easyHotel .com simple comfort, great value Investor presentation - - PowerPoint PPT Presentation

easyHotel plc

Investor presentation May 2016

easyHotel.com

simple comfort, great value

easyHotel plc

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Disclaimer

• This presentation (this "presentation") is for general information only and is the property of easyHotel plc ("easyHotel"). Making

this presentation available in no circumstances whatsoever implies the existence of a commitment or contract by or with easyHotel, or any of its affiliated entities, or any of its or their respective subsidiaries, directors, officers, representatives, employees, advisers or agents ("Affiliates") for any purpose.

• This presentation as well as any other related documents or information do not purport to be all inclusive or to contain all the

information that you may need. There is no obligation of any kind on easyHotel or its Affiliates to update this presentation. No representation or warranty, express or implied, is or will be made in relation to, and no responsibility or liability is or will be accepted by easyHotel or its Affiliates as to, or in relation to, the accuracy, reliability, or completeness of any information contained in this presentation and easyHotel (for itself and on behalf of its Affiliates) hereby expressly disclaims any and all responsibility or liability (other than in respect of a fraudulent misrepresentation) for the accuracy, reliability and completeness of such information.

• All projections, estimations, forecasts, budgets and the like in this presentation are illustrative exercises involving significant elements
• f judgement and analysis and using assumptions, judgements and analyses which may or may not prove to be correct. The actual
• utcome may be materially affected by changes in e.g. economic and/or other circumstances. Therefore, in particular, but without

prejudice to the generality of the foregoing, no representation or warranty is given as to the achievability or reasonableness or any projection of the future, budgets, forecasts, management targets or estimates, prospects or returns. You should not do anything (including entry into any transaction of any kind) or forebear to do anything on the basis of this presentation. Before entering into any arrangement, commitment or transaction you should take steps to ensure that you understand the arrangement, commitment or transaction and have made an independent assessment of the appropriateness of the arrangement, commitment or transaction in light

• f your own objectives and circumstances, including the possible risks and benefits of entering into such an arrangement, commitment
• r transaction.
• No information, representations or opinions set out or expressed in this presentation will form the basis of any

contract.

• This presentation is not directed to, or intended for distribution to or use by, any person or entity that is a citizen
• r resident or located in any locality, state, country or other jurisdiction where such distribution or use would be

contrary to law or regulation or which would require any registration or licensing within such jurisdiction.

• The information and opinions contained in this document are provided as at the date of this presentation and

are subject to change without notice.

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Introduction

Guy Parsons

Chief Executive Officer

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Highlights

Experienced management team delivering growth strategy

• Scalable platform
• Professionalising operations

Owned hotels: Liverpool, Manchester, Birmingham^, Ipswich*, Barcelona* Placing to raise up to £30m

• Accelerating owned hotel roll-out
• Invest in assets with high returns

HY2016 vs. HY2015

• 8.0% like-for-like revenue

increase for owned hotels

• 10.9% Adjusted EBITDA

increase Strong development pipeline: Franchise hotels: Brussels, Amsterdam, Dubai

^ Acquisition to be completed * Subject to planning permission

1,880 rooms 21 Hotels 14 Cities 9 Countries

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2015/2016 half year results

Marc Vieilledent

Chief Financial Officer

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• Total system sales up 10.4% to £9.66m (2015: £8.75m*)
• Total revenue up by 11.6% to £2.59m (2015: £2.32m*)
• 8.0% like-for-like revenue increase for owned hotels
• Gross profit margin was 64.6% (2015*: 64.0%), excluding pre-opening costs
• Adjusted EBITDA up by 10.9% to £0.58m (2015: £0.52m)
• Cash and cash equivalents was £17.61m (Sep 2015: £22.64m), after £4.59m of capital expenditure
• Interim dividend of 0.11p per share (2015: nil)

Financial Summary for Half Year Ending 31 March 2016

This excludes South Africa one-off fee

15%

* 2015 amounts exclude the £0.27m one-off termination fee of a South African franchisee agreement

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YTD March 2016 YTD March 2015 Change £’000 £’000 % Revenue 2,589 2,319 11.6 Gross profit 1,671 1,485 12.5 Gross profit margin 64.6% 64.0% 0.6pt Central costs (1,096) (966) 13.4 Adjusted EBITDA 575 519 10.9 Depreciation and amortisation (224) (179) 25.1 Interest (29) (36) (19.4) Profit before tax before one-offs 322 304 5.9

Profit Before Tax Before One-Offs

This excludes South Africa one-off fee

15%

Gross profit up

12.5%

Profit before tax before one-

• ffs up 5.9%

Central staff costs on budget at £0.70m (2015:£0.57m)

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*One-offs South African one off

• 270

Pre-opening costs (Liverpool) (49)

• SBP/LTIP and other expenses

(133) (3) Foreign exchange loss (Benelux franchisee)

