Last close As at 05/08/2026
—
— 0.00 (0.00%)
Market capitalisation
—
Research: Consumer
PPHE Hotel Group
PPHE Hotel Group |
Keeping busy |
Interim results |
Travel & leisure |
13 September 2016 |
Share price performance
Business description
Next event
Analysts
PPHE Hotel Group is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||
Higher than expected costs and delayed openings suggest that our EBITDA forecasts may now be met only thanks to consolidation of PPHE’s Croatian resort businesses. However, despite continued headwinds there is reassurance that assumed like-for-like EBITDA shortfall, notably in London, is partly related to current transformative investment (consolidated rooms to rise this year by c 70%), with full pay-off from 2018. Robust finances are evident in the recent special dividend of 100p/share and successful property refinancings, which underline substantial hidden reserves (‘fair value’ adjustment of c 1,000p/share to reported 803p NAV).
Year end |
Revenue (£m) |
EBITDA |
PBT* |
EPS* |
DPS |
EV/EBITDA |
12/14 |
217.0 |
76.1 |
28.6 |
68.9 |
19.0 |
8.7 |
12/15 |
218.7 |
80.1 |
31.8 |
76.1 |
20.0 |
8.6 |
12/16e |
266.0 |
85.0 |
23.5 |
51.1 |
20.0** |
10.2 |
12/17e |
318.0 |
98.0 |
28.5 |
63.3 |
21.0 |
8.7 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Plus 100p special dividend paid Aug 2016.
H116: A lot of moving parts
The half year to 30 June saw contrasting fortunes for PPHE’s two main profit sources, London and the Netherlands, as well as consolidation from April of operations in Croatia after buying in its joint venture. There were also significant corporate transaction costs, which we assume to have accounted for much of the overall £2.6m (7%) decline in EBITDA. While London trading was predictably subdued (-5% RevPAR was in line with market reports for the capital), the focus on room rate (+1%) could not prevent cost pressures (eg selling and payroll) driving UK EBITDA down 14%. Netherlands again stole the show with RevPAR up 5% on a demanding comparative and EBITDA up 16%, albeit currency-boosted. Croatia’s initial EBITDA contribution was understandably minor as Q2 is its shoulder period.
EBITDA forecasts maintained but change of mix
The changes to our forecasts, detailed on page 2, reflect the Croatia deal, newly-announced delay in London openings and our fresh caution about cost control. For 2016, while we assume H2 stabilisation in London (July’s sharp market pick-up was exceptional), EBITDA margin reduction on a par with H1 looks reasonable. The delay to late Q4 in opening two hotels and the Riverbank extension brings pre-opening costs without associated revenue. However, this EBITDA shortfall should be made good by Croatia’s seasonally stronger half. For next year, the profit driver remains the new c 900 rooms in London since costs may be expected to remain an issue and first inclusion of loss-making Q1 will depress Croatia.
Valuation: London openings to spark new interest
Despite disappointment that PPHE’s longstanding prized assets in London may have gone off the boil, we believe this to be temporary and there should be material payoff from expansion. At 8.7x 2017e EV/EBITDA, PPHE’s valuation is on a par with European hotel peers and at a discount to reported NAV, let alone fair value.
