Release Date: August 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PPHE Hotel Group Ltd (LSE:PPH, Financial) reported record-breaking performance in both revenue and EBITDA despite challenging macroeconomic conditions.
- The company has a unique integrated business model, managing the entire value chain from development to operation, which sets it apart from competitors.
- PPHE Hotel Group Ltd has a strong partnership with Radisson Hotel Group, providing exclusive rights to use the Park Plaza brand in Europe, Middle East, and Africa.
- The company announced an increase in interim dividend from 16p to 17p per share and launched a share buyback program of up to GBP4 million.
- PPHE Hotel Group Ltd has successfully opened several new properties, including the art’otel London Hoxton and Radisson RED Berlin Kudamm, with more openings planned in Rome and other locations.
Negative Points
- The company faced delays in the opening of new properties due to supply chain issues and bureaucratic challenges, particularly in Rome.
- Average room rates decreased by 4.4%, impacting RevPAR, although occupancy rates increased.
- Development costs and debt financing for construction have significantly impacted the company's balance sheet.
- The New York project remains on hold due to increased build costs and changes in legislation, with the company currently not planning to proceed with the hotel development.
- There is a significant discount between the company's share price and its NAV, which management attributes to the complexity of the business and current market conditions.
Q & A Highlights
Q: Can you explain the opening phasing and stabilization process for new properties?
A: Greg Hegarty, Co-CEO, explained that when opening a new property, they phase the occupancy to manage costs and test market demand. They open inventory floor by floor to ensure operational efficiency. Typically, a hotel reaches full potential within three to six months, with the third year being the most productive.
Q: What is the typical debt profile for PPHE Hotel Group?
A: Daniel Kos, CFO, stated that they aim for a 60% loan to cost ratio for new builds. As hotels mature, the real value often exceeds the cost, reducing the loan to value ratio. They refinance based on interest rates and typically amortize 15% to 30% of debt over 5 to 10 years.
Q: What is the status of the New York project that was put on hold due to COVID?
A: Daniel Kos mentioned that the New York project remains paused due to increased build costs and legislative changes. The project is currently valued at $30 million, and they are looking to recoup this amount rather than proceed with construction.
Q: Why is there a significant discount between the share price and NAV?
A: Daniel Kos explained that the company is complex and not easy to understand. However, with a strong pipeline and results, they expect the discount to narrow as they demonstrate strong cash flow and improve asset valuations.
Q: What are the challenges faced in opening new properties in Rome and Hoxton?
A: Greg Hegarty highlighted supply chain issues and bureaucratic challenges in Rome as primary delays. Despite these, they expect Rome to open in Q4 2024, and they are learning from these experiences to improve future projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
