kensington Holland
Park lease which ends in 2065. There are no such options as
above.
Lease liabilities
The lease liabilities are secured by the related underlying
assets. The undiscounted maturity analysis of lease liabilities at
31 December 2022 is as follows:
2022
Minimum lease payments due
Within 1-5 years After Total
1 year 5 years
------- --------- -------- --------
Lease payments 3,345 13,075 31,420 47,841
Finance
charges (1,474) (4,876) (9,271) (15,621)
Net present
values 1,871 8,199 22,140 32,220
2021
Minimum lease payments due
Within 1-5 years After Total
1 year 5 years
------- --------- -------- --------
Lease payments 3,085 11,915 32,606 47,606
Finance
charges (1,163) (3,934) (9,501) (14,598)
Net present
values 1,922 7,981 23,105 33,008
The Group has elected not to recognise a lease liability for
short term leases (leases with an expected term of 12 months or
less) or for leases of low value assets. The expense incurred for
short term and low value leases is GBP50k (2021: 50k).
18 DEFERRED INCOME TAX
Deferred tax Deferred tax Total
assets liabilities
GBP'000 GBP'000 GBP'000
Balance as at 1 January 2021 2,159 (1,758) 401
Recognised in the income statement (1,037) (157) (1,194)
Recognised in other comprehensive
income - (1,399) (1,399)
------------ ------------ -------
Balance at 31 December 2021 1,122 (3,314) (2,192)
Recognised in the income statement 258 (82) 174
Recognised in other comprehensive
income - 32 32
------------ ------------ -------
Balance at 31 December 2022 1,379 (3,364) (1,985)
============ ============ =======
The Group has recognised deferred tax assets of GBP1.4m (2021:
GBP2.2m), which are expected to offset against future profits, in
respect of tax losses. This is on the basis that it is probable
that profits will arise in the foreseeable future, enabling the
assets to be utilised.
19 EQUITY
CALLED UP SHARE CAPITAL
GBP'000
Allotted, issued and fully paid
64,679,014 Ordinary Shares of 1p each as at 1 January
2022 and 31 December 2022 647
647
=======
At the 31 December 2022, the ordinary shares rank pari passu.
There are no changes to the voting rights of the ordinary shares
since the balance sheet date.
SHARE PREMIUM
GBP'000
At 1 January
2022 23,904
At 31 December
2022 23,904
OTHER COMPONENTS OF EQUITY
Merger reserve Share based payment Revaluation Translation Total
reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 January 2021 1,772 438 12,356 63 14,629
Share based payment charge - 72 - - 72
Property revaluation - - 5,039 - 5,039
Deferred tax on property revaluation - - (1,399) - (1,399)
Exchange differences on translating
foreign operations - - - 169 169
-------------- ------------------- ----------- ----------- -------
At 31 December 2021 1,772 510 15,996 232 18,510
-------------- ------------------- ----------- ----------- -------
Exchange differences on translating
foreign operations - - - (136) (136)
Share based payment charge - 42 - - 42
-------------- ------------------- ----------- ----------- -------
At 31 December 2022 1,772 552 15,996 96 18,416
-------------- ------------------- ----------- ----------- -------
20 SHARE BASED PAYMENTS
The Company operates a share-based payments scheme for Directors
as outlined in the Directors Remuneration Report. Share options
were awarded as part of longer-term incentives.
The option holder may only exercise the option if, on the date
of exercise, the market value targets are achieved.
480,000 share options were granted in the period ( 2021 :
609,000) and the average share price target for options issued in
2022 was 15p (2021: 15p).
