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4/8/2014 Action Hotels PLC | Preliminary Results | FE InvestEgate

http://www.investegate.co.uk/ArticlePrint.aspx?id=201404070700131571E 1/10

Action Hotels PLC

Preliminary ResultsRNS Number : 1571E

Action Hotels PLC

07 April 2014

Action Hotels plc("Action Hotels" or the "Company")

Maiden results for the year ended 31 December 2013

Action Hotels plc, a company focused on developing and managing branded economy and midscale hotels in the undersupplied markets of theMiddle East and in Australia, is pleased to announce its maiden unaudited results for the year ended 31 December 2013. All currency amounts are in US $ unless otherwise stated. Key highlights · Successful admission to AIM and fundraising of $50.0m (before costs) from institutional investors to fully fund the opening of an additional

eight hotels, 1,500 rooms· Opening of Action Hotels' sixth hotel, with Holiday Inn as partner, bringing total room count at year end to 1,004· Year-‐on-‐year growth in revenues, Average Daily Rate (ADR), occupancy and revenue per available room (RevPAR)· Dividend of GBP 0.96 pence per share declared for 2013 with the Board expecting to follow a progressive dividend policy Financial summary· Total reported revenue increased by 5.4% to $29.8m· Average Daily Rate (ADR) increased by 5.8% to $105· Revenue per available room (RevPAR) grew by 8.9% to $81 reflecting strong occupancy and average room

rate performance· Operating profit $4.4m (2012: $4.7m)· Adjusted EBITDA (pre-‐exceptional items) $9.1m (2012: $8.8m)1

· Revaluation uplifts (net of deferred tax) of $9.95m on the hotel portfolio (2012: $18.50m)· Net Asset Value (NAV) of $167.1m (2012: $41.4m), NAV per share of $1.13 Operational highlights· On a like-‐for-‐like basis:

o Year-‐on-‐year growth in occupancy (+4%), ADR (+6%), RevPAR (+10%) and revenue (+5%) across the portfolio

o Occupancy rates for 2013 increased by 4% to 78%o Continuing to operate at occupancy levels significantly beyond breakeven points -‐ average breakeven

occupancy across the portfolio is 33%· Opened our sixth hotel, the only Holiday Inn in Oman, Holiday Inn Seeb, with 185 rooms which has already achieved 66% occupancy for

March 2014· Secured and fully funded pipeline of a further eight hotels, taking total room count to 2,500 (150% growth) by 2016 1 The adjusted EBITDA is reconciled to net loss on page 8.The statutory reported figures below include the impact of exceptional costs relating to restructuring pre IPO.These significant costs have all been included in the financials for the year ended 31 December 2013 and contributed to the net loss at a before and after tax level forthe year. Such items are not expected in the financial year 2014. Commenting on the results, Alain Debare, Chief Executive Officer, Action Hotels said: "2013 has been a transformational year for Action Hotels with our admission to AIM raising $50m before costs and the opening of our sixth hotel,Holiday Inn Seeb Muscat, our first hotel with Intercontinental Hotels Group. "2014 has started well with occupancy levels remaining strong across the portfolio and encouraging growth in all of our key metrics. Our newesthotel, Holiday Inn Seeb Muscat, which we opened In December 2013, is showing performance to date ahead of our expectations. We remain ontrack to execute our pipeline of eight additional hotels whilst maintaining the performance of our existing hotel portfolio."

Enquiries:Action Hotels CompanyAlain Debare, Chief Executive OfficerKatie Shelton, Communications Director

Via Redleaf Polhill

finnCapMatthew Robinson/Grant Bergman (Nomad)

020 7220 0500



Guy Hewitt (Analyst) RedleafRebecca Sanders Hewett Dwight Burden/Jenny Bahr/Rachael Brown

Tel: 0207 382 [email protected]

About Action Hotelswww.actionhotels.com Action Hotels is an owner, developer and asset manager of branded three and four star economy and midscale hotels in the Middle East andAustralia. The Group's objective is to become a leading owner, developer and asset manager of branded economy and midscale hotels in key MiddleEast markets and Australia. Action Hotels has completed six hotels, of which five are in the Middle East and one is in Australia, with a further twohotels under construction (both in the GCC), one hotel expansion and another six Pipeline projects (one in Australia and the remainder in the GCC). Chairman's statement It is my pleasure to announce our first set of results as a publicly traded company. For Action Hotels 2013 was a transformational year with theopening of our sixth hotel, our first hotel partnering with Intercontinental Hotels Group, and the successful admission of our shares to trading on theLondon Stock Exchange AIM market in December 2013. During the IPO process we were very pleased to raise $50m before costs and secure anumber of new institutional shareholders. Our vision of being the market leading developer, owner and manager of economy and midscale hotels primarily focused on the Middle East is wellon-‐track. We anticipate growing our current portfolio of just over 1,000 hotel rooms to 5,000 hotel rooms by 2020. The Group will achieve thisambition by owning and leasing hotels, which will create a strong balance of asset-‐backing with an ability to scale in a timely manner.

