Interim Results

5 September 2024

Safestay plc

("Safestay", the "Company" of the "Group")

Interim Results

23% increase in EBITDA reflects strong strategic progress and operational leverage

Accelerated expansion in 2024 to date with four outstanding new sites added to the portfolio, strengthening the Group's platform for long-term growth

Safestay (AIM: SSTY), one of Europe's largest hostel groups, is pleased to announce its Interim Results for the six months to 30 June 2024 (H1 2024 or the "Period").

H1 2024 Financial Highlights:

H1 2024 Operational Highlights:

Current Trading & Outlook

Larry Lipman, Chairman of the Group, commented:

"2024 so far has been a period of significant strategic progress for Safestay as we have continued to strengthen our position as one of Europe's leading hostel operators. During the first half of the year, we successfully added to our portfolio with two very exciting new properties in Spain, taking us to five in the market and giving us increased critical mass to drive synergies and revenue growth. We also acquired a fantastic new site in central Brighton - taking us to six in the UK - and, early in H2, entered the Budapest hostel market to expand our reach in Eastern Europe.

In addition to our portfolio expansion, we have continued to focus on driving organic growth through operational excellence, supporting a 23.1% increase in Adjusted EBITDA in H1. Our strong trading momentum has continued into H2 with encouraging sales performances and occupancy rates across the peak summer months of July and August.

Safestay's portfolio now comprises 20 sites with 17 currently serving guests in premium locations across some of Europe's great destination cities. In addition to remaining focused on delivering organic growth through our operational initiatives, we will continue to actively evaluate new opportunities where well located, attractive sites become available. We are excited by the significant long-term growth opportunities available to us as an established international operator in the highly fragmented and significant global hostel market."

Copies of this announcement are available on the Company's website, www.safestay.com

Enquiries

For more information visit our:

Website www.safestay.com

Vox Markets page https://www.voxmarkets.co.uk/company/SSTY/news/

Instagram page www.instagram.com/safestayhostels/

Chairman's Statement

Introduction

During H1 2024 Safestay delivered a period of important strategic, operational, and financial progress. The appeal of Safestay's portfolio of premium hostels remains very strong amongst its core customer base of young travellers, families, and business travellers. This resulted in a 6.0% increase in bed nights sold during the period to 412,442 (H1 2023: 389,124), of which 42.3% were booked through more profitable direct and non-commissionable channels (H1 2023: 26.9%).

The increasing demand for our great value hostels continues to be supported by the growing popularity of the Safestay brand as well as the strength of the Group's outstanding locations across highly popular European travel locations. As a result, we delivered sales growth of 6.6% to £10.7 million. This was driven by a 1.8% increase in occupancy to 70.6% (H1 2023: 68.8%) and a 54.6% increase in non-accommodation sales to £1.6m (H1 2023: £1.0 million), in line with our main operational KPIs of increasing occupancy and total revenue per available bed ('total REVPAB').

We are pleased to report a 23.1% increase to Adjusted EBITDA for continuing operations to £3.2 million (H1 2023: £2.6 million), reflecting continued revenue growth, tight cost control and the business's operational leverage.

Strategic portfolio expansion

Safestay operates in the significant and fragmented international hostel market, which is estimated to grow to US$8.89 billion by 2027 (Source: Markets and Research, August 2022). Overall market growth continues to be driven by increasing consumer trends towards great value travel accommodation and the rise in international travel by Millennial and Gen-Z customer demographics. Our strategy is focused on continuing to drive organic revenue growth through operational excellence whilst also actively pursuing strategic expansion opportunities where great sites become available.

Safestay is an experienced acquirer of hostels and we have a proven track record of quickly integrating and improving the performance of acquired sites. We are well-positioned to take advantage as hostels and other buildings capable of being converted to hostels come to the market, but only if all internal criteria are met. Overall, our core offer of a comfortable and safe stay in beautiful, often iconic buildings that are centrally located, in well-known and popular cities, remains unchanged. During the first half of the year, we returned to more aggressive expansion of the portfolio with three new sites added across attractive European travel locations and building further critical mass in both Spain and the UK.