Exhibit 1: Analysis of revenue and profit
Y/E December (£m) |
H115 |
H215 |
FY15 |
H116 |
H216e |
FY16e |
FY17e |
Revenue |
|||||||
UK |
|||||||
London |
|||||||
RevPAR |
£124 |
£144 |
£134 |
£118 |
£144 |
£131 |
£132 |
Change |
Flat |
+1% |
+1% |
-5% |
Flat |
-2% |
+1% |
Available rooms |
1880 |
1880 |
1880 |
1898 |
1898 |
1898 |
1898 |
Room revenue |
42.4 |
49.5 |
91.9 |
41.0 |
50.0 |
91.0 |
91.5 |
Non-room revenue |
20.9 |
22.8 |
43.7 |
20.5 |
22.5 |
43.0 |
43.0 |
Existing revenue |
63.3 |
72.3 |
135.6 |
61.5 |
72.5 |
134.0 |
134.5 |
Waterloo + Park Royal + Riverbank extension* |
- |
- |
- |
- |
2.0 |
2.0 |
47.0 |
Total London revenue |
63.3 |
72.3 |
135.6 |
61.5 |
74.5 |
136.0 |
181.5 |
Leeds and Nottingham |
5.2 |
6.6 |
11.8 |
4.9 |
6.6 |
11.5 |
11.5 |
UK |
68.5 |
78.9 |
147.4 |
66.4 |
81.1 |
147.5 |
193.0 |
Netherlands (€m) |
28.4 |
30.1 |
58.5 |
29.6 |
30.4 |
60.0 |
60.6 |
Exchange rate |
1.38 |
1.39 |
1.38 |
1.28 |
1.18 |
1.23 |
1.18 |
Netherlands |
20.6 |
21.7 |
42.3 |
23.2 |
25.8 |
49.0 |
51.5 |
Croatia (HRKm) |
- |
- |
- |
92.1 |
287.9 |
380.0 |
390.0 |
Exchange rate |
- |
- |
- |
9.63 |
8.86 |
9.12 |
8.90 |
Croatia** |
- |
- |
- |
9.6 |
32.4 |
42.0 |
44.0 |
Germany and Hungary*** |
10.4 |
11.4 |
21.8 |
10.6 |
12.4 |
23.0 |
24.5 |
Owned & leased hotels |
99.5 |
112.0 |
211.5 |
109.7 |
151.8 |
261.5 |
313.0 |
Management and holdings |
2.7 |
4.5 |
7.2 |
1.8 |
2.7 |
4.5 |
5.0 |
TOTAL |
103.2 |
116.5 |
218.7 |
111.6 |
154.4 |
266.0 |
318.0 |
EBITDA |
|||||||
UK |
|||||||
London |
|||||||
Existing |
23.6 |
28.8 |
52.4 |
20.3 |
26.8 |
47.1 |
47.1 |
Margin (%) |
37 |
40 |
39 |
33 |
37 |
35 |
33 |
Waterloo + Park Royal + Riverbank extension* |
- |
- |
- |
- |
(3.0) |
(3.0) |
9.5 |
Total London EBITDA |
23.6 |
28.8 |
52.4 |
20.3 |
23.8 |
44.1 |
56.6 |
Leeds and Nottingham |
0.8 |
1.2 |
2.0 |
0.7 |
1.2 |
1.9 |
1.9 |
UK |
24.4 |
30.0 |
54.4 |
21.0 |
25.0 |
46.0 |
58.5 |
Netherlands (€m) |
8.8 |
9.8 |
18.6 |
9.5 |
9.7 |
19.2 |
19.4 |
Exchange rate |
1.38 |
1.39 |
1.38 |
1.28 |
1.18 |
1.23 |
1.18 |
Netherlands |
6.4 |
7.0 |
13.4 |
7.4 |
8.1 |
15.5 |
16.4 |
Croatia (HRKm) |
- |
- |
- |
14.9 |
112.1 |
127.0 |
116.0 |
Exchange rate |
- |
- |
- |
9.63 |
8.86 |
9.12 |
8.90 |
Croatia** |
- |
- |
- |
1.5 |
12.5 |
14.0 |
13.0 |
Germany and Hungary** |
(0.4) |
0.1 |
(0.4) |
(0.8) |
0.3 |
(0.5) |
0.1 |
Owned & leased hotels |
30.3 |
37.1 |
67.5 |
29.2 |
45.8 |
75.0 |
88.0 |
Management and holdings |
4.8 |
7.8 |
12.6 |
3.3 |
6.7 |
10.0 |
10.0 |
TOTAL |
35.1 |
45.0 |
80.1 |
32.5 |
52.5 |
85.0 |
98.0 |
Source: Edison Investment Research. Note: *Late Q416: Waterloo 494 rooms, Park Royal 212 rooms and Riverbank extension 184 rooms. **From April 2016. ***Including Nuremberg 177 rooms from June 2016.
