Audited Results for the year ended 31 December 15

Action Hotels PLC

("Action Hotels" with its subsidiaries the "Group")

Audited Results for the year ended 31 December 2015

Annual Report and notice of Annual General Meeting

Action Hotels plc, a leading owner, developer and asset manager of three and four-star hotels in the Middle East and Australia, is pleased to announce its audited full year financial results for the year ended 31 December 2015. 

All currency amounts are in US million $ unless otherwise stated.

2015 Key highlights 

· Completion of 10th and largest hotel and the addition of new hotels taking total room count at year end to 1,928, a 30% increase from last year (2014: 1,488 rooms) and an increase of 92% since IPO

· Year-on-year growth in all key financial performance indicators - Revenue, EBITDA, Net profit and Net Asset Value

· $2.8m reported net profit - ahead of management expectations and an increase of 47% on last year (2014: $1.9m)

· Increase in Net Asset Value per share of 5% to USD 1.40/GBP 0.95 (2014: USD 1.32/GBP 0.87)

· Final dividend increase of 1.8% to GBP 1.47 pence per share, bringing the total dividend for the year to GBP 2.21 pence per share (2014: GBP 2.17 pence per share), a yield (as at 18 April 2016) of 4.3%

2015 Financial highlights

· Total reported revenue increased by 16% to $43.5m (2014: $37.6m)

· Adjusted EBITDA1 increased by 42% to $16m (2014: $11.3m)

· Operating profit increased to $8.7m (2014: $6.1m)

· Increase in reported Net Asset Value (NAV) of $10m to $196m (2014: $186m)

· Adjusted NAV2 increased 6% to $206.3m (2014: $194.8m)

2015 Operational highlights

· Solid occupancy on mature hotels on a like-for-like basis increased to 79.3% (2014: 78%)

· Average EBITDA breakeven occupancy across the portfolio remained low at 30% (2015: 35%)

· Opening of two new hotels, ibis Seef Bahrain and Premier Inn Sharjah, as well as the acquisition of ibis Budget Melbourne Airport and completion of ibis Styles Brisbane Elizabeth Street, increasing operational rooms by 30% to 1,928

· Committed and fully funded pipeline of a further six hotels plus three plots of investment land, taking total room count to a minimum of 2,650 by 2018

· First year of trading at ibis Seef Bahrain, which was EBITDA positive early after opening and continues to perform well

2016 current trading

· Positive start to the year with revenue up by 14% over the same period last year

· Strong performances from our operating hotels and new rooms contributing to the revenue growth

· Average occupancy at our mature hotels of 77%

· Strong performance in our Kuwait hotels with ibis Salmiya and ibis Sharq trading at an average occupancy of 89.5%

· New hotels also performing well, with Premier Inn Sharjah, which opened in August 2015, already delivering an average occupancy for Q1 of 79% whilst the 304 room ibis in Bahrain is achieving occupancy of 60.6% for the first quarter

· ibis Styles Brisbane reported a positive GOP for its first month of operation

 Commenting on the results, Alain Debare, Chief Executive Officer, Action Hotels said:

"2015 has been another successful year of delivering growth to our shareholders. We opened new hotels and added more projects to the pipeline whilst overseeing strong performances from our existing profitable operating hotels. Our focus continues to be the delivery of our pipeline of hotels on time and on budget. We expect to deliver a further three hotels this year, taking the total for 2016 to five new hotels in one year."

The Annual Report will be posted to shareholders and made available on the Company's website, http://www.actionhotels.com/ at a later date and will contain a notice of the Company's Annual General Meeting, which will be held on 3rd May 2016 in London, UK.

1 Adjusted EBITDA has been defined as operating profit before depreciation, amortisation, restructuring and listing costs, gains and losses arising from the disposal of property, plant and equipment, pre-opening costs and other non-recurring expenses.

2Adjusted net asset value is the net asset value of the Group adjusted for the deferred tax provision that is required on the revaluation of properties to the Statement of Financial Position. The deferred tax provision as at 31 December 2015 is $10.5m (2014: $8.7m) and would only become payable if these revalued properties were sold.

