(SSTY ) 1H19 results to the 30 June 2020 illustrated the decisive actions taken during the period have protected the Group well with a strong balance sheet to support the business through 2021.
The 1H20 report highlights the group was trading strongly for the first two months of the trading period with total revenue for January and February up 32% on the previous year, with an underlying like for like increase of 15%. Occupancy rates for the first two months was also up at 64%, (50% in 2019).
However, during March, the level of bookings reduced significantly following the implementation of travel restrictions cross Europe and the UK and Group took the decision to close all its hostels on 1 April 2020.
Whilst the group began re-opening certain sites from 26 May 2020, overall occupancy rates of the available hostels remained depressed at 55% given the various travel and lockdown restrictions still in force.
Therefore, the Group operated just 45% of its available bed stock for the first six months of 2020, resulting in a 58% fall in total revenue to £3.4m.
To mitigate the reduction in revenue, management rapidly reduced operating costs wherever possible and utilised Government support schemes wherever available and renegotiated rent terms with landlords in each operating territory. In some countries, employees were paid directly by the government whilst being furloughed, which corresponded to a further £0.3 million saving.
These decisive actions limited the £4.6m decrease in revenue to a £4.2m swing at the adjusted EBIT level resulting in a loss of £3.3m.
The Group reported a Loss Before Tax of £4.7m versus a profit of £0.9m for 1H19 and a reported loss per share for the period of 7.3p (1H19: 1.4p loss per share).
However, the balance sheet remains strong, with Cash at bank as at 16 September of approximately £1.0m with an agreed a new £5.0m overdraft facility agreed during the period with HSBC.
Net asset value per share was 48.2p per share (2019: 41.8p per share) as at 30 June, following the revaluation increase of more than £10m on the London Elephant & Castle property in September 2019 to £26.8 million.
Shares in SSTY were hit hard towards the end of February following the emerging CV19 pandemic, however over the past month the shares gave stabilised at around the 13p level.
Post Period End
The Group traded at the higher end of management’s expectations in July and August with all hostels re-opened by the 28 August (except London Kensigton and Barcelona Gothic)
On 23 September, the Group re-banked with HSBC and agreed in principle to replace the £5.0m overdraft facility with the more generous £5.0m Coronavirus Business Interruption Loan Scheme.
Whilst there are positive indications from the Company that bed stock availability is increasing with the re-opening of its hostels (bar London Ken and Barcelona Gothic), occupancy rates remain relatively low.
Notwithstanding the above, the Group has enough capital already at its disposal to support the business into 2021 and there are already signs occupancy rates are trending upwards based solely on domestic travel. This will obviously be accelerated if foreign travel restrictions are lifted.
Larry Lipman, Chairman of Safestay, said: "We made a good start to 2020, however, trading was materially impacted by the Covid-19 pandemic from March onwards. We responded quickly to protect our financial position and the safety of our guests and employees.
As a result, the business is stable and it is encouraging to have now reopened nearly all our hostels. While it is still difficult to predict the pace of our recovery, we are re-engaging effectively with our customer base and we are confident that we will in time return our hostel portfolio to pre-Covid-19 occupancy levels."
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