• (205)

Total (182) 62 YTD March 2016 YTD March 2015 £’000 £’000 Profit before tax before one-offs 322 304 One-offs* (182) 62 Profit before tax 140 366 Taxation (57) (122) Profit for the period 83 244

Profit After Tax and One-Offs

This excludes South Africa one-off fee

15%

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YTD March 2016 YTD March 2015 Growth £’000 £’000 % Owned Hotel Revenue 2,022 1,705 18.6 Profit before tax 814 674 20.8

Owned Hotel Performance

This excludes South Africa one-off fee

15%

18.6%

Total Revenue L4L Revenue

8.0%

Profit before tax

20.8%

Weighted-average* RevPAR growth

+9.9%

RevPAR

£25.40

*Weighted by room number

ROCE on existing hotels

>15% £25.4

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• Like for like revenue growth of 1.1%
• Decrease in profit before tax reflects:
• 2015 one-offs: termination fees (South Africa, Larnaka) and FX loss

related to Benelux franchisee

• 2016 investment for growth: marketing and expenses related to

franchise and development agreement negotiations

YTD March 2016 YTD March 2015 Growth £’000 £’000 % Franchised Hotel Revenue 567 884 (35.9) Profit before tax 317 449 (29.4)

Franchise Hotel Performance

This excludes South Africa one-off fee

15%

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p11 YTD March 2016 YTD March 2015 £’000 £’000 Adjusted EBITDA 575 519 One-offs (excl. non-cash LTIP/SBP cost) (58) 65 Working capital (748) (14) Net cash generated from operations (231) 570 Net cash used in investing activities* (4,590) (861) Net cash generated from/(utilised by) financing activities (203) (962) Net increase/(decrease) in cash and cash equivalents (5,024) (1,253) Cash and cash equivalents at the beginning of the period 22,636 24,264 Exchange differences on translation of foreign operations 2

• Cash and cash equivalents at the end of the period

17,614 23,011

Liverpool

£0.3m

Birmingham

£0.2m

Manchester

£3.3m

Barcelona

£0.8m

£4.6m

Cash Flow Analysis

This excludes South Africa one-off fee

15%

*Investment activity breakdown:

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• Current hotel pipeline outstanding commitment of c. £24m
• Cash on the balance sheet of £17.6m at 31 March 2016
• NatWest bank facility of £7.2m:
• Due for repayment in January 2017
• Discussions underway with UK banks to replace existing facility
• Initiated discussions with Spanish banks to part-fund Barcelona development

for a € denominated facility at 50-60% Loan To Cost

• Strategy not to borrow more than 3x net debt/mature EBITDA
• Board continues to evaluate funding options

Financing

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• Owned hotels outperforming the market*
• Construction started on the owned Liverpool and Manchester hotels, and

the franchised Brussels, Amsterdam and Bur Dubai hotels

• Full year trading on track to meet board expectations

Current Trading and Prospects

* STR Global

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Strategy update

Guy Parsons

Chief Executive Officer

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• Across Europe c.73% of decisions are based on a combination of location and/or price
• Budget hotels used predominantly by domestic guests
• easyHotel brand is a significant super budget operator
• High brand awareness of “easy” brands driving consumer preference

Total hotel market estimated at* : Share 2014 2020 2030 2014 2020 2030 (000) rms rms rms % % % Branded Budget 137 180 215 19% 23% 25% All Other 602 600 635 81% 77% 75% UK Market 739 780 850 100% 100% 100%

Opportunity

• UK hotel market has significant potential to grow

* Melvin Gold Consulting 2015

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easyHotel Strategy

Owned Hotel Development

• Potential for c.12,000 rooms in UK and Europe
• 5 hotels under development
• Target Return on Capital of 15.0%^*
• Management resources and expertise in place to

deliver projects on time and on budget

Franchise Hotel Roll-Out

• Potential for c.15,000 rooms in the UK and Europe
• 3 currently under development

Professionalising The Business

• Increase RevPAR
• Improve margins
• Customer focus

£6-8k EBITDA* per room Total investment cost = 6.5-7.5x EBITDA* £600-800 fee* per room High incremental margin Increasing brand presence without capital investment Marketing budget contribution

^ Board will assess sites with returns below 15% in locations which offer superior risk adjusted returns in the longer term * Target at maturity

Maximise revenue Minimise costs Repeat guests

Driving EBITDA returns

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Operational Improvement

• Revenue and marketing strategy leading

to market outperformance

• Promotions to drive forward

bookings

• PPC/SEO/multi-variant testing

increasing web visits and conversion

• Key operational costs reduction:
• Savings on new cleaning contract
• Introduction of new payroll model
• 5

5 10 15 20 Oct 2015 Nov 2015 Dec 2015 Jan 2016 Feb 2016 Mar 2016 Percentage Points