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Chairman's Statement

I am pleased to report to our Shareholders another year of growth at Action Hotels as we continue to execute and deliver our pipeline of three and four star hotels across the GCC and Australia into our profitable operating portfolio.

2015 marked the completion of our tenth and largest hotel, the 367-room ibis Styles Brisbane Elizabeth Street, increasing the total number of completed rooms by over 30% to 1,928 across six countries. Earlier this year we also completed the 104-room Tulip Inn Ras Al Khaimah, which will become operational in H1 2016.

In addition, we completed our first acquisition of an existing operational hotel, ibis Budget Melbourne Airport, showing the flexibility in our approach to accelerating growth.

Middle East

Our focus remains the expansion of our hotel portfolio across the GCC, driven by increasing demand for quality, affordable hotel accommodation and the material undersupply in the economy and midscale hotel sectors.

This gap between the demand and supply of three and four star hotels in these countries provides an exciting opportunity for Action Hotels to be a first mover addressing this imbalance, which continues to widen as governments and corporates create more jobs in non-oil industries as part of their committed diversification programmes.

In addition to the rapid growth of new jobs being made available across the GCC, other factors are increasing the numbers of intra-regional travellers. A growing middle class, along with increasingly affordable and accessible air travel across the GCC (additional airline and airport capacities along with the emergence of low cost airlines) are driving demand for affordable, quality, value for money hotel accommodation across the region.

Australia

Australia is a market that we know extremely well and where we have a good presence and network on the ground. Whilst the hotel market dynamics are more mature than the Middle East, our ability to access prime hotel developments and opportunities give us the opportunity to operate and grow our portfolio in Australia.

We now have three hotels with a total of 595 rooms in Australia (Glen Waverley, Melbourne airport and Brisbane) and will continue to seek and review further opportunities that meet our robust return on investment criteria.

Financial Performance

We saw growth across all our financial KPIs: Revenue up 16%, EBITDA up 42%, Net profit up 47% and Net asset value rising by 5.4% during the year.

Development pipeline

All of our pipeline hotel projects are fully funded using the cash generated from our profitable operating hotels, along with secured debt from banks and financial institutions at competitive rates. For these developments we will not require any additional equity fundraise. We continue to review future hotel opportunities with a flexible approach to accelerating our growth through freehold, leasehold, joint ventures and existing hotel opportunities. Depending on the nature of future opportunities and the capital required, we may look to use our public company equity.

Dividend

Most of our operating hotels to date have positively contributed to EBITDA shortly after opening, and even though we continue to accelerate our growth, the profitability and cash profile of our operating business enables a dividend to be paid to shareholders. I am delighted to announce that the board is recommending a final dividend of GBP 1.47 pence per share for 2015, resulting in a full year dividend of GBP 2.21 pence per share (2014: GBP 2.17 pence per share). The board are confident of maintaining a progressive dividend policy.

Board, Management, Colleagues

I am proud of the dedication and hard work that my fellow colleagues continue to apply each day for Action Hotels. We have a highly experienced team across all areas of the business and I send my sincere gratitude for all your efforts last year.

Outlook

We remain on track for a record year of hotel openings across the GCC and Australia. In Australia we recently opened our largest hotel, ibis Styles Brisbane Elizabeth Street and early business is already encouraging.

We have also completed our first Tulip Inn branded hotel, which is also our first hotel in Ras Al Khaimah (construction has been completed and we are awaiting final sign-off from local authorities). New additions that are due to open during 2016 include the ibis Styles Bahrain, Mercure Sohar, Mercure Riyadh Olaya and Tulip Inn Modon Jeddah.

We look forward to continuing to update our shareholders on our progress throughout the course of this year.

Sheikh Mubarak A M Al-Sabah

Founder and Non-Executive Chairman

Chief Executive Officer's review

2015 was another action-packed year of new hotel completions, openings and strong performances across our operational hotels, along with material progression of our development pipeline.