In April we signed an initial 20-year term management contract to run the resort-based 120 bed Calpe Seafront Hostel on Spain's Costa Blanca. The Calpe Seafront hostel is located opposite Salt Lake, home to flocks of greater flamingos, five minutes' walk from Arenal-Bol beach and a 45-minute drive from Alicante airport. It was acquired after the hostel had been put into administration during the pandemic, when trading was severely curtailed. The hostel has been closed since. As an established hostel operator in Spain, we are well positioned to take over the management under the Safestay brand and incorporate it into the Group's booking system. Prior to the pandemic, the Calpe Seafront was a successful hostel, and we are confident of being able to quickly re-establish trading and return it to being a successful business. The Group has already completed some minor refurbishment work and is targeting re-opening the property in Q4 2024 under Safestay branding, subject to receipt of necessary licences. Under the management contract, Safestay receives a fixed management fee plus a percentage of revenue and profits above certain levels. The Board believes this new operating model for the Group offers an exciting template for further potential management outsourcing transactions.

In May we continued to build critical mass in the Spanish market with the acquisition of Hotel Lineros in Cordoba for €2.0 million funded from the Group's existing cash resources. Hotel Lineros is a spectacular building and a natural fit with the Group's portfolio of unique properties. The hotel is ideally located just a short walk from Cordoba's famous ancient mosque, La Mezquita, which attracts 1.5 million visitors each year. The historic city centre is also a major tourist destination and a UNESCO world heritage site. The property is currently run as a hotel, and whilst undergoing a conversion process, is expected in the eight months to 31 December 2024 to generate meaningful revenue for the Group.

In June we acquired a freehold property in the centre of Brighton with the intention of converting it into a 220-bed hostel, subject to planning permission. The property is in the heart of Brighton - a city which attracts over 11 million visitors per year - and set over five stories. The cost of conversion is estimated at £1.0 million and should take approximately six months once planning permission is received. In its first year of trading, sales and EBITDA are projected to be £750,000 and £250,000 respectively. The total acquisition consideration was £2.3 million funded by the Group's existing cash resources and a new £1.2 million loan from the trustees of the Sheldon Pension Fund and Sentpark Capital Limited.

Operational Excellence

In addition to strategically expanding our portfolio, a key pillar of the Group's growth strategy is focused on driving organic revenue growth through operational excellence. Under the guidance of our Chief Operating Officer, Peter Zielke, a primary aim has been to lift all operational standards across the portfolio and create unique experiences for our guests that will, in turn, underpin sustainable revenue growth.

Key operational focus areas for the Group include driving occupancy rates; increasing Total REVPAB; increasing bookings through commission-free own channels supported by effective, digital-led marketing; and increasing non-accommodation sales through the provision of ancillary services to guests who are staying at our hostels. All of this is supported by our Commercial Hub in Warsaw, which was established in 2023 and is a one-stop shop for revenue management, sales and marketing, and critical HR functions.

Occupancy during the period was 70.6%, a 1.8% increase year on year (H1 2023: 68.8%), nearing pre-pandemic levels (H2 2019: 71.1%). Occupancy naturally increases over the summer and so the average for the year is expected to be higher and broadly in-line with 2019 at 71%. This improvement reflects increasing demand for Safestay's customer proposition as well as the success of our marketing initiatives and a gradual recovery in Group bookings, which represented 23% of accommodation sales in the period compared to just under 13% in the prior year.

Average Bed Rate ("ABR") fell 4.5% year-on-year (H1 2023: ABR £23.18) against the backdrop of wider consumer price pressures across the whole portfolio. In Spring 2024, management made strategic decisions to protect overall yield in lieu of ABR. These decisions meant that the Group delivered an increase of Total REVPAB by 3.2% to £18.28 (H1 2023: £17.72), aided by the Group's sharpened focus on increasing sales of food and beverage and ancillary services including laundry facilities, towel rentals, and secure luggage storage. Our dynamic pricing software, PricePoint, allows us to swiftly implement changes in pricing strategy every two minutes as the market changes.