The funds raised at the time of IPO have enabled us to fully fund our current hotel pipeline which will increase our number of rooms by 1,500 by theend of 2016, taking the total to 2,500 rooms (150% growth). We are always looking for additional opportunities that meet the criteria of ourstrategy, and we hope to be able to update the market on this in due course.

Our current portfolio of six hotels continues to perform well and our low cost base enables us to break-‐even at lows levels of occupancy. Our hands-‐on approach to working with our chosen hotel operators has ensured our portfolio of hotels maintain year-‐on-‐year growth in our key metrics ofoccupancy, ADR, RevPAR and revenue.

Middle East

The Middle East hotel market continues to be focused on upper scale and luxury creating further opportunities for us to work with in our core middlemarket segment with leading brands that have high growth aspirations for the region. The region's current announced pipeline of economy andmidscale hotels represents less than 20% of the overall branded hotel supply. This dynamic is well below the levels seen in Europe and NorthAmerica.

We consider that our contrarian approach to the market, alongside our substantive expertise and regional know-‐how gives us our major point ofdifferentiation to other hotel groups. Our strategy continues to prove successful as evidenced by the increasing demand for our hotel offering fromGCC, Levant and other intra-‐regional travellers.

Australia

As a region Australia is a more mature hotel market; but for Action Hotels, Australia remains opportunistic and highly attractive. We have beenworking alongside Accor since 2006 and our ibis Glen Waverley in Melbourne has shown consistent performance year-‐on-‐year, as well as having thelowest break-‐even occupancy level in our current portfolio.

We have already started work on our next hotel in Australia, ibis Brisbane, a 368 room hotel situated in a prime central location. We believe this willbe the largest midscale hotel in the region and will be an extremely attractive asset. We look forward to opening this by the end of 2015.

Operating metrics (like for like basis)2

Year ended Year ended % movement31-‐Dec-‐13 31-‐Dec-‐12

Total room count 819 819 Nil

Occupancy 78% 75% 4%ADR $106 $100 6%RevPAR $82 $74 10%Total Revenue $30m $28m 5%

2 The additional 185 rooms for Holiday Inn Seeb Muscat are not included in the above as they opened during December 2013.

Dividends

The cash flow profile of our business enables us to pay an attractive dividend even during our aggressive growth phase. The declared dividend for2013 of GBP 0.96p will be paid on 30 May 2014. In accordance with the admission document, Action Group Holdings, whose holding in ActionHotels represents 64.7% of the share capital, has waived its entitlement to this dividend.

As per the Company's progressive dividend policy, we are expecting to pay a higher total dividend in 2014 to be paid as an interim and final dividend.

Employees

On behalf of the Board, I would like to thank all of our dedicated employees for their contribution to the business over the last year, especially withthe demands required to get us to our successful AIM admission. We look forward to working with you all in this coming year.

Outlook



The financial year 2014 has started well. Occupancy levels continue to remain strong across the portfolio, and we have already seen encouraginggrowth in ADR, RevPAR and revenue on 2013 figures.

Our latest hotel, Holiday Inn Seeb Muscat, has shown strong performance in its first three months since opening. For March 2014 occupancy ratesaveraged at 66% with an ADR of $137, and achieved 100% occupancy for the first time on 17 March 2014.