On a reported financial basis, we saw material growth in revenue of 16%, Adjusted EBITDA up 42% and net profit up 47% on last year. We also continued to further strengthen our asset backed position with a 5% increase in net asset value to USD 196m. Our strong growth in EBITDA is driven by continued positive operating performance, a strictly controlled cost environment and benefits from economies of scale with fixed and overhead expenses.

The performance of our operating hotels remains strong as the economy and mid-market hotel sector in which we operate remains significantly undersupplied. We are focused on maintaining high occupancy levels and keeping a stringent control on expenses, which are the key drivers to our low break-even occupancy and good performance.

Hotel portfolio

We remain focused on the completion of the pipeline as well as maximising the performance of our operational hotels and creating new development opportunities. The portfolio at the end of 2015 consisted of 10 completed hotels and 1,928 rooms, a growth of 92% since IPO (1,004 rooms in December 2013) with a further seven hotels and 721 rooms in the pipeline (this includes the 104-room hotel, where construction is complete and we are awaiting sign-off from local authorities) that will position Action Hotels as the region's leading hotel owner with a minimum 17 hotels and 2,649 rooms by 2018. In addition, at the year-end we had two key investment land plots in Dubai and Kuwait, and a further plot in Q1 2016 in Dubai's Media City, which are expected to increase the number of hotels and rooms further in due course.

During the year we welcomed three new hotels, adding 545 rooms into our operational portfolio. We were delighted to open the 304-room ibis Seef and the 168-room Premier Inn Sharjah, two of our greenfield site developments and Action's debut in two new countries, Bahrain and the UAE. In October, we acquired the 73-room ibis Budget Melbourne Airport in Australia. Although our strategy to date has been focused on greenfield projects, we were able to acquire this profitable airport hotel at an attractive price and it is an excellent fit into our existing portfolio.

Hotel completions and openings

In addition to the 3 new hotels this year, during December we completed the construction of the largest freehold hotel in our portfolio, ibis Styles Brisbane Elizabeth Street and the Tulip Inn property in Ras Al Khaimah, where construction is now complete and we are awaiting final sign-off from local authorities. Our Brisbane property opened on 1st March 2016 and marks a milestone for Action Hotels as it is our 10th hotel. Along with the imminent opening of Tulip Inn Ras Al Khaimah, this will take us to 2,033 operating rooms.

This gave us a year-on-year increase in growth of our portfolio of 30% in completed rooms, again demonstrating another year of delivery to our shareholders.

Operational performance

Our operational hotels delivered another year of strong performance. During 2015, the portfolio consisted of 5 stabilised hotels (beyond year 3 of operations), the Holiday Inn Muscat in its second year, the opening of two new hotels and the acquisition of the ibis at Melbourne Airport in October.

Performance remains strong at the mature hotels (831 rooms), underpinning our strong operational profit and cash flow. Our hotels typically reach maturity after their 3rd year from opening where a steady occupancy, ADR and RevPAR is expected. Our two Kuwait hotels, ibis Sharq and ibis Salmiya enjoyed yet another excellent year with occupancies of 86% and 83% respectively. In Kuwait we are benefitting from economies of scale which are key drivers to superior operating profits. This cost sharing strategy is one that we will repeat in Bahrain, Oman and Melbourne with multiple hotels in those markets.

Holiday Inn Muscat performed well in its second year of operation, with occupancy and ADR growing by 7.9% and 4.2% respectively. It remains the only Holiday Inn brand in Oman and the hotel has established itself in the local market. I am also pleased to report that the hotel obtained its liquor licence, which will further support the hotel's exceptional performance.

New hotels performances

Our first hotel in Bahrain, the 304-room ibis Seef opened in Q1 2015 and displayed a promising first year. The hotel, which comprises of 304 rooms including 18 apartments, is well positioned to attract families and business travellers. Since the opening we have seen strong demand from business and leisure travellers from Saudi Arabia and we remain positive on the outlook for tourism in Bahrain.

