FY19 results: Good operationally and financially
Financially, FY19 was a good year for PPHE with total revenue growth of 4.8% to £357.7m, EBITDA growth of 8.6% to £122.9m, clean PBT growth of 7.9% to £49.7m and DPS growth of 5.7% to 37p. The numbers were in line with our expectations.
On a like-for-like basis, revenue increased by 5.2% due to a RevPAR increase of 5.1%. The RevPAR increase was due to a like-for-like increase in occupancy of 130bp to 80.7%, and the average room rate increasing by 3.4% to £128.5.
FY19 was also an active year from a development perspective, with three hotels repositioned and reopened in the UK and Netherlands; the repositioning of a campsite in Croatia; site works progressed for the art-otel in Hoxton London; and the acquisition of other sites for actual or potential development in New York (opening in 2023), Belgrade (no opening date as yet) and London. After the year-end, PPHE announced the acquisition of a property for development in Zagreb.
Exhibit 1: Group performance
Year-end December, £000s |
H118 |
H218 |
FY18 |
H119 |
H219 |
FY19 |
Revenue |
148,809 |
192,673 |
341,482 |
155,273 |
202,419 |
357,692 |
Growth y-o-y (l-f-l) |
4.4% |
|
6.0% |
6.3% |
|
5.2% |
Occupancy |
74.9% |
|
79.4% |
76.8% |
|
80.6% |
Average room rate (£) |
114.4 |
|
123.1 |
121.7 |
|
128.5 |
Growth y-o-y (l-f-l) |
(0.9%) |
|
2.0% |
4.8% |
|
3.4% |
RevPAR |
85.7 |
|
97.7 |
93.4 |
|
103.6 |
Growth y-o-y (l-f-l) |
2.9% |
|
5.0% |
7.5% |
|
5.1% |
EBITDAR |
44,730 |
75,977 |
120,707 |
46,506 |
78,162 |
124,668 |
Margin |
30.1% |
39.4% |
35.3% |
30.0% |
38.6% |
34.9% |
Growth y-o-y (l-f-l) |
0.4% |
|
5.0% |
5.1% |
|
3.2% |
EBITDA |
40,581 |
72,591 |
113,172 |
45,655 |
77,239 |
122,894 |
Margin |
27.3% |
37.7% |
33.1% |
29.4% |
38.2% |
34.4% |
Growth y-o-y (l-f-l) |
0.5% |
|
5.6% |
5.7% |
|
3.4% |
Source: PPHE Hotel Group accounts, Edison Investment Research
Geographically, the greatest contributors to revenue growth were the UK and the Netherlands with RevPAR outperformance in favourable market conditions and rooms coming on stream after repositionings. All countries excluding Croatia increased EBITDA on an absolute basis, but the Netherlands saw a reduction in margin as well as Croatia, due to the disruption from the repositionings and continuing labour cost pressures, the latter being a feature in all markets. The introduction of IFRS 16 increased EBITDA by £5.3m, or 4.7%, as the company has leases on two hotels in Germany.
Exhibit 2: UK performance
Year-end December, £000s |
H118 |
H218 |
FY18 |
H119 |
H219 |
FY19 |
Revenue |
89,568 |
105,524 |
195,092 |
95,656 |
111,725 |
207,381 |
Growth y-o-y (l-f-l) |
3.6% |
|
4.6% |
6.8% |
|
6.3% |
Occupancy |
82.7% |
|
85.7% |
85.0% |
|
87.7% |
Average room rate (£) |
135.3 |
|
145.1 |
144.0 |
|
152.4 |
Growth y-o-y (l-f-l) |
(4.7%) |
|
0.0% |
6.4% |
|
5.0% |
RevPAR |
112.0 |
|
124.4 |
122.3 |
|
133.7 |
Growth y-o-y (l-f-l) |
(2.7%) |
|
3.2% |
9.2% |
|
7.5% |
EBITDAR |
29,000 |
37,800 |
66,800 |
31,000 |
40,000 |
71,000 |
Margin |
32.4% |
35.8% |
34.2% |
32.4% |
35.8% |
34.2% |
Growth y-o-y (l-f-l) |
6.6% |
|
7.1% |
6.6% |
|
6.0% |
EBITDA |
27,889 |
37,117 |
65,006 |
30,849 |
39,847 |
70,696 |
Margin |
31.1% |
35.2% |
33.3% |
32.2% |
35.7% |
34.1% |
Growth y-o-y (l-f-l) |
3.6% |
|
5.8% |
5.7% |
|
5.0% |
Source: PPHE Hotel Group accounts, Edison Investment Research
The UK benefited from good underlying market conditions and consistent outperformance in key markets such as London and Nottingham; improving performance at several hotels as trading ramps after development or repositioning in prior years (Park Plaza London Waterloo and Park Plaza London Riverbank); as well as the re-opening of Holmes Hotel London in H119. At 87.7%, occupancy was the highest annual level recorded for the UK since PPHE has been listed; the prior peak was 87.5% in 2014. This was the second year of EBITDA margin improvement after two years of margin falls in FY16 and FY17, which were due to property tax increases and the disruption from repositioning, etc.
