What will Stelios say? EasyHotel first half profits fall on costs – but revenues climb above-expectations
EasyHotel is enjoying the easy life: revenues were above expectations for the first half of the year – although profits more than halved on costs.
The figures
Total sales were up 10.4 per cent to £9.66m for the six months ended 31 March, while total revenues climbed 11.6 per cent to £2.59m, slightly ahead of the board's expectations.
Like-for-like revenue for owned hotels increased by eight per cent, while adjusted EBITDA rose 10.9 per cent to £580,000. Pre-tax profit slumped 62 per cent to £140,000 "reflecting increased pre-opening costs (associated with the increased development pipeline), depreciation and amortisation and share based payments", the company said.
EasyHotel is recommending an interim dividend of 0.11p, up from nothing last year.
Why it's interesting
EasyHotel is in growth phase: there are five owned hotel projects underway, with £4.59m of investment made during the period and construction has started on sites in Liverpool and Manchester, while Birmingham is expected to complete in a few weeks.
Planning permission has also been submitted for new hotels in Barcelona and Ipswich and there are three new franchise hotels under construction in Brussels, Amsterdam and Bur Dubai, a first for the company.
Brokers are encouraged by what they see, with most analysts having it on their buy list and Investec has said its share price could reach 120p – it's currently at 100p per share.
However, not everyone is happy with the direction the business is going.
EasyHotel co-founder and majority owner Sir Stelios Haji-Ioannou went on the warpath earlier this year about executive pay at the firm he helped to set up, at a time when profits are expected to be flat.
The fact they have dropped over the first six months means we could see him flaring up again.
What EasyHotel said
Chief executive Guy Parsons said: "Trading in the first half of financial year 2015/16 was slightly ahead of the board's expectations as owned hotels started to benefit from the new revenue management strategy. This momentum has continued into the beginning of the second half, traditionally the busiest trading months of the year for hoteliers, and full year trading is on track to meet the board's expectations.
"The board remains focused on operational efficiency whilst ensuring the company has the right infrastructure and resources in place to execute the growth strategy. The company's committed owned and franchise pipeline is currently expected to add more than 1,000 rooms to the network over the next two years.
"With more opportunities, both owned and franchise, available than had been expected the board is considering its funding options to take full advantage of these opportunities. The board remains confident that it can secure properties in major and regional UK cities as well as key European gateway cities whilst leveraging the strong brand to increase EasyHotel's presence in the growing branded super budget hotel segment."