In August we also opened the Premier Inn hotel in Sharjah, our first hotel with Premier Inn. The hotel, which has been fitted out in Premier Inn's newest product specifications, is well positioned to service the local business market due to its prime location and the lack of other value-for-money hotel options within the Emirate. The hotel has already reached EBITDA profitability and has experienced promising occupancies with occupancy 79% for the first quarter of 2016.

Post year-end hotel openings

In March 2016, we opened the ibis Styles Brisbane Elizabeth Street. Our opening event received a great deal of media attention when Sheikh Mubarak A M Al Sabah, our Founder and Chairman, officially opened the largest ibis branded hotel in Australia in presence of Queensland and Accor Hotels officials.

This addition to the portfolio marks the opening of our largest and 3rd hotel in Australia. Brisbane is a stable and growing market, set to benefit from record investment projects including the Brisbane Airport extension and the $2bn investment into the Queens Wharf casino, a retail and entertainment precinct which will be just adjacent to the ibis Styles. The design of this hotel, its unbeatable location, its contemporary style and its great value for money will quickly attract a strong following.

We have also completed the construction of Tulip Inn Ras Al Khaimah. The hotel opening is experiencing a slight delay due to additional requirements requested by the local authorities, which are now in hand - the hotel is scheduled to open imminently.

Pipeline

Material progress was made across our development portfolio during the year as we look to open an additional three hotels during the course of 2016. The number of rooms in our development pipeline now stands at 721 rooms, taking our total room count to 2,649 by 2017.

Development works continue in Sohar, Oman for the opening of our first Accor branded Mercure hotel due in H2 2016. Along with this we continue to progress with two hotels in Saudi Arabia, Tulip Inn Modon Jeddah and Mercure Riyadh Olaya as well as a further hotel in Bahrain, ibis Styles Bahrain.

We also hold three development land plots in Dubai (Healthcare City and Media City) and Kuwait (Sharq) and are currently evaluating how best to optimise the values of these plots and are in discussions with a number of potential operators.

Pipeline opportunities

Our aim is to identify and develop high quality assets in key gateway locations, which have the potential for significant positive returns for our stakeholders. We continue to increase the size of our development pipeline portfolio without the requirement for additional equity.

We are also reviewing additional hotel development opportunities across freehold, leasehold and by acquiring operational hotels all with the aim of reaching our target of 5,000 hotel rooms by 2020.

Current trading and outlook

Action Hotels has seen a good start to the year with an additional four hotels added to the portfolio. Overall, revenue compared to the same period last year is up 14% with stable performance at our operating hotels and new rooms contributing to the revenue growth.

Occupancy at our mature hotels remains strong with an average occupancy of 77%. The group continues to benefit from its regional coverage with market pressures in Jordan and Oman compensated by strong performance in other markets such as Kuwait where our two hotels deliver a combined occupancy of 89.5%.

Our new hotels are also performing well. Our Premier Inn branded hotel in Sharjah, which opened in August 2015 is already delivering an average occupancy for Q1 of 79%, whilst the 304 room ibis in Bahrain achieved occupancy of 60.6% in the first quarter. Finally, the ibis Styles Brisbane Elisabeth Street, which opened on 1st March reported a positive GOP for its first month of operation.

Our focus is also on delivering the pipeline. Our next hotel opening will be the Tulip Inn Ras Al Khaimah later this month followed by the completion of four additional hotels by the year-end. We also continue to strengthen our development pipeline evident by the recent acquisition of a prime plot of land in Dubai's Innovation Hub which will join the pipeline in due course.

I am also delighted to announce that we are in the final stages of appointing a new group Finance Director who will be joining the Company's Senior management. I look forward to welcoming him to the team and introducing him to our shareholders in due course.

Alain Debare

CEO

Finance Review

Action Hotels experienced another year of growth across all its key financial indicators (Revenue, EBITDA, Net profit and Net asset value) during 2015 as a result of three new operational hotels, the leveraging and continued improved performances from our maturing hotels.

Revenue

Reported total revenue for the year increased by 16% to USD 43.4m, with just over USD 5.2m as a result of new hotels openings in Bahrain and Sharjah and the acquisition of ibis Budget Melbourne Airport.

