Action Hotels PLC Related Party Transaction and Trading Update (1485A)
22 December 2017 - 6:00PM
UK Regulatory
TIDMAHCG
RNS Number : 1485A
Action Hotels PLC
22 December 2017
The information contained within this announcement is deemed by
the Company to constitute inside information stipulated under the
Market Abuse Regulation (EU) No. 596/2014. Upon the publication of
this announcement via the Regulatory Information Service, this
inside information is now considered to be in the public
domain.
22 December 2017
Action Hotels plc
Related Party Transaction and Trading Update
Related Party Transaction
Action Hotels plc ("Action Hotels", the "Group" or the
"Company"); a leading owner, developer, and asset manager of
branded three and four-star hotels in the Middle East and
Australia, advises that it has obtained a rent waiver from a
subsidiary of its major shareholder, Action Group Holding Company
(K.S.C.C), which constitutes a related party transaction under the
AIM Rules, along with an update on trading for the year ending 31
December 2017.
The Company has agreed a rent waiver of USD$1.2m with the owner
of the ibis Salmiya Hotel ("ibis Salmiya") in Kuwait for the
six-month period 1 July 2017 to 31 December 2017 (the "Rent
Waiver"). The owner of ibis Salmiya is Action Real Estate Co.
K.S.C.C. ("AREC"), which Sheikh Mubarak A. M. Al Sabah (a director
of the Company) is a director and a major shareholder of. The
leasehold agreement between the Company and AREC with regards to
ibis Salmiya was signed in April 2013 and fully disclosed as a
Related Party transaction at the time of the IPO. This waiver is
being treated as a one-off occurrence and further details of the
impact of this waiver are set out below in the trading update.
By reason of Sheikh Mubarak A. M. Al Sabah being a director of,
and shareholder in Action Hotels, as well as being a director of,
and shareholder of AREC, the Rent Waiver constitutes a related
party transaction under AIM Rule 13 of the AIM Rules for Companies.
The independent directors of the Company (being the directors of
the Company excluding Sheikh Mubarak A. M. Al Sabah and Rawaf
Bourisli), having consulted with the Company's nominated adviser,
Zeus Capital Limited, consider that the terms of the Rent Waiver
are fair and reasonable insofar as its shareholders are
concerned.
Trading update
The Middle East and North Africa (MENA) Hospitality Market as a
whole is currently experiencing static economic conditions largely
driven by lower oil prices, reduced government and private sector
spending leading to muted growth demand resulting in a drop in
Revenue Per Available Room (RevPAR).
Action Hotels has a resilient business model, focusing on the
economy and mid-scale hotel market, and as a result has seen less
of decline in RevPAR from its Middle East hotels compared to many
of the luxury and upper upscale hotels in the region. However,
given the current climate, it has taken appropriate actions with
regards to its cost base to balance out the lower than expected
revenue from these hotels. One of these steps has been reviewing
and renegotiating terms with the hotel owners on their leasehold
properties in addition to monitoring the running costs by working
closely with the hotel operators.
The Rent Waiver will deliver a cost reduction of USD $1.2m in
the year to the 31 December 2017. This will assist in offsetting
the expected 7% underperformance in 2017 revenue against market
expectations. Adjusted EBITDA is now expected to be in the region
of $15.6m.
2018 update
Given the current conditions in the Middle East, the Board has
also taken the decision to delay the opening of Mercure Riyadh
Hotel which is its first in the Kingdom of Saudi Arabia, to Q1
2019. The Board will then prioritise these resources to concentrate
on the 347 room, Novotel South Wharf, Melbourne Convention Centre
hotel, which is expected to open in April 2018. The Australian
market remains buoyant and is not seeing any slowdown in growth and
the Company's Australian portfolio is providing a good balance. The
Company is currently reforecasting its 2018 expectations to reflect
these changes.
Despite the numerous challenges facing the hotel industry, the
Middle East, particularly the Gulf Cooperation Council (GCC),
remains one of the fastest growing markets in the world(1) . The
market leading research for the hotel industry, STRG, forecast that
most markets will either bottom out or slowly start recovering as
oil prices stabilise, key infrastructure projects come online, and
new tourism strategies take effect during the coming years.
For more information, contact:
Action Hotels PLC Tel: +44 (0) 20
7907 9663
Alain Debare, Chief Executive
Officer
Katie Shelton, Director
of Corporate Affairs
Zeus Capital plc (NOMAD
& Broker)
Dan Bate / Andrew Jones Tel: +44 (0) 16
1831 1512
Victoria Ayton Tel: +44 (0) 20 3829 5000
Notes to Editors
Action Hotels PLC
Action Hotels PLC is a leading owner, developer and asset
manager of branded three and four star hotels in the Middle East
and Australia. Established in 2005, Action Hotels currently has 13
completed hotels with 2,276 rooms in aggregate across the Middle
East and Australia, with further properties in development in both
regions.
More information is available at
http://www.actionhotels.com/
(1) TRI CONSULTING - THE MIDDLE EAST HOTEL MARKET REVIEW
This information is provided by RNS
The company news service from the London Stock Exchange
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