In a tough trading period affected by terrorist attacks and Brexit, contemporary hostel owner Safestay (SSTY) still managed to boost revenue by 84 per cent in 2016 (see table).
However, this was rather overshadowed by a subsequent refinancing package and the sale and leaseback of its two freehold hostels in Edinburgh and Elephant and Castle. A new £18.4m five-year facility was secured, replacing an existing bank loan and two convertible loans, while the sale and leaseback will generate gross cash of £12.6m. The new loan will also allow significant savings on interest payments. In addition, the two properties were valued at £30.3m following the leaseback, little changed from the previous freehold valuation of £30.8m, which means that Safestay will extract £12.6m in cash without significantly changing the book value of the assets.
The attraction of the business model is the cost: its pitch is that "for just under £20 a night", anyone can stay in a safe, comfortable room, and last year saw individual bed nights sold rise by 62 per cent to 297,276. Pre-tax losses reflected an increase in finance costs from £0.8m to £1.4m as a result of higher debt to meet the cost of refurbishing its Holland Park site and buying the Edinburgh hostel.
Canaccord Genuity forecasts adjusted pre-tax profit for 2017 of £0.2m and EPS of 0.6p (from losses of £0.3m and 1p in 2016).
| SAFESTAY (SSTY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 53p | MARKET VALUE: | £18m | |
| TOUCH: | 51-55p | 12-MONTH HIGH: | 64p | LOW: 36p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 58p | NET DEBT: | 136%* | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012** | 0.70 | -0.27 | na | na |
| 2013** | 1.93 | 0.31 | na | na |
| 2014 | 1.94 | 0.14 | 1.30 | 0.3 |
| 2015 | 4.02 | -0.82 | -2.52 | nil |
| 2016 | 7.41 | -1.46 | -1.49 | nil |
| % change | +84 | - | - | - |
Ex-div:- Payment:- *Includes £10.2m in finance lease obligations **Pre-IPO figures | ||||