Revenue from Australia accounted for 14% of total revenue. We expect the percentage of total revenue attributable to Australia to increase over the coming year due to the opening of our largest hotel to date, ibis Styles Brisbane Elizabeth Street and a full year trading from ibis Budget Melbourne Airport.

Operating profit, Adjusted EBITDA and Profit after Tax

Operating profit increased by USD 2.6 million to USD 8.7 million and adjusted EBITDA increased by 42% to USD 16 million driven by new hotel additions along with strong performances from our existing hotels.

EBITDA margin for the year increased by 23% on last year to 37% (2014: 30%) showing the results of our effective cost reduction and economies of scale. We are also seeing good profit conversion as revenue increases but our cost-base is fixed, i.e. the kicking in of operational gearing of previous investments into general and administration costs.

The improvement in performance, cost reduction and revaluations on our investment land improved profit after tax by 47% to USD 2.8 million (2014: $1.9 million).

Dividends

In line with the Board's intentions to pay a progressive dividend to shareholders, it proposes a final dividend in respect of the year ended 31 December 2015 of GBP 1.47 pence sterling per share, taking the total dividend for the year to GBP 2.21 pence sterling per share. The dividend is expected to be paid on 31st May 2016, subject to the approval of the dividend at the Company's annual general meeting, which is expected to take place on 3rd May 2016. The Company's ordinary shares will be marked ex-entitlement to such dividend on 28th April 2016, and the dividend will be payable to all shareholders on the Company's share register at the close of business on 29th April 2016.

Financial Position

Due to the material investment and acceleration of the pipeline, total bank debt as at 31 December 2015 increased to USD 194 million (2014: USD 109.9 million) with cash and cash equivalents at USD 9.5 million. Total gearing at the year-end was 58% (2014: 55%) and Loan to Value (LTV) was 49.5% (2014: 37%).

1 Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is recognised net of returns, rebates, municipality fees and discounts. Service charges collected from the customers are recorded as revenue, as the Group is required to provide the service to the customer in return for the receipt of the service charge

2 Loan to Value is defined as total debt as a percentage of non-current assets

Property revaluations

Independent property valuations were prepared by Jones Lang LaSalle on our Middle Eastern properties, CBRE on our Australian properties and Hamptons International on our investment lands.

The valuations of the operational freehold hotels are included in the Statement of Financial Position and fair value, which are revalued annually.

Revenue recognition

Adjusted EBITDA has been defined as operating profit before depreciation, amortisation, restructuring and listing costs, gains and losses arising from the disposal of property, plant and equipment, pre-opening costs and other non-recurring expenses-net.

Net Asset Value and adjusted Net Assets

Reported Net Asset Value for the Group increased by 5.4% to USD 196 million as we continued to progress our hotel pipeline. Adjusted Net Asset Value is the net asset value of the Group adjusted for the deferred tax provisions on the revaluation on our properties. The deferred tax provisions at the year end amounted to USD 10.5 million and would only become payable if these revalued assets were sold.

As at 31 December 2015 the Adjusted net asset value was USD 206.4 million, an increase of 6% on 2014 (2104: USD 194.8 million) and an adjusted net asset value per share of USD 1.40 (GBP 0.95 pence) per share (2014: USD 1.32 per share/ GBP 0.87 pence per share).

Looking ahead

The first quarter of 2016 has started well with revenue for the quarter up 14% on the same period last year, as our new hotels started to contribute.

At the operating hotel level the adjusted GOP also saw a sharp increase of 12% and an increase in operational EBITDA of 15% over the same period last year.

Notable contributions again came from the two Kuwait hotels, which achieved occupancy levels of just under 90%.

We look forward to updating on financial progress at our 2016 interim results later this year.

I would like to thank the Board and the finance team for their support and hard work during the past year and I look forward to welcoming our new group Finance Director.

Katie Shelton

Interim Group Chief Financial Officer

Consolidated Income Statement

For the year ended 31 December 2015

Consolidated Statement of Financial Position

For the year ended 31 December 2015