Grant Exercise price per Period within which options Number of share options
date share (pence) are exercisable outstanding
2022 2021
12-May-14 15p 01/01/2024 to 31/12/2031 396,521 396,521
12-May-14 50p 01/01/2024 to 31/12/2031 528,695 528,695
21-May-14 50p 21/05/2017 to 20/05/2024 132,173 38,550
14-Jul-17 50p - - 250,000
21-Jul-17 15p 01/01/2024 to 31/12/2031 500,000 500,000
11-Oct-18 15p 01/01/2024 to 31/12/2031 100,000 100,000
1-Jan-19 15p 01/01/2024 to 31/12/2031 500,000 500,000
26-Jun-19 15p 01/01/2024 to 31/12/2031 100,000 100,000
5-Sep-19 15p 01/01/2024 to 31/12/2031 100,000 100,000
2-Jan-20 15p 01/01/2024 to 31/12/2031 900,000 900,000
31-Oct-20 9p 01/01/2024 to 31/12/2031 186,400 186,400
30-Nov-20 15p 01/01/2024 to 31/12/2031 104,900 104,900
31-Dec-20 13p 01/01/2024 to 31/12/2031 129,100 129,100
31-Jan-21 13p 01/01/2024 to 31/12/2031 129,100 129,100
28-Feb-21 14p 01/01/2024 to 31/12/2031 119,900 119,900
31-Mar-21 15p 01/01/2024 to 31/12/2031 111,900 111,900
30-Apr-21 15p 01/01/2024 to 31/12/2031 75,200 75,200
31-May-21 15p 01/01/2024 to 31/12/2031 66,400 66,400
30-Jun-21 15p 01/01/2024 to 31/12/2031 62,700 62,700
31-Jul-21 15p 01/01/2024 to 31/12/2031 44,400 44,400
14-Apr-22 15p 01/01/2024 to 31/12/2031 400,000 -
9-Nov-22 16p 01/01/2024 to 31/12/2031 30,000 -
25-Nov-22 16p 01/01/2024 to 31/12/2031 50,000 -
4,767,389 4,443,766
============ ===========
The share options are exercisable at a price equal to the
average quoted market price of the Company's shares on the date of
grant. The share options that have been issued in 2022 have a
vesting period to 1 January 2024 and have no minimum price
condition. The options are forfeited if the employee leaves the
Group before the options vest. Details of these share options are
summarised in the table below:
During 2022, it was agreed with the Business Growth Fund that
Larry Lipman, the Chairman, will waive his 250,000 share options
issued on 14 July 17. He has also agreed that if he exercised any
of the remaining share options, he cannot sell these shares for two
years.
2022 2022 2021 2021
Number of share Weighted average exercise Number of share Weighted average exercise
options price options price
Brought forward 1 January 4,443,766 18.2p 4,634,166 38.0p
Forfeited in the period (156,377) 50.0p (800,000) 33.6p
Issued in the period 480,000 20.9p 609,600 15.0p
Outstanding at 31 December 4,767,389 19.3p 4,443,766 35.9p
=============== ========================= =============== =========================
Exercisable at end of
the period 388,573 50.0p 2,327,789 42.8p
=============== ========================= =============== =========================
No options were exercised in the period.
The fair value of the share options was calculated using the
Black Scholes model. There is a charge of GBP42k taken though the
income statement (2021: GBP72k).
The inputs are as follows:
2022 2021
Closing price of Safestay
plc 15.5p 19.5p
Weighted average share
price 15.7p 20.3p
Weighted average exercise
price 19.3p 35.9p
Expected volatility 52% 35%
Average vesting period 2.0 years 7.0 years
Risk free rate 1.47% 1.28%
Expected dividend yield 0.00% 0.00%
The expected volatility percentage was derived from the quoted
share prices since flotation.
21 Notes to the cashflow statement
2022 2021
GBP'000 GBP'000
Profit/(loss) before tax (724) 693
Adjustments for:
Depreciation of property, plant and equipment and amortisation
and impairment of intangible assets 3,586 3,773
Profit on disposal of fixed assets - (6,957)
Finance cost 2,558 2,545
Share based payment charge 42 72
Exchange movements (836) 116
Lease Modifications 280 -
Rent concessions - (1,275)
Changes in working capital:
Decrease in inventory 11 12
Decrease/(increase) in trade and other receivables 154 549
(Decrease) in trade and other payables 1,059 (800)
------- -------
Net cash from operating activities 6,130 (1,272)
======= =======
22 Related Party Transactions
The Group has taken advantage of the exemption contained within
IAS 24 - 'Related Party Disclosures' from the requirement to
disclose transactions between wholly owned group companies as these
have been eliminated on consolidation.
The remuneration of the directors, who are the key management
personnel of the Group, is set out below:
2022 2021
GBP'000 GBP'000
Short term employee
benefits 364 332
Pension 5 6
Share based payment
charges 0 72
369 410
======= =======
Further information about the remuneration of individual
directors is provided in the Directors' Remuneration Report.