Since 1 January 2023, the Group has returned to an annual capex budget equivalent to 3.0% of annual revenue. This is essential to maintaining the Group's reputation as a leading premium hostel operator and to protecting the quality of the portfolio by ensuring that every site remains in excellent condition.

Financial Review

The Group generated revenues from continuing operations of £10.7 million (H1 2023: £10.0 million), a 6.6% increase on the prior period. Within this, accommodation sales increased 1.3% to £9.1 million (H1 2023: £9.0 million) and non-accommodation sales increased 54.6% to £1.6m (H1 2023: £1.0 million).

Adjusted EBITDA from continuing operations increased by 23.1% to £3.2 million (H1 2023: £2.6 million). The Adjusted EBITDA margin increased 4.0% to 29.6% (H1 2023: 25.6%) reflecting a more benign cost inflation compared to the prior period, the increased proportion of sales generated through direct channels, tight cost control, and the Group's operational leverage.

The Group recorded a loss before tax from continuing operations of £113k (H1 2023: loss of £947k) and a profit for the period attributable to the owners of the parent company of £63k (H1 2023: loss of £1,003k). The Group recorded Earnings Per Share ("EPS") from continuing operations of 0.16p (H1 2023: loss of 1.46p) and basic loss per share from discontinued operations of 0.07p (H1 2023: loss of 0.08p). As always, most income is expected to be generated in the second half of the year and the Board therefore anticipates reporting further profitable growth in H2.

Net cash generated from operations was £5.0 million (H1 2023: £5.4 million), primarily due to tax payments on overseas profits.

Group bank borrowings as at 30 June 2024 were £19.8 million (H1 2023: £16.6 million). Cash at bank was £2.1 million, broadly in line with its balance at 31 December 2023 (FY 2023: £2.0 million). The year-on-year decrease (H1 2023: £7.1m) reflects £4.3 million paid for the Edinburgh acquisition in the prior year as well as the acquisitions during the period, outlined above.

In January, the Group announced the refinancing of all its existing borrowings into a single £16.0 million Term Loan and added a new £2.5 million Revolving Credit Facility ("RCF") to support future growth plans. The new Term Loan and RCF are for five years and were provided by existing lender HSBC. The Term Loan interest rates are £4.4 million at 3.955%, £10 million at SONIA but capped at 4.75% with a floor of 3% and £1.6 million at SONIA, all with an additional margin of 2.6%. The RCF has a rate of SONIA plus a margin of 2.85%. The Term Loan is repayable at £0.1 million per quarter from March 2025 together with a final payment at completion. Interest on both the Term Loan and RCF is payable quarterly from March 2024. The Term Loan replaces the previous interest only £12.7 million facility with HSBC and enables the repayment of the outstanding CBILS loan of £3.3 million which carried a significantly higher interest rate.

Current Trading & Outlook

We are very pleased with the strategic progress made during the first half of the year. This strong momentum has continued into H2 so far with strong occupancy levels in July and August and sales significantly ahead of last year at the end of August. Forward bookings for the remainder of 2024 and into 2025 are comfortably ahead of the prior year supported by a continuing recovery in group bookings. As a result of the Group's progress in H1 and its trading momentum the Board anticipates delivering further profitable growth in H2 .

Since the period end, we have continued to develop our portfolio including through the acquisition in August of a leasehold city centre site in Budapest, Hungary, building on Safestay's established Eastern European presence in the Czech Republic, Slovakia, and Poland. In August we also took the strategic decision to surrender the lease for the Group's 52-room hotel in Vienna, removing the only loss-making property in the Group's portfolio and enabling the redeployment of capital where there are stronger returns.

In June, we successfully opened our Edinburgh Cowgate hostel following its acquisition in 2023 and we have been very encouraged by early trading and positive customer feedback, with particularly strong occupancy rates over the summer months including during the Edinburgh Fringe festival.

In the longer-term, the Board remains highly confident in Safestay's significant growth prospects. These are underpinned by the Group's growing portfolio of premium hostels in outstanding locations, as well as the Group's ability to leverage its established systems, brand, and proven operational capabilities to a sizeable and growing total addressable market. As a result, we look forward to the future with optimism and confidence.