We reported earlier this year that our ibis Amman, Jordan had been awarded the 'Innovative Award for Tourism 2013' prize by the Jordanian Societyof Tourism and Travel and was also ranked first by number of guests in the three star category and fourth overall by all hotels in Jordan. This reallydoes underpin our strategy and demonstrates that we are first movers filling in the gaps within the hotel market in the Middle East. I would like to take this opportunity to thank the Board for their guidance and all our employees and others involved with the business of ActionHotels plc for their loyalty and hard work during a very busy and challenging year. Sheikh Mubarak Al SabahChairman

CEO's statement

I'm delighted to report on a year of growth for Action Hotels in its maiden year as an AIM traded company. Our recent admission to AIM is alreadyadding increased recognition to the business and access to capital markets has provided the platform for accelerated growth. Action Hotels specialises in providing high quality branded economy and midscale accommodation in the key markets of the Middle East.Throughout 2013, our combined portfolio of hotels continued to show growth in our key hotel metrics of ADR, occupancy and RevPAR, and wereport solid operating financial results for the Company. We remain focused on our simple strategy: to own, develop and operate branded three andfour star hotels, in partnership with leading hotel operators in the key markets of the Middle East. Our business is underpinned by strong macroeconomic dynamics, as well as a growing population that is driving demand for high quality, economyand midscale hotel rooms in the Middle East. Our Australian hotel, originally opportunistic has proved highly successful with the ibis Glen Waverleygenerating the highest ADR in the portfolio. Building on this success the company is now engaged on a new development in the centre of Brisbane,due to open by the end of 2015. Our operational focus has been on building on our first mover advantage and improving the performance of operating hotels. This is being achievedthrough revenue growth, working with our selected branded hotel operators to maximize performance, optimising commercial opportunities,driving increases in average room rates and reducing operating costs. Our performance has been strong. Occupancy levels increased, especially in the Middle East where it averaged 80.5% during the year (2012:76.2%). Across our portfolio we have seen strong RevPAR growth of 9% year on year, resulting from a combination of increases in occupancy (+3%)and daily rate (6%). Kuwait

Our two hotels in Kuwait, ibis Salmiya and ibis Sharq delivered solid performances. RevPAR grew by 13% and 22% respectively. Along with ourrevenue growth strategies, operational costs continued to be well managed with the hotels achieving good adjusted gross operating margin (grossoperating profit less base management fee) of 63.3% and 60.3% respectively. These hotels demonstrate strong financial and operationalperformance in a market with high demand and very limited supply in branded economy and midscale sector. Oman

ibis Muscat enjoyed another strong twelve months with RevPAR growth of 16% in its fourth full year of operation. Occupancy grew 11% to 77.4%,and produced a steady increase of 4.3% in ADR following increased demand from corporates and infrastructure project related companies. Revenuecontinues to grow into 2014, and along with a well-‐managed cost base, the hotel has stabilised its GOP margin above 50%. During December 2013, we also opened our first Holiday Inn, a great addition to our portfolio and the only Holiday Inn in Oman, which contains 185rooms. This property includes 11 apartments that will become operational in Q2 2014 and will service those travellers requiring a longer stay. Thehotel has received very good feedback and has been trading well; Year to March 2014 occupancy was 58.9%. The hotel achieved a breakevenperformance in the first full month of operation. It has already enjoyed good ratings on the online travel review platforms and is leading the ratingsin the midscale hotel sector in Muscat. Jordan

The ibis Amman traded well during 2013 with occupancy above 80% and RevPAR growth of 1.8%. The hotel successfully implemented a strategy tobuild its corporate customers and secure longer-‐term business. Evidence of success in this strategy is tangible as the hotel enjoys high volumes ofbusiness from NGO and international organisations. Australia

ibis Glen Waverley continued to trade well, producing the highest ADR in the Group hotel portfolio. This hotel, in its fourth full operational year, sawa small contraction in total revenue in 2013. This was mainly driven by a $70k decline in food and beverage revenues, which was partiallycompensated by room revenue growth of 0.6%. Whilst occupancy dropped by 2.7%, the hotel achieved a 0.8% RevPAR growth following anincrease of 3.7% in the average room rate. Whilst performance was stable in Australian dollars, our consolidated results were reduced by theweakening of the Australian dollar against the US dollar. Partnerships

We only develop and operate hotels with global hotel brands and our strong partnership with selected leading hotel operators is key to our strategy.The hotels are managed by hotel operators under long term management agreements. We enjoy very close relations with Accor's ibis,Intercontinental Hotel Group's Holiday Inn and Whitbread's Premier Inn brands all of which understand the favourable market dynamics and haveannounced sizeable growth targets in the Middle East. The high barriers to entry, with local ownership restrictions and access to local markets, makeAction Hotels an attractive partner for these global operators. Our hotel partners provide us with powerful brand equity, operational excellence and very strong marketing capabilities that drive a superior guestexperience with superior returns. We work alongside them and maintain an active role on both an operational and strategic level on all our hotels, asall revenue and expenses accrue to Action Hotels. It is proving a very powerful combination and the hotel operators are keen to be associated with aspecialist and focused hotel owner in the region.