Per PPHE and STR Global, the RevPAR increases for the wider London, Leeds and Nottingham markets were 3.7%, 3.9% and broadly flat, respectively, therefore PPHE’s aggregate growth of 7.5% is well above those of the markets. In London, PPHE’s RevPAR growth of 7.7% compares with the upper upscale segment’s growth of 4.7%.
Looking forward, STR Global forecasts London RevPAR growth for PPHE’s segment of 1.7% in FY20, although this forecast was made prior to considering any impact from the coronavirus outbreak. In FY20 PPHE should benefit from the maturing and further renovation of Holmes Hotel London, Park Plaza London Riverbank and Park Plaza Victoria London. An art’otel is expected to open in FY22 (art’otel battersea) and FY23 (art’otel hoxton with 343 hotel rooms and five floors of office space).
Exhibit 3: Netherlands performance
Year-end December, £000s |
H118 |
H218 |
FY18 |
H119 |
H219 |
FY19 |
Revenue |
24,829 |
24,740 |
49,569 |
25,859 |
27,917 |
53,776 |
Growth y-o-y (l-f-l €) |
|
|
7.5% |
8.0% |
|
7.4% |
Occupancy |
83.9% |
|
85.7% |
86.6% |
|
86.2% |
Average room rate (€) |
139.8 |
|
138.4 |
145.0 |
|
142.6 |
Growth y-o-y (l-f-l) |
|
|
7.9% |
2.6% |
|
2.2% |
RevPAR (€) |
117.2 |
|
118.6 |
125.6 |
|
122.9 |
Growth y-o-y (l-f-l) |
|
|
8.1% |
5.2% |
|
3.2% |
EBITDAR |
7,200 |
7,000 |
14,200 |
7,100 |
7,900 |
15,000 |
Margin |
29.0% |
28.3% |
28.6% |
27.5% |
28.3% |
27.9% |
Growth y-o-y (l-f-l €) |
(2.4%) |
|
3.5% |
5.0% |
|
9.6% |
EBITDA |
7,132 |
6,959 |
14,091 |
7,083 |
7,920 |
15,003 |
Margin |
28.7% |
28.1% |
28.4% |
27.4% |
28.4% |
27.9% |
Growth y-o-y (l-f-l €) |
0.0% |
|
11.0% |
3.8% |
|
6.3% |
Source: PPHE Hotel Group accounts, Edison Investment Research
The Netherlands performed in line with our expectations. Despite FY19 being affected by the closure of a number of hotels during the year, the Netherlands recorded its highest annual occupancy level since PPHE listed. On a like-for-like basis, occupancy was 86.9% versus 86.0% in FY18. FY19 saw the maturing of Park Plaza Victoria Amsterdam, which reopened in FY18, but was affected by repositioning projects at Park Plaza Vondelpark and Park Plaza Utrecht, which fully reopened for the last quarter of FY19.
Per PPHE and STR Global, RevPAR for the Amsterdam, Utrecht and Eindhoven markets in FY19 fell by 1.3%, 1.4% and 1.1%, respectively, due to reductions in occupancy and room rates. In Amsterdam, RevPAR for PPHE’s hotels grew by 4% versus the upper upscale market, which declined by 1.3%.
For FY20, STR Global forecasts 1.5% RevPAR growth for Amsterdam; again this forecast was made before the impact of coronavirus was considered. PPHE should continue to benefit from the ramping of Park Plaza Victoria Amsterdam, Park Plaza Vondelpark, Amsterdam and Park Plaza Utrecht.