Larry Lipman, Chairman

5 September 2024

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Condensed consolidated statement of changes in equity

Consolidated Statement of Cashflows

1 General Information

Safestay plc, the "Company" together with its subsidiaries, "the Group", is a public limited company whose shares are listed on the Alternative Investment Market ("AIM") of the London Stock Exchange and is incorporated and domiciled in the United Kingdom and registered in England and Wales. The registered number of the Group is 08866498 and its registered address is 1a Kingsley Way, London, N2 0FW.

2 Basis of Preparation

The consolidated interim financial information has been prepared in accordance with UK-adopted International Financial Reporting Standards ("IFRS") in conformity with the requirements of the Companies Act 2006.

The Group's Annual Report and Accounts for the period ended 31 December 2024 are expected to be prepared under IFRS.

The comparative information for the period ended 30 June 2023 in this interim report does not constitute statutory accounts for that period under section 435 of the Companies Act 2006.

Statutory accounts for the period ended 31 December 2023 have been delivered to the Registrar of Companies.

The auditors' report on the statutory accounts for 31 December 2023 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

Significant Accounting Policies

The consolidated interim financial information has been prepared in accordance with accounting policies that are consistent with the Group's Annual Report and Accounts for the period ended 31 December 2023 which is published on the Safestay website, located at www.safestay.com. At the date of authorisation of this financial information, certain new standards, amendments and interpretations to existing standards applicable to the Group have been published but are not yet affective and have not been adopted early by the Group. The impact of these standards is not expected to be material.

In adopting the going concern basis for preparing these financial statements, the Directors have considered the business model and strategies, as well as taking into account the current cash position and facilities.

Based on the Group's cashflow forecasts, the Directors are satisfied that the Group will be able to operate within the level of its current facilities for the foreseeable future, a period of at least twelve months from the date of this report. Accordingly, the Directors consider it appropriate for the Group to adopt the going concern basis in preparing these financial statements.

Financial information contained in this document does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 ("the Act"). The statutory accounts for the year ended 31 December 2023 have been filed with the Registrar of Companies. The report of the auditors on those statutory accounts was unqualified, and did not contain a statement under section 498(2) or (3) of the Act.

The financial information for the six months ended 30 June 2024 and 30 June 2023 is unaudited.

These condensed interim financial statements have not been audited, do not include all the information required for full annual financial statements and should be read in conjunction with the Group's consolidated annual financial statements for the year ended 31 December 2023.

The financial statements have been presented in sterling, prepared under the historical cost convention, except for the revaluation of freehold properties, right of use assets and fair value of derivative financial assets and liabilities.

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 2023.

New Accounting Policies

Due to the refinancing and the subsequent hedging arrangements agreed in January 2024 the Group has considered the need to apply hedge accounting on the two derivatives for the interim financial information. The Group has decided not to apply hedge accounting on the two derivatives. Fair value movements in these financial assets and liabilities will be recorded through the income statement.

New standards and interpretations effective in the year

No new standards have been implemented this year that have a material impact on the business.

3 Segmental Analysis

Total liabilities for the Europe segment for the period ending 30 June 2024 includes £470k of liabilities held for sale (30 June 2023: £nil). Total liabilities for the Europe segment for the year ending 31 December 2023 includes £506k of liabilities held for sale.

4 Discontinued Operations

Following the classification of the asset group of "Vienna Hotel" as held for sale in September 2023, the operational performance was classified as discontinued. The Hostel formed part of the Europe operating segment.

5 Earnings Per Share

Basic profit/(loss) per share has been calculated by dividing the loss attributable to shareholders by the weighted average number of shares in issue during the period.

Diluted profit/(loss) per share has been calculated after adjusting the weighted average number of shares used in the basic calculation to assume the conversion of all potentially dilutive shares, such as share option awards.

The number of shares used in calculating basic and diluted profit/(loss) per share are reconciled below:

6 Fixed Assets

7 Borrowings