We are delighted that our partners have also received continued recognition through industry accolades. Accor's ibis brand was awarded 'BestBudget Hotel Brand' at the Business Travellers Awards 2013, demonstrating the strong recognition of the brand by the business travel community.During 2013, our ibis Amman received the 'Innovative Award for Tourism 2013' and ibis Kuwait was awarded 'Best Budget Accommodation' byBusiness Destinations. The Board has exciting plans for Action Hotels and we remain committed to becoming the leading hotel owner, operator and asset manager ofeconomy and midscale hotels in the Middle East region. Whilst the social and macroeconomics of the Middle East are very supportive with high GDPgrowth, we have a very contrarian investment style in a region where the hotel landscape is mainly focused on upper upscale and luxury hotels, thuscreating a very limited supply of hotels in the economy and midscale sector. In line with our strategy, a key priority for the company is to drive revenue growth through the successful execution of the development pipeline,and in the process establishing a presence in all key markets of the Middle East. We remain strongly committed to delivering on the eight hotels inthe pipeline to 2016, and creating 1,500 more rooms on time and on budget bringing the total room count to over 2,500. During 2013 we progressed well on our hotels currently under construction and are excited at the prospect of opening three new hotels in 2014 -‐ibis Seef, Bahrain, Premier Inn Sharjah, UAE and Premier Inn, Bahrain, as well as a 10-‐room extension to the ibis Salmiya, Kuwait. These projects willadd 600 new rooms to the portfolio during 2014. Our future development plans will continue to capitalise on our reputation and our recognised experience in developing mid-‐market hotels. Whilst we have a strong balance sheet with a Net Asset Value (NAV) of $167.1m, we will accelerate our growth through a balance of owned andleased properties, enabling us to rapidly enter target markets with reduced capital commitment, and capitalising on the first mover advantage. We strive to deliver high growth and high returns for our shareholders. We expect to substantially grow our operating income from the growth inour room count. We also expect to continue benefiting from the development uplift on our freeholds. The social and macroeconomics of the Middle East are conducive to high GDP growth across all sectors of the region's economy we believe that ourfocus on the under supplied economy and mid-‐scale hotels will generate superior returns and higher growth in the medium term. As we continue toexplore further opportunities, I hope to announce additions to the pipeline during the course of the 2014. Current trading

The wider economic outlook remains positive and we aim to deliver continued growth. Our performance in the first few months of this year remainspositive, which sets a solid platform for a successful 2014. The recent opening of our new hotel in Muscat will strongly contribute to our expectedrevenue growth in 2014, and we remain focused on maximising the performance of our operating hotel portfolio. We will continue to pursue ourdevelopment pipeline and identify new opportunities for future growth. Alain DebareChief Executive Officer Finance Director's statement

Our five operational hotels performed well during the financial year. We saw improvement in our key performance metrics: occupancy, revenue,RevPAR and ADR. Our sixth hotel opened in December 2013 and I look forward to reporting on its performance in 2014. On the Balance Sheet, our NAV as at the year-‐end (2013: $167.1m) (2012: $41.4m) was enhanced by revaluations of hotel assets, the IPOfundraising and conversion of debt into equity at IPO. Occupancy

Occupancy levels for the year grew by 3% to 77% across our portfolio of hotels. Our four hotels operating in the Middle East in 2013 enjoyedoccupancy levels above 80% (2012: 76%). ibis Glen Waverley, our Australian hotel had a slight reduction in occupancy levels to 66.3% (2012:68.2%), which was partly offset by a higher ADR. ibis Glen Waverley is located close to a business park giving it high weekday occupancy and loweroccupancy at weekends but maintains the lowest break-‐even occupancy level of all the hotels in our portfolio. Average daily rate

We saw positive growth in room rates across the portfolio. Our occupancy levels are such that we have been actively working with our hoteloperators to push up room rates and hence we saw ADR increase by 5.8% passing the $100 per night rate to $105.00 (2012: $99.29). ibis GlenWaverley had an ADR of $146.27 a 3.7% uplift on last year ($141.10) and continues to provide our highest rate per night in the current portfolio. Revenue management remains a key priority for us in 2014. RevPAR

Following on from the strong performances in occupancy and ADR, our RevPAR for the year, on a like for like basis, increased to $82, an 8.9%increase on the previous year. ibis Sharq in Kuwait, in its third full year of operation, was the top performer in RevPAR growth in the portfolio withan increase of 22.2%. Revenue