Exhibit 4: Germany performance
Year-end December, £000s |
H118 |
H218 |
FY18 |
H119 |
H219 |
FY19 |
Revenue |
15,874 |
15,569 |
31,443 |
14,122 |
15,399 |
29,521 |
Growth y-o-y (l-f-l €) |
|
|
7.9% |
3.2% |
|
2.7% |
Occupancy |
77.7% |
|
80.7% |
78.0% |
|
80.7% |
Average room rate (€) |
95.5 |
|
98.1 |
105.8 |
|
106.9 |
Growth y-o-y (l-f-l) |
|
|
1.9% |
4.3% |
|
4.9% |
RevPAR (€) |
74.2 |
|
79.2 |
82.5 |
|
86.2 |
Growth y-o-y (l-f-l) |
|
|
10.0% |
4.8% |
|
4.7% |
EBITDAR |
4,200 |
4,800 |
9,000 |
4,100 |
5,000 |
9,100 |
Margin |
26.5% |
30.8% |
28.6% |
29.0% |
32.5% |
30.8% |
Growth y-o-y (l-f-l €) |
0.0% |
|
4.1% |
6.8% |
|
6.1% |
EBITDA |
2,070 |
3,172 |
5,242 |
3,947 |
4,757 |
8,704 |
Margin |
13.0% |
20.4% |
16.7% |
27.9% |
30.9% |
29.5% |
Growth y-o-y (l-f-l €) |
(4.0%) |
|
5.3% |
3.6% |
|
6.3% |
Source: PPHE Hotel Group accounts, Edison Investment Research
PPHE outperformed its peers in Germany, where growth was mostly positive, helped by conferences in Cologne. Per PPHE and STR Global, RevPAR for the Berlin, Cologne, Nuremberg and Budapest markets changed by +1.4%, +8.5%, -4.4% and +6.3%, respectively, in FY19. In Berlin, PPHE’s RevPAR increased by 4.9% versus the upper upscale segment growth of 1.4%. The EBITDA margin of 29.5% was the highest ever reported by the company, in part due to changes in ownership structure of the freeholds etc, in recent years. Excluding these changes, the EBITDAR margin of 30.8% was also an all-time high. Looking forward to FY20, there will be a less-favourable backdrop due to fewer conferences in Cologne.
Exhibit 5: Croatia performance
Year-end December, £000s |
H118 |
H218 |
FY18 |
H119 |
H219 |
FY19 |
Revenue |
16,297 |
43,896 |
60,193 |
16,710 |
44,437 |
61,147 |
Growth y-o-y (HRK) |
9.7% |
3.4% |
5.0% |
3.9% |
2.8% |
3.1% |
Occupancy |
51.0% |
|
62.4% |
52.7% |
|
63.1% |
Average room rate (HRK) |
569.0 |
|
785.8 |
571.0 |
|
772.1 |
Growth y-o-y |
1.4% |
|
0.0% |
0.4% |
|
(1.7%) |
RevPAR (HRK) |
290.1 |
|
490.4 |
300.8 |
|
487.1 |
Growth y-o-y |
10.0% |
|
0.9% |
3.7% |
|
(0.7%) |
EBITDAR |
700 |
19,000 |
19,700 |
0 |
19,400 |
19,400 |
Margin |
4.3% |
43.3% |
32.7% |
0.0% |
43.7% |
31.7% |
Growth y-o-y (HRK) |
27.9% |
(2.6%) |
(1.8%) |
(92.7%) |
2.8% |
(0.4%) |
EBITDA |
96 |
18,462 |
18,558 |
-554 |
18,781 |
18,227 |
Margin |
0.6% |
42.1% |
30.8% |
-3.3% |
42.3% |
29.8% |
Growth y-o-y (HRK) |
N/M |
(2.9%) |
(2.4%) |
N/M |
3.0% |
(0.6%) |
Source: PPHE Hotel Group accounts, Edison Investment Research
The Croatian operations performed better than our expectations due to a good focus on costs while continuing to invest in the business. As previously disclosed, competition from Greece, Turkey and Eqypt intensified during the year, which has led to the EBITDA margin being at its lowest level since the business was consolidated in FY16. Looking to the future, FY20 should benefit from the maturing of the Arena One 99 campsite and the first phase of Arena Kažela Campsite, opened in FY18 and FY19, respectively; and the second phase of investment in Arena Kažela and launch of Verudela Beach resort Pula, both scheduled to open before the summer season of FY20. FY21 should see the opening of the luxury upscale Hotel Brioni Pula.
Current trading and the coronavirus
The current trading statement indicates that trading for the first two months of the year is in line with the board’s expectations.
At the date of the results, there had been no significant impact on PPHE’s operations from the global outbreak of coronavirus, however it was too soon to have seen any impact given the countries in which it operates. Management closely monitors cancellations of existing bookings and pacings of new bookings to gauge the health of the business. To date there were few cancellations from Asian travellers, which are not a major source of customers, and the majority of these ‘cancellations’ had postponed to later in the year rather than cancelled outright. With respect to new bookings, there had been a slight, ie not material, slowdown. Management’s preference in a downturn is to maintain discipline on room rate at the expense of occupancy.
On 11 March 2020, PPHE issued a business update, which highlighted the following: ‘As has been widely reported in the media and by industry benchmark reports, over recent weeks there has been reduced demand for international travel which has resulted in an increase in cancellations and a slowdown in future bookings across the travel and hotel industry, including the Group’s estate.
Due to the fast-moving nature of the situation, it is too early to provide any meaningful estimate of quantum on the Group’s earnings for the current financial year given the trajectory and duration of the virus and its impact remains highly uncertain. The necessary actions to minimise the impact on the business are being taken.’