Details of the directors' share options is provided in the
Directors' Remuneration Report and in note 20 of the accounts. The
directors' share options have been audited.
Safestay plc has a common directorship with Safeland plc. In the
year, Safestay plc rented premises from Safeland plc on
non-commercial terms. Total rent paid to Safeland plc was GBP50,000
( 2021 :GBP50,000).
Safeland plc has 528,695 share options as at 31 December 2022
(2021: 528,695), valued at GBP48k.
23 FINANCIAL INSTRUMENTS
Capital management
Total Capital is calculated as equity, as shown in the
consolidated statement of financial position, plus debt.
The Board's policy is to maintain a strong capital base with a
view to underpinning investor, creditor and market confidence and
sustaining the future development of the business. Capital consists
of ordinary shares, other capital reserves and retained earnings.
To this end, the Board monitors the Group's performance at both a
corporate and individual asset level and sets internal guidelines
for interest cover and gearing.
The executive directors monitor the Group's current and
projected financial position against these guidelines. In order to
maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
2022 2021
GBP'000 GBP'000
Share capital 647 647
Share premium account 23,904 23,904
Retained earnings (13,209) (12,928)
Merger reserve 1,772 1,772
Share based payment
reserve 551 510
Revaluation reserve 15,996 15,996
Translation reserve 96 231
Bank loans 17,000 18,007
Property financing
loans 7,088 7,078
Lease liabilities 32,220 33,008
-------- --------
The Group has no externally imposed capital requirements.
Significant Accounting Policies
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised, in respect of each class of financial asset, financial
liability and equity instruments are disclosed in note 1 to these
financial statements and in the tables below:
Categories of financial instruments
At 31 December 2022 , the Group held the following financial
assets:
2022 2021
GBP'000 GBP'000
Trade and other receivables
(note 13) 1,187 1,227
Cash and cash equivalents
(note 14) 5,226 4,482
------- -------
6,413 5,709
======= =======
At 31 December 2022 , the Group held the following financial
liabilities:
2022 2021
GBP'000 GBP'000
Bank loans (note 16) 17,000 18,007
Property financing loans
(note 16) 7,084 7,078
Lease liabilities (note
17) 32,220 33,008
Trade and other payables
(note 15) 3,128 2,069
59,432 60,162
======= =======
All financial liabilities are measured at amortised cost.
The carrying amounts of the Group's bank loans and overdrafts,
lease obligations and trade and other payables approximate to their
fair value.
2022 2021
GBP'000 GBP'000
Total liabilities (62,732) (57,962)
Cash and cash equivalents 5,226 4,482
-------- --------
Net Debt (57,506) (53,480)
======== ========
Financial risk management
The Group's financial instruments comprise bank loans and
overdrafts, Lease liabilities, cash and cash equivalents, and
various items within trade and other receivables and payables that
arise directly from its operations.
The main risks arising from the financial instruments are
interest rate risk and liquidity risk. The Board reviews and agrees
policies for managing these risks which are detailed below.
Interest rate risk
The Group's interest rate risk arises from long-term borrowings.
Borrowings at variable rate expose the Group to cash flow interest
rate risk which is partially offset by cash held at variable
rates.
Liquidity risk
All of the Group's long-term bank borrowings are secured on the
Group's property portfolio. If the value of the portfolio were to
fall significantly, the Group risk breaching borrowing covenants.
The Board regularly review the Group's gearing levels, cash flow
projections and associated headroom and ensure that excess banking
facilities are available for future use.
The business continued to manage its liquidity risk with the
renewal of its debt facility with HSBC on the 13 January 2020 with
a facility of GBP12.7m until 2025. In addition, a GBP5.0m bank
CBILs facility was secured for 6 years on 16th December 2020, which
is interest free for the first year increasing to 3.99% above base
rate from year 2. Repayment of CBILs facility commenced in April
2022.
The business continues to service this debt and make the
interest payments as they fall due. There are no off-balance sheet
financing arrangements or contingent liabilities.
Foreign currency risk
The group is exposed to foreign currency risk from overseas
subsidiaries with group transactions carried out in Euros.
Exposures to currency exchange rates arise from the Group's
overseas sales and purchases, which are primarily denominated in
Euros.
This risk is mitigated by each hostel holding a denominated bank
account in the country of operation. The group monitors cashflows
and considers foreign currency risk when making intra-group
transfers.