Reported revenue for the period grew 5.4% to $29.8m (2012: $28.2m). The Middle East operating hotels contributed 76% of the total revenue forthe year, up from 73% of the portfolio in 2012. With the opening of Holiday Inn Seeb Muscat we expect this percentage to increase in 2014. Adjusted EBITDA

Adjusted EBITDA fell by 6% to $8.3m (2012: $8.8m). Reconciliation of Net loss toAdjusted EBITDA

2013 2012

Net loss $(9.1)m $(1.0)mListing and restructuring costs $ 3.5m -‐Finance income $(0.4)m -‐Finance cost $ 5.2m $ 5.7mCurrency translation $ 3.1m -‐Taxation $ 2.1m -‐Operating Profit $ 4.4m $ 4.7m

Depreciation $ 3.3m $ 3.3m



Amortisation $ 0.6m $ 0.6mAsset disposal losses -‐ $ 0.2mAdjusted EBITDA $ 8.3m $ 8.8m

Adjusted EBITDA in 2013 was adversely impacted by $0.5m of additional costs primarily relating to the company's new status as an AIM listedcompany. Loss before tax As with most hotel development companies in their growth phase, the operating profit/loss figure is impacted by depreciation and finance costcharges whilst revenue ramps up over a three-‐year period. The loss before tax of $7.0m (2012: $0.2m loss) is stated after charging $3.5m (2012: nil) of exceptional items relating to restructuring prior to theIPO. We do not anticipate such exceptional items in financial year 2014. It also includes a foreign exchange loss of $3.2m (2012; gain of $0.8m),primarily arising on accounting for the translation of intra-‐group loans to the Australian properties. Taxation In 2013 as a result of the restructuring of the Company and its different tax status the Company recognized a deferred tax charge of $2.0m inrelation to Kuwait deferred tax liabilities. Dividend As set out in the Company's admission document dated 17 December 2013, the Board intends to propose a final dividend in respect of the yearended 31 December 2013 of GBP 0.96p per share which is expected to be paid on 30 May 2014, subject to approval of the dividend at theCompany's annual general meeting which is expected to occur on 29 May 2014. It is expected that the Company's ordinary shares will be marked ex-‐entitlement to such dividend on 7 May 2014 and the dividend will be payable to all shareholders on the Company's share register at the close ofbusiness on 9 May 2014. Except that, as announced at the time of the Company's admission to trading on AIM, the major shareholder, ActionGroup Holdings, has waived its entitlement to this dividend. Financial position Net bank debt as at 31 December 2013 was $64.7m (2012: $98.4m). Cash and cash equivalents were $43.63m (2012: $1.99m). Loan tenors rangefrom 3 -‐ 7 years. Debt Analysis (in USD 000's) 31 Dec 2013 31 Dec 2012

Bank Debt (Long term + Current) ($108,316) ($100,348)Cash & Cash equivalents $43,626 $1,989Net bank debt ($64,690) ($98,359)

Total Equity* $167,094 $120,892

Gearing ratio (Net Debt/Equity) 38.7% 81.4% *Total equity (plus partner current account as at 31 December 2012). Property revaluations The Board follows an annual revaluation policy and as at 31 December 2013, the carrying value of the hotel assets was $240.7m (2012: $233.5m). Looking ahead We are excited about our growth prospects following our admission to trading on AIM listing. The funds raised fully fund our current pipeline ofeight additional hotels which, due to the nature of our operations and our low and early break even points, will contribute to earnings soon afteropening. Holiday Inn Seeb Muscat has made an extremely good start with strong occupancy and ADR. Alaister MurrayFinance Director

Action Hotels plcUnaudited Consolidated Income StatementFor the year ended 31 December 2013

Year ended31 December

2013


2012USD'000 USD'000

Revenue 29,763 28,235Cost of sales (7,447) (7,040)Gross profit 22,316 21,195Administrative and distribution expenses (17,866) (16,266)Losses on disposal of property, plant and equipment (22) (239)Operating profit 4,428 4,690Restructuring and listing costs (3,492) -‐Finance income 361 23Finance costs (5,211) (5,795)



Foreign exchange (losses) /gains (3,132) 821Loss before tax (7,046) (261)Tax (charge) / credit (2,069) 15Loss for the year attributable to owners of the company (9,115) (246)

Loss per share attributable to owners of the company: Basic and diluted (cents) (9.0) (0.2) All operations were continuing throughout the years. Action Hotels plcUnaudited Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2013