Monthly RevPAR performance versus market (mature* hotels) Source STR Global

* Old Street and Glasgow owned hotels

• Customer satisfaction up vs. last year
• TripAdvisor: +8.0bps

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Deals Secured: 278 rooms

Q2 2017 Q3 2017

Birmingham

• pening

Liverpool

• pening

Manchester

• pening

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Planning Permission Submitted: a further 298 rooms

easyHotel Ipswich

94 rooms Refurbishment to start when planning permission is granted Opening by June 2017

easyHotel Barcelona

204 rooms Planning submitted in April 2016, pending approval Opening early 2018

Q3 2017 Q4 2017 Q1 2018 Q2 2018

Ipswich

• pening

Barcelona

• pening

We continue to review a number of potential acquisitions

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Committed Franchise Projects: >500 rooms

easyHotel Amsterdam 131 rooms Under construction Opening end 2016 easyHotel Brussels 107 rooms Under construction Opening end 2016 easyHotel Bur Dubai 300 rooms Planning obtained Opening end 2017

Potential future franchised projects > 1,000 rooms

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Summary Strategy implementation on track Positive trading continues Over 1,000 rooms committed to deliver enhanced financial returns and board considering funding

• ptions to secure additional opportunities

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easyHotel.com

simple comfort, great value

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Appendix A: Statement of Comprehensive Income

YTD March 2016 YTD March 2015 30 September 2015 £’000 £’000 £’000 System sales 9,663 9,021 19,951 Revenue 2,589 2,589 5,541 Cost of sales (967) (834) (1,729) Gross profit 1,622 1,755 3,812 Administrative expenses (1,453) (1,148) (2,882) Analysed as: Adjusted EBITDA 575 519 1,457 Pre-opening costs (49)

• (33)

Restructuring

• (345)

South African one off

• 270

270 SBP/LTIP and other expenses (133) (3) (32) Depreciation and amortisation (224) (179) (387) 169 607 930 Profit from operations 169 607 930 Net finance (costs)/income (29) (241)* (143) Profit before taxation 140 366 787 Taxation (57) (122) (178) Profit for the period 83 244 609

* Including £205k unrealised foreign exchange loss on amounts due from Benelux franchisee

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Appendix B: Balance Sheet

YTD March 2016 YTD March 2015 30 September 2015 £’000 £’000 £’000 Non-Current Assets Intangible assets 84 60 67 Property, plant and equipment 25,339 19,418 20,951 Total non-current assets 25,423 19,478 21,018 Current Assets Trade and other receivables 365 781 360 Cash and cash equivalents 17,614 23,011 22,636 Corporate taxation

• 7

Total current assets 17,979 23,792 23,003 Total assets 43,402 43,270 44,021 Non-Current Liabilities Trade and other payables 139 167 145 Deferred tax liability 142 94 128 Bank borrowings

• 7,200

7,200 Total non-current liabilities 281 7,461 7,473 Current Liabilities Trade and other payables 3,396 3,593 4,106 Corporation taxation 37 167

• Bank borrowings

7,200

• Total current liabilities

10,633 3,760 4,106 Total liabilities 10,914 11,221 11,579 Total net assets 32,488 32,049 32,442 Equity Share capital 625 625 625 Share premium 28,592 28,592 28,592 Merger reserve 2,750 2,750 2,750 EBT reserve (1,067) (1,067) (1,067) Currency translation reserve 41

• Retained earnings

1,547 1,149 1,542 Total equity 32,488 32,049 32,442

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Appendix C: Cash Flow Statement

YTD March 2016 YTD March 2015 30 September 2015 Cash flows from operating activities £’000 £’000 £’000 Profit before taxation for the year 140 366 787 Adjustments for: Depreciation of property, plant and equipment 224 179 387 Share based payments 124 2 30 Finance income (80) (38) (187) Finance expense 109 279 330 Operating cash flows before movement in working capital 517 788 1,347 Decrease/(increase) in trade and other receivables (4) 140 563 (Decrease)/increase in trade and other payables (716) (92) 382 Cash generated from operations (202) 836 2,292 Corporate tax paid

• (25)

(222) Net cash flows from operating activities (202) 811 2,070 Finance income 80 38 187 Finance expense (109) (279) (151) Net cash generated from operations (231) 570 2,106 Investing activities Purchase of property, plant and equipment (4,590) (861) (2,593) Net cash used in investing activities (4,590) (861) (2,593) Financing activities Outflow from own share purchase

• (962)

(962) Dividend paid (203)

• Finance expense
• (179)

Net cash generated from/(utilised by) financing activities (203) (962) (1,141) Net increase/(decrease) in cash and cash equivalents (5,024) (1,253) (1,628) Cash and cash equivalents at the beginning of the period 22,636 24,264 24,264 Exchange differences on translation of foreign operations 2

• Cash and cash equivalents at the end of the period

17,614 23,011 22,636