Foreign transactions are translated into the functional currency
at the exchange rate ruling when the transaction is entered.
Foreign exchange gains and losses resulting from the settlement of
such transactions, and from the translation at year end exchange
rates, of monetary assets and liabilities are recognised in the
income statement.
The Group have performed a sensitivity analysis to determine the
impact of a fluctuation in exchange rate on the business. The Group
have assumed that 10% fluctuation in exchange rate reasonably
reflects the change in the currency pair over the last 12
months:
Profit before Profit before
tax (losses)/gains Equity (losses)/gains tax (losses)/gains Equity (losses)/gains
2022 2022 2021 2021
GBP'000 GBP'000 GBP'000 GBP'000
10% Strengthening of Sterling
versus the Euro (117) (1,549) 315 (1,661)
10% Weakening of Sterling
versus the Euro 129 1,704 (346) 1,827
Interest rate risk management
The Group is exposed to interest rate risk on its borrowings.
The GBP12.7 million main facility has an interest rate of 2.95%
above the London inter-bank offer rate (LIBOR). When the GBP10.2
million from the Edinburgh sale proceeds was used to reduce the
debt in July 2021, LIBOR was replaced with 2.95% above SONIA. The
GBP5 million CBILS in interest free in year 1 and has an interest
rate of 3.99% above base rate from year 2 until it is fully repaid
at the end of year 6. The Group carefully manages its interest rate
risk on an ongoing basis.
Interest rate sensitivity
The sensitivity analysis in the paragraph below has been
determined based on the exposure to interest rates for all
borrowings subject to interest charges at the statement of
financial position date. For floating rate liabilities, the
analysis is prepared assuming the amount of the liability
outstanding at the statement of financial position date was
outstanding for the whole year. A 0.5% increase or decrease is used
when reporting interest rate risk internally to key management and
represents management's assessment of the reasonably possible
change in interest rates.
Based on bank borrowings, at 31 December 2022, if interest rates
were 0.5% higher or (lower) and all other variables were held
constant, the Group's net profit would increase or decrease by
GBP83,000 (2021: GBP89,000). This is attributable to the Group's
exposure to interest rates on its variable rate borrowings.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with
the Board of directors. The Board manages liquidity risk by
regularly reviewing the Group's gearing levels, cash flow
projections and associated headroom and ensuring that excess
banking facilities are available for future use. All of the Group's
long-term bank borrowings are secured on the Group's property
portfolio.
Liquidity and interest risk analysis
The following tables detail the Group's remaining contractual
maturity for all financial liabilities. The tables have been drawn
up based on the undiscounted cash flows of financial liabilities
based on the earliest date on which the Group can be required to
pay including interest.
Later
than
Less than 1-2 years 3-5 years 5 years Total
1 year
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Variable interest rate
borrowings 1,379 1,577 16,659 - 19,615
Property financing
borrowings 191 191 573 10,193 11,148
Trade and other payables 3,124 - - - 3,124
Lease liabilities 3,345 3,345 9,729 31,420 47,839
8,039 5,113 26,961 41,613 81,726
========= ========= ========= ======= =======
The above amounts reflect the contractual undiscounted cash
flows, which may differ to the carrying values of the liabilities
at the reporting date.
The repayment of the GBP5 million CBILS started in April 2022.
It was agreed with HSBC that the main debt facility would be
interest only from July 2021 after the disposal of Edinburgh, which
involved a GBP10.2 million debt repayment to HSBC.
24 FAIR VALUES OF NON-FINANCIAL ASSETS
The following table shows the levels within the hierarchy of
non-financial assets measured at fair value on a recurring
basis:
Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000
2021
Freehold Property - - 9,484 9,484
Leasehold Property - - 31,691 31,691
- - 41,175 41,175
------- ------- ------- -------
2022
Freehold Property - - 12,471 12,471
Leasehold Property - - 28,796 28,796
- - 41,267 41,267
------- ------- ------- -------
The group's freehold and leasehold property asset is estimated
based on appraisals performed by independent, professionally
qualified property valuers. The significant inputs and assumptions
are developed in close consultation with management. The valuation
process and fair value changes are reviewed by the directors at
each reporting date.
25 Business combinations
See accounting policy in note 1.
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