2013


2012USD'000 USD'000

Loss for the year (9,115) (246)Items that will not be reclassified subsequently to profitand loss:Gains on property revaluations 12,260 20,273Tax charge relating to property revaluations (2,312) (1,768)Items that may be subsequently reclassified to profit orloss:Exchange differences on translation of foreign operations 286 313Other comprehensive income for the year net of tax 10,234 18,818Total comprehensive income for the year attributable toowners of the parent

1,119 18,572

Total comprehensive income attributable to equity shareholders arises from continuing operations. Action Hotels plcUnaudited Consolidated Statement of Financial PositionAs at 31 December 2013

At 31

December2013

At 31December

2012USD'000 USD'000

Non-‐current assetsIntangible assets 13,198 13,753Property, plant and equipment 227,498 219,746

240,696 233,499Current assetsCash and bank balances 43,626 1,989Trade and other receivables 6,558 4,369Receivables due from related parties 13,810 16,617Inventories 110 91

64,104 23,066Total assets 304,800 256,565

Current liabilitiesTrade and other payables 15,912 13,327Payables due to related parties 161 1,008Bank borrowings 10,284 100,348Current tax payable 89 -‐Partners' current account -‐ 79,488

26,446 194,171

Net current assets / (liabilities) 37,658 (171,105)

Non-‐current liabilitiesLoans due to related parties 57 11,309Bank borrowings 98,032 -‐Provision for end of service indemnity 490 371



Deferred tax liability 12,681 9,308111,260 20,988

Total liabilities 137,706 215,159

Net assets 167,094 41,406

EQUITY

Share capital 24,102 16,325Share premium 124,479 88,143Revaluation reserve 52,582 42,634Merger and other reserves 758 (80,112)Retained earnings (34,827) (25,584)Total equity attributable to owners of the Company 167,094 41,406

Action Hotels plc

Unaudited Consolidated Statement of Changes in EquityFor the year ended 31 December 2013

Share capital Share premium

Revaluation

reserve

Merger and other

reserves

(note 26)

Retained

earnings Total

USD'000 USD'000 USD'000 USD'000 USD'000 USD'000

Balance at 1 January 2012 16,325 88,143 24,129 (79,784) (25,216) 23,597

Total comprehensiveincome/(loss) for the year

-‐ -‐ 18,505 313 (246) 18,572

Merger reserve distributions -‐ -‐ -‐ (763) -‐ (763)

Reserves transfer -‐ -‐ -‐ 122 (122) -‐Balance at 31 December 2012 16,325 88,143 42,634 (80,112) (25,584) 41,406

Total comprehensive (loss) / incomefor the year

-‐ -‐ 9,948 286 (9,115) 1,119

Merger reserve distributions -‐ -‐ -‐ (1,346) -‐ (1,346)

Reserves transfer -‐ -‐ -‐ 128 (128) -‐

Shareholder capitalisation of loans -‐ -‐ -‐ 74,022 -‐ 74,022

Shareholder contribution of Sharjahproperty

-‐ -‐ -‐ 7,135 -‐ 7,135

Share issue less costs 7,777 36,336 -‐ 49 -‐ 44,162

Share-‐based payments -‐ -‐ -‐ 596 -‐ 596

Balance at 31 December 2013 24,102 124,479 52,582 758 (34,827) 167,094

Action Hotels plc

Unaudited Consolidated Statement of Cash FlowsFor the year ended 31 December 2013

Year ended

31

December

2013

Year ended

31

December

2012

USD'000 USD'000

Cash flows from operating activities:

Net loss for the period (9,115) (246)Adjustments for:

Finance costs 5,211 5,795Interest income (361) (23)Income tax expense 2,069 (15)Depreciation of property, plant and equipment 3,339 3,277Amortisation of intangible assets 548 548Losses on disposal of property, plant & equipment 22 239



Share based payment expense 596 -‐

Foreign exchange (loss) / gain 3,283 (804)

Restructuring and listing costs 3,492 -‐Operating cash flows before movements in working

capital: 9,083 8,771

Decrease / (increase) in receivables 32 (2,030)

Decrease in related party receivables -‐ trading 40 1,269

(Increase) /decrease in inventory (22) 3

Increase in payables 918 1,917

Increase/ (decrease) in related party payables 81 (853)

Increase in provision for end of service indemnity 118 53

Net cash from operating activities 10,250 9,130

Cash flow from investing activities

Interest received 361 23

Drawdown of related party receivables -‐ non trade (2,091) (8,792)