Exhibit 2: Financial summary
£000s |
2014 |
2015 |
2016e |
2017e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
217,000 |
218,700 |
266,000 |
318,000 |
EBITDA |
|
|
76,100 |
80,100 |
85,000 |
98,000 |
Operating Profit (before amort and except) |
|
58,700 |
63,100 |
61,000 |
70,000 |
|
Intangible Amortisation |
(2,200) |
(2,000) |
(2,100) |
(2,100) |
||
Operating Profit |
56,500 |
61,100 |
58,900 |
67,900 |
||
Net Interest |
(27,800) |
(29,300) |
(36,000) |
(41,500) |
||
Associates |
(2,300) |
(2,000) |
(1,500) |
0 |
||
Exceptionals |
7,000 |
(1,800) |
3,300 |
0 |
||
Profit Before Tax (norm) |
|
|
28,600 |
31,800 |
23,500 |
28,500 |
Profit Before Tax (FRS 3) |
|
|
33,400 |
28,000 |
24,700 |
26,400 |
Tax |
(200) |
1,200 |
0 |
0 |
||
Profit After Tax (norm) |
28,400 |
33,000 |
23,500 |
28,500 |
||
Profit After Tax (FRS 3) |
33,200 |
29,200 |
24,700 |
26,400 |
||
Average Number of Shares Outstanding (m) |
41.5 |
41.8 |
42.1 |
42.2 |
||
EPS - normalised (p) |
|
|
68.9 |
76.1 |
51.1 |
63.3 |
EPS - normalised fully diluted (p) |
|
|
68.9 |
76.1 |
51.1 |
63.3 |
EPS - (IFRS) (p) |
|
|
80.0 |
69.9 |
53.9 |
58.3 |
Dividend per share (p) |
19.0 |
20.0 |
20.0 |
21.0 |
||
EBITDA Margin (%) |
35.1 |
36.6 |
32.0 |
30.8 |
||
Operating Margin (before GW and except.) (%) |
27.1 |
28.9 |
22.9 |
22.0 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
844,400 |
885,600 |
1,139,000 |
1,117,000 |
Intangible Assets |
25,400 |
21,900 |
25,000 |
23,000 |
||
Tangible Assets |
641,500 |
687,500 |
940,000 |
917,000 |
||
Income units sold to private investors |
129,400 |
125,500 |
124,000 |
122,000 |
||
Investments |
48,100 |
50,700 |
50,000 |
55,000 |
||
Current Assets |
|
|
77,700 |
71,700 |
182,000 |
192,000 |
Restricted deposits |
3,200 |
3,200 |
10,000 |
10,000 |
||
Stocks |
900 |
1,000 |
2,000 |
2,000 |
||
Debtors |
11,800 |
9,100 |
15,000 |
15,000 |
||
Cash |
55,800 |
50,600 |
140,000 |
145,000 |
||
Other |
6,000 |
7,800 |
15,000 |
20,000 |
||
Current Liabilities |
|
|
(46,100) |
(59,900) |
(109,000) |
(91,000) |
Creditors |
(33,700) |
(48,500) |
(80,000) |
(80,000) |
||
Deposits from unit holders |
0 |
0 |
0 |
0 |
||
Short term borrowings |
(12,400) |
(11,400) |
(29,000) |
(11,000) |
||
Long Term Liabilities |
|
|
(623,500) |
(629,500) |
(867,000) |
(858,000) |
Long term borrowings |
(420,100) |
(440,100) |
(700,000) |
(700,000) |
||
Financial liability to unit holders |
(140,500) |
(136,200) |
(132,000) |
(128,000) |
||
Other long term liabilities |
(62,900) |
(53,200) |
(35,000) |
(30,000) |
||
Net Assets |
|
|
252,500 |
267,900 |
345,000 |
360,000 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
75,600 |
83,200 |
83,600 |
98,000 |
Net Interest |
(32,100) |
(32,500) |
(37,800) |
(42,200) |
||
Tax |
(100) |
(100) |
(100) |
(100) |
||
Capex |
(34,200) |
(63,100) |
(90,000) |
(25,000) |
||
Acquisitions/disposals |
9,700 |
(3,600) |
(63,000) |
0 |
||
Exchange rate |
10,000 |
6,000 |
(23,000) |
0 |
||
Dividends |
(7,100) |
(8,300) |
(51,000) |
(8,700) |
||
Other |
3,400 |
(5,800) |
0 |
0 |
||
Net Cash Flow |
25,200 |
(24,200) |
(181,300) |
22,000 |
||
Opening net (debt)/cash |
|
|
398,700 |
373,500 |
397,700 |
579,000 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Closing net (debt)/cash |
|
|
373,500 |
397,700 |
579,000 |
557,000 |
Source: Edison Investment Research, company accounts
|
|