Safestay reports 23pc rise in first-half earnings

5th Sep 2024 12:06

(Sharecast News) - Hostel operator Safestay reported a 23% increase in first-half EBITDA on Thursday, reflecting significant operational progress and portfolio expansion.

The AIM-traded company posted a 6.6% rise in revenue to £10.7m, up from £10m in the first six months of 2023, driven by improved sales through direct channels and tight cost control.

Adjusted EBITDA from continuing operations rose to £3.2m, up from £2.6m year-on-year, pushing the EBITDA margin to 30%, compared to 26% last year.

The company reduced its pre-tax loss to £0.11m, a sharp improvement from the £0.95m loss reported in the first half of 2023.

Profit after tax was £63,000, compared to a £1m loss in the same period last year.

Safestay also benefited from successful debt refinancing with HSBC in January, securing a £16m five-year term loan and a £2.5m revolving credit facility to support long-term growth.

The company's bed nights increased 6% to 412,442, while occupancy rates neared pre-pandemic levels at 70.6%.

Total revenue per available bed (RevPAB) grew 3.2% to £18.28, supported by a rise in ancillary sales.

While the average bed rate (ABR) declined by 4.5% year-on-year to £22.15, it remained ahead of pre-pandemic levels.

Safestay said its strategic expansion added four new sites to its portfolio in 2024, including the Edinburgh Cowgate Hostel, opened in June.

The company also secured its first management contract in April to run a 120-bed resort hostel in Calpe, Spain, and acquired two additional properties in Cordoba, Spain, and Brighton, UK, which were being converted into hostels.

Looking ahead, Safestay said it was experiencing strong momentum into the third-quarter, with forward bookings for 2024 and 2025 significantly ahead of the previous year.

The company also made a strategic decision to surrender its lease on a loss-making property in Vienna, further strengthening its portfolio.

In August, Safestay added its fourth new site of the year, a leasehold property in Budapest, Hungary, as part of its ongoing expansion in Eastern Europe.

"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," said chairman Larry Lipman.

"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 the second-half, entered the Budapest hostel market to expand our reach in Eastern Europe."

Lipman said that in addition to the portfolio expansion, Safestay continued to focus on driving organic growth, supporting a 23.1% increase in adjusted EBITDA in the first half.

"Our strong trading momentum has continued into the second half 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 its focus on delivering organic growth through its operational initiatives, Larry Lipman said the firm would continue to actively evaluate new opportunities where well-located, attractive sites became 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."

At 1126 BST, shares in Safestay were up 13.04% at 26p.

Reporting by Josh White for Sharecast.com.