Repayment of related party receivables -‐ non trade 376 -‐

Transfers to restricted cash (1,082) (906)

Capital expenditure from restricted cash 797 437

Purchases of property, plant and equipment (8,562) (5,922)

Net cash (used in) investing activities (10,201) (15,160)

Cash flow from financing activities

Repayment of borrowings -‐ Bank loans (2,213) (1,916)

Drawdown of borrowings -‐ Bank loans 12,648 15,339

Repayment of borrowings -‐ Related party -‐ (154)

Drawdown of borrowings -‐ Related party 325 173

Repayment of notes payable -‐ (79)

Repayment of partners' current account (22) (2,290)

Drawdown on partners' current account 292 1,603

Proceeds on issue of shares 44,423 -‐

Share issue costs paid (4,600) -‐

Restructuring and listing costs paid (2,842) -‐

Finance costs paid (5,502) (5,845)

Distributions paid before contribution of Salmiya

property (1,347) (763)

Net cash from financing activities 41,162 6,068

Net increase in cash and cash equivalents 41,211 38

Cash and cash equivalents at the beginning of the

period 1,385 1,332

Effect of foreign exchange changes 160 15

Cash and cash equivalents at end of the period 42,756 1,385

Restricted cash balance 870 604

Total cash and bank balances 43,626 1,989

Basis of Preparation

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by

the European Union and IFRIC interpretations. The consolidated financial statements have been prepared under the historical cost convention,

except for the revaluation of certain classes of property, plant and equipment. The preparation of financial statements in conformity with IFRS

requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the

Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are

significant to the consolidated financial statements will be disclosed in the notes to the financial statements.

A presentational currency of US Dollars has been used on the basis that the functional currency in the majority of jurisdictions in which the Group

operates and which represent its primary economic environment are either pegged to the US Dollar, or pegged to a basket of currencies, which

include the US Dollar.

The financial statements have been prepared on the going concern basis. The Directors have made this assessment after consideration of the

Group's budgeted cash flows and related assumptions, including appropriate stress testing thereof, key risks and uncertainties and debt maturity

review and in accordance with the Going Concern and Liquidity Guidance for Directors of UK Companies 2009 published by the Financial Reporting

Council. Further information on Group's business activities, cash flows, liquidity and performance are will be set out in the Business review and its

objectives, policies and processes for managing its capital and financial risks will be detailed in the notes to the financial statements.

Acquisition of businesses under common control

Action Hotels plc was incorporated in Jersey on 7 May 2013 and took control of the Action Hotels business on 9 December 2013 through the

following common control transactions with its shareholder ("the Transaction"). The Company issued 100 million shares to its shareholder in



return for 100% of the beneficial interest in and voting control over the issued share capital of Action Hotels Limited, a company incorporated inDubai International Financial Centre. Action Hotels Limited in turn acquired 100% of the issued share capital of Action Hotels Company LLC, acompany incorporated in Kuwait, through a share for share exchange. Action Hotels plc was subsequently admitted to trading on the AIM market of the London Stock Exchange and issued a further 47.6 million shareson 23 December 2013. Pursuant to the Transaction, Action Hotels Company LLC, which had previously been the parent company of the Group became a subsidiary ofAction Hotels plc and the existing shareholder of Action Hotels Company LLC became the shareholder in Action Hotels plc. Accordingly, the financialstatements have been prepared using merger accounting principles. The comparative information prior to the date of Transaction presented inthese financial statements therefore represents the consolidated results of the group under its previous parent company. The following accountingtreatment has been applied to account for the Transaction: -‐ the consolidated assets and liabilities of Action Hotels Company LLC and its subsidiaries ("the Subsidiary group") were recognised and measuredat the pre-‐Transaction carrying amounts, without restatement to fair value; -‐ the retained earnings and other equity balances recognised in the consolidated statement of financial position reflect the consolidated retainedearnings and other equity balances of the Subsidiary group adjusted to reflect the share capital and share premium of the Company at the time ofthe Transaction. -‐ the comparative balances as at 31 December 2012 and the results for 2012 and the period from 1 January 2013 to the date of the Transaction,are those of the Subsidiary group. The contribution of the business and assets of the ibis Salmiya hotel to Action Hotels Company LLC on 1 April 2013 has also been accounted forunder merger accounting principles as it was previously under common control. Operating profit and adjusted EBITDA (Unaudited)

Year ended

31

December

2013

Year ended

31

December

2012

USD'000 USD'000

Operating profit for the period is stated after charging:Depreciation of property, plant and equipment 3,339 3,277Amortisation of intangible assets 548 548Share-‐based payments 19 -‐Operating lease rentals 2,980 2,964Restructuring and listing costs include:Warrants issued 577 -‐

The adjusted EBITDA for the year can be derived as followsYear ended

31 December

2013

Year ended

31 December

2012

USD'000 USD'000

Operating profit 4,428 4,690

Depreciation of property, plant and equipment 3,339 3,277

Amortisation of intangible assets 548 548

Other gains and losses 22 239

Adjusted EBITDA 8,337 8,754

Foreign exchange losses / (gains) (Unaudited)

Year ended

31

December

2013

Year ended

31

December

2012

USD'000 USD'000

Foreign exchange loss / (gain) 3,132 (821)

The loss / (gain) on foreign exchange relates primarily to a loan between the Company and one of its subsidiaries which is denominated inAustralian Dollars. The loss / (gain) arose as a result of a significant movement in the exchange rate with the US dollar. Restructuring and listing costs (Unaudited)

The Group classified costs in connection with its restructuring prior to the public offering and its admission to trading on the AIM market of theLondon Stock Exchange separately. The costs expensed in the consolidated income statement totalled $3,492k (2012: $nil). Share offering costs of$5,658k were deducted from the share premium account (note 25).

Tax (charge) / credit (Unaudited)



Year ended 31December 2013

Year ended 31December 2012

USD'000 USD'000

Current tax charge (98) -‐

Deferred tax credit 9 15

Deferred tax charge on restructuring (1,980)

(2,069) 15

During the year ended 31 December 2013 the Group's head office has changed its domicile from the State of Kuwait to Dubai International

Financial Centre (DIFC). The Group's effective tax rate in the country of domicile is 0% (2012: 0%). The Group's tax liabilities arise in other

jurisdictions in which it operates which are detailed below:


2013


2012

USD'000 USD'000

Loss before tax on continuing operations 7,046 261

Tax at the DIFC's tax rate of 0% -‐ -‐

Tax arising in Australia 89 (15)

Tax arising in Jordan -‐ -‐

Tax arising in Oman -‐ -‐

Tax arising in Bahrain -‐ -‐

Tax expense for the year, excluding restructuring 89 (15)

Deferred tax arising in Kuwait on restructuring 1,980 -‐

2,069 (15)

A deferred tax charge of $1,980k arose in Kuwait in respect of the contribution of the Salmiya lease intangible asset into the Group on 1 April 2013.

The tax charge arising in Australia of $89k consists of a current income tax charge of $98k (2012: $nil) being offset by a deferred tax credit of $9k

(2012: $15k). This deferred tax credit arose in respect of timing differences arising from long term employee benefits including retirement benefits

have been recognised in the income statement. There are no other significant differences between accounting profits and taxable profits.

No current income tax charge has been suffered in Jordan (2012: $nil). In 2013 and 2012 the Group benefitted from a 25% exemption from

corporate income tax in respect of taxable profits arising in Jordan. No tax charge was suffered in respect of the remaining 75% of profits as a result

of the utilisation of historical losses. A deferred tax asset has not been recognised in respect of carried forward tax losses of $0.2 million in Jordan

at 31 December 2013.

No current income tax has been suffered in Oman (2012: $nil). In 2013 and 2012 the Group benefitted from a tax exemption such that the Group

is not required to pay any corporate income tax on the taxable profits arising in Oman. At 31 December 2013, the Group had tax losses carried

forward in Oman of $1.5m for which no deferred tax asset has been recognised.

No current income tax has been suffered in Bahrain (2012: $nil), as Bahrain does not levy income tax on the profits of companies apart from

companies operating in the oil & gas sector.

No current income tax has been suffered in Jersey as the Group has not generated any taxable gains or profits in that jurisdiction.

At 31 December 2013, the total temporary differences associated with investments in subsidiaries was $nil (2012: $nil), such that there is no

unrecognised deferred tax liability in this respect.

In addition to the amounts charged to the statement of income, the following amounts relating to tax have been recognised in other

comprehensive income:


2013


2012

USD'000 USD'000

Deferred Tax

Items that will not be reclassified subsequently to profit or loss:

Gains on property revaluation 708 1,767

Deferred tax arising on restructuring in respect of property revaluations 1,604 -‐

Tax expense recognised in other comprehensive income 2,312 1,767

This information is provided by RNS

The company news service from the London Stock